Trade Neg FarmMgrs100705 1

Trade Negotiations & U.S. Agriculture:Prospects & Issues for the Future: 

Trade Negotiations & U.S. Agriculture: Prospects & Issues for the Future Parr Rosson Professor & Director Center for North American Studies Department of Agricultural Economics Texas A&M University

Overview: 

Overview International Setting & Trade Strategy Role of Trade Agreements The World Trade Organization Negotiations in Doha Development Agenda DS 267, ‘Cotton Case’ Conclusions & Implications

International Setting & Trade Strategy: 

International Setting & Trade Strategy

Slide4: 

1990 2000 2001 F2005 F2010 F2015 F2020 0 2 4 6 8 0 2 4 6 8 NA WE I. ASIA EE/FSU D. ASIA ME AFR LA TOTAL Billions 6,310 7,570 Ind. + 8%, Dev. + 31% China, India, Indonesia

Slide6: 

China + 6.5% India + 5.4%

Slide9: 

U.S. Tariffs, 1789-2004 Statistical Abstract of the United States 1789 1816 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 0 10 20 30 40 50 60 70 Percent 0 10 20 30 40 50 60 70 Tariff of Abominations, 1828 Morrill Act, 1861 Smoot-Hawley Tariff, 1930 Generalized System of Preferences, 1968 Fordney-McCumber Tariff, 1922 GATT, 1947 WTO, 1995

Slide10: 

World Average Agricultural Tariffs, 2002 Source: WTO & ERS/USDA 114 85 55 40 30 25 12 Asia Caribbean Islands Central America South America European Union North America United States 0 20 40 60 80 100 120 140 Percent Region Average World Average 62%

U.S. Trade Strategy: 

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 Only Forum Where All 148 Countries Are Present & Farm Policy Is Negotiated Concurrent Initiatives

Progress to Date: 

Progress to Date

Slide13: 

Australia ‘05 Bahrain ’06? CAFTA-DR ’06? Chile ‘04 FTAA ‘06 Morocco ’06? Southern African Customs Union ‘06 Singapore ‘03 Jordan ‘01 U.S. Trade Agreements NAFTA ‘94 Israel ‘85 CUSTA, ‘89 Andean FTA ‘06 Panama ‘06 Thailand ’06? MEFTA ‘06

Trade Agreements In-Place (7): 

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 (9): 

Trade Agreements-Pending (9) Morocco-President Signed 8/17/04, Pending Signature, King of Morocco CAFTA-DR-Signed by President, Passed El Salvador, Guatemala, Honduras (20 Years) Bahrain-Pending Submission to Congress Panama-Nine Negotiating Sessions Held, Panama Delays Colombia, Ecuador, Peru (ANDEAN)-Nine Rounds, Negotiations Continue Thailand-Three Rounds Held

Trade Agreements-Pending (9): 

Trade Agreements-Pending (9) Southern African Customs Union (SACU): Botswana, Namibia, Lesotho, Swaziland, South Africa-Six Rounds Held Oman-Two Rounds of Negotiations Held, Part of Middle East Free Trade Area (MEFTA) United Arab Emirates-Two Rounds Held, part of MEFTA

Why Regional 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 Any One Agreement-Small Impact, Taken Together-Large Impact

Strategic Considerations: 

Strategic Considerations Secure Key Strategic Materials Oil, Fertilizer, Natural Gas Stem Illegal Immigration by Creating Economic Opportunity in Other Countries Create ‘Buffer Zone’ Against Terrorism (Thomas Barnett & 9/11 Commission Report)

Doha Development Agenda in the World Trade Organization (2001-?: 

Doha Development Agenda in the World Trade Organization (2001-? Preparing for the Hong Kong Ministerial December 8-13, 2005

Three Pillars of Trade Reform (Agreed in Concept August 1, 2004): 

Three Pillars of Trade Reform (Agreed in Concept August 1, 2004) Market Access: Reductions in Tariffs Export Competition: Elimination of Export Subsidies Trade Distorting Domestic Support: Reductions Over Time

Market Access: 

