1. Texas Vegetable Assn. Mid-Year Meeting McAllen, Texas June 17, 2004
Central America Free Trade: What’s at Stake For Texas Agriculture? C
Parr Rosson, Professor & Director
Center for North American Studies
Department of Agricultural Economics
Texas A&M University
NAS

2. What’s At Stake?
Access to Dominican Republic & Central American Markets
Sources of Raw Materials
Gains/Losses to Trade
Greater Efficiency & Economies of Scale

3. Southern African Customs Union ‘05
15 Trade Agreements Completed or Pending
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

4. World Average Agricultural Tariffs, 2000
Percent
140
Bound Average
115
World Average
120
100 85 80
62% 55 60 40 30 40 25 12 20
South Asia
United States
South America
European Union
North America
Caribbean Islands
Central America

5. Bound Tariffs for Selected Products, 2000
Percent
South America
Central America
100 86 86
Caribbean Islands
North America 80 52 52 60 40 39 40 12 20 10
Fruit Fresh
Fruit Preparations
Source: ERS/USDA

6. Bound Tariffs for Selected Products, 2000
Percent
South America
100
Central America 86 86
Caribbean Islands 80
North America 54 60 51 41 38 40 12 20 11
Vegetables
Vegetable Preparations
Source: ERS/USDA

7. DR-Central American Free Trade Agreement

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

9. CAFTA
WHO?
Costa Rica
Dominican Republic
El Salvador
Guatemala
Honduras
Nicaragua
What? Free Trade Area Between Each Country & the United States
When? Early 2005, if Approved
How? Trade Promotion Authority

10. CAFTA (cont.)
About ½ of Markets Open to U.S. Agriculture When Implemented
Opportunities: HQ Beef, Cotton, Wheat, Soybeans
Rest of Market Access Over Years: Pork, Beef, Poultry, Rice, Corn, Dairy

11. DR-CAFTA Demographics
Country
Pop.
(mil)
GDP/
Person
Poverty %
Lit.
Ag. Pop.
Costa Rica
3.9
$8,300
20.6 96 20
El Salvador
6.5
$4,600 48
80.2 30
Guatemala
13.9
$3,900 75
70.6 50
Honduras
6.7
$2,500 53
76.1 34
Nicaragua
5.1
$2,200
67.5 42
Dom. Rep.
8.7
$6,300 25
84.7 17
Total/Avg.
44.8
$4,633
45.3
79.2
32.2

12. U.S. Total Trade with CAFTA, 2003
Billion Dollars
Exports
Imports
Balance
$4.5
$5.0
$4.2
$4.0
$3.4
$3.4
$3.3
$2.9
$2.8
$3.0
$2.3
$2.0
$1.8
$2.0
$0.8
$0.5
$1.0
$0.1
$0.0
-$0.2
-$0.3
-$0.2
-$0.5
-$0.7
-$1.0
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Dominican Rep.
Source: Foreign Trade Statistics, U.S. Census Bureu

13. U.S.-Central American Agricultural Trade, 1990-2003
$1.3
$1.4
$1.5
$1.6
$1.8
$2.0
$2.2
$2.1
$1.9
$0.5
$0.6
$0.7
$0.8
$0.9
$1.0
$1.1
$1.2
-$0.8
-$0.9
-$1.0
-$1.2
-$0.7
Billion Dollars
Imports
Exports
Balance
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
-$0.5
-$1.0
-$1.5
1990
1995
2000
2003
Source:
Foreign Agricultural Trade of The United States
, Calender Year, USDA/ERS

15. 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
$260
Other
$129
Beverages
Oilseeds
$37
Cotton
$90
$47
Animals
Animals
Veg/Fruit
$204
$47
$44
Veg/Fruit
$117
Source: U.S. Trade Internet System,

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

17. U.S. Onion and Melon Exports to CAFTA
Million Dollars
Onions
Melons
$5.0
$3.9
$4.0
$2.6
$3.0
$2.0
$1.9
$2.0
$1.5
$1.3
$1.0
$0.6
$0.6
$1.0
$0.4
$0.2
$0.1
$0.0
$0.0
$0.0
$0.0
$0.1
$0.0
$0.0
$0.1
$0.0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: U.S. Trade Internet System,

18. U.S. Onion and Melon Imports from CAFTA
Million Dollars
$200.0
Onions
Melons
$161.1
$143.0
$142.1
$150.0
$126.2
$106.6
$102.5
$93.9
$85.7
$100.0
$79.0
$74.4
$50.0
$1.2
$0.8
$0.8
$0.8
$0.9
$1.1
$0.8
$1.2
$0.8
$1.3
$0.0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: U.S. Trade Internet System,

19. 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

20. 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

21. for Yellow & White Onions
CAFTA Base Tariffs
for Yellow & White Onions
120
Percent 97
100 80 60 47 40 15 15 15 15 20
Costa Rica*
El Salvador
Guatemala
Honduras
Nicaragua
Dom. Rep.
* Denotes Tariff-Rate Quota

22. CAFTA Phase-Out Period for Yellow & White Onions
Years 18 15 15 15 15 16 14 12 12 10 10 8 6 4 2
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Dom. Rep.

23. Monthly U.S. Cantaloupe Shipments and Imports
Million Pounds
$/CWT
400 30
Texas
Other U.S.
CAFTA
Mexico
Price 25
300 20
200 15 10
100 5
Jan 01
May 01
Jan 02
May 02
Jan 03
May 03
Jan 04
Source: Agricultural Marketing Service, USDA

26. Monthly U.S. Onion Shipments and Imports
Million Pounds
$/CWT
500 50
Other U.S.
Texas
Mexico
CAFTA
Other Imports
Price
400 40
300 30
200 20
100 10
Apr
Apr
Apr
Jan 01
Jan 02
Jan 03
Jan 04
Source: Agricultural Marketing Service, USDA

27. Shipping Trends
CAFTA Poses Biggest Threat to Texas Cantaloupe & Honeydew
Other US Bigger Threat in Some Years
Mexico Beneficiary of Higher Prices for Onions & Cantaloupe
Texas Benefits from Higher Prices for Cantaloupe, Watermelon & Onions
Declining Shipments from Texas
-42.5%
-33.8%
-34%
Million Pounds

28. Summary Negotiations Completed
DR-CAFTA May Go To Congress Soon
Labor & Environmental Interests Important to the Debate
DR-CAFTA Tariff Reductions Will Open Markets, Over Time
Dr-CAFTA Major Supplier of Honeydew and Cantaloupe to U.S. Market
Texas Season Overlaps with Rest of United States & DR-CAFTA
Mexico & Other US Major Competition in Watermelon & Onions

29. Issues for Texas Are More Trade Agreements a Desirable Outcome?
Without DR-CAFTA, U.S. Market Access Limited
Even with DR-CAFTA, No Guarantee of Market Growth, Some Countries Need Economic Development & Income Growth
Investment in CA May Spur Production & Development of Infrastructure
SPS Problems May Arise, More Trade Disputes Likely
Recent Declines in Shipments of Texas Cantaloupe, Honeydew & Onions Troublesome

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