After careful review of the details of the Central America Free Trade Agreement (CAFTA), the National Corn Growers Association (NCGA) Corn Board has voted to support the deal, citing its favorable provisions for corn growers.
"The Corn Board thoroughly analyzed the final text, and we feel CAFTA will benefit corn growers by opening new markets and locking in access to the Central American countries," NCGA President Dee Vaughan said. "The elimination of tariffs on feed grains and other agricultural exports gives U.S. farmers the opportunity to sell their world-class goods to new customers."
El Salvador, Guatemala, Honduras and Nicaragua signed the agreement Dec. 17, while Costa Rica signed the agreement in mid-February. The five countries already import more than $1 billion of U.S. agricultural products annually, and that figure is likely to rise under the provisions of CAFTA.
"In the past, the CAFTA countries and many other developing nations have had high tariffs and non-tariff barriers for U.S. exports," Vaughan said. "This agreement reduces those barriers and encourages business development, investment and promotion of free trade."
Under the agreement, yellow corn exports to Central American countries will receive duty-free access for current tariff rate quota (TRQ) levels with an increase of 5 percent over the course of a 15-year transition period. The current TRQ is approximately 1 million metric tons. U.S. exports to Guatemala will receive duty-free access over a 10-year period and tariffs on exports to Costa Rica will drop to zero immediately.
The co-products market is also expected to benefit from the deal, as export duties for corn gluten feed and dried distillers grains will go to zero. Vaughan said corn usage resulting from the agreement is also expected to increase due to favorable provisions for beef, pork and poultry.
"It’s really a win-win situation for U.S. agriculture in general," he said. "All of the commodities covered in the agreement will benefit."
Vaughan also refuted recent media reports that CAFTA will have a negative impact on the ethanol industry. News stories and independent studies have claimed CAFTA will make U.S.-produced corn sweetener and ethanol un-competitive. On the contrary, the agreement won’t have any damaging effects on ethanol, Vaughan said.
"CAFTA will have absolutely no impact on the way ethanol is traded," he said. "The import rules for ethanol are governed by an entirely separate initiative (the Caribbean Basin Initiative) that has been in place since 1990. The duty-free access conditions established by that agreement will not change."