International Policy

1
International Policy

• Live in a global economy where
• Interdependence means that any policy decisions
  made by one country has a impact on the U.S.
• Many ag markets are global in scope thus while
  the price of corn may be in the US, there is a
  global market influenced by world supply and
  demand forces
• The exceptions to this global market are few and
  are limited to those commodities that have been
  able to isolate themselves through barriers to
  trade (successful only in varying degrees)

Read Chapters 4, 5, 6 Knutson, Penn and
Flinchbaugh
19
2
North America Free Trade AgreementNAFTA

• Really 3 Separate Trade Agreements
• Canada US Trade Agreement (CUSTA) effective in
  1989
• Canada Mexico Trade Agreement effective in 1993
• US Mexico Trade Agreement effective in 1994
• Farm Policy Harmonization is a major problem

3
North America Free Trade AgreementNAFTA

• CUSTA 1989
• Tariffs on most commodities phased out over 5-10
  year period with following important exceptions
  being Tariff Rate Quotas (TRQ) on
• Poultry Canadian Poultry Board
• Dairy Canadian Dairy Board and US price
  supports
• Sugar US price supports
• A TRQ allows a certain amount of imports at a
  lower tariff (sometimes zero) with impacts above
  the quota assessed a higher tariff. Example the
  TRQ in Canada for cheese is 245 of the price at
  20,412 MT. For the US it is 58 at 134,995 MT.

4
North America Free Trade AgreementNAFTA

• US Mexico Trade Agreement in 1994
• Convert all trade barriers to tariffs (Mexico had
  extensive licensing of imports) and then reduce
  to zero over 5-15 years.

5
North America Free Trade AgreementNAFTA

• Overall provision that has caused conflict
  involves the ability of the three countries to
  maintain their own domestic farm programs
  (subsidies) in the setting of freer trade
  reductions in tariffs.
• If free trade is to exist there must be
  harmonization of policies.

6
North America Free Trade AgreementNAFTA

• Basic method for dispute settlement involves the
  establishment of Panels which act as judges of
  who did what to whom (legal rights and
  obligations)
• Members of these panels include
• 2 members chosen by one country
• 2 members chosen by the other country
• 1 mutually agreed upon chair
• Original agreements had a provision for
  continuing discussion to eliminate domestic
  program issues but no Secretariat was established
  (comparable to EU Commission) to continue to
  process of negotiation

7
Canada Policies

• Canadian Wheat Board (CWB)
• No production controls
• All wheat and barley marketed through CWB except
  that fed on farm
• Strict Controls over quality
• Emphasis on protein content
• Controls varieties planted
• CWB markets wheat to domestic and export markets
• Pools all receipts from marketing
• Pays producers the average price adjusted for
  quality
• Payments in increments as sales take place
• Closes out the pool at end of marketing season
• Little or no carryover

8
Canada Policies

• Canadian Wheat Board acts as an effective barrier
  to trade by virtue of its marketing requirement
• The price incentive is to move wheat south rather
  than north
• Dairy and poultry boards have high TRQs combined
  with marketing quotas limiting the quantity of
  product that can be sold
• Net Income Stabilization Account (NISA) program
  whereby farmers can deposit with the government
  up to 3 of sales revenue which is matched up to
  250,000 each year with an account limit of 1.5 X
  5 year average sales
• Withdrawals are allowed in low income years

9
Mexico Policy

• Mexican Farm Supports
• SAGARPA USDA of Mexico
• PROCAMPO Small farmer payments
• Market support payment Pays difference
  between government determined target price
  and market price
• Maintains sugar industry
• Discourages fructose in soft drinks

10
Mexico Policy Issues

• Concern about level of U.S. subsidies
• Imports of poultry and hogs
• Lower price of corn and soybeans
• Corn staple
• Input for livestock and poultry
• Input for HFCS production
• Results in low prices for poultry and hogs
• Deny access to U.S. sugar market
• Share of U.S. imports
• HFCS imports to Mexico

11
Mexico Policy Issues

• Research/Extension Weak
• Infrastructure
• Roads Border issue
• Railroads Privatization
• Utilities
• Irrigation development
• Plant and animal protection

12
Comparison of Mexican and U.S. Agricultural
Production
13
Geopolitical Centers of Influence

• Countries or groups (blocs) of countries that
  have (or could have a major impact on U.S.
  agriculture and agribusiness
• Some individual countries are in this position
  now, have been, or will be
• Mexico
• Canada
• Japan
• China
• Russia
• Some are organized into blocs
• NAFTA
• EU
• MERCOSUR/FTAA
• Cairns group
• APEC

14
Geopolitical Centers of Influence

• Then there are the developing countries
• Largely ignored up to now
• Want preferred access to developed country
  markets
• There are interest groups outside the countries
  and blocs that try to influence the world agenda
• Greenpeace
• UN/FAO

15
U.S.

• 9.6 M sq km
• 19 arable
• 214 sq km irrigated
• 280 M people
• Ag
• Corn, soybean, wheat, chicken, beef, milk, pork
• Export 2 of 5 acres
• Ag policy
• Export-oriented
• Farmer safety net substantial

16
Canadian Agricultural Production
17
Canada WTO Box Status

• NISA?
• Dairy and poultry boards?
• CWB?

18
Mexico/Canada/US

• Basic need exist for harmonization of policies
• Farm subsidies
• Market information
• Grades and standards
• Infrastructure
• Plant and animal protection