US TRADE POLICY Retrenchment or Resurgence? Joe Glauber International Food Policy Research Institute Farmers Cooperative Conference Minneapolis, MN 3 November 2016
Support for trade liberalization falters
Making America Great Again?
And not just the US.
US net exports as percent of GDP 8% 6% 4% 2% 0% -2% -4% -6% -8% Surplus driven by productivity growth (Gordon) 1850 1857 1864 1871 1878 1885 1892 1899 1906 1913 1920 1927 1934 1941 1948 1955 1962 1969 1976 1983 1990 1997 2004 2011
US agricultural trade Bil USD 175 155 135 115 95 75 55 Trade balance Exports Imports 35 15-5 1935 1939 1943 1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015
US net ag exports as percent of net farm income 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% -40% 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Growth in global consumption Annual growth rate (%) 3.5 3.0 2.5 2.0 Global population growth rate 1.5 1.0 0.5 0.0 Rice Wheat Corn Soya 2004/05-2013/14 2014/15-2023/24 Source: USDA, PSD database; ERS international baseline
Growth in global agricultural trade Bil USD 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Launch of Doha Round China accession to WTO Source: WTO
Growth in trade volumes, selected product groups 300% 250% 200% 150% 100% 50% 0% Oilseeds Wheat Rice Feed grains Beef and veal Swine Poultry Source: USDA, PSD database
Growth of South-South Ag Exports Bil USD 400 350 300 250 200 150 100 50 0 South-South North-South Source: UNCTAD
Bil USD 400 350 300 250 200 150 100 50 0 Growing share of developing country exports go to other developing markets Exports to Developed Markets Exports to Developing Markets Source: UNCTAD
Largest Developing Country Exporters 2013 Exports Billion USD Change from 2009 Share to Developing Markets Brazil 84.6 +59% 66% China 46.1 +65% 56% India 41.8 +188% 79% Argentina 40.6 +50% 74% Indonesia 34.7 +67% 68% Thailand 32.7 +53% 67% Malaysia 26.5 +47% 76% Mexico 22.0 +52% 12% Ukraine 16.1 +83% 59% Turkey 16.1 +58% 56% World 1,502.7 +49% 39% Source: Flake and Flake (2015) and UNCTAD (2015)
Doha Development Agenda, RIP 2001: Launch post 9/11 2003: Cancun ministerial => emergence of G20/G33/C4 2004: Framework Agreement => tradeoffs (CCPs for SSM/SP) 2005: Hong Kong ministerial => elimination of export subsidies 2006: Geneva meltdown => EU market access v US domestic support 2007: G4 process => Potsdam (EU/US v BZ/India) 2008: July ministerial => breakup over SSM (India v US) 2013: Bali ministerial => trade facilitation; public stockholding 2015: Nairobi ministerial => export competition
Nairobi Package Export subsidies eliminated Developed countries: 2020 Developing countries: 2023 Developing use of marketing and internal transportation subsidies (Art 9.4): 2028 Volume standstill based on average of previous 5 years Export credits repayment period restricted to 18 months Developed: end of 2017 Developing: end of 2020 Food aid Best efforts on cash versus in kind State Trading Enterprises Best efforts
Nairobi Package Special Safeguard Mechanism Recognizes right of developing countries to have SSM (HK ministerial) Committee on Agriculture will have special session to discuss Public Stockholding for Food Security Purposes Reaffirmed Bali declaration peace clause for stockholding practices; vulnerable to SCM challenge Permanent solution to be found by MC11 (2017) Cotton Market access Developed and developing countries in position to do so : duty free/quota free access to LDCs Domestic support recognize efforts to reform policies; more to be done Export competition immediate phase out for dvlpd; by 2017 for dvlpng Market Access Domestic support
Average bound MFN tariffs for agricultural products Source: WTO
Average applied MFN tariffs for agricultural products Source: WTO
Applied versus bound tariffs 250 Applied MFN Rate 200 150 100 50 0 Tariff overhang 0 50 100 150 200 250 Bound MFN Rate Source: WTO
Impact of DDA reduction formula on applied tariff rates Minimal access in developing countries due to high tariff binding overhang Most market access gains concentrated in key developed countries Source: Laborde 2014.
DDA v TPP Tariff Rate (%) 50 45 40 35 30 25 20 15 10 5 0 Japan s Beef (Chilled/Frozen) Import Tariffs WTO bound Current applied DDA (-57%) TPP (-82%) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Implementation Year But, far from comprehensive Sensitive products remain protected under TPP Dairy Sugar Rice More access for SeP under Rev4? Limited tariff lines TRQs
Deep agreements => standardization and harmonization of standards Labor TPP Environment Cross border services trade E-commerce SPS Dispute settlement TTIP GMO approvals SPS harmonization Growth hormones Geographical indications
Domestic support levels 45 40 35 30 25 20 15 10 5 0 Producer Subsidy Equivalent as percent of value of farm production 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: OECD
Composition of domestic support 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% OECD Average 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Tied to output Tied to inputs Decoupled from production Source: OECD
Producer Subsidy Equivalents Percent of value of production 70 60 50 40 30 20 10 0 PSE Coupled PSE Source: OECD, calculations by author
Composition of Domestic Support 2014 percent 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Brazil Russia Mexico China Turkey Indonesia Korea Output Input other coupled decoupled Source: OECD
Growth of Agricultural Insurance Programs Premium volume $ billion World 35 30 25 20 15 10 5 0 1980 1990 2000 2010 2020 Source: Glauber 2015 $ billion China US 14 12 10 8 6 4 2 0 2001 2003 2005 2007 2009 2011 2013 Source: Glauber 2015
China corn support Source: Gale 2015
China corn Thous ha 40,000 38,000 36,000 34,000 32,000 30,000 28,000 26,000 24,000 22,000 20,000 Harvested area Thou tonnes 120,000 100,000 80,000 60,000 40,000 20,000 0 Ending stocks Source: USDA, PSD database
Estimated change in outlays, FY 2014-23, by WTO classification under 2014 farm bill $ billion 20 10 0-10 -20-30 -40-50 Net change: Green: - $52.8 bil Amber: +$32.3 bil Green Amber Source: Glauber and Westhoff 2016
Implications for the WTO Do new mega-regionals establish standards for global trade? Multi-lateralize mega-regionals? Expansion to TPP: Indonesia, Philippines, Korea, China? India?? Brazil LDCs If inclusive, brought into the WTO If exclusive, does WTO primary role becomes dispute resolution? What if TPP fails to be ratified?
With no agreement on domestic support, dispute settlement likely venue for addressing adverse trade effects US Upland Cotton US Country of Origin Labeling 2014 farm bill: Peanuts Soybeans ARC/PLC for cottonseed Developing country subsidies
Conclusions Rise of protectionist sentiments hopefully temporary? In US, failure to address adverse effects of globalization For agriculture, growth in demand is outside of US US is well poised to take advantage of that growth, but the degree of access to those markets must not be limited by the demand of sensitive commodities within our countries While most gains of liberalization are in market access, the other pillars must not be ignored (indeed the exchange rate may be quite high) Bilateral agreements and mega-regionals like CETA, TPP, TTIP and NAFTA have potential to provide significant market access gains and progress in resolving NTBs, BUT unless plura-lateralized through WTO have potential to weaken the multilateral system and risk leaving many members (particularly developing countries) disadvantaged Important for world for US to retake a leadership role in Geneva