Trade Negotiations

1
Trade Negotiations U.S. AgricultureProspects
Issues for the Future

• Parr Rosson
• Professor Director
• Center for North American Studies
• Department of Agricultural Economics
• Texas AM University

2
Overview

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

3
International Setting Trade Strategy
4
Billions
8
ME
AFR
LA
TOTAL
7,570
NA
WE
I. ASIA
EE/FSU
D. ASIA
8
6,310
Ind. 8, Dev. 31
6
6
4
China, India, Indonesia
4
2
2
0
0
1990
2000
2001
F2005
F2010
F2015
F2020
5
(No Transcript)
6
China 6.5 India 5.4
7
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8
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9
U.S. Tariffs, 1789-2004
Percent
70
70
Tariff of Abominations, 1828
Smoot-Hawley Tariff, 1930
60
60
Morrill Act, 1861
50
50
Generalized System of Preferences, 1968
40
40
30
30
WTO, 1995
20
20
Fordney-McCumber Tariff, 1922
10
10
GATT, 1947
0
0
1789
1816
1820
1840
1860
1880
1900
1920
1940
1960
1980
2000
Statistical Abstract of the United States
10
World Average Agricultural Tariffs, 2002
Percent
140
Region Average
114
World Average
120
85
100
62
80
55
60
40
30
25
40
12
20
0
Asia
United States
South America
North America
European Union
Central America
Caribbean Islands
Source WTO ERS/USDA
11
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
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Progress to Date
13
CUSTA, 89
Bahrain 06?
Jordan 01
CAFTA-DR 06?
NAFTA 94
Israel 85
Morocco 06?
Thailand 06?
Panama 06
MEFTA 06
Andean FTA 06
FTAA 06
Singapore 03
Chile 04
Australia 05
Southern African Customs Union 06
U.S. Trade Agreements
14
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

15
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

16
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

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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

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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)

19
Doha Development Agenda in the World Trade
Organization (2001-?
Preparing for the Hong Kong Ministerial December
8-13, 2005
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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

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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

22
Export Competition

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

23
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 Dont Make Substantial Cuts, A Deal
  Breaker

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Agricultural Producer Support By Country
1986-88 and 2001-03
-Percent of Total Farm Receipts from Government-
1986-1988
80
71
2001-2003
65
62
60
60
40
39
33
40
26
20
20
12
20
2
0
New Zealand
Canada
United States
EU
Japan
Korea
Source OECD's database (see www.oecd.org)
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Total Allowable Trade Distorting Domestic
Support, 'The Big 3, 2002
Billion
128
140
Includes Amber Blue Boxes, Product Specific
Non-product Specific De Minimis, Each Based on 5
of Total Value of Agricultural Production
120
100
80
49
48
60
40
20
0
European Union
United States
Japan
WTO, Trade Policy Review and calculations.
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Total Trade Distorting Domestic Support Remaining
After Year 1 Down Payment (calculated)
Billion
120.0
100.2
100.0
80.0
60.0
39.2
38.4
40.0
20.0
0.0
European Union
United States
Japan
27
Total Trade Distorting Domestic Support
Assuming 50 Percent Reduction
-Billion Dollars-
60.0
50.1
50.0
40.0
30.0
19.6
19.2
20.0
10.0
0.0
European Union
United States
Japan
Calculated
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Real Income Effects of Liberalization of Global
Merchandise Trade, by Country, 2015
-Impacts in 2015 Relative to the Baseline (2001
dollars)-
-Billion Dollars-
350.0
277.9
300.0
250.0
190.9
200.0
142.1
150.0
100.0
60.4
52.2
44.2
12.9
12.3
50.0
10.9
0.0
EU 25
Japan
Brazil
World Total
Korea and Taiwan
High-income Countries
United States
Middle East
Developing Countries
Source Anderson, Martin and van der Mensbrugghe
(2005a, Table 12.3)
29
Impacts of Doha on Agricultural Output and
Employment Growth, by Country, 2005-2015
-Annual Average Growth Rate (Percent)-
6
Output
4.4
4.4
4.3
Employment
4
2.2
1.7
1.6
1.1
1
2
0
-0.4
-1.4
-1.4
-2
-2.1
-2.8
-4
-4.1
-6
Canada
EU 25
Korea and Taiwan
New Zealand
United States
Japan
Brazil
Source Anderson, Martin and van Mensbrugghe
(2005a, Tables 12.12 and 12.13)
30
Percent Change
Large Gains
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Conclusions and Implications
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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

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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

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Thank You!
Questions?
Parr Rosson Department of Agricultural
Economics Texas AM University College Station,
TX 77843-2124 E-mail prosson_at_tamu.edu Telephone
979-845-3070