Texas Agricultural ForumTexas Agricultural ForumWaco, TexasWaco, Texas

January 21, 2004January 21, 2004

New Trade Negotiations:New Trade Negotiations:What’s at Stake For Texas Agriculture?What’s at Stake For Texas Agriculture?

Parr RossonParr RossonCenter for North American StudiesCenter for North American StudiesDepartment of Agricultural EconomicsDepartment of Agricultural EconomicsTexas A&M UniversityTexas A&M University CNAS

What’s at Stake?What’s at Stake?Market AccessSecure Sources of Raw Materials &

InputsGains & Losses to TradeAdjustment for Some Sectors

U.S. Trade NegotiationsU.S. Trade NegotiationsGATT 1947-94US/Israel 1985Uruguay Round 1986-93 (GATT)Canada 1989NAFTA 1994 (Year 10)Doha Round 2000-05? (WTO)3 Regionals CompletedCompleted in 2002/036 Regionals Pending

Australia ‘05

BahrainCAFTA ‘05

Chile ‘04FTAA ‘06

Morocco ‘06

Southern African Customs Union ‘06

Singapore ‘03

Jordan ‘03

U.S. Trade AgreementsU.S. Trade Agreements

NAFTA ‘94 Israel ‘85

CUSTA, ‘89

U.S. Agricultural Trade, 1970-2003 EU.S. Agricultural Trade, 1970-2003 E

1970 72 74 76 78 80 82 84 86 88 90 92 94 96 98 2000 2003 E$0

$10

$20

$30

$40

$50

$60

$70Billion Dollars

ImportsExports

Trade Surplus

Imports

Exports

US Agricultural Trade with NAFTAUS Agricultural Trade with NAFTA

$8$9

$10$9

$12 $12$13 $13

$14

$16 $16

$6$7

$8$9

$11$12

$12 $13$14

$15$16

$2 $2 $2

-$0

$1 $0 $1

-$0

$0 $0 $0

1990-92 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

$0

$5

$10

$15

$20

-$5

Billion US Dollars

US Exports US Imports Trade Balance

NAFTA Became NAFTA Became EffectiveEffective

World Trade OrganizationWorld Trade Organization“Doha Development Agenda”“Doha Development Agenda”

Attempt to Restart is Underway‘Common Sense’ Letter, 1/12/04Export Subsidies, Trade Distorting

Policies & Cotton/Cotton TextilesRetaining Protection of the Peace Clause

Important for U.S. Agriculture & Open Markets

Market AccessMarket Access

U.S. Average Tariff, 1789-2002

Statistical Abstract of the United States

1789 1816 1820 1840 1860 1880 1900 1920 1940 1960 1980 20000

10

20

30

40

50

60

70Percent

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

World Average Agricultural Tariffs, 2000

115

85

55

4030 25

12

South A

sia

Caribbea

n Islan

ds

Centra

l Ameri

ca

South A

merica

Europea

n Union

North A

merica

United Stat

es0

20

40

60

80

100

120

140 Bound AverageWorld Average

62%

Percent

Bound Tariffs for Selected Products

3946

40 39 37

54 5550 50

42

86 86 86 86 86

25 2519

2318

Total Grains Grain Products Feed Oilseeds0

20

40

60

80

100

Percent

South America Central America Caribbean Islands North AmericaSource: ERS/USDA

Bound Tariffs for Selected Products

34

43 43 41 4348

68

86

55

68

88 91 90 90 87

21

49

80

41

85

Live Animals Meat Fresh Meat Frozen Meat Prepared Dairy0

20

40

60

80

100

Percent

South America Central America Caribbean Islands North AmericaSource: ERS/USDA

New AgreementsNew Agreements

ChileChileEffective January 1, 2004Tariffs Eliminated Immediately, or Over

4, 8, 10 or 12 YearsChile’s Price Band System on Wheat, Chile’s Price Band System on Wheat,

Vegetable Oils, & Sugar EliminatedVegetable Oils, & Sugar EliminatedU.S. Receives Preferential Access U.S. Receives Preferential Access

Compared to Canada & European UnionCompared to Canada & European UnionU.S. Export Impacts Small (18-52%)U.S. Import Impacts Small (6-14%)

$63 $72 $94 $109 $103 $169 $126 $126 $135 $152 $116 $98 $111

$481 $445 $495 $457$543 $547

$751 $745 $784$910

$1,027 $1,023$1,154

-$418 -$374 -$401 -$348-$441 -$378

-$625 -$619 -$648-$758

-$910 -$924-$1,043

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

$0

$500

$1,000

$1,500

-$500

-$1,000

-$1,500

Billion U.S. Dollars

U.S. Exports U.S. Imports Balance

U.S.-Chile Agricultural Trade, 1990 - 2002U.S.-Chile Agricultural Trade, 1990 - 2002

Immediate 4 Years 10 YearsPork *Beef, with TRQ Poultry, with TRQ

Some Fruits Some FruitsSome Vegetables Some VegetablesSome Tree Nuts Some Tree Nuts

