U.S. Horticultural Trade with Countries of the Proposed FTAA

U.S. trade in horticultural products with countries in the Western Hemisphere (excluding trade with Cuba) has become a major component of the overall exchange of food and agriculture with the region.  In CY 2001, horticultural products accounted for about 26 percent of total U.S. agricultural exports to the Western Hemisphere.  This figure compares with 22 percent in 1995.  On the other hand, about a quarter of all U.S. agricultural imports from the region in 2001 were horticultural products.  On November 1, 2002, trade ministers of the 34 democracies in the Western Hemisphere met in Quito, Ecuador, to continue negotiations seeking to complete the Free Trade Area of the Americas (FTAA) by January 1, 2005.  Once implemented, the FTAA would be the largest free-trade area in the world. 

The United States has already experienced the benefits of trade liberalization with some countries in the Western Hemisphere.  In 1987, the United States and Canada began eliminating import tariffs and other restrictions to trade with the creation of the U.S./Canada Free Trade Agreement.  The accord was expanded in 1994 to include Mexico with the implementation of the North America Free Trade Agreement (NAFTA).  Since then, trade in horticultural products between the United States, Canada, and Mexico has expanded significantly.  The fruit and vegetable industries in North America, as well as its consumers, have benefited from new market opportunities offered by lower tariffs, elimination of import licenses, and the development of a more transparent business environment.  It is expected that the FTAA will bring similar benefits to all Western Hemisphere countries. 

U.S. Exports 

U.S. exports of horticultural products to countries in the Western Hemisphere reached a record $5.1 billion in CY 2001, up 4 percent from shipments in 2000 and more than 40 percent above the valued exported 7 years ago.  Following Canada and Mexico, which are already trading with the United States under liberalization, Venezuela is the major U.S. market among the proposed FTAA members.  Total U.S. exports of horticultural products to Venezuela in 2001 were valued at nearly $70 million.  Top U.S. horticultural products to Venezuela consist of deciduous fruits (mainly apples and grapes), canned vegetables (mostly canned sweet corn), and juices.  Other top U.S. markets in the region are Brazil, the Bahamas, and the Dominican Republic, with U.S. horticultural sales to these markets reaching $65 million, $54 million, and $50 million in 2001, respectively.

 
With a value of $960 million, miscellaneous fruits and vegetables accounted for just 20 percent of U.S. horticultural exports to the FTAA region.  Beers, potato chips, and seasonings dominate this category group.  Fresh and processed fruits and vegetables are other important horticultural products the United States exports to the area.

U.S. Imports  

The value of U.S. imports of horticultural products from the proposed members of the FTAA reached a record $10 billion in 2001.  Fresh vegetables and fruits account for half of U.S. imports of horticultural products from FTAA countries.  The value of U.S. imports of fresh produce from the region reached $5 billion in 2001.  Some major vegetables imported included tomatoes, green peppers, onions, squash, and asparagus.  Major fresh fruit imports consist of bananas, table grapes, cantaloupes, pineapples, and mangoes.  Costa Rica is the main supplier of bananas, followed by Ecuador and Guatemala.  Chile supplies most of the table grapes to Mexico.

 

The main FTAA supplier of horticultural products to the United States is Chile, selling about $870 million of the fruits and vegetables in 2001.  About 60 percent of total U.S. imports of horticultural products from Chile are deciduous fruits.  In the past, these imports balance U.S. deciduous fruit demand during the spring and early summer months.  However, increasing use of cold storage facilities, and the expansion of varieties of fruits with longer growing seasons is encouraging more competition between U.S. and Chilean fresh fruits.

U.S./FTAA Horticultural Trade Balance

The United States runs a horticultural trade deficit with the members of the proposed FTAA.  This deficit reached a record $5 billion in 2001.  A stronger U.S. dollar vis-à-vis the currencies  of many FTAA countries and increased consumption of fresh produce by U.S. consumers have been partially responsible for the increasing trade surplus.  U.S. industry groups have also cited the implementation of unfair phytosanitary barriers as contributing to the growing trade imbalance. 

The large U.S. horticultural trade deficit has raised concerns between U.S. producers and traders.  Many have questions on the potential competitive advantage many Western Hemisphere countries may get from the agreement and its adverse effect on U.S. fruit and vegetable trade.  Moreover, the U.S. horticultural sector is skeptical about an FTAA since there is perception that past U.S. trade agreements have not fulfilled their expectations. 

Overall, U.S. tariffs on horticultural imports are the lowest in the world and, as such, domestic producers have to compete without benefit of tariff protection.  On the other hand, many countries impose high tariffs and other types of trade barriers that hamper the competitiveness of U.S. horticultural sales.  An FTAA that could provide meaningful and equal access to U.S. shippers will be the key for U.S. horticultural sectors’ unconditional support for this or any other future trade agreement.

 

U.S.-Chile Free Trade Agreement Near Implementation

The United States and Chile have been working on the completion of a free trade agreement.  The potential deal would have a direct impact in all areas of the U.S. and Chilean economies, including trade in agriculture.  In recent years, shipments of horticultural products have become an important component in U.S.-Chile agricultural trade.  The value of U.S. horticultural exports to Chile in 2001 reached $28 million, 50 percent more than shipments in 2000 and almost double the value exported 7 years ago.  On the other hand, Chile’s exports of horticultural products to the United States were valued at $860 million in 2001. 

More than 60 percent of total U.S. imports of horticultural products from Chile are fruits.  Chile’s exports of fresh fruits to the United States in 2001 totaled about 575,000 tons, valued at $605 million.  These figures contrast with Chilean exports of 430,000 tons, valued at about $315 million in 1995.

Wine imports, the second largest category, accounts for 16 percent of the value of U.S. horticultural imports from Chile in 2001, compared to 10 percent 7 years ago.  The demand is driven by an upward trend on U.S. wine consumption, as well as by increased promotional efforts by Chilean wine producers and traders.