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Ag Policy, Lecture 5 Knutson, 6th Edition Chapters 4,

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Trade Policy does NOT exist in Isolation. A component of Foreign Policy ... Given to President Bush in 2002 for 5 years. US Trade Policy Issues. Food Diplomacy ... – PowerPoint PPT presentation

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Title: Ag Policy, Lecture 5 Knutson, 6th Edition Chapters 4,


1
Ag Policy, Lecture 5 Knutson, 6th Edition
Chapters 4, 6
  • Agricultural Trade Issues and Policies
  • Relationships
  • Trade Issues
  • Geopolitical Centers of Influence

2
International Policy
  • Live in a global economy where
  • Interdependence of policies
  • Global Agriculture Markets
  • Few commodities are isolated through barriers to
    trade (successful only in varying degrees)

3
US Trade Policy Complexity
  • Trade Policy does NOT exist in Isolation
  • A component of Foreign Policy
  • Intertwined in Domestic/Economic Policy
  • Intertwined in Ag Food Policy

4
US Trade Policy Complexity
  • President
  • Council of Economic Advisors
  • Secretary of State
  • National Security Advisor
  • Several Congressional Committees
  • Foreign Relations
  • Ways and Means
  • Finance
  • Defense
  • Agriculture
  • Several government agencies
  • State
  • Defense
  • Treasury
  • NSC
  • CEA
  • OMB
  • USDA

5
Fast Track-Trade Promotion Authority (TPA)
  • Gives President authority to negotiate trade
    agreements with approval of the Congress but
    without modification by the Congress
  • Constitutional requirement that Congress approves
    all agreements (treaties) with foreign
    governments
  • TPA necessary to achieve serious negotiations by
    a foreign government
  • TPA given reluctantly by the Congress,
    particularly when power is given to the opposite
    party as was the case in the Clinton years
  • Given to President Bush in 2002 for 5 years

6
US Trade Policy Issues
  • Food Diplomacy
  • Increased Market Access
  • Building Markets
  • Developing Market Economies
  • Increasing Food Security
  • Protectionist Policies

7
Food Diplomacy
  • Positive
  • Punitive

8
Market Access
  • Why do we want market access?
  • Why would we refuse others access?
  • Access is gained by reducing barriers to trade
  • Bilateral Multilateral Trade Agreements
  • Free-trade Agreements
  • Customs Unions
  • Common policy toward non-members
  • Common Markets
  • Free movement of factors of production
  • Alignment of major economic agricultural
    policies
  • Economic Unions
  • Unified social/economic policies

9
Building Foreign Markets
  • USDA Foreign Ag Service and Producer Checkoff
    partnership in promotion
  • Education
  • Demonstration
  • Formerly Mass Media Advertisement
  • Market Intelligence
  • Export Credit and Enhancement
  • Cash or Commodity Subsidies
  • Credit Guarantees (USDA General Sales Manager)

10
Building Market Economies
  • Typically Mingled with Multiple Objectives for
    Developing Economies
  • Partnerships with UN, World Bank, Voluntary
    Organizations
  • Institution Building
  • Technical Assistance
  • Infrastructure Development
  • Applied Research

11
Food Security
  • Global Food Availability
  • Individual Food Security
  • Food Safety

12
Protectionist Policies
  • Barriers to Trade
  • All Domestic Farm Policies
  • Trade Remedy Laws
  • Anti-Dumping Provisions
  • Countervailing Duty (Tariff)

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
NAFTA (North American Free Trade Agreement)
  • 3 Separate Agreements
  • Canada US Trade Agreement (CUSTA) effective in
    1989
  • Canada Mexico Trade Agreement effective in 1994
  • US Mexico Trade Agreement effective in 1994

16
NAFTA Trade
  • U.S Absolute (Comparative) Advantages
  • Corn, Soybeans, (Poultry, Fed beef, Hogs)
  • Canada Absolute (Comparative) Advantage
  • (Wheat, Oats, Barley, Canola, Flax, Fed Beef)
  • Mexico Absolute (Comparative) Advantage
  • Vegetables, (sugar)

17
NAFTA Issues
  • Countries maintain separate domestic farm
    policies
  • U.S. Price/Income Support to Farmers,
    Conservation
  • Canada State Trading (CWB), Production
    Controls, Conservation, NISA
  • Mexico -- Direct Support, Price Supports
  • Dispute Settlement, 5 member panel of judges

