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 – Slow Progress in WTO – Cancun Ministerial Derailed Progress – FTAA ‘Lite’ Not As Appealing Economic Incentives – Open Markets – Increase Business Efficiency – Create Economies of Scale

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

Australia ‘04 Bahrain ‘04 DR-CAFTA ‘04 Chile ‘04 FTAA ‘06 Morocco ‘04 Southern African Customs Union ‘05 Singapore ‘03 Jordan ‘03 U.S. Trade Agreements-3d Largest Market NAFTA ‘94 Israel ‘85 CUSTA, ‘89 Andean FTA 05 Panama ‘05 Thailand ‘05

U.S. Average Tariff, Statistical Abstract of the United States Percent Tariff of Abominations, 1828 Morrill Act, 1861 Smoot-Hawley Tariff, 1930 Generalized System of Preferences, 1968 Fordney-McCumber Tariff, 1922 GATT, 1947 WTO,

World Average Agricultural Tariffs, South Asia Caribbean Islands Central America South America European Union North America United States Bound Average World Average 62% Percent

DR-Central American Free Trade Agreement

Dominican Republic, 800 Miles NE North Houston, 1,300 Miles NW Mexico Separate Agreement with United States

DR-CAFTA Demographics Country Pop. (mil) GDP/ Person Poverty % Lit. % Ag. Pop. % Costa Rica3.9$8, El Salvador6.5$4, Guatemala13.9$3, Honduras6.7$2, Nicaragua5.1$2, Dom. Rep.8.7$6, Total/Avg Total/Avg.44.8$4,

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 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)

U.S. Ag Trade with DR-CAFTA, 2003 Source: Foreign Trade Statistics, U.S. Census Bureau $242 $238 $349 $200 $95 $442 $865 $105 $763 $221 $114 $280 -$623 $133 -$414 -$21 -$19 $162 Costa Rica El Salvador Guatemala Honduras Nicaragua Dominican Rep. $0 $200 $400 $600 $800 $1000 -$200 -$400 -$600 -$800 Million Dollars ExportsImportsBalance

U.S. Agricultural Exports to Central America Source: U.S. Trade Internet System, Grains & Feeds $218 Oilseeds $90 Animals $47 Veg/Fruit $44 Beverages $37 Other $47 Grains & Feeds $582 Oilseeds $260 Animals $204 Veg/Fruit $117 Cotton $47 Other $129 Total, 1990: $483 million Total, 2003: $1,339 million

U.S. Agricultural Imports from Central America Bananas $453 Fruit/Veg. $133 Fish $211 Coffee $372 Sugar $133 Other $264 Bananas $674 Fruit/Veg $527 Fish $478 Coffee $459 Sugar $188 Other $328 Total, 1990: $1,566 millionTotal, 2003: $2,654 million Source: U.S. Trade Internet System,

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

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

CAFTA Base Tariffs for Yellow & White Onions Costa Rica*El SalvadorGuatemalaHondurasNicaraguaDom. Rep Percent * Denotes Tariff-Rate Quota

CAFTA Phase-Out Period for Yellow & White Onions Costa RicaEl SalvadorGuatemalaHondurasNicaraguaDom. Rep Years

Monthly U.S. Onion Shipments and Imports Source: Agricultural Marketing Service, USDA Jan 01 Apr Jan 02 Apr Jan 03 Apr Jan Million Pounds $/CWT Other U.S.TexasMexicoCAFTAOther ImportsUS Price

Monthly U.S. Watermelon Shipments and Imports Source: Agricultural Marketing Service, USDA Jan 01 May 01 Jan 02 May 02 Jan 03 May 03 Jan Million Pounds Cents/Pound, Various Red TexasOther U.S.CAFTAMexicoUS Price

Monthly U.S. Cantaloupe Shipments and Imports Source: Agricultural Marketing Service, USDA Jan 01 May 01 Jan 02 May 02 Jan 03 May 03 Jan Million Pounds $/CWT TexasOther U.S.CAFTAMexicoUS Price

Monthly U.S. Honeydew Shipments and Imports Source: Agricultural Marketing Service, USDA Jan 01 May Jan 02 May Jan Million Pounds $ per 2/3 Carton of 6s TexasOther USCAFTAMexicoUS Price

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

Source: U.S. Trade Internet System, $226 $283 $273 $332 $409 $339 $322 $353 $329 $319 $317 $290 $338 $612 -$1,174 -$1,180 -$1,107 -$1,074 -$987 -$850 -$855 -$956 -$1,137 -$1,277 -$1,592 -$1,757 -$1,894 -$2,120 -$948 -$898 -$834 -$742 -$578 -$511 -$533 -$603 -$808 -$958 -$1,276 -$1,467 -$1,556 -$1, $0 $400 $800 -$400 -$800 -$1,200 -$1,600 -$2,000 -$2,400 Million U.S. Dollars U.S. ExportsU.S. ImportsBalance U.S.-Australia Agricultural Trade,

U.S. Agricultural Trade with Australia, 2003 Animals 37.9% Oilseeds 21.2% Hort 18.1% Grains 7.2% Other 15.5% $232 $130 $111 $44 $95 Animal Products 60.6% Bev 29.5% Hort 2.8% Grains 2.2% Sugar 2.1% Other 2.8% Total Imports: $2,120 MillionTotal Exports: $612 Million $627 $1,174 Source: U.S. Trade Internet System,

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

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

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?

Center for North American Studies Parr Rosson Ph: “Informed Decisions for Global Change” C NAS