The World Trade Organization Iss

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					          Trade Negotiations & U.S.
                Agriculture:
          Prospects & Issues for the
                   Future
Parr Rosson


                                       C
Professor & Director
Center for North American Studies      NAS
Department of Agricultural Economics
Texas A&M University
Overview
 International Setting & Trade Strategy
 Role of Trade Agreements
 The World Trade Organization
   Negotiations in Doha Development Agenda
   DS 267, ‘Cotton Case’
 Conclusions & Implications
International Setting &
Trade Strategy
                          World Population
            Billions
              ME       AFR    LA       TOTAL                                    8
                                                                        7,570
 8            NA       WE    I. ASIA   EE/FSU   D. ASIA

     Ind. + 8%, Dev. + 31%             6,310
                                                                                6

 6


                                                                                4

 4                                                      China, India,
                                                         Indonesia
                                                                                2
 2


                                                                                0
 0
     1990          2000      2001      F2005    F2010       F2015       F2020
US Census Bureau
                      GDP Growth Projections
            % Change From Previous Year


7              5.6

6                          4.9
                                       4.6         4.5         4.4         4.3         4.2         4.1         4         4         3.9
5

4        3.2
                     2.5         2.5         2.5         2.4         2.4         2.4         2.4         2.4       2.3       2.4
3

2
                      Developed Countries                                   Developing Countries
1

0
     2004                   2006                    2008                    2010                    2012                 2014
Source: International Financial Statistics January 2005 and projections after 2004 are from Global Insight
(formerly DRI-WEFA), FAPRI 2005 U.S. And World Agricultural Outlook.
        Regional GDP Growth Projections
        % Change From Previous Year
    6
        
                 
    5
                                    
        
                                                         
                                                                             
                                                                                                         
    4                                            
                                                          
                                                                                                          
                            
                                     
                                                                                               
                                                                                                         
                                                                                                              
                  
    3
              Africa            Asia            Latin America                  Middle         East
    2
                                                                                   China + 6.5%
    1                                                                              India + 5.4%

    0
    2004                  2006                2008                 2010                2012                  2014
Source: International Financial Statistics January 2005 and projections after 2004 are from Global Insight
(formerly DRI-WEFA), FAPRI 2005 U.S. And World Agricultural Outlook.
        Regional GDP Growth Projections
    % Change from Previous Year
8
    

               
6                        
                                     
                                             
                                                                               
                                                           
                                                                                          
                                                                                                        
                                                                                                             
4                                                                                                          
                                                                                  
                                                                                                           

                              CIS        EU        Other E.           Europe
2




0
 2004                  2006                   2008                   2010                  2012              2014
Source: International Financial Statistics January 2005 and projections after 2004 are from Global Insight
(formerly DRI-WEFA), FAPRI 2005 U.S. And World Agricultural Outlook.
        U.S. Agricultural Trade, 1970 - 2005E
        Bi l l i on Dol l ars
$80.0
                                       Exports  ports
                                                 Im            Bal an ce
$60.0                                 
                                
                                   
                                  
                 
$40.0                 
                       
                    
                      
$20.0             
         
      
 $0.0
        
         
            
            
               
               
                   
                    
-$20.0                    
                         
                              
                              
                                 
                                    
-$40.0                                
                                        
                                         
-$60.0                                    
    1970            1975        1980        1985        1990          1995    2000   2005E

  S ou rce : U.S . Trade In te rn e t S yste m , www.fas.u sda.gov/u strade
             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
10                                      Tariff, 1922                               10

                                                        GATT, 1947
 0                                                                                 0
 1789 1816 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
Statistical Abstract of the United States
      World Average Agricultural Tariffs, 2002
        Percent

140                                          Region Average
           114
120                                          World Average
100                      85
 80                                                           62%
                              55
 60
                                   40
 40                                     30         25
                                                              12
 20

  0




Source: WTO & ERS/USDA
U.S. Trade Strategy
 Unilateral
   Generalized System of Preferences (GSP)
   CBI/CBERA
   African Growth Opportunities Act (AGOA)
 Regional/Bilateral
   NAFTA, CAFTA-DR, Others          Concurrent
                                    Initiatives
 Multilateral
   World Trade Organization
   Only Forum Where All 148 Countries Are Present &
   Farm Policy Is Negotiated
Progress to Date
CUSTA, ‘89
             CAFTA-DR      Jordan ‘01 Bahrain ’06?
NAFTA ‘94                                      Israel ‘85
             ’06? Morocco ’06?
                                              Thailand ’06?


