us-chile free trade agreement what is there for agriculture? jaime malaga texas tech university...
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US-Chile Free Trade AgreementWhat is there for Agriculture?
Jaime MalagaTexas Tech University
Flynn AdcockTexas A&M University
Center for North American Studies
2004 AAEA Meetings, Denver, Colorado
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Overview
• US-Chile Trade
• Main FTA Topics
• Agricultural Sector Impacts
• Implications
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Chile• 5th Economy in Latin America• 15.5 million people• Fastest growing and strongest LA economy• 25 years of stable and market oriented policies• Small size: 1.5% of US GDP, 15% of Mexico’s
GDP, 10% of Brazil’s• Relatively high per capita income; ($10,000)• Overall small trade partner (37th US export market)• Large mining country and excellent agriculture
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Chile: Free Trade Oriented
• Overall tariff level: 6%
• Chile’s Free Trade Agreements under implementation:
Mercosur 1996 (Associate member) Canada: 1997 Mexico: 1998 C. America: 2001 European Union: 2003
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U.S.-Chile Merchandise Trade, 1990 - 2003
Source: U.S. Census Bureau
$1.7 $1.8
$2.5 $2.6 $2.8
$3.6$4.2 $4.4
$4.0
$3.1$3.5
$3.1$2.6 $2.7
-$1.3 -$1.3 -$1.4 -$1.5-$1.8 -$1.9
-$2.3 -$2.3 -$2.5-$3.0
-$3.3 -$3.5-$3.8 -$3.7
$0.4 $0.5$1.1 $1.1 $1.0
$1.7 $1.9 $2.1$1.5
$0.1 $0.2
-$0.4
-$1.2 -$1.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
$0.0
$2.0
$4.0
$6.0
-$2.0
-$4.0
-$6.0
Billion U.S. Dollars
U.S. Exports U.S. Imports Balance
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Chile: Import Growth by Country
• Import growth by country 2002/2000
– From the US -26%
– From Mercosur: +12%
– From the EU: + 5%
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Source: U.S. Census Bureau
$63 $72 $94 $109 $103$169
$126 $126 $135 $152$116 $98 $111 $144
-$481-$445
-$495-$457
-$543 -$547
-$751 -$745-$784
-$910
-$1,027 -$1,023
-$1,154-$1,213
-$418-$374 -$401
-$348
-$441-$378
-$625 -$619 -$648
-$758
-$910 -$924
-$1,043 -$1,069
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
$0
-$500
-$1,000
Million U.S. Dollars
U.S. Exports U.S. Imports Balance
U.S.-Chile Agricultural Trade, 1990 - 2003
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U.S. Agricultural Trade with Australia, 2003
Wheat25.0%
Corn Gluten18.6%
Hort14.9%
Other Grains11.3%
Cotton6.8%
Other23.4%
$36$27
$22
$16 $10
$34
Grapes35.7%
Grape Wines11.2%
Seeds9.2%
Stone Fruit7.7%
Avocados7.3% Apples/Pears
6.1%
Fruit/Veg Juices5.5%
Other17.4%
$442
$138
$113
$95$90 $75
$68
$215
Total Imports: $1,213 MillionTotal Exports: $144 Million
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
US Agricultural Trade with Chile, 2003
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US Corn, Wheat, and Soybeans Exports to Chile (1999 – 2003)
0
10,000
20,000
30,000
40,000
50,000
60,000
1999 2000 2001 2002 2003
Year
Val
ue
($1,
000U
S)
Corn
Wheat
Soybeans
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US-Chile FTA Background• US- Chile: 12 years talking, 2 years negotiation• 2003 Signature• January 2004 Implementation• Both economies quite open already so expected
impacts not large• Schedules:
– Immediate– 4 years– 8 years– 10 years– 12 years
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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
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NTB Eliminated
• Recognition of US food standards
• Recognition of US meat inspection system
• Elimination of “price bands” for wheat and other US ag. imports
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Impacts ?
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Overall Impact(USITC Year 2016)
• US Exports to Chile: 18% to 52% higher
• US Imports from Chile: 6% to 14% higher
• Effect on US total Exports and Imports Very small (0.09% and 0.03%)
• Effect on Ag Imports relatively higher.
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Figure ES-1Range of estimated impacts of tariff reductions on the United States from the U.S.-Chile FTA, selected sectors, 2016
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Oth
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0
200
400
600
800
1000
1200
Milli
on D
olla
rs
HighLow
Imports
HighLow
Exports
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Wheat and Flour
• US important supplier until 1997• Market share lost: Canada 70%, and
Argentina (no tariff)• FTA: negotiated elimination of “price band”
and replacement with 31% initial tariff to be eliminated in 12 years
• The US may recover market share form Argentina and Canada up to $ 75 million by year 12th
• Difficult to recover flour market.
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Soybeans• US exported soybeans, soy oil and soy meal until
early 90’s to Chile• Markets lost to Argentina, Brazil, Paraguay, and
Bolivia. (Mercosur partners, no tariff)• FTA with US eliminates immediately 6% tariff.
So competitiveness improved• No impact on oil and meal expected• US Soybeans may recover some share but not
more than $ 10 million/year
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Beef• Beef consumption in Chile growing fast. World 9th
Largest Beef importer • Main problem: standards and inspections not
recognized by Chile• Argentina and Brazil major providers • FTA eliminates tariff in 4 years on US beef and allows
recognition for US inspection/standards• US exports will depend on acceptation of grain-fed vs
grass-fed beef quality.
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Ag. Imports Impact
• Fresh Fruits/Vegetables – Most tariffs immediately eliminated – Import expansion up to $ 200 million additional
• Processed Food (fruit)– Protected by the US: 12 year schedule. US tariffs 10-
30%– Impacts can be important by year 12th, Chile has low
costs for canned/preserved fruit production.– Up to $ 200 million possible.
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Monthly U.S. Grape Shipments and Imports
Jan 00
Jul 00
Jan 01
Jul 01
Jan 02
Jul 02
Jan 03
Jul 03
0
50
100
150Thousand Metric Tons
U.S. Imp from Chile Imp from ROW
Source: Agricultural Marketing Service, USDA and Foreign Agricultural Service, USDA
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Ag. Imports Impact -2
• Avocados– Growing consumption in the US– Some overlapping with US production – US Tariff: +- 11% ad-valorem – US protection: 12 year schedule with TRQ and
Safeguard (trigger prices)
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US Ag.Exports Growth to the World and to Chile (% change, Jan-May `03/`04)
5.42
40.92
-1.41
107.62
239.39
163.16
2037.11
194.02
4
-50
0
50
100
150
200
250
300
TOTAL AG TREE NUTS ANDPREPARATIONS
CHEESE & CURD EGG & EGGPRODUCTS
ICE CREAM
%
US to World US to Chile
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US-Chile FTA: Model for other US-LA FTA?
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Conclusion Implications
• Small overall impact expected• Major impact in US Exports: Non-agricultural• Major impact in US Imports: Agriculture, but not dramatic• FTA will level playground with other Chilean suppliers• Ag import impacts avocados, processed fruits• Ag export impacts: wheat, soybeans, beef, high value foods • Model for other FTA with LA.