1. 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

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. 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

5. U.S. Average Tariff, 1789-2002 Statistical Abstract of the United States 178918161820184018601880190019201940196019802000 0 10 20 30 40 50 60 70 Percent 0 10 20 30 40 50 60 70 Tariff of Abominations, 1828 Morrill Act, 1861 Smoot-Hawley Tariff, 1930 Generalized System of Preferences, 1968 Fordney-McCumber Tariff, 1922 GATT, 1947 WTO, 1995 1789

6. World Average Agricultural Tariffs, 2000 115 85 55 40 30 25 12 South Asia Caribbean Islands Central America South America European Union North America United States 0 20 40 60 80 100 120 140 Bound Average World Average 62% Percent

7. DR-Central American Free Trade Agreement

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

9. DR-CAFTA Demographics Country Pop. (mil) GDP/ Person Poverty % Lit. % Ag. Pop. % Costa Rica3.9$8,300 20.69620 El Salvador6.5$4,60048 80.230 Guatemala13.9$3,9007570.650 Honduras6.7$2,5005376.134 Nicaragua5.1$2,2005067.542 Dom. Rep.8.7$6,300 2584.717 Total/Avg Total/Avg.44.8$4,63345.379.232.2

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 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

12. U.S. Agricultural Exports to Central America Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade 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

13. 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, 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 47 15 97 Costa Rica*El SalvadorGuatemalaHondurasNicaraguaDom. Rep. 0 20 40 60 80 100 120 Percent * Denotes Tariff-Rate Quota

17. CAFTA Phase-Out Period for Yellow & White Onions 15 12 10 15 Costa RicaEl SalvadorGuatemalaHondurasNicaraguaDom. Rep. 0 2 4 6 8 10 12 14 16 18 Years

18. Monthly U.S. Onion Shipments and Imports Source: Agricultural Marketing Service, USDA Jan 01 Apr Jan 02 Apr Jan 03 Apr Jan 04 0 100 200 300 400 500 Million Pounds 0 10 20 30 40 50 $/CWT Other U.S.TexasMexicoCAFTAOther ImportsUS Price

19. 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 04 0 200 400 600 800 Million Pounds 0 0.1 0.2 0.3 0.4 0.5 Cents/Pound, Various Red TexasOther U.S.CAFTAMexicoUS Price

20. 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 04 0 100 200 300 400 Million Pounds 0 5 10 15 20 25 30 $/CWT TexasOther U.S.CAFTAMexicoUS Price

21. Monthly U.S. Honeydew Shipments and Imports Source: Agricultural Marketing Service, USDA Jan 01 May Jan 02 May Jan 04 0 20 40 60 80 100 Million Pounds 0 5 10 15 20 $ per 2/3 Carton of 6s TexasOther USCAFTAMexicoUS Price

22. Australia Trade Agreement

23. 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. Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade $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 -$1,508 19901991199219931994199519961997199819992000200120022003 $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, 1990-2003

25. 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, 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 Parr Rosson Ph: 979-845-3070 E-mail: prosson@tamu.edu “Informed Decisions for Global Change” C NAS