                  Panama ‘06
Andean FTA                            MEFTA
                                      ‘06
‘06


    FTAA ‘06                         Singapore ‘03

             Chile ‘04    Southern African    Australia ‘05
                         Customs Union ‘06
                    U.S. Trade Agreements
Trade Agreements In-Place (7)
 Israel-1985-1994    Jordan-December
 Canada-US           17, 2001-2010
 (CUSTA)-1989-1998   Chile-January 1,
 North America       2004-2015
 (NAFTA)-1994-2008   Singapore-May 6
   US-Mexico         2003-2012
   US-Canada         Australia-January 1,
   Canada-Mexico     2005-2022
Trade Agreements-Pending (9)
 Morocco-President         Panama-Nine
 Signed 8/17/04, Pending   Negotiating Sessions
 Signature, King of        Held, Panama Delays
 Morocco
                           Colombia, Ecuador,
 CAFTA-DR-Signed by
 President, Passed El      Peru (ANDEAN)-
 Salvador, Guatemala,      Nine Rounds,
 Honduras (20 Years)       Negotiations Continue
 Bahrain-Pending           Thailand-Three
 Submission to Congress    Rounds Held
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
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
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)
Doha Development Agenda in the
World Trade Organization (2001-?

      Preparing for the Hong
         Kong Ministerial
        December 8-13, 2005
  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
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’
Export Competition
   Reduce & Eliminate Export Subsidies
   by Date Certain (Agreed)
     EU Export Subsidies, $2+ Billion/Year
     U.S. Export Credit Guarantees > 180 Days
   Food Aid to Be Disciplined
   Strong Support for Export Competition
   Reforms
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 Don’t Make Substantial Cuts, A ‘Deal
  Breaker’
                    Agricultural Producer Support By Country
                            1986-88 and 2001-03
                    -Percent of Total Farm Receipts from Government-

    80%                     1986-1988                                           71%
                            2001-2003                                                   65%
                                                                      62% 60%
    60%

                                                            40% 39%
    40%                       33%
                                              26%
                                      20%             20%
    20%         12%

                       2%

      0%
            New Zealand      Canada         United States    EU       Japan     Korea

Source: OECD's database (see www.oecd.org)
     Total Allowable Trade Distorting Domestic
Billion $
              Support, 'The Big 3,‘ 2002
$140             $128
                                   Includes Amber + Blue Boxes, Product Specific
$120                               + Non-product Specific De Minimis, Each Based
                                   on 5% of Total Value of Agricultural Production
$100

 $80

 $60                                                  $49                      $48


 $40

 $20

  $0
       European Union                         United States                Japan
 WTO, Trade Policy Review and calculations.
Total Trade Distorting Domestic Support Remaining
Billion $
          After Year 1 Down Payment (calculated)
$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
        Total Trade Distorting Domestic Support
              Assuming 50 Percent Reduction
$60.0                         -Billion Dollars-
                 $50.1

$50.0


$40.0


$30.0
                                        $19.6      $19.2

$20.0


$10.0


 $0.0
             European Union        United States   Japan
Calculated
        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
   $50.0                   $12.3                            $10.9       $12.9

    $0.0
               EU 25                    Japan   Korea and   Brazil                 High-income           World Total
                        United States            Taiwan              Middle East    Countries Developing
                                                                                               Countries
Source: Anderson, Martin and van der Mensbrugghe (2005a, Table 12.3)
         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)
     Trade Liberalization Impacts on Factor Prices, 2015
                                              Unskilled            Land Owner
                          Skilled Wages                                          Inflation
                                               Wages                  Rent
                                                        Percent Change
         EU 25                 1.3               -0.1                    -71       -1.2

      United States            0.2                0                      -24       -0.3

          Japan                2.4               1.5                     -67.2     -0.2

    Korea and T aiwan          7.8               7.3                     -45.8     -1.3

          Brazil               1.4               2.8        Large        35.9      2.8
                                                            Gains
   Sub-Saharan Africa          5.7               8.4                     6.4       -4.3

        T hailand              6.3               13.4                    12.5      -0.2

        Vietnam                15.1              23.3                    5.8       -0.2

      New Zealand              1.1               3.5                     20.9      1.5

Anderson, Martin, and van der Mensbrugghe (2005a, T able 12.7).
Conclusions and Implications
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
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
       Thank You!
C
NAS        Questions?
                  Parr Rosson
                                             C
                                             NAS

      Department of Agricultural Economics
            Texas A&M University
        College Station, TX 77843-2124
          E-mail: prosson@tamu.edu
           Telephone: 979-845-3070

				
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