Agricultural Trade Policy Outlook: Emerging Trends and Research Topics. Robert Johansson

Transcription

1 Agricultural Trade Policy Outlook: Emerging Trends and Research Topics Robert Johansson Selected Paper prepared for presentation at the International Agricultural Trade Research Consortium s (IATRC s) 2015 Annual Meeting: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, FL. Copyright 2015 by Robert Johansson. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.

2 1 AGRICULTURAL TRADE POLICY OUTLOOK: EMERGING TRENDS AND RESEARCH TOPICS Robert Johansson Chief Economist, USDA International Agricultural Trade Research Consortium /13/15

3 2 Recent Developments Free Trade Agreement Negotiations Trans Pacific Partnership (TPP) Transatlantic Trade and Investment Partnership (TTIP) World Trade Organization Ministerial Conference/DDA Dispute Settlement Other Animal/crop diseases Climate change Economic outlook / U.S. competitiveness

4 3 Trans Pacific Partnership (TPP) Agreement reached on Oct. 5 and notified to Congress on Nov. 3 (signature Feb. 2016) TPP region: Japan, Vietnam, Malaysia, New Zealand, Brunei, Canada, Mexico, Australia, Chile, Peru, Singapore, U.S. nearly 40% of world GDP Agriculture Package: Most tariffs eliminated; some preferential TRQs and safeguards for sensitive products SPS Plus GIs/Ag Biotech/Organics

5 4 U.S. Agricultural Exports TPP accounts for 40-50% of total $billion TPP

6 Billions of People Trillions, 2005 PPP$ Importance of FTAs to U.S. Trade: The TPP and Asia-Pacific Integration 5 Asia s middle class is the fastest growing market in the world And will drive global middle class demand in the coming decades North America Asia Pacific North America Asia Pacific In 2030: 66% of the world s middle class will be in Asia Source: OECD In 2030: 59% of the world s middle class consumption will be in Asia

7 6 Transatlantic Trade and Investment Partnership To date, eleven negotiating rounds. Next round is in Feb Key issues for agriculture: Tariffs (13.7% simple average for US exports to EU vs. 4.7% for EU export to US) (ERS, 2015) Nontariff measures (SPS, TBT, GIs, licensing) Beef, pork, poultry, dairy, grains, oilseeds, processed products

8 Transatlantic Trade and Investment Partnership 25 $billion US exports to EU EU exports to US Balance

9 500 House Trade Votes

10 9 World Trade Organization 10 th Ministerial, Nairobi, Kenya (Dec ) Possible outcome on export competition for agriculture Developing countries pushing for safeguards and public stockholding flexibility (e.g., price supports) Other issues (ecommerce, TRIPs, SVEs, LDCs, accessions of Afghanistan and Liberia)

11 10 World Trade Organization Dispute Settlement Cases 500 cases (as of October 2015) In comparison, around 300 cases during the 47 years of the GATT Most cases concern trade remedies / nonag 6 new ag panels in 2015: US Chinese export subsidies for ag/non-ag enterprises EU Russian tariffs on ag and non-ag products China EU modification of poultry tariff concessions US/NZ Indonesia ag import restrictions Japan Korean ag import restrictions Brazil Indonesian poultry import restrictions

12 11 World Trade Organization Country of Origin Labeling (COOL) Started in December 2008 Final AB report (compliance) in May 2015 Arbitration began in June 2015 Arbitration report issued December 7 Canada: $781 million (requested $2.3 bil.) Mexico: $228 million (requested $713 mil.) DSB will meet on December 18

13 12 Post Mortem How do Economists present sophisticated modeling (econometric / PE / GE) to a relatively unsophisticated audience? The lawyers understand Econ 101 yet we are using relatively sophisticated econometric and modeling techniques that are not easy for non-economists to grasp. Some post-mortem critique of that case is needed from objective researchers. Lots of material out there to sift through.

14 13 Other Trade Issues Economic Factors Affecting U.S. Trade Sluggish global economic growth Strong U.S. dollar Lower commodity prices Other countries economic situation and policies (China, India, Brazil, Russia)

15 14 Other Trade Issues Livestock / Crop Disease Outbreaks HPAI/BSE looking at effects on trade Citrus plant diseases and impact on citrus products Climate change COP 21 USDA report --- Food Security and Climate Change Improved trade will reduce impacts of climate related supply shocks.

