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Trade Negotiations and U.S. Agriculture: Good or Bad? Or Both?

Trade Negotiations and U.S. Agriculture: Good or Bad? Or Both?. Producers are asking…. What do we get out of trade agreements? Aren’t we the only ones who abide by them? We can’t enforce the deals we make…. Agreements make use more dependent on imports…

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Trade Negotiations and U.S. Agriculture: Good or Bad? Or Both?

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  1. Trade Negotiations andU.S. Agriculture:Good or Bad?Or Both?

  2. Producers are asking… • What do we get out of trade agreements? • Aren’t we the only ones who abide by them? • We can’t enforce the deals we make…. • Agreements make use more dependent on imports… • Why should we support more negotiations? • Shouldn’t we focus on supporting and protecting our own farm sector and not worry about exports? DTB Associates, LLP

  3. 54% 49% 44% 37% 20% Wheat Soybeans Cotton Corn Rice Acreage Exported Percent Exported of Total Acreage Harvested: 2002 Market Year DTB Associates, LLP

  4. Many Products Depend on Overseas Markets Percent of Domestic Production Exported(1998 – 2000 Average Volume) DTB Associates, LLP

  5. Importance of TradeEmployment • Exports support 750,000 jobs • Every $1b in exports creates 15,000 jobs • Exports support 1/3 of all rural jobs • In addition to on farm jobs, most are in trade and transportation, services, food processing and other manufacturing DTB Associates, LLP

  6. Importance of TradeEconomic Activity • 2003 - U.S. exports of $57b create additional $84b in support services to harvest, process, package, store, transport and market • High-value products generate greater additional economic activity - $370 million in value-added for every $1b exported DTB Associates, LLP

  7. Bulk vs. High Value Exports DTB Associates, LLP

  8. U.S. Meat and Poultry Exports DTB Associates, LLP

  9. Corn and Soybean Exportsin the Form of Beef and Pork The quantity of soybeans in the form of beef and pork represents an additional 8% of soybean exports. The quantity of corn in the form of beef and pork represents an additional 18% of corn exports. Source: US Meat Export Federation Estimates for years 2003-2005 DTB Associates, LLP

  10. Corn Exportsin the Form of Broilers • Over 12% of all U.S. corn goes to poultry feed – about 1b bu. (slightly less than ethanol at 14%). • 15% of all broiler production in the U.S. is exported. • So U.S. corn exports in the form of broilers is about 200 million bushels – an additional 10% of corn exports. DTB Associates, LLP

  11. Have previous trade agreements failed? There have been four major trade agreements since 1979: • Tokyo Round • US - Canada FTA • Uruguay Round • NAFTA • (China WTO Accession) DTB Associates, LLP

  12. The Tokyo Round Gave Us: • First time access to Japan for beef (now a $1.5b market) • First time access to Japan for citrus (now $230 million) • Improved access to the EU for rice (now $326 million) DTB Associates, LLP

  13. US-Canada Agreement Gave Us: • Improved access to Canada for fruits and vegetables (now $789 million) • Improved access to Canada for corn (now $126 million) DTB Associates, LLP

  14. The U.S.-Canada FTADid Not Give Us: • Free access for dairy products or poultry (the U.S. did not give free access for dairy or peanut products). • Elimination of the Wheat Board. DTB Associates, LLP

  15. Examples of What theUruguay Round Gave Us: • First time access to Japan for rice (now $100 million) • Improved access to the EU for almonds ($315 million) • Improved access to Japan for pork (now $736 million) • Improved global access for poultry (now $2.3 billion) DTB Associates, LLP

  16. The Uruguay Round Also Gave Us: • First time limits on EU export subsidies • Limits on trade distorting domestic supports • Elimination of all non-tariff measures • The SPS Agreement • A much improved dispute settlement system DTB Associates, LLP

  17. Most Famous (or Infamous) Trade Agreement isNAFTA “NAFTA has been one of the worst trade agreements we have ever negotiated.” (A U.S. Senator, in a statement opposing Trade Promotion Authority, 5/15/2002) DTB Associates, LLP

  18. Has NAFTA been a failure for U.S. agriculture? Index of U.S. Agricultural Exports (2003 est.) DTB Associates, LLP

  19. DTB Associates, LLP

  20. Total U.S. Agricultural Trade with Canada DTB Associates, LLP

  21. In Short, the NAFTA Gave Us: • Significant guaranteed and preferential access to Mexico for many products. • But no improvements in trade with Canada. DTB Associates, LLP

