Soy shippers, Panama Canal partner on trade
The Soy Transportation Coalition on Monday signed a memorandum of understanding with the Panama Canal Authority, marking the first time that a shipper organization has offered to partner on promoting the 2014 expansion of the Panama Canal.
At the signing ceremony in Washington soybean growers called on the U.S. government, grain elevator operators and transportation providers to modernize freight transportation infrastructure, saying that without such investment they would lose their competitive advantage in world markets to countries like Brazil, crimping sales at a time when the nation is looking to exports to help the economy recover.
U.S. farmers sent about 560 million bushels of soybeans on vessels through the Panama Canal last year, the largest amount for any commodity. The ability of the canal to handle larger ships will drive economies of scale and keep transportation costs low. But soy growers said U.S. port, rail, inland waterway and highway infrastructure has to match the canal's capacity and efficiency if the agriculture sector expects to realize the full potential of the waterway that serves as a key node for global trade.
'It is time to upgrade our infrastructure to meet the future demands,' Phil Bradshaw, immediate past chairman of the United Soybean Board and an Illinois farmer, said at the luncheon event, citing U.N. estimates that the world will have to produce twice as much food by 2050.
The Soy Transportation Coalition has commissioned a study by Informa Economics on the effect of the Panama Canal's expansion on the U.S. agriculture sector. The study, which is expected to be completed by late August, seeks to answer questions such as whether foreign ports serving international customers are capable of handling super-size bulk and container vessels, whether container shipping will be the primary beneficiary and how the canal's new toll structure will influence farmers' decisions to transport grains bound for Asia by barge through the Gulf or by rail via the Pacific Northwest, Executive Director Mike Steenhoek told American Shipper.
Under the MOU, the Panama Canal pledges to share information necessary to complete the study and help disseminate the results. Both parties also will work together on educational events and joint marketing of trade opportunities made possible by the extra set of jumbo locks being built in Panama.
The Panama Canal Authority has signed similar collaboration agreements with U.S. and other ports aimed at promoting trade through the canal and data exchange.
Panama, in addition to being a transit point, is also becoming an important destination for U.S. exports.
Once the free trade agreement recently negotiated by the Obama administration and the Panamanian government enters into force, more than 87 percent of U.S. exports of consumer and industrial goods, and more than half of U.S. agricultural products, will immediately become duty-free, said Islam Siddiqui, chief agricultural negotiator in the Office of the U.S. Trade Representative.
U.S. agricultural goods face an average tariff of 15 percent, with tariffs on some products as high as 260 percent. Other products will gain duty-free status through tariff-rate quotas, with tariffs for volumes above the annual quota reduced over time.
Products that will be duty-free from the outset include soybeans and soybean products. Panama's 20 percent tariff on refined soybean oil will be phased out in 15 years, Siddiqui said.
'Panamanian duties on most other U.S. agricultural goods will be phased out within five to 12 years and, for a few of Panama's most import-sensitive products, within 15 to 20 years,' he said.
Last year the United States enjoyed a $5.7 billion trade surplus with Panama.
The stalled agreement, which must still be ratified by Congress, moved ahead after Panama changed its labor laws to include internationally recognized rights for workers and improved the transparency of its tax system. ' Eric Kulisch