16 China Falls to Number Two for U.S. Agricultural Exports, Canada Returns to Top Spot Billion dollars China Canada Mexico forecast Source: USDA (ERS-FAS) Outlook for U.S. Agricultural Trade, USDA Global Agriculture Trade System

17 10/ / / / / / / / / / / / / / / / / / / / / / / / / /2014 2/2015 4/2015 6/2015 8/2015 Million Metric Tons Monthly Chinese Corn/Barley/Sorghum Imports by Origin US-CORN US-SORGHUM US-DDG Ukraine-CORN Thailand/Burma/Laos-CORN Other-CORN BARLEY Other-SORGHUM Other-DDG Source: Global Trade Information Services (GTIS)

18 17 The dollar and the Brazilian real Real per dollar, 6-week moving average Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Source: Eikon/Datastream

19 The price of corn * in dollars and real 18 Dollars per bushel, 6-week moving average 8.5 Reals per bushel, 6-week moving average Price in US dollars (left axis) Price in real (right axis) Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 *Central Illinois, from USDA Agricultural Marketing Service 5

20 The price of soybeans * in dollars and real 19 Dollars per bushel, 6-week moving average 17.5 Reals per bushel, 6-week moving average Price in real (right axis) Price in US dollars (left axis) Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 *Central Illinois, from USDA Agricultural Marketing Service 13

21 Dollar strengthens, exports falling below trend 2000 = 100 Billion dollars (nominal) 120 $ Monthly Agriculture Exports (right axis) Strength of US dollar (left axis) $16 $14 $12 $10 $8 $6 $4 $ Source: Eikon/Datastream, USDA Global Agricultural Trade System $0

22 Dollar strengthens, imports rise 2000 = 100 Billion dollars (nominal) 120 $ Monthly Agricultural Imports (right axis) Strength of US dollar (left axis) $10 $8 $6 $4 $ Source: Eikon/Datastream, USDA Global Agricultural Trade System $0

23 22 FY U.S. Ag Trade $bil $131.5 $122 billion Balance Exports Imports FY 2016 projected as of 12/1/15.

24 23 Outlook Regional trade agreements will continue to flourish in absence of multilateral reform WTO largely becoming a dispute settlement body, unless the Ministerial sets a new course Developing country policies increasingly important in terms of global market distortions Wild card issues: livestock/plant disease outbreaks, climate change/natural disasters, transportation, economic outlook

25 Source: IDB Integration and Trade Sector based on INTrade. RTA expansion [ 1975] 24

26 Source: IDB Integration and Trade Sector based on INTrade. RTA expansion [ 1995] 25

27 Source: IDB Integration and Trade Sector based on INTrade. RTA expansion [ 2014] 26

28 Trans Pacific Partnership Japan U.S. Tariff Comparison 27 % Japan U.S. Simple average, using DDA ad valorem equivalents

29 Tariff Rate (%) TPP Illustration (Japan Beef Tariff) 28 Japan s Beef (Chilled/Frozen) Import Tariffs WTO Bound MFN Applied Australia EPA for frozen beef Failed WTO result TPP Agreement Implementation Year

30 29 Trade Balances Diverge in India and China Billion $ USD Trade policy matters Agricultural Trade Balance India +$20 b China -$70 b Source: GTA

31 30 Rise of the New Subsidizers India Exports 14 Mil. MT Wheat Rice Beef Sugar Source: Global Trade Atlas

32 US$ Millions Trade Distorting Domestic Support Rising by Developing Countries 45,000 40,000 Total Trade Distoring Domestic Support EU India 31 35,000 India 30,000 EU USA 25,000 China 20,000 Japan Russia 15,000 10,000 China US Brazil Canada Indonesia 5,000 Australia Source: Cairns Group & WTO Notifications

33 Percentage of Gross Farm Receipts 32 Evolution of Producer Support Estimate, % 35% 30% 25% 20% 15% 10% 5% 0% -5% Grand Total OECD 8 Emerging Economies Notes: % PSE: Producer Support Estimate in percentage of gross farm receipts. The OECD total does not include the non-oecd EU Member States. The Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia are included in the OECD total for all years and in the EU from The emerging economies are Brazil, China, Colombia, Indonesia, Kazakhstan, Russia, South Africa and Ukraine. Source: OECD (2015), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database). doi: /agr-pcse-data-en

34 Percentage of Gross Farm Receipts 33 50% 40% 30% 20% 10% % Evolution of Producer Support Estimate, % -20% United States Brazil China European Union (EU-28) Notes: % PSE: Producer Support Estimate in percentage of gross farm receipts. The Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia are included in the EU from Source: OECD (2015), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database). doi: /agr-pcse-data-en

35 Net CCC Outlays: Increase Relative to Baseline avg $bil. Programs Programs + Crop Ins Programs + Crop Ins + CRP 2014 Farm Bill 2008 Farm Bill Source: FAPRI analysis for OCE

36 35 Research Outlook Quantitative Analysis Moving beyond tariffs and the US/EU Developing tools to analyze developing country policies and trade/price effects NTMs Counterfactual: How do we frame the question? Sectoral analyses will likely become more important to understand in more granular detail. Assessing the wild cards Economic framework for analyzing non-policy disruptions to trade