AAEA Annual Meetings Denver, CO August 1-4, 2004

1
AAEA Annual MeetingsDenver, COAugust 1-4, 2004

• DR-CAFTA Australia Trade AgreementIssues
  Implications for U.S. Agriculture

C
NAS
Parr Rosson Professor Director Center for North
American Studies Texas AM University
2
Why Regional Agreements?

• 2d Best Solution After MTN
• Slow Progress in WTO
• Cancun Ministerial Derailed Progress
• FTAA Lite Not As Appealing
• Economic Incentives
• Open Markets
• Increase Business Efficiency
• Create Economies of Scale

3
Strategic Considerations

• Support Democracy in Latin America?
• Reduce Illegal Immigration?
• Secure Strategic Materials?
• Oil/Natural Gas
• Fertilizer
• Create Buffer Against Terrorism?
• Seam State Argument, Tom Barnett, U.S. Naval
  War College

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CUSTA, 89
Bahrain 04
Jordan 03
DR-CAFTA 04
NAFTA 94
Israel 85
Morocco 04
Thailand 05
Panama 05
Andean FTA 05
Singapore 03
Chile 04
FTAA 06
Australia 04
Southern African Customs Union 05
U.S. Trade Agreements-3d Largest Market
5
U.S. Average Tariff, 1789-2002
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 Tariff, 1922
10
10
GATT, 1947
0
0
1789
1789
1816
1820
1840
1860
1880
1900
1920
1940
1960
1980
2000
Statistical Abstract of the United States
6
World Average Agricultural Tariffs, 2000

Percent
140
Bound Average
115
World Average
120
85
100
80
62
55
60
40
30
25
40
12
20
0
South Asia
United States
South America
North America
European Union
Central America
Caribbean Islands
7
DR-Central American Free Trade Agreement
8
Mexico
Houston, 1,300 Miles NW
Dominican Republic, 800 Miles NE
Separate Agreement with United States
North
9
DR-CAFTA Demographics
Country Pop. (mil) GDP/ Person Poverty Lit. Ag. Pop.
Costa Rica 3.9 8,300 20.6 96 20
El Salvador 6.5 4,600 48 80.2 30
Guatemala 13.9 3,900 75 70.6 50
Honduras 6.7 2,500 53 76.1 34
Nicaragua 5.1 2,200 50 67.5 42
Dom. Rep. 8.7 6,300 25 84.7 17
Total/Avg.
44.8
4,633
45.3
79.2
32.2
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DR-CAFTA

• About ½ of Markets Open to U.S. Agriculture When
  Implemented
• Opportunities for HQ Beef, Cotton, Wheat,
  Soybeans
• Rest of Market Access Over 15-20 Years Pork,
  Beef, Poultry, Corn, Rice, Dairy (18 20 Years,
  resp.)
• U.S. Allows Minimal Access for Sugar (99 tmt to
  140 tmt, 100 Duty)

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U.S. Ag Trade with DR-CAFTA, 2003
Million Dollars
865
1000
Exports
Imports
Balance
763
800
442
600
349
280
242
238
221
400
200
162
133
114
105
95
200
0
-19
-21
-200
-400
-414
-600
-623
-800
Honduras
Nicaragua
Costa Rica
Guatemala
El Salvador
Dominican Rep.
Source Foreign Trade Statistics, U.S. Census
Bureau
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U.S. Agricultural Exports to
Central America
Total, 1990 483 million
Total, 2003 1,339 million
Grains Feeds
Grains Feeds
218
582
Other
47
Oilseeds
Other
260
129
Beverages
Oilseeds
Cotton
37
90
47
Animals
Animals
Veg/Fruit
204
Veg/Fruit
47
44
117
Source U.S. Trade Internet System,
www.fas.usda.gov/ustrade
13
U.S. Agricultural Imports from
Central America
Total, 1990 1,566 million
Total, 2003 2,654 million
Bananas
Fruit/Veg
453
527
Fruit/Veg.
Bananas
133
674
Fish
211
Fish
Other
478
264
Other
328
Sugar
Sugar
Coffee
Coffee
133
188
372
459
Source U.S. Trade Internet System,
www.fas.usda.gov/ustrade
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Melon Tariff Phase-Out

• US Tariffs Eliminated Immediately
• Most CA Tariffs Eliminated Immediately
• Exception Dominican Republic May Impose 20
  Safeguard Duties
• 5 Years for Watermelon
• 10 Years for Other Melons

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Onion Tariff Phase-Out

• US Tariffs Eliminated Immediately
• CA Tariffs Eliminated Over 10 to 15 Years
• All But El Salvador Have Some Type of Safeguard
  or Tariff-Rate Quota