WheatCorn 8 Years 12 YearsRice Some Fruits Some Fresh Vegetables

Other Grains Some Vegetables Dairy, with TRQWheat Flour Some Processed Foods Tobacco, with TRQ

Soybeans/Products Some Sugar/Products, with TRQ*Cotton Some Processed Foods

Some Sugar/Products

Immediate 4 Years 10 YearsPork *Beef, with TRQ Chicken Parts,

Fresh Fruits Chicken, Whole with TRQFresh Vegetables Some Dairy

Tree Nuts *Corn (2 Years) 12 YearsOther Grains Wheat

Soybeans/Products Rice*Cotton 8 Years Wheat FlourTobacco Some Dairy Vegetable Oils

Sugar/ProductsProcessed Foods

U.S. Access to Chile

Chile's Access to U.S. Market

U.S. Agricultural Exports to Chile, 2002U.S. Agricultural Exports to Chile, 2002

Corn Gluten17.9%

Wheat16.3%

Food Preps9.0%

Animal Feed6.6%

Rice6.1%

Cotton4.2%

Saps/Thickeners3.2% Seeds

3.2%Corn3.0%

Other30.5%

$19.9

$18.1$10.0$7.3

$6.8$4.7$3.6

$3.5$3.3

$33.9

Total: $111.1 Million

U.S. Agricultural Imports from Chile, 2002U.S. Agricultural Imports from Chile, 2002

Grapes40.2%

Grape Wines11.9%Stone Fruit

9.4%

Corn7.1%

Avocados7.1%

Fruit Juices4.8%

Apples/Pears4.6%

Kiwi/Berries3.4%

Other11.5%

$464.1

$136.9$108.7

$82.2

$81.5

$55.5$52.8

$39.3 $132.6

Total: $1,154 Million

Central America Free Central America Free Trade AgreementTrade Agreement

CAFTACAFTAWHO so Far? El Salvador,

Guatemala, Honduras, NicaraguaCosta Rica & Dominican Republic to

be Added w/in MonthsAbout ½ of Markets Open to U.S.

Agriculture When Implemented (Jan. 2005)??– HQ Beef, Cotton, Wheat, SoybeansHQ Beef, Cotton, Wheat, Soybeans

Rest Over 15-20 Years: Pork, Beef, Poultry, Rice, Corn, Dairy

Dominican Republic, 800 Miles NE

North

Houston, 1,300 Miles NW

Mexico

CAFTA DemographicsCAFTA DemographicsCountry Pop.

(mil)GDP/

PersonPoverty

%Lit.%

Ag. Pop. %

Costa Rica 3.9 $8,300$8,300 20.6 96 20

El Salvador 6.5 $4,600 4848 80.2 30

Guatemala 13.913.9 $3,900 7575 70.670.6 5050Honduras 6.7 $2,500 5353 76.176.1 3434Nicaragua 5.1 $2,200 5050 67.567.5 4242Dom. Rep. 8.78.7 $6,300$6,300 25 84.7 17

Total/Total/AvgAvg.

44.844.8 $4,633$4,633 45.345.3 79.279.2 32.232.2

U.S. Agricultural Trade with Central America

$0.5 $0.6 $0.6 $0.7 $0.8 $0.9 $1.0 $1.0

$1.3$1.1 $1.1 $1.2 $1.3

-$0.8 -$0.8 -$0.9 -$0.9 -$0.8 -$0.9 -$1.0-$1.2

-$0.8 -$0.8-$1.0

-$0.7 -$0.7

$1.3 $1.4 $1.5 $1.6 $1.6$1.8

$2.0$2.2 $2.1

$1.9$2.1

$1.9 $2.0

1990 1995 2000

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

-$0.5

-$1.0

-$1.5

Billion Dollars

Exports Trade BalanceImports

2002

U.S. Agricultural Exports to Central America

Grains & Feeds$217

Oilseeds$90 Animals

$47

Tobacco$33

Vegetables$27

Other$69

Grains & Feeds$422

Oilseeds$194

Animals$162

Vegetables$89

Other$196

Rice$56

Total, 1990: $482 million Total, 2000: $1118 million

U.S. Rice Exports, 1993 and 2002U.S. Rice Exports, 1993 and 2002

Source: Foreign Agricultural Service, USDA, www.fas.usda.gov/ustrade

407

897

112

625

65

620

481419

266

417

691

324

573

315

88 99

1993 20020

200

400

600

800

1,000

Thousand Metric Tons

N Amer. C Amer. Asia W Europe Carib. Mid East Africa S Amer.

