Rice millers and farmers from Central America and the Dominican Republic are making an urgent plea to their U.S. counterparts: Help stop the reduction in tariffs on U.S. rice.
The Latin millers want to continue to keep buying U.S. rice in large quantities, a delegation told members of the USA Rice Federation last week at a conference in San Diego, but warned that if they buy too much as tariffs continue to fall under the Dominican Republic-Central America (CAFTA-DR) free trade pact, local farmers will be devastated.
The U.S. signed it’s first-ever free trade agreement with small, developing countries -- Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic -- more than a decade ago, and by most measures, the pact has been beneficial for all seven nations.
“It’s been just over 10 years since we started cutting agricultural tariffs on both sides, and the deal has delivered exactly as trade agreements are supposed to,” said USDA Trade Counsel Jason Hafemeister earlier this year as Undersecretary Ted McKinney prepared to lead a delegation to several of the CAFTA-DR countries. “Going forward, a deal that has been a solid positive for U.S. agriculture has the potential to get even better as further market openings create more opportunities for U.S. exports.”
Jason Hafemeister, USDA
In 2003, before the pact was ratified, the U.S. was exporting about $1.6 billion worth of farm commodities to the CAFTA-DR countries, according to USDA data. By 2017 those exports had more than doubled to $4.3 billion worth of corn, rice, wheat, dairy, beef, pork and poultry.
And exports going north also doubled over the past decade as trade barriers gradually fell. Last year the U.S. imported about $5.8 billion worth of bananas, coffee, pineapples and other products from its CAFTA-DR partners. That’s up from $2.4 billion in 2003.
“While all the countries in the CAFTA-DR region face significant challenges, the GDP of the region has effectively doubled even as barriers to U.S. exports have fallen,” said Hafemeister. “The good news is there is plenty of room to grow … And the prospects for further economic growth in the region are good, particularly if all countries continue to pull together to facilitate trade.”
But there’s going to be just too much trade, said Eduardo Rojas, the newly elected president of the board of directors for Costa Rica’s National Rice Corporation and a leader on the Central American Rice Federation (FECARROZ).
In a delayed start, the CAFTA-DR’s tariffs on U.S. rice began dropping steadily and are expected to reach zero in all of the countries in five years. At the same time, each of the Latin countries continues to increase the size of their tariff rate quotas for U.S. rice that allows hundreds of thousands of tons to enter with no tariffs.
All of that, together with weather and banking problems, is putting a major strain on the mostly small domestic farmers, said Enrique Lacs, a FECARROZ adviser and former deputy economics minister in Guatemala.
Lacs, Rojas and several others have presented the leadership at USA Rice with a proposal to stop the reduction in tariffs on U.S. rice and freeze in place TRQs that guarantee access to rice from the U.S.
"Central America is the second-largest importer of paddy rice for the United States and we hope that this meeting will facilitate a future alliance with the American rice industry so that we can be converted into the largest importer of paddy rice," FECARROZ President Mario Solorzano said during the San Diego meeting. "The FECARROZ proposal is a win-win strategy that is necessary in order to guarantee the long term sustainability of the commercial relationships between the United States, Central America, and the Dominican Republic."
If tariffs are allowed to go to zero, Lacs told Agri-Pulse, the 62,000 rice farmers and processors in the CAFTA-DR countries will go out of business. Instead of farmers and millers, the Latin countries will only have importers, buying the cheapest supplies they can find.
“The risk for Central America is that producers will disappear because they are small and can’t compete,” Lacs said.
Unlike most trade pacts, the CAFTA-DR allows for additional negotiation on agricultural issues, said Rojas and Lucs. The pact specifically allows the countries to assemble an agricultural committee to address unforeseen problems, and that’s expected to happen next year. The FECARROZ proposal is meant to both inform that committee and persuade USA Rice to join with their Latin counterparts to provide a united front.
USA Rice leaders have promised to consider the proposal.
“Central America is a top destination for U.S. rice and helps keep our export market thriving,” said USA Rice Chairman Charley Mathews Jr. “We are pleased that FECARROZ has given thought to how this trade can be sustained and reached out to us to start this dialogue.”
But USA Rice Chief Operating Officer Bob Cummings tells Agri-Pulse that he’s not convinced.
“I’m not sure I abide by the whole argument,” Cummings said. “They came to us with the proposal. They’re big customers, so we’re going to listen to them and we’re now going to start the process internally, examining what they came to us with.”
The interaction between FECARROZ and USA Rice has been cordial, with the Latin officials getting a warm welcome in San Diego at the U.S. group’s annual outlook conference, but the visitors came with deep convictions.
“We’re going to die standing and fighting this,” Rojas told the U.S. farmers and millers attending the meeting.
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