International Policy Update & Producer Opportunities Parr Rosson Professor & Director Center for North American Studies Department of Agricultural Economics Texas A&M University C NAS
Overview Trade Trends International Institutions Trade Agreements Conclusions & Implications
Trade Trends & International Setting
World Population 8 Billions ME AFR LA TOTAL NA WE I. ASIA EE/FSU D. ASIA Ind. + 8%, Dev. + 31% 6,310 7,570 8 6 6 4 4 2 2 0 0 1990 2000 2001 F2005 F2010 F2015 F2020 US Census Bureau
Global Insight, Inc., World Economic Outlook, 2002. $70 $60 $50 World Economic Output GDP, Trillion 1997 Dollars NA WE I. ASIA EE/FSU D. ASIA ME AFR CSA Ind. + 64%, Developing + 140% $40 $30 $20 $10 $0 1990 2000 2001 F2005 F2010 F2015 F2020
U.S. Tariffs, 1789-2004 70 Percent 60 Tariff of Abominations, 1828 Smoot-Hawley Tariff, 1930 70 60 50 40 Morrill Act, 1861 Generalized System of Preferences, 1968 50 40 30 20 WTO, 1995 30 20 10 0 1789 1816 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 Statistical Abstract of the United States Fordney-McCumber Tariff, 1922 GATT, 1947 10 0
Source: WTO & ERS/USDA World Average Agricultural Tariffs, 2002 Percent 140 120 115 Region Average World Average 100 85 80 60 40 20 55 40 30 25 62% 10 0
Top 10 U.S. Ag Export Markets Billion Dollars $12.0 Canada Mexico Japan EU-25 China/HK Taiwan Korea Turkey Indonesia Russia $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 2000 2001 2002 2003 2001 2005 Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade 2006 Forcast for Fiscal Year from USDA/FAS (Feb 06 Forecast) $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 U.S. Agricultural Trade, 1970-2006F Billion Dollars 1970 Exports 1975 Imports 1980 Trade Surplus Vanishes 1985 1990 1995 Since 2000: Exports + 25% Imports + 50% 2000 2006F 2005
Observations Disparity in Population & Income Growth Disparity in Use of Trade Barriers Disparity in Agricultural Trade Growth Finally Seeing China Emerge as Market, Cuba Growing Questions About Role & Future Importance of Trade
International Institutions & Trade Strategies
U.S. Trade Strategy Unilateral Generalized System of Preferences (GSP) CBI/CBERA African Growth Opportunities Act (AGOA) Regional/Bilateral NAFTA, CAFTA-DR, Others Multilateral World Trade Organization Concurrent Initiatives Only Forum Where All 150 Member Countries Are Present & Farm Policy Is Negotiated
Doha Development Agenda in the World Trade Organization (2001-6?) The Hong Kong Ministerial December 13-18, 2005 Agreement on Reductions by April 30, 2006 Draft Schedules Due July 31, 2006 Conclude Negotiations December 31, 2006
Three Pillars for Negotiations in Agriculture Market Access Export Competition Domestic Support Negotiations Under Tight Timeline Due to Expiration of TPA July 2007
Hong Kong, December 2005 Little Progress Made in Hong Kong EU Trade Commissioner said state of negotiations was serious but not desperate. Agreement to Eliminate Export Subsidies by 2013 Greater Quota-Free, Duty-Free Access Granted LDCs, Up to 97% of Products LDC s want it above 99% and Prepared to Veto While Many Fundamental Issues Remain Unresolved, Deadlines Have Been Set
Hong Kong, December 2005 (continued) Agreement on Degree of Tariff Cuts by April 30, 2006 EU Wants to Reduce by 39% (They Claim 46%) while U.S. and Others Think EU Needs to Reduce by about 60% Each Country to Submit Tariff Schedules by July 30 While Export Subsidies Addressed, More work on STE s and Export Credit Guarantees Needed Agreement Still Needed on Cuts in Trade Distorting Domestic Support (Amber/Blue) U.S. Wants about 53%, Pushing EU and Japan Towards 80% This Does Not Address Green Box Programs U.S. wants New Blue Box for CCPs
