Trade Conflicts: What’s at Stake for US Agricultural? · Bilateral trade with Canada, 2014-16 0.0...
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Trade Conflicts: What’s at Stake for US Agricultural? Joseph W. Glauber Senior Research Fellow International Food Policy Research Institute Gardner Agricultural Policy Lecture Normal, Illinois 31July 2018
Transcript of Trade Conflicts: What’s at Stake for US Agricultural? · Bilateral trade with Canada, 2014-16 0.0...
Trade Conflicts: What’s at Stake for US Agricultural?
Joseph W. GlauberSenior Research FellowInternational Food Policy Research Institute
Gardner Agricultural Policy LectureNormal, Illinois31July 2018
Trade worries tank markets
Source: CME Group
Top US feed grain markets, 2015-17Corn Other feed grains
Rank Country Exports 2015-17(mil MT)
Rank Country Exports 2015-17(Mil MT)
1 Mexico 13.439 1 China 6.360
2 Japan 11.769 2 Mexico 0.477
3 Colombia 4.564 3 Japan 0.136
4 Korea, South 4.097 4 Sudan 0.122
5 Peru 2.549 5 Canada 0.085
6 Taiwan 2.243 6 Kenya 0.082
7 Saudi Arabia 1.568 7 Pakistan 0.070
8 Canada 0.996 8 Djibouti 0.066
9 Guatemala 0.886 9 South Africa 0.062
10 Costa Rica 0.708 10 Somalia 0.045
Source: US Dept Commerce
Top US feed grain markets, 2015-17Corn Other feed grains
Rank Country Exports 2015-17(mil MT)
Rank Country Exports 2015-17(Mil MT)
1 Mexico 13.439 1 China 6.360
2 Japan 11.769 2 Mexico 0.477
3 Colombia 4.564 3 Japan 0.136
4 Korea, South 4.097 4 Sudan 0.122
5 Peru 2.549 5 Canada 0.085
6 Taiwan 2.243 6 Kenya 0.082
7 Saudi Arabia 1.568 7 Pakistan 0.070
8 Canada 0.996 8 Djibouti 0.066
9 Guatemala 0.886 9 South Africa 0.062
10 Costa Rica 0.708 10 Somalia 0.045
Source: US Dept Commerce
Top 10 export markets for US soybeans and productsRank Soybeans Mil $ Soybean oil Mil $ Soybean meal Mil $
1 China 12,346 Mexico 213 Mexico 7272 EU 1,822 Dom Republic 104 Philippines 7043 Mexico 1,493 Korea, South 104 Canada 3094 Japan 1,008 Colombia 53 Colombia 3035 Indonesia 895 China 47 Thailand 2126 Taiwan 582 Venezuela 41 Dom Republic 1967 Thailand 352 Peru 41 EU 1918 Bangladesh 305 Guatemala 36 Venezuela 1549 Vietnam 298 Morocco 33 Guatemala 141
10 Korea, South 248 Canada 24 Ecuador 113
Top 10 export markets for US soybeans and productsRank Soybeans Mil $ Soybean oil Mil $ Soybean meal Mil $
1 China 12,346 Mexico 213 Mexico 7272 EU 1,822 Dom Republic 104 Philippines 7043 Mexico 1,493 Korea, South 104 Canada 3094 Japan 1,008 Colombia 53 Colombia 3035 Indonesia 895 China 47 Thailand 2126 Taiwan 582 Venezuela 41 Dom Republic 1967 Thailand 352 Peru 41 EU 1918 Bangladesh 305 Guatemala 36 Venezuela 1549 Vietnam 298 Morocco 33 Guatemala 141
10 Korea, South 248 Canada 24 Ecuador 113
Top US wheat markets, 2015-17Rank Country Exports 2015-17
(mil MT)Rank Country Exports 2015-17
(Mil MT)
1 Mexico 3.024 11 Thailand 0.712
2 Japan 2.863 12 Guatemala 0.532
3 Philippines 2.397 13 Peru 0.444
4 Nigeria 1.549 14 Yemen 0.432
5 Korea, South 1.254 15 Algeria 0.425
6 Taiwan 1.081 16 Dominican Republic 0.364
7 China 0.972 17 Ethiopia 0.354
8 Indonesia 0.954 18 Venezuela 0.347
9 Colombia 0.785 19 Chile 0.339
10 European Union-28 0.733 20 Morocco 0.321
Top 10 export markets for meat products