1993 Total: 2,860 TMT 2002 Total: 3,809 TMT

Bananas$453

Coffee$372

Fish$211

Shellfish$159Sugar

$133

Other$742

Coffee$732Bananas

$611

Fish$478

Shellfish$368 Fruits

$274

Other$1361

U.S. Agricultural Imports fromCentral America

Total, 1990: $1699 million Total, 2000: $2977 million

Free Trade Area of the Free Trade Area of the AmericasAmericas

FTAAFTAAOpen Markets in Western Hemisphere

– Average US Ag. Tariffs 12%– South America: 40%– Caribbean: 85%

Negotiations Moving Forward, But Slower than Expected: Brazil a Sticking Point

Target Date for Completion 1/05Target Date for Implementation 1/06

U.S. Agricultural Trade with South America

$1.1 $1.2 $1.4 $1.5$1.8

$2.3$2.6 $2.7 $2.6

$1.8 $1.7

$3.9 $3.7 $3.8 $3.6$4.1 $4.2

$4.8$5.4

$4.9$5.3

$4.8

-$2.8 -$2.5 -$2.4 -$2.1 -$2.3-$1.9 -$2.2

-$2.7-$2.3

-$3.5-$3.1

1990 1995 2000

$0.0

$2.0

$4.0

$6.0

-$2.0

-$4.0

Billion Dollars

Exports ImportsTrade Balance

Grains$575

Oilseeds$141

Animals$131

Rice$62

Vegetables$59

Other$96

Grains$711

Oilseeds$230

Animals$197

Cotton$141

Other$305

Vegetables$122

U.S. Agricultural Exports to South AmericaU.S. Agricultural Exports to South America

Source: Foreign Agricultural Trade of The United States , Calendar Year, USDA/ERS

Total, 1990: $1062 million Total, 2000: $1706 million

Coffee$799

Fish$788

Fruit Juices$644

Shellfish$491

Bananas$449

Other$3288

Fish$1410

Coffee$851

Fruits$742Shellfish

$657Bananas

$487Sugar Prod.

$279

Other$4487

U.S. Agricultural Imports fromU.S. Agricultural Imports fromSouth AmericaSouth America

Source: Foreign Agricultural Trade of The United States, Calendar Year, USDA/ERS

Total, 1990: $5179 million Total, 2000: $6847 million

Raw Materials & InputsRaw Materials & Inputs

U.S. Oil Imports by SourceU.S. Oil Imports by Source

Petroleum Imports by Country of Origin, 1960-2001. USDOE, EIA, Annual & Monthly Reports

6.91

5.07

8.02 7.718.33

8.84

10.16

11.4611.02

12.03

1980 1985 1990 1993 NAFTA 1995 1997 2000 2001 20020.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00NAFTA Non-OPEC (Ex. NAFTA) OPEC

Million Barrels/Day (Avg.)

U.S. Fertilizer ImportsU.S. Fertilizer Imports

USDA, FAS

10.8 10.8 10.4

12.213.6 13.7 13.9

14.615.3 14.9

16.618.1

17.0

1990 1993 1995 2000 20020.0

5.0

10.0

15.0

20.0 Canada W. Europe ROW

Million Metric Tons

U.S. Fertilizer Imports from ROWU.S. Fertilizer Imports from ROWAnnual Average 1990-92Annual Average 1990-92

226

200 193

117 117 111

IsraelChile

Russia/Belarus

Bulgaria

Mexico

Trinidad/Tobago

0

50

100

150

200

250 1,000 Metric Tons

U.S. Fertilizer Imports from Row, 2002U.S. Fertilizer Imports from Row, 2002

1291

438 394289

216 178 16088 72 31

Russia/Belarus

Trinidad/Tobago

Saudi Arabia

QatarBahrain

Venezuela

EgyptLithuania

Morocco

Kuwait

0

200

400

600

800

1000

1200

1400

1600

1,000 Metric Tons

1,000 Metric Tons

Gains to TradeGains to Trade

Exports, Imports, Farm IncomeExports, Imports, Farm IncomeU.S. Agricultural Exports to W.H.

Countries Up 8% After Full Phase-In to $600 million

U.S. Agricultural Imports from W.H. Countries Up 6% to $850 Million

U.S. Farm Income Up $200 Million/Year

ERS, USDA, 2000.

Sector ImpactsSector ImpactsMore Exports of Corn, Soybeans,

CottonMore Imports/Competition for

Sugar, Peanuts, Citrus, Some Vegetables

FTAA Likely to $4.0 Billion to U.S. GDP/Year

ERS, USDA, 2000.

So What for Texas?So What for Texas?More Exports & Potential for Higher

PricesAccess to Lower Cost InputsMore Competition in Some Sectors

– Sugar, Peanuts, Textiles, Maybe Cotton– Meats-But Sanitary Issues Critical– Winter Vegetables & Some Fruit

Products: SPS ImportantOpportunity for Input on Agreements as

‘Fast Track’ is Implemented

Issues for TexasIssues for TexasAre More Trade Agreements a Desirable

Outcome?Without CAFTA & FTAA, U.S. Market

Access LimitedEven with Agreements, No Guarantee of

Strong Export GrowthPolitical & Economic Stability Disrupt

TradeWith or Without Agreements, More Trade

Disputes Certain

Center for North American StudiesCenter for North American Studies

Parr RossonParr RossonPh: 979-845-3070Ph: 979-845-3070E-mail: prosson@tamu.eduE-mail: prosson@tamu.edu

“Informed Decisions for Global Change”

CNAS