|Free Trade Area of the Americas - FTAA
COMMITTEE OF GOVERNMENT REPRESENTATIVES ON THE PARTICIPATION OF
CONTRIBUTION IN RESPONSE TO THE OPEN AND ONGOING INVITATION
National Confectioners Association
Submission from the U.S. Confectionery Industry Concerning
This statement is submitted by the National Confectioners Association and the Chocolate Manufacturers Association (NCA/CMA) in response to the public request from the FTAA Committee of Government Representatives on the Participation of Civil Society for comments on the negotiations in the Free Trade Area of the Americas. This submission echoes the aggressive trade liberalization initiatives the US confectionery industry has supported in other fora, including the Doha Round of trade negotiations.
I. INDUSTRY BACKGROUND
Four hundred companies, all members of the Chocolate Manufacturers Association and the National Confectioners Association, manufacture more than 90% of the chocolate and confectionery products in the United States. Another 250 companies supply those manufacturers. The industry is represented in 35 states with particular concentration in Pennsylvania, New Jersey, Illinois, California, New York, Wisconsin, Texas, Virginia, and Ohio. Approximately 65,000 jobs in the US are directly involved in the manufacture of confectionery and chocolate products. When the distribution and sale of these products is taken into consideration, the employment effect triples.
üThe US chocolate and confectionery industry is a principle consumer of key US agricultural commodities. For every dollar of cocoa imported, between one and two dollars of domestic agricultural products are used in the making of chocolate.
oSugar: 3 billion pounds annually or 8 million pounds a day. Confectionery manufacturers are the second largest users of sugar in the US most of which is domestic sugar. The value of sugar consumed in confectionery manufacture is $800 million annually.
oMilk and Milk Products: 653 million pounds annually or 1.8 million pounds per day. The value of dairy products consumed in the making of chocolate last year was $490 million.
oPeanuts: 322 million pounds of domestic peanuts annually. The chocolate and confectionery industry consumes 25% of the US crop.
oAlmonds: 43 million pounds of California almonds annually valued at $67 million.
oSweeteners: 1.7 billion pounds of corn syrup sweeteners are used annually valued at over $205 million.
üThe industry generated $23.5 billion in sales last year of chocolate, chocolate confectionery, and sugar confectionery products.
üIn 2001, the industry exported more than $726 million in chocolate, chocolate confectionery, and sugar confectionery products to more than 50 countries around the world.
üMore than $512 million exported in confectionery products in 2001 to nearly every FTAA member country. This accounts for almost 70% of US confectionery exports.
üLast year, the US market absorbed $1.2 billion in imports of confectionery products from FTAA member countries, more than two times US exports. Most products entered duty free.
The US confectionery industry views the countries of the FTAA as priority export markets and important source countries for world-price priority commodities. Nearly 70% of NCA / CMA members’ products are exported to FTAA member countries. In addition, critical raw materials are sourced from Latin and South America. Our members view the FTAA as a real opportunity to further open markets for finished confectionery products in Latin America and South America. Just as important, the industry expects that access to raw and intermediary materials is included on the negotiating table. The US confectionery industry urges that import regimes limiting access to world-price sugar, dairy and peanuts be aggressively liberalized.
Market access liberalization that includes elimination of high tariffs and non-tariff barriers could considerably increase US confectionery exports. Citing the NAFTA as an example, US confectionery exports to Mexico and Canada have increased 22% overall since implementation. If FTAA markets are further liberalized, we anticipate a comparable growth in exports to the region.
The Harmonized System tariff codes for our members’ finished products and intermediary products are noted below along with current applied tariff rates for imports into the US. For finished confectionery, US tariffs are 6% or less.
US Tariffs on Sugar Confectionery, Chocolate and Chocolate Confectionery Products
Table Notes: Duty-free access is generally given to all GSP
countries for imports of confectionery products. One exception is noted: Only
Least Developed Countries receive duty-free access for candied nuts. Ranges
indicate some tariff lines to the 8-digit level may offer variations in duty
rates. Preferential duties may not apply to every tariff line.
II. SUMMARY OF THE US CONFECTIONERY INDUSTRY’S PRIORITIES
The US confectionery industry’s priorities in the FTAA Market Access negotiations support and complement the industry’s objectives in the Doha Round of the WTO negotiations, specifically -- increased access.
III. THE US CONFENCTIONERY INDUSTRY SUPPORTS FREE AND FAIR TRADE
The US confectionery industry has made free trade and the maintenance of an open US market an operating principle for 20 years. US tariffs on NCA / CMA members’ products are among the lowest in the world and there are no quantitative restrictions on imports of finished confectionery into the United States. In addition, more than 140 developing and least developed countries enjoy duty free access to the US confectionery market through the Generalized System of Preferences (GSP). Of those receiving GSP benefits, 29 are FTAA member countries. Confectionery products exported from FTAA members Canada and Mexico benefit from duty free or reduced duty access to the United States via the NAFTA.