18
MERCOSUR
  • Argentina, Brazil, Paraguay, and Uruguay
  • Established in 1991
  • Competitive in Corn, Soybean, Beef, and Orange
    Juice Production
  • U.S. has lost some beef markets because of the
    freer trade within MERCOSUR
  • Strong Advocate for Eliminating Subsidies
  • Opportunities
  • Expand to include Bolivia, Chile, Peru, Ecuador,
    Colombia, Venezuela
  • Potentially a part of FTAA
  • Problems
  • Political and Economic Instability

19
Cairns Group
  • Established in 1986 in Cairns, Australia
  • 18 southern hemisphere countries
  • Major members include Australia, New Zealand,
    Brazil, Argentina, Chili, Thailand, Canada
  • All export dependent
  • Wheat, rice, coffee, beef, dairy, soybeans
  • Ag policies
  • Works largely through WTO
  • Seeks removal of barriers to trade
  • Seeks elimination of ag subsidies (Critics of
    U.S. and EU)
  • Members not free of ag policies that impede trade

20
APEC
  • Asian Pacific Economic Cooperation,
  • 21 countries that border Pacific Ocean
  • Highly diverse membership including U.S.,
    Japan, China, Russia, Mexico, Chile, Australia,
    New Zealand, Vietnam, Thailand
  • Accounts for 60 of World GDP
  • Accounts for 60 of U.S. ag exports
  • Accounts for 50 U.S. of imports
  • Objectives
  • Free trade among developed country members by
    2010
  • Free trade throughout by 2020

21
Japan
  • 125 M people
  • Ag
  • 40 self-sufficient on food needs
  • Income increases encourages dietary change
  • Ag Policy
  • Conversion from rice to FV
  • Control dietary change through Japan Food
    Agency purchases in international market.
  • 3rd largest US customer but Australia and New
    Zealand has location advantage.
  • Strong Protectionist Stance

22
China
  • 1.3 Billion people
  • Ag
  • Essentially self-sufficient
  • Undergoing substantial dietary change
  • Ag Policy
  • State dominated
  • Transition to market economy
  • Entry into WTO

23
Russia
  • 145 M people
  • Ag
  • Grain, sugar beets, rapeseed/canola, beef, milk
  • Net importer (major market for U.S. meat)
  • Ag Policy
  • Slow conversion to market economy
  • Privatization of land
  • State control of imports

24
Developing Countries
  • 67 Countries (40 of world population)
  • Low-Income (lt 2000 per capita)
  • Net-Importers (dependent on food aid)
  • Mostly trade with developed countries
  • Policies Center Around Increased Income
  • Expansion of Exports
  • Difficult to establish export markets
  • Reluctant to allow imports

25
EU Common Agricultural Policy (CAP)
  • EU History
  • 1957 Treaty of Rome formed European Economic
    Community
  • Customs Union No internal barrier to trade
    among members common external tariff Free
    movement of labor and capital
  • 1992 Maastricht Treaty formed European Union to
    establish common currency
  • 1999 European Monetary Union (Adoption of the
    Euro)

26
EU Common Agricultural Policy (CAP) cont.
  • 25 Members
  • Original Treaty of Rome Included
  • France
  • Germany
  • Italy
  • Belgium
  • Netherlands
  • Luxembourg

27
EU Common Agricultural Policy (CAP) cont.
  • Governance
  • Council of the European Union
  • Decision body with heads of state for each
    country (like Senate)
  • European Parliament
  • Legislature body with 626 members appointed by
    population (like House)
  • European Commission
  • Executive branch implements policy
  • Commission on Agriculture manages CAP
  • Court of Justice
  • Dispute settlement body

28
EU Value of Ag Production and Processing (B)
29
Dimensions of the EUs Common Agricultural Policy
  • TRQ to prevent imports
  • Price Supports
  • Intervention price (EU purchase for storage)
  • Direct Payments
  • Related to historical yield and current acres
  • Payment per head for livestock
  • Production Controls
  • Set aside percent of cropland
  • Marketing/production quotas in dairy
  • Export subsidy to prevent stocks in storage from
    becoming excessive

30
Dimensions of the EUs Common Agricultural Policy
  • Multifunctional Payments
  • Noncommodity outputs that are jointly produced by
    agriculture
  • Countryside benefits of farming
  • Notion that agriculture can become too intensive
    and farmers need to be compensated for making it
    less intensive
  • Organic Farming
  • Sanitary Phytosanitary Standards
  • Import restrictions on hormone treated beef
  • Import restrictions on GMOs

31
Why Expand?
  • EU
  • Political influence
  • Security
  • Globalization
  • Trade

32
Lecture 5, Wrap up
  • Complexity of Trade Policy
  • Trade Development Issues
  • Geopolitical Centers of Influence
  • Next Class
  • WTO (Chapter 5)
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