Market Access Highest Tariffs Cut the Most U.S. Pushing for Deep Tariff Cuts by Developing Countries (60-75%) Issue: Many Developing Countries Want ‘Special’ Treatment & Some Reluctant to Agree to Large Cuts Much Left ‘To Be Negotiated’ & A Potential ‘Deal Breaker’

Export Competition: 

Export Competition Reduce & Eliminate Export Subsidies by Date Certain (Agreed) EU Export Subsidies, $2+ Billion/Year U.S. Export Credit Guarantees > 180 Days Food Aid to Be Disciplined Strong Support for Export Competition Reforms

Trade Distorting Domestic Support: 

Trade Distorting Domestic Support Programs that Cause Production to Be Different than Would Be Without Programs Year 1 Cut of 20% Subsequent Phased Reductions 40-50% Range Reductions from Allowable Support Issue: Developing Countries Wanted Cuts Now, Tariff Reductions Later If Big 3 Don’t Make Substantial Cuts, A ‘Deal Breaker’

Slide24: 

Agricultural Producer Support By Country 1986-88 and 2001-03 -Percent of Total Farm Receipts from Government- Source: OECD's database (see www.oecd.org) 12% 33% 26% 40% 62% 71% 2% 20% 20% 39% 60% 65% New Zealand Canada United States EU Japan Korea 0% 20% 40% 60% 80% 1986-1988 2001-2003

Slide25: 

Total Allowable Trade Distorting Domestic Support, 'The Big 3,‘ 2002 WTO, Trade Policy Review and calculations. $128 $49 $48 European Union United States Japan $0 $20 $40 $60 $80 $100 $120 $140 Billion $ Includes Amber + Blue Boxes, Product Specific + Non-product Specific De Minimis, Each Based on 5% of Total Value of Agricultural Production

Slide26: 

Total Trade Distorting Domestic Support Remaining After Year 1 Down Payment (calculated) $100.2 $39.2 $38.4 European Union United States Japan $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 Billion $

Slide27: 

Total Trade Distorting Domestic Support Assuming 50 Percent Reduction Calculated $50.1 $19.6 $19.2 European Union United States Japan $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 -Billion Dollars-

Slide28: 

Real Income Effects of Liberalization of Global Merchandise Trade, by Country, 2015 -Impacts in 2015 Relative to the Baseline (2001 dollars)- Source: Anderson, Martin and van der Mensbrugghe (2005a, Table 12.3) $60.4 $12.3 $52.2 $44.2 $10.9 $12.9 $190.9 $142.1 $277.9 EU 25 United States Japan Korea and Taiwan Brazil Middle East High-income Countries Developing Countries World Total $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 -Billion Dollars-

Slide29: 

Impacts of Doha on Agricultural Output and Employment Growth, by Country, 2005-2015 -Annual Average Growth Rate (Percent)- Source: Anderson, Martin and van Mensbrugghe (2005a, Tables 12.12 and 12.13) 4.3% 1.7% -0.4% -1.4% 1.6% 4.4% 4.4% 1% -1.4% -2.8% -4.1% -2.1% 2.2% 1.1% Canada United States EU 25 Japan Korea and Taiwan Brazil New Zealand 0% 2% 4% 6% -2% -4% -6% Output Employment

Slide30: 

Percent Change Large Gains

Conclusions and Implications: 

Conclusions and Implications

Conclusions & Implications: 

Conclusions & Implications U.S. Market Is Open, Rest of World Is Not U.S. Export Growth Lags Import Growth Agricultural Trade Distorted by Tariffs, Export Subsidies, Trade Distorting Domestic Support U.S. Pushing for Deep Tariff Cuts by Developing Countries To Open More Markets for U.S. Exports Little Agreement on How Much Tariffs Might Be Cut

Conclusions & Implications: 

Conclusions & Implications Reductions in Trade Distorting Domestic Support Likely Substantial Some Adjustment for U.S. Producers Absent WTO Progress, World Trade & Economic Growth Stifled, Especially in Agriculture-Not Good for U.S. Agriculture Cotton Case Could Figure in Outcome U.S. Response Other Cases (Rice, Soybeans??) Trade Reform is at a Crossroads: Protection or Progress? If Export Markets Are Important, Trade Agreements & WTO Progress Are Necessary

Slide34: 

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