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Analysis of the U.S.-Brazil Wheat Trade: Market Access and Policy Implications

This report examines the historical context and current situation of U.S.-Brazil wheat trade, focusing on market share and trade policy issues stemming from the Mercosur Agreement of 1991. Key points include Brazil's TRQ commitments, the impact of various negotiations, and the implications for U.S. competitiveness in the wheat market. Despite Brazil’s agriculture support programs boosting domestic production, U.S. exports have suffered from inadequate TRQ implementation. Understanding these dynamics is essential for improving trade opportunities for U.S. wheat producers.

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Analysis of the U.S.-Brazil Wheat Trade: Market Access and Policy Implications

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Presentation Transcript

  1. Brazil Policy Issues June 2014

  2. Historical Brazil – US Wheat Trade Situation Market Share Percent Mercosur Agreement November, 1991 47% US market share 7% US market share Source: USDA PS&D

  3. Historical Brazil – U.S. Wheat Trade

  4. Market Access - TRQ • WTO official reported upon inquiry • Uruguay Round Agreement on Agriculture • Brazil agreed to 750,000 MT ZERO duty TRQ • Bound duty on wheat to 55% maximum • Brazil Apr 1996 – renegotiate, updated status in 2003, 2009 and 2012 • U.S. has Initial Negotiating Rights / Canada Substantial Supplier (based on 1980s market) • Countries cannot unilaterally remove a market access commitment

  5. USW Efforts - TRQ • Raised to USDA/USTR in 2010 and multiple times since • Passed board motion as a priority in 2011 • Raised to USDA/USTR again in 2011 • Raised the issue in Geneva to Brazilian Mission in April 2011, Brazilian Embassy 2012, Brazilian Mission 2013, Brazilian officials in 2012 • Economic analysis on lost revenue to US Farmers and trade impact • Consultant meetings in 2014

  6. Market Access - TRQ • Brazil government stance • 10% applied duty is less distortive than raising the duty to the 55% bound rate • US has better access under current terms than implementing the TRQ • Why USW continues to push • More consistent competitiveness at 0% duty • WTO Case Law exists that limits Mercosur from using the 0% duty TRQ • 2008 and 2013 TRQ for wheat - shown ability to implement a TRQ • Historical wheat ties – competitive at equal basis • Growing market

  7. Brazil Farm Programs – Support • Increased funding to spur wheat production • Domestic Support notifications • Government spending more in recent years on wheat production – reducing trade opportunities • Minimum Support Price & PEP program • Support farmers • Export surplus • Wheat received the most trade distorting support in 2008/09 of any commodity

  8. Brazil’s Trade Distorting Support for Wheat

  9. Brazil Farm Support

  10. Other Issues • Merchant Marine Renewal Tax • 25% of ocean freight cost – allowance in NE • Cotton Case Negotiations • Negotiations • Retaliation / Compliance

  11. Conclusion • Trade Agreement has had a major impact on US wheat competitiveness • Brazil’s lack of TRQ implementation has hurt US export opportunities • Brazil’s farm policies have encouraged wheat production and result in exports to third countries • Need to get policies right to improve US wheat opportunities

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