  22. Don’t we always give up more than we get? Farmers in other countries say their governments always get out-negotiated. Most countries believe the U.S. has benefited more than they have in recent trade agreements and they are probably right. But that is probably because the U.S. gave up more in earlier trade rounds – from post-WWII to the late sixties – and therefore has less to give now. DTB Associates, LLP

  23. But aren’t we the only ones who abide by our commitments? Most countries abide by their commitments. Exceptions get a lot of attention. Our hands aren’t clean… DTB Associates, LLP

  24. 500-1,000 ag. products in an average country tariff list 128 countries participated in the Uruguay Round 58 dispute settlement cases filed in agriculture; 0.08% of all commitments ~60,000-100,000 specific ag. commitments DTB Associates, LLP

  25. Since 1995, the U.S. has filed 16 challenges against others for failing to comply with WTO agricultural commitments. Other countries have filed 11 cases against the U.S. for failing to comply on ag, plus an additional 50 in other areas. The U.S. has won more cases than it has lost. DTB Associates, LLP

  26. But isn’t it true that the WTO can’t enforce disputes we win? Most countries do modify their laws to conform to WTO dispute settlement rulings. It is true that the WTO cannot force them to do so. In such cases, the aggrieved country can retaliate, as the U.S. did in hormone dispute against the EU. DTB Associates, LLP

  27. The EU hormone case is generally cited as the classic example of the“failure of the dispute settlement system.” But was it a failure? DTB Associates, LLP

  28. Our WTO victory, and our retaliation against the EU, probably prevented copycat hormone bans -- and the potential loss of $3 billion in beef exports to other countries. DTB Associates, LLP

  29. But aren’t we being overtaken by imports? No, the U.S. is not being overtaken by imports. Imports would account for only about 9% of U.S. consumption if non-competing agricultural imports like coffee, tea, rubber, etc. were excluded from the following numbers. DTB Associates, LLP

  30. DTB Associates, LLP

  31. The U.S. is self-sufficient in key commodities (pork, poultry, rice, feedgrains, wheat and soybeans) and is nearly self-sufficient in others (sugar, beef, and dairy).And, the U.S. exports more than it imports, so American farmers are also feeding millions of people overseas. DTB Associates, LLP

  32. Why should we support new trade negotiations? DTB Associates, LLP

  33. Exports are Crucial to the Farm Economy DTB Associates, LLP

  34. The World Market is Huge DTB Associates, LLP

  35. And It’s Growing 1.6 Billion Increase 60 Million Increase DTB Associates, LLP

  36. Why the U.S. is Seeking to Reduce Inequities in Ag Tariffs DTB Associates, LLP

  37. What the U.S. is Trying to Achieve DTB Associates, LLP

  38. What the U.S. is Trying to Achieve on Export Subsidies: DTB Associates, LLP

  39. Why (and how) the U.S. Wants to HarmonizeDomestic Supports: Current Limits U.S. Proposal DTB Associates, LLP

  40. OECD: Values include support in payments and price supports. DTB Associates, LLP

  41. OECD: Values include support in payments and price supports. DTB Associates, LLP

  42. Why shouldn’t we focus on supporting and protecting our own farm sector, and not worry about exports? DTB Associates, LLP

  43. Some people are arguing that we should focus our farm policy on supporting the domestic price rather than relying on the market and exports. • Prices above world price must be protected from import competition. Therefore, new import restrictions for both raw and processed products. • Price supports encourage over-production. Therefore, supply management or export subsidies - or both. Export subsidies for livestock products to offset higher input costs. • Alternative: international commodity agreements where major countries would “stock or de-stock” depending on prices to prop up world price. Cartel-like deals -- tried before and either fail, or like export embargoes, backfire. How would this work? DTB Associates, LLP

  44. WTO or FTA’s • WTO negotiations deal with all unfair practices; FTA’s don’t. • WTO negotiations deal with EU export subsidies; FTA’s don’t. • WTO negotiations deal with important ag export markets; most FTA’s don’t. • FTA’s can resolve specific problems and benefit certain exports; they can be very positive for U.S. agriculture overall. • FTA’s eliminate effect of preferential trade agreements (GSP, CBI, Andean Trade Preferences) • Neither WTO nor FTA’s are ever “one way streets” -- all winners and no losers. DTB Associates, LLP

  45. July: Major disputes and their resolution (sugar, cotton, etc.)August: The Doha Agenda and its potentialSeptember: Trade and Domestic Policy Future presentations DTB Associates, LLP

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