The industry has maintained this free trade stance in spite
of excessive raw material costs for sugar, dairy and peanuts which result from
US domestic price support programs and tariff and non-tariff barriers that block
US industry access to these commodities at world prices. Our industry pays 2-3
times the world price for these key inputs, incurring hundreds of millions of
dollars in additional cost each year.
IV. ACCESS TO ESSENTIAL RAW MATERIALS
In order for US confectionery manufacturing facilities to remain competitive in both the domestic and world markets, we must have access to world price sugar, dairy and peanuts. We urge a systematic approach to the elimination of barriers to trade in these commodities globally and suggest that negotiators make full use of the FTAA negotiations as an impetus to liberalize import regimes, including the US import restraints on sugar, dairy and peanuts. Given that the Doha Round of WTO negotiations is to support increased market access for developing countries, liberalization for key raw material imports from FTAA members will progress that objective.
As the second largest user of sugar in the US, access to world-price sugar is important for the US confectionery industry. For 2001/02, world sugar exports are projected by the U.S. Department of Agriculture at 34.5 million metric tons, raw value. World production is projected at 126.8 million metric tons, raw value. Thus, over 27% of world production is exported. A higher percentage of sugar production is internationally traded than is the case for wheat (22% of 2001/02 world production), rice (6%), coarse grains (13%), and oilseeds (23%). Therefore, an international agricultural trade agreement that does not deal with sugar is close to a contradiction in terms.
According to USDA, the leading sugar-exporting nations for 2001/02 include two FTAA members: Brazil (9.50 million metric tons, raw value), the European Union (3.70), Australia (3.65), Thailand (3.55), Cuba (2.70), South Africa (1.50), Guatemala (1.19) and India (1.00).
Imports of sugar1 from FTAA members have steadily decreased
since 1998. In year 2001, imports were down 3.5% from the previous year. Based
on USITC data, the US sources raw cane sugar of HTS code 1701.11.10002 from 22 of
the FTAA member countries.3 Annual production from these countries in 2001
totaled 33 million metric tons; exports totaled more than 12 million mt.4
However, because of the tariff rate quota on sugar, US imports were limited to
715,500 metric tons, which represents merely 2.2% of production and 5.8% of FTAA
exports. US negotiators should be prepared to significantly increase
access to the US market for these developing countries’ exports.
V. ACCESS FOR FINISHED CONFECTIONERY & INTERMEDIARY PRODUCTS
Our members increasingly rely on foreign markets to achieve their revenue and profitability goals. Market access improvements will be critical if our members are to take advantage of new export opportunities in rapidly expanding FTAA markets.
The industry’s objective is the total elimination of tariffs on chocolate, chocolate confectionery and sugar confectionery products. We support the elimination of duties on all cocoa and cocoa-containing products that are classified in Chapter 18 of the Harmonized System. Duty elimination for these products would benefit cocoa producing developing countries in South America. Such trade liberalization could also ultimately lead to increased consumer demand for chocolate and non-chocolate confectionery products in markets around the world creating new opportunities for US exporters.
Secondly, we continue to support liberalization of all processed foods including chocolate, confectionery, and sweet biscuits. There are different approaches that can be used to achieve the final goal. The simplest is for countries to agree to a maximum rate for processed foods by a date certain, i.e. 5% by 2005. We are prepared to have all confectionery products included.
Tariffs in South America remain prohibitively high (10% - 65%) in at least half of the 33 markets. Bahamas and the Mercosur countries impose the highest tariff rates for confectionery imports. The average tariff in the region for confectionery is almost 20%.
There continue to be obstacles to US exports of confectionery products. While some of the regulatory practices identified are not trade barriers per se, they are being administered in such a way as to obstruct our members’ exports. Measures include:
NCA / CMA have consistently urged the elimination of these obstacles in bilateral, regional and multilateral fora as appropriate. We view the FTAA Market Access negotiations as a critical venue to address these barriers with the goal of eliminating any redundant, costly and unnecessary requirements among all FTAA member countries, and maximizing export opportunities for our members. Access achieved in the FTAA should:
NCA / CMA appreciate the opportunity to provide comments on the FTAA as negotiators prepare to further advance positions. We look forward to continuing to work with FTAA negotiators to ensure increased access to South American markets for our member companies’ confectionery products and access to world-priced essential commodities from the region.
1 Products of HTS Heading 1701 as
reported by USITC Trade Website, Imports for Consumption measured in
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