By Amrietha Nellan
From being one of the original cattle ranching states, to the national leader of the modern craft beer scene, Colorado has a knack for developing iconic American industries. Colorado’s strong brand is recognized around the world, and is a source of competitive advantage for the state’s agricultural exports. However, high tariffs and transportation costs to major markets dampen the full economic potential of these industries for Colorado. Thankfully, the Trans-Pacific Partnership (TPP) makes unprecedented gains in market access and lower barriers to trade for U.S. exports — benefiting Colorado ranchers and brewers alike.
Colorado’s ranching roots date back to when the Spanish were in the area over 450 years ago. With this long history to perfect practice and product, and ideal conditions nearly year-round for rearing cattle, Colorado became one of the top beef producers in the country. Today, beef is the number one agricultural export and second commodity export for the state, bringing in $646 million in 2015 alone. But the industry is still hampered by trade barriers, even in the largest market for U.S. beef: Japan.
Currently, Japan imposes tariffs as high as 38.5% on fresh, chilled, and frozen beef. Taken on their own, these high taxes inflate the price of U.S. beef and drives down consumer demand. But there is an additional challenge for U.S. beef products in Japan. Our major competitor in the Japanese market, Australia, negotiated lower tariffs on its beef exports to Japan that went into effect last year. The lower price of Australian beef has already cut into U.S. beef sales in Japan, losing $100 million in expected sales between 2014 and 2015. But TPP solves this problem. It eliminates Japan’s tariffs on U.S. beef products to zero and drops the tariff on fresh, chilled, and frozen beef by over 75%. On a level playing field again, TPP will help Colorado beef exporters get back on track for double digit growth.
Breweries have also been in Colorado for a while, coming over during the Gold Rush in the late 1850s. But the first microbrewery was only established in 1979, igniting the beginning of the now lucrative craft beer industry. U.S. exports of craft brews have grown by over 35% annually, with Colorado a little ahead of the national average. The Asia-Pacific is one of the leading consumer markets driving today’s craft beer export growth. And with TPP, Colorado’s nearly 300 craft breweries will be in an ideal position to quench this global thirst.
Brewers only export when the cost of exporting is outweighed by the increased profit margins in foreign markets. That profit margin can be eaten away by high tariffs, and ultimately discourage brewers from entering the international market. TPP goes to the heart of the issue by eliminating tariffs as high as 35% on U.S. beer in TPP markets. The agreement also increases the profitability of exporting by reducing a major component of the cost of exporting: transportation. TPP provides a streamlined customs process that experts say will cut wait times and reduce the number of days it takes to ship products between TPP markets. All this comes at the perfect time — as shelf space becomes increasingly scarce in the U.S. for new brews, TPP makes it easier to find space abroad.
It’s clear that TPP will expand the market for Colorado’s beef and beer exports, drawing larger gains from trade for Colorado’s ranchers and brewers. But the gains are not only limited to their industries — “for every job produced in the craft brewing industry there is the opportunity for an additional 12.5 jobs to be created in packaging, machinery and other industries”, similarly, “for every $1 billion in beef exports, 12,700 jobs are created.” With this multiplier effect on job creation, TPP is a clear win for these industries, American workers, and the state.