Canadian House Approval of FTA Threatens U.S. Market Share

June 18, 2010 Bookmark and Share

Canada’s House of Commons approved on Monday a trade agreement between that country and Colombia, taking a major step toward passage of a measure that could ultimately devastate the U.S. wheat industry’s share in its largest Latin American market.

Canada and Colombia began negotiations toward their agreement in 2007 and signed it in 2008. By contrast, a U.S.-Colombia free trade agreement was signed in 2006 and approved by the Colombian Congress in 2007, but has since languished in the U.S. system along with two other agreements, with Panama and South Korea.

Colombia purchased $1.67 billion in U.S. agricultural products in 2008, sustaining thousands of U.S. jobs; in 2007/2008, U.S. wheat won nearly 70 percent of Colombian purchases. While the U.S. has maintained a strong foothold in the market since that time, U.S. wheat products are facing fierce competition from Argentina, which benefits from trade preferences under the Mercosur agreement, and Canada, which will have duty-free access once its agreement is finalized.

By contrast, tariffs on U.S. wheat to Colombia fluctuate between 10 and 15 percent and can be as high a 124 percent according to World Trade Organization bound rates – meaning U.S. wheat producers stand to lose export sales to Colombia worth up to $92 million per year, roughly half of their current market share, if the U.S.-Colombia trade agreement isn’t quickly ratified.

Unlike in the U.S., the Canadian Senate is an appointed body that typically approves bills that have passed the House of Commons.

The U.S. wheat industry will continue to follow the agreement’s progress in our northern neighbor’s legislative body and push for immediate consideration of our own pending agreement.

For more on the importance of the U.S.-Colombia agreement, please visit www.wheatworld.org/trade.