Title: Ag Policy, Lecture 5 Knutson, 6th Edition Chapters 4,
1Ag Policy, Lecture 5 Knutson, 6th Edition
Chapters 4, 6
- Agricultural Trade Issues and Policies
- Relationships
- Trade Issues
- Geopolitical Centers of Influence
2International 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)
3US 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
4US 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
5Fast 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
6US Trade Policy Issues
- Food Diplomacy
- Increased Market Access
- Building Markets
- Developing Market Economies
- Increasing Food Security
- Protectionist Policies
7Food Diplomacy
8Market 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
9Building 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)
10Building 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
11Food Security
- Global Food Availability
- Individual Food Security
- Food Safety
12Protectionist Policies
- Barriers to Trade
- All Domestic Farm Policies
- Trade Remedy Laws
- Anti-Dumping Provisions
- Countervailing Duty (Tariff)
13Geopolitical 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
14Geopolitical 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
15NAFTA (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
16NAFTA 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)
17NAFTA 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
18MERCOSUR
- 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
19Cairns 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
20APEC
- 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
21Japan
- 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
22China
- 1.3 Billion people
- Ag
- Essentially self-sufficient
- Undergoing substantial dietary change
- Ag Policy
- State dominated
- Transition to market economy
- Entry into WTO
23Russia
- 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
24Developing 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
25EU 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)
26EU Common Agricultural Policy (CAP) cont.
- 25 Members
- Original Treaty of Rome Included
- France
- Germany
- Italy
- Belgium
- Netherlands
- Luxembourg
27EU 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
28EU Value of Ag Production and Processing (B)
29Dimensions 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
30Dimensions 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
31Why Expand?
- EU
- Political influence
- Security
- Globalization
- Trade
32Lecture 5, Wrap up
- Complexity of Trade Policy
- Trade Development Issues
- Geopolitical Centers of Influence
- Next Class
- WTO (Chapter 5)