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

AAEA Annual Meetings Denver, CO August 1-4, 2004. DR-CAFTA & Australia Trade Agreement: Issues & Implications for U.S. Agriculture . C. NAS. Parr Rosson Professor & Director Center for North American Studies Texas A&M University. Why Regional Agreements?. 2d Best Solution After MTN

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

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  1. AAEA Annual MeetingsDenver, COAugust 1-4, 2004 DR-CAFTA & Australia Trade Agreement:Issues & Implications for U.S. Agriculture C NAS Parr Rosson Professor & Director Center for North American Studies Texas A&M 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

  4. CUSTA, ‘89 Jordan ‘03 Bahrain ‘04 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 Total/Avg. 44.8 $4,633 45.3 79.2 32.2

  10. 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)

  11. 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

  12. 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

  14. 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

  15. 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

  16. CAFTA Base Tariffs for Yellow & White Onions Percent 120 97 100 80 60 47 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

  20. 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

  22. Australia Trade Agreement

  23. 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

  24. U.S.-Australia Agricultural Trade, 1990-2003 Million U.S. Dollars $800 $612 $409 $353 $339 $338 $332 $329 $322 $319 $317 $400 $290 $283 $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 -$1,276 -$1,277 -$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

  25. U.S. Agricultural Trade with Australia, 2003 Total Exports: $612 Million Total Imports: $2,120 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% Other Grains 2.1% Hort 2.8% 7.2% 2.8% Grains 2.2% Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade

  26. 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

  27. 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

  28. 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?

  29. Center for North American Studies C NAS Parr Rosson Ph: 979-845-3070 E-mail: prosson@tamu.edu “Informed Decisions for Global Change”

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