WASHINGTON - The U.S.-Australian free trade agreement would reduce the value of agricultural land rents in the United States by about $75 million per year and could lead to some reduction in land values, according to a report on the impact of the agreement by the U.S. International Trade Commission.

ITC economists reached the conclusion on land rents as part of a formal investigation requested by U.S. Trade Representative Robert Zoellick as required under the 2002 Trade Act. The report was released in May.

Reduction in rents

In an economic simulation on the "change of welfare" for Americans if the agreement is finalized, ITC economists concluded that the overall value of the agreement to the United States when fully implemented would be a positive $490.8 billion per year because of increases in manufacturing exports, but that land rents would go down slightly because the agreement would result in more agricultural imports than exports. The only other loss to the United States would be $241.7 million in tariff revenues. Exports would increase the value of manufacturing facilities by $296.3 million, skilled labor by $236.7 million and unskilled labor by $271.6 million. In percentage terms, the agreement would hurt land rents more than it would increase the value of manufacturing and labor, however. The reduction in land rents would amount to 0.12 percent of current land rents, which the ITC estimated to total $62.3 billion per year. The increases in the value of manufacturing facilities and labor would amount to only 0.01 percent of those categories.

An ITC economist who worked on the report told Congress Daily that the analysis was "very abstract" because it considers the impact of the U.S.-Australian free trade agreement without other economic developments and also assumes that the agreement would be implemented completely in January 2005. The agreement reduces U.S. agricultural tariffs on meat, dairy and other Australian agricultural products, but some of the agricultural provisions will not be fully implemented for 18 years.

The ITC economist said the impact on ranchers, farmers and landowners would be "very small." But he said, "Anytime a producer is selling less, his tools are worthless."

The economist said he did not believe farmers or ranchers "would feel a decline in their rents" but would be more likely to feel the impact in the sales of their products. Ranchers and farmers who own their own land may find that - barring other economic developments - when they want to sell land, they might have to accept a slightly lower price, he said. The economist said he expected the impact to be bigger on ranchland than dairyland because meat imports from Australia would be expected to rise more quickly than dairy imports.

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