Other Negotiating/Related Issues NAMA (Non-Ag Market Access) The Cotton Case (DS 267) U.S. Budget Situation Dissension within EU (France vs. Everyone Else)
Observations WTO Could Result in No Substantial Agreement Future of WTO May Be On the Line Agreement Important to U.S. Open Markets Get Rid of Export Subsidy Distortions Minimize Litigation Over Farm Policy
Role of Trade Agreements
Why Regional Agreements? 2d Best After MTN WTO Has Been Slower than Desired Outcome is Uncertain Economic Incentives Open Markets Increase Business Efficiency Keep Pressure on MTN to Perform
Strategic Considerations Secure Strategic Materials Oil, Fertilizer, Natural Gas Stem Illegal Immigration by Creating Economic Opportunity in Other Countries Create Buffer Zone Against Terrorism (9/11 Commission Report)
CUSTA, 89 CAFTA-DR Jordan 01 Bahrain 05 NAFTA 94 Israel 85 05 Morocco 04 Thailand 06 Andean FTA 06 Panama 06 MEFTA 06 S. Korea FTAA 06 Singapore 03 Chile 04 Southern African Customs Union 06 U.S. Trade Agreements Australia 05
Trade Agreements In-Place (7) Israel-1985-1994 Canada-US (CUSTA)-1989-1998 North America (NAFTA)-1994-2008 US-Mexico US-Canada Canada-Mexico Jordan-December 17, 2001-2010 Chile-January 1, 2004-2015 Singapore-May 6 2003-2012 Australia-January 1, 2005-2022
Trade Agreements-Pending (10) Morocco-President Signed 8/17/04, Pending Signature, King of Morocco CAFTA-DR-Signed by President, (20 Years to Full Implementation) Bahrain-Pending Submission to Congress Panama-Nine Negotiating Sessions Held, Panama Delays Colombia, Ecuador, Peru (ANDEAN)- Nine Rounds, Negotiations Continue Thailand-Three Rounds Held S. Korea - 2007
Trade Agreements-Pending (10) Southern African Customs Union (SACU): Botswana, Namibia, Lesotho, Swaziland, South Africa-Six Rounds Held MEFTA: Oman & United Arab Emirates Under Negotiation: Egypt, Others??
Mexico Houston, 1,300 Miles NW Dominican Republic, 800 Miles NE North
CAFTA-DR Demographic Overview Country Pop. (mil) GDP/ Person Poverty % Lit. % Ag. Pop. % Costa Rica 3.9 $8,300 20.6 96 20 El Salvador 6.5 $4,600 48 80.2 30 Guatemala 13.9 $3,900 75 70.6 50 Honduras 6.7 $2,500 53 76.1 34 Nicaragua 5.1 $2,200 50 67.5 42 Dom. Rep. 8.7 $6,300 25 84.7 17
CAFTA-DR Prospects U.S. Ag. Export Gains of $1.5 Billion Annually Near Term: HQ Beef, Cotton, Wheat & Soybeans Long Term: Rice, Dairy, Pork, Poultry & Corn Challenges: Sugar, Cantaloupe, Honeydew Limitations: Infrastructure, Income Growth/Distribution, Plant & Animal Health Other Opportunities: Investment
CAFTA-DR Ag. Trade, 2003 US Exports: $1,339 million US Imports: $2,654 million Veg/Fruit 8.7% Cotton 3.5% Meats 15.2% Oilseeds 19.4% Other 12.4% Sugar 7.1% Coffee 17.3% Other 9.6% Fish 18.0% Bananas 25.4% Grains & Feeds 43.5% Fruit/Veg 19.9% USDA, FATUS.
Observations Agreements May Be Necessary Condition for Opening New Markets for Agriculture Time is Crucial Due to Expiration of TPA Some Agreements Easier than Others Future of Free Trade of the Americas in Serious Doubt
Conclusions and Implications
Conclusions & Implications U.S. Market Is Open, Rest of World Is Not U.S. Export Growth Lags Import Growth If Trade Growth is Important, Disparities Must Be Addressed Progress in WTO Important to U.S. & Texas for at Least 2 Reasons: Markets Farm Policy
Conclusions & Implications Reductions in Trade Distorting Domestic Support Likely Substantial Some Adjustment for U.S. Producers Absent WTO Progress, Expect More Litigation in WTO Aimed at Farm U.S. Policy Trade Reform is at a Crossroads: Protection or Progress? If Export Markets Are Important, Trade Agreements & WTO Progress Are Necessary, But Not Sufficient
Thank You! Questions? Parr Rosson Department of Agricultural Economics Texas A&M University College Station, TX 77843-2124 E-mail: prosson@tamu.edu Telephone: 979-845-3070