Global Agricultural Trade and U'S' Farm Bill Prospects

1
Global Agricultural Trade and U.S. Farm Bill
Prospects

• Ellen Terpstra
• Deputy Under Secretary
• Farm and Foreign Agricultural Services
• U.S. Department of Agriculture

2
Global Agricultural Trade and U.S. Farm Bill
Prospects

• U.S. Agricultural Exports
• Global factors
• Long-term forecast
• The Trade Agenda
• WTO
• FTAs
• U.S. Farm Bill

3
U.S. Agricultural Trade
All major commodity groups to reach record export
sales in 2008. Grain oilseed
prices surge export volumes rise for nearly
every group except oilseeds in 2008. Import
growth continues faster pace.
101
Records
81.9
76.5
70.0
Exports
Imports
24.5
Trade Surplus
11.9
08p
4
Canada Mexico Account for Much of the Growth in
U.S. Ag Exports
5
Fastest Growing Middle ClassThe middle class in
developing countries could reach almost 1 billion
households by 2020
6
Other Factors Driving U.S. Export Gains

• Strong growth in global economy
• Value of the U.S. dollar continues to fall
• Renewable energy markets boost demand
• Reduced foreign competition
• Policy moves to prevent exports

7
World Economic GrowthBy Region
8
Other Factors Driving U.S. Export Gains

• Strong growth in global economy
• Value of the U.S. dollar continues to fall
• Renewable energy markets boost demand
• Reduced foreign competition
• Policy moves to prevent exports

9
WTO Doha Round Negotiations

• Holds tremendous potential for improved worldwide
  agricultural trade
• Falconer Text Brings unresolved issues into
  clearer focus
• Architecture for all elements of agricultural
  market access
• Size of cuts in trade-distorting subsidies
• Magnitude of sensitive and special product
  flexibilities

10
WTO Doha Round Negotiations

• Market Access Must deliver substantial new trade
  flows in developed and developing countries,
  through
• Ambitious tariff cutting formulas
• Substantial TRQ expansion in exchange for lower
  tariff cuts on Sensitive Products
• Special Product disciplines that provide
  flexibility but no exclusions from tariff
  commitments
• Special Safeguard Mechanisms that do not
  undermine existing WTO tariff limits (bindings)

11
WTO Doha Round Negotiations

• Export Competition Making Progress
• Subsidies
• Food Aid / Export Credits
• STEs
• Domestic Support Focus on the U.S.
• Overall Trade Distorting Support
• Blue Box

12
Projected Participation in FTAs in 2010
Based partly on data from R. Fiorentino, L.
Verdeja, C. Toqueboeuf, Weil, Gotshal and Manges
13
U.S.-Australia FTA

• Entered into force in 2005
• Already seen a 16 increase in overall two-way
  trade
• Two-way agricultural trade now nearly 3.3
  billion annually
• While trade balance continues to run heavily in
  Australias favor, growth in U.S. exports is
  promising

14
Administrations U.S. Farm Bill Proposals

• Underlying Objectives
• more equitable, predictable, and better able to
  withstand challenge
• Supports Emerging Priorities
• renewable energy, conservation, research, rural
  development and trade
• Fiscally Responsible
• save 10 billion over 2002 Farm Bill spending
• Provided 4.5 billion more than projected
  spending if the 2002 Farm Bill were extended

15
Administrations U.S. Farm Bill Proposals

• Commodity program proposals
• Move toward a market-oriented loan rate
• Increase Direct Payments by 5.5 billion
• Create revenue-based Counter-cyclical program
• Tighten subsidy payment limits
• Eliminate the three-entity rule
• Lower AGI to 200,000

16
Both House and Senate Farm Bills

• Lack real reform, creating farm policy less
  responsive to open markets
• Increase rather than decrease market-distorting
  provisions
• Create larger vulnerability to international
  trade rules
• Fail to generate true savings to pay for its
  spending
• Raise taxes on other industries to pay for
  increased spending

17
U.S. Farm Bill

• House-Senate Conference forces short time
  pressures
• March 15 extension expires
• Overall funding level with appropriate spending
  offsets
• 10 billion over budget baseline
• Tax increases are non-negotiable
• Farm policy reforms are necessary for
  Administration support
• Administration wants a Farm Bill that the
  President can sign

18
Conclusion

• Expanded foreign market access is vital to U.S.
  agriculture
• Doha can have a critical impact on future U.S.
  policy direction
• U.S. continues seeking other bilateral and
  regional trade agreements
• Without effective farm policy reform, U.S.
  commodity programs will become more vulnerable to
  trade challenges

19
Global Agricultural Trade and U.S. Farm Bill
Prospects

• Ellen Terpstra
• Deputy Under Secretary
• Farm and Foreign Agricultural Services
• U.S. Department of Agriculture