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CAFTA Base Tariffs
for Yellow White Onions
Percent
120
97
100
80
47
60
40
15
15
15
15
20
0
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Dom. Rep.
Denotes Tariff-Rate Quota
17
CAFTA Phase-Out Period
for Yellow White Onions
Years
18
15
15
15
15
16
14
12
12
10
10
8
6
4
2
0
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Dom. Rep.
18
Monthly U.S. Onion Shipments and Imports
Million Pounds
/CWT
500
50
Other U.S.
Texas
Mexico
CAFTA
Other Imports
US Price
400
40
300
30
200
20
100
10
0
0
Apr
Apr
Apr
Jan 01
Jan 02
Jan 03
Jan 04
Source Agricultural Marketing Service, USDA
19
Monthly U.S. Watermelon Shipments and Imports
Million Pounds
Cents/Pound, Various Red
800
0.5
Texas
Other U.S.
CAFTA
Mexico
US Price
0.4
600
0.3
400
0.2
200
0.1
0
0
Jan 01
Jan 02
Jan 03
Jan 04
May 01
May 02
May 03
Source Agricultural Marketing Service, USDA
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Monthly U.S. Cantaloupe Shipments and Imports
Million Pounds
/CWT
400
30
Texas
Other U.S.
CAFTA
Mexico
US Price
25
300
20
200
15
10
100
5
0
0
Jan 01
Jan 02
Jan 03
Jan 04
May 01
May 02
May 03
Source Agricultural Marketing Service, USDA
21
Monthly U.S. Honeydew Shipments and Imports
Million Pounds
per 2/3 Carton of 6s
100
20
Texas
Other US
CAFTA
Mexico
US Price
80
15
60
10
40
5
20
0
0
May
May
May
Jan 01
Jan 02
Jan 04
Source Agricultural Marketing Service, USDA
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Australia Trade Agreement
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Australia Trade Agreement

• Australia Will Eliminate All Tariffs Immediately
• US Fruits/Vegetables Have Price Safeguards
• US Beef Has 18 Year TRQ
• Price Trigger Safeguard Indefinitely
• US Dairy Has 18 Year Tariff-Rate Quotas
• Affects Cheeses, Milk Powder Ice Cream
• US Cotton Peanuts Have 18 Year TRQ
• US Sugar Grants No Additional Access

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U.S.-Australia Agricultural Trade, 1990-2003
Million U.S. Dollars
800
612
409
353
339
338
332
329
322
319
317
400
283
290
273
226
0
-400
-511
-533
-578
-603
-800
-742
-808
-834
-850
-855
-898
-948
-956
-958
-987
-1,074
-1,200
-1,107
-1,137
-1,174
-1,180
-1,277
-1,276
-1,467
-1,600
-1,508
-1,556
-1,592
U.S. Exports
U.S. Imports
Balance
-1,757
-2,000
-1,894
-2,120
-2,400
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source U.S. Trade Internet System,
www.fas.usda.gov/ustrade
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U.S. Agricultural Trade with Australia, 2003
Total Imports 2,120 Million
Total Exports 612 Million
Animal Products
60.6
Animals
37.9
Oilseeds
21.2
1,174
232
130
627
111
95
44
Hort
Bev
Other
18.1
Sugar
29.5
15.5
Grains
Other
2.1
Hort
7.2
2.8
2.8
Grains
2.2
Source U.S. Trade Internet System,
www.fas.usda.gov/ustrade
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Conclusions

• U.S. Market Much More Open than Other Countries
• With Trade Agreements, Tariffs Will Fall, U.S.
  Access to Markets Will Increase
• More Import Competition in Some U.S. Sectors
• Opportunity for Input On Agreements

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Concerns Issues

• Are More Trade Agreements A Desirable Outcome?
• Supranational Authority?
• Without Trade Agreements, U.S. Market Access
  Limited
• Even With Agreements, No Guarantee of Market
  Growth
• Investment Economic Development Crucial for
  Central America Many Others

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Concerns Issues

• Australian Wheat Board Not Disciplined
• Concerns About Impacts of Manufacturing Beef
  Imports from Australia on U.S. Cull Cow Prices
• SPS Not Satisfactorily Addressed in Australia
  Agreement
• Creative Destruction of Trade Agreements
• How to Mitigate Negative Impacts?

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Center for North American Studies
C
NAS

Informed Decisions for Global Change

• Parr Rosson
• Ph 979-845-3070
• E-mail prosson_at_tamu.edu