Agricultural Trade Liberalization in the Doha Round of WTO Negotiations Preliminary Results FAPRI

1. Agricultural Trade Liberalization in the Doha Round of WTO Negotiations Preliminary ResultsFAPRI World Outlook Conference Washington D.C. May 16-17, 2002

2. Objective of the Analysis • Assess the impacts of complete trade liberalization in grain, oilseeds, livestock, dairy, and cotton markets. • Scenario I looks at the complete removal of tariffs, TRQs, and exports subsidies. • Scenario II will look at a combined removal of domestic policies and total trade liberalization (in progress). • Emphasis is on international prices, trade, and S&Us in major trading countries.

3. Contributions of the Study • Provides estimates of terms of trade effects of various trade distortions. • Identifies winners and losers from trade liberalization among trade partners and among producers and consumers. • Provides estimates of the relative impact of domestic farm policies and trade policies on important variables.

4. Key Assumptions • Full trade liberalization starts in 2002/03 and is implemented instantaneously. • In first scenario, domestic programs are maintained with open borders. We assume away budgetary pressures induced by production subsidies in absence of trade barriers. This is a transparent procedure with some drawbacks. • It is assumed in the scenario that liberalization would force the EU wheat price to follow the world wheat price. • A caveat on quality differentials in meats, dairy mitigating price arbitrage after liberalization.

5. Notable Trade Policy Changes • Removal of binding dairy TRQs and high over-quota tariffs. • Removal of export subsidies in the EU (e.g., dairy and meats). • High tariffs or TRQs in net-importing Asian markets are removed (e.g., rice). • Removal of India's high tariffs on oilseeds, products, and export subsidies on wheat.

6. Grain PricesFOB Gulf

7. Wheat Net Exporters Note: percentage change in net trade is between baseline and scenario

8. Wheat Net Exporters Note: percentage change in net trade is between baseline and scenario

9. India Wheat Net Imports

10. Key Results for Grain Markets: Corn • World corn net trade is first up (+3.5 %) then slightly down after 2006, driven by reduction in animal numbers. • A shift from commodity exports to meat exports is driven by the tariff difference between meat and corn.

11. Corn Net Importers Note: percentage change in net trade is between baseline and scenario

12. Soybean PriceFOB Decatur

13. Soybean Meal PriceFOB Decatur 48%

14. Soybean Oil PriceFOB Rotterdam

15. Key Results for Oilseed Markets: Soybean Complex World: • Production unchanged but production and processing locations shift. • Argentina and Brazil expand area. • Importers with tariffs (China and India) contract output and import more.

16. Soybean Net Exporters Note: change in net trade volume is between baseline and scenario

17. Key Results for Oilseed Markets: Soybean Complex Brazil: • Expands its area and production by 2.80% or by about 1.5 mmt, (1 mmt to domestic crush and 0.5 mmt to exports). • Meal use is up (+7.7%) covered by additional domestic crush and decreased meal exports (-1.2%). • Oil domestic use down (-0.16%) together with higher crush, exports expand (+10.7%).

18. Key Results for Oilseed Markets: Soybean Complex Argentina: • Additional production (1.1 mmt) is exported entirely. • Domestic crush down slightly. • Meal use down (-3.5%) and exports constant. • Oil consumption unchanged and oil exports decline marginally.

19. Key Results for Oilseed Markets: Soybean Complex China: • Area and crush down by 1.67% and 0.22%. • Production down by more than crush, leading to higher beans imports (1.1%). • Meal imports up (22.7%) because of reduced production and increased use. • Same story on soy oil.

20. Key Results for Oilseed Markets: Soybean Meal World meal trade: • Down because feed use in U.S. and Brazil is up more than their production. • Argentina and India crush less. • Consumption and imports are down in most importing countries (EU, FSU, Eastern Europe, Japan, Korea, Taiwan, ROW).

21. Key Results for Oilseed Markets: Soybean Oil World oil trade: • Up by 5%. • China and India and ROW import more, (substitution of domestic production) • The U.S. and Brazil export more. • Argentina oil production and export are down, because its crushing industry loses the protection by the export tax.

22. Rapeseed PriceCIF Hamburg

23. Rapeseed Meal PriceFOB Hamburg

24. Rapeseed Oil PriceFOB Hamburg

25. Rapeseed Net Exporters Note: change in net trade volume is between baseline and scenario

26. Rapeseed Net Importers Note: change in net trade volume is between baseline and scenario

27. Key Results for Oilseed Markets: Rapeseed Meal Rapeseed Meal • Domestic prices constant or declining. • Canada, India and China increase meal use, all others decrease the use (driven by animal numbers and cross prices). • Total trade falls by 1.8%

28. Key Results for Oilseed Markets: Rapeseed Oil • Domestic rapeseed oil prices fall in FSU, Japan, and India, boosting their consumption by 1%, 1.4% and 11.4% respectively. • Consumption in all other markets shrinks because of higher domestic prices. • Total world consumption increases by 0.28%. Trade declines by1.7%.

29. Sunflower Seed PriceCIF Lower Rhine Price

30. Sunflower Seed Meal PriceCIF Rotterdam Price

31. Sunflower Seed Oil PriceFOB NW Europe Price

32. Key Results for Oilseed Markets: Sunflower Complex • World production (+1.82%) profits from the increased demand and resulting higher prices. • Production changes according to domestic prices. With no tariff protection, Eastern Europe, China, ROW have lower prices and lower area. • The countries with lower production import more (ROW) or export less (China, Eastern Europe). Argentina and the FSU pick up the slack, they substitute raw material exports for domestic crush.

33. Key Results for Oilseed Markets: Sunflower Complex Meal Trade: • Argentina: shift from meal into seed exports. • ROW: shift into seed imports from domestic production, supporting the expansion of domestic crush. • EU: shift into meal imports from raw materials. Sunflower Oil • The exporters’ crush is down, they export less oil but more seeds. World oil trade is down (-4.75%), we see a shift into trade of raw material and increased crush by the consuming countries.

34. Beef PriceNebraska Direct Fed Steer Price

35. Pork PriceBarrow and Gilt Price, National Base 51-52% Lean Equivalent

36. Poultry PriceU.S. 12-City Price

37. Key Results for Livestock and Meats • Importing countries with high protection (e.g., Japan, Philippines, S. Korea) increase their excess demand of meat with the decrease in domestic prices. •  Some importing countries with already low duties reduce their imports because import cost went up (e.g., Mexico). • Most high-cost exporting countries decrease their excess supply of meat with lower prices resulting from trade liberalization. Some high-cost exporting countries increase their exports when world prices rise by more than the removed duties. • Low cost exporters from North and South Americas increase their exports with rising world prices.

38. Key Results for Livestock and Meats • Traditional exporters gain in the beef export market including Argentina (35% increase in net exports), Australia (7.9%), Brazil (7.2%), New Zealand (4.4%). The U.S. becomes a net exporter, reaching a peak of 743 tmt in 2009. • Brazil, Canada, and the U.S. are the gainers in the pork sector, increasing their exports by 63.1%, 41.3%, and 190.6%, respectively. • The U.S.,Brazil, and Thailand are the gainers in poultry trade, with their respective exports increasing by 25.3%, 24.1%, and 42.6%.   

39. European Union Meat Net Exports Note: change in net trade volume is between baseline and scenario

40. Japan Meat Net Imports Note: change in net trade volume is between baseline and scenario

41. Mexico Meat Net Imports Note: change in net trade volume is between baseline and scenario

42. Butter and Cheese PricesFOB Price N. Europe

43. Key Results for Dairy Markets: Butter • World total butter trade increases by 6.1%. The value of total net exports increases by 36.5%. • India becomes net exporter. With exports of about 34.3 tmt. • EU and U.S. prices decrease about 1.5% and 23.6%, while Australia and New Zealand prices increase by 23.0% and 18.9%, respectively.   • U.S. and Canada imports increase by 6.2% and 1939%, respectively. South Korea and Indonesia imports increase by 56.5% and 15%, respectively. Japanese imports increase by 12.9 tmt (about 720%).

44. Butter Net Exporters Note: percentage change in net trade is between baseline and scenario

45. Key Results for Dairy Markets: Cheese • World cheese trade decreases by 5.1%. Total trade starts to grow in 2010. Value of total net exports increases by 20.7%. • Net U.S. imports decrease by 65%. Canadian and Japanese net imports increase by 629% and 2.3%. • Argentina, Ukraine, and Switzerland increase their exports by 188%, 23%, and 43.2, respectively. Czech Republic becomes net exporter with 27.9 tmt.

46. Cheese Net Exporters Note: percentage change in net trade is between baseline and scenario

47. NFD and WMP PricesFOB Price N. Europe

48. Key Results for Dairy Markets: NFD • EU, U.S., Australia and New Zealand prices increase by 9.4%, 17.8%, 27.7%, and 25.7%, respectively. • World total NFD trade increases by 10.9%. Value of total net exports increases by 48.6%. • Brazil decreases its net imports by 77%. Canada becomes a net importer. In the scenario, its imports become 30.5 tmt. SouthKorea and Indonesia imports increase about 650% and 12%, respectively.

49. NFD Net Exporters Note: percentage change in net trade is between baseline and scenario

50. Key Results for Dairy Markets: WMP • World total WMP trade expands by 3.6%.Value of total net exports increases by 26.4%. • EU price decreases by 4.2%, while Australia and New Zealand prices increase 11.2% and 32.4%, respectively. • Argentina, Australia and New Zealand increase their exports by 18%, 13%, and 2%, respectively. EU exports decrease by 10%. China becomes a net exporter. Its exports amount to 33.9 tmt.