Rank Beef Mil $ Pork Mil $ Poultry Mil $1 Japan 1,561 Japan 1,581 Mexico 9642 Korea, South 1,034 Mexico 1,381 Canada 5213 Mexico 1,016 Canada 790 Hong Kong 4344 Canada 818 China 601 Taiwan 1475 Hong Kong 790 Korea, South 437 Angola 1176 Taiwan 364 Hong Kong 352 Cuba 115
7European Union-28 268 Australia(*) 186 Guatemala 109
8 Egypt 108 Colombia 123 Chile 89
9United Arab Emirates 65 Philippines 85 Vietnam 80
10 Philippines 60 Dominican Republic 60 Philippines 79
Google Trends: TPP
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Google Trends: TPP
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US pulls out of TPPTPP negotiations concluded
Conventions
Foregone benefits to ag:• Farm Bureau:
– Ag exports: +$5.5 bil– Farm income: +$4.4 bil
• USITC: Ag exports: +$7.2 bil(dairy +$1.8 bil; meats +$1.3 bil)
• ERS: Ag exports: +$3 bil• CanadaWest: US loses due to
preferential TPP access of others to Japan, Vietnam
TPP
`Dade and Ciuriak 2018, CanadaWest Foundation
Google search “NAFTA”
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US-Canada agricultural trade
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10
15
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25
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
US exports to Canada Canada exports to US
Bil USD
US-Mexico agricultural trade
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25
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
US exports to Mexico Mexico exports to US
Bil USD
02468
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US-Canada
Canada-US
Bilateral flows with the United States, 2014-16
Bil USD
02468
101214161820
US-Mexico
Mexico-US
Bil USD
Bilateral trade with Canada, 2014-16
0.0 1.0 2.0
Other Grain ProdsMisc Hort Products
Other Feeds & FodderBeverages Ex Juice
Other Veg, Prep/PresBeef & Veal Fr/Froz
CoffeeChocolate & Prep
Berries, FrRelated Sugar Prod
Other Veg, FrOther Dairy Prods
Other Veg Oils/WaxesLettuce, Fr
WinePork, Fr/Froz
Pork, Prep/PresEssential Oils
Chickens, Fr/FrozSoybean Meal
US imports from CanadaUS exports to Canada
0.0 2.0 4.0
Snack FoodsOther Consumer Oriented
Red Meats, FR/CH/FROther Intermediate Products
Other Vegetable OilsLive Animals
Processed Fruit & VegetablesFresh Vegetables
Other Bulk CommoditiesCoarse Grains
Roasted & Instant CoffeeWheat
Sugars, Sweeteners, Bev BasesFeeds & Fodders
Planting Seeds
Bil USD Bil USD
Bilateral trade with Mexico, 2014-16
0 2 4 6
Fresh VegetablesOther Fresh Fruit
Wine and BeerSnack Foods
Processed Fruit &…Red Meats, FR/CH/FR
Other Consumer OrientedTree Nuts
Live AnimalsSugars, Sweeteners, Bev…Raw Beet & Cane Sugar
Fruit & Vegetable JuicesOther Intermediate…
Coffee, UnroastedOther Vegetable Oils
Bananas and PlantainsRoasted & Instant CoffeeOther Bulk Commodities
Other Dairy Products
0 1 2
CornSoybeans
Pork, Fr/FrozSoybean Meal
Beef & Veal Fr/FrozMisc Hort ProductsRelated Sugar Prod
Wheat, UnmilledOther Feeds & Fodder
Nonfat Dry MilkChickens, Fr/Froz
CheeseCotton, Ex LintersOther Grain Prods
Seeds, Field/GardenBeverages Ex JuiceRice-Paddy, Milled
Turkeys, Fr/FrozBeef Variety Meats
Feed Grain Prods
US exports to Mexico US imports from Mexico
Bil USD Bil USD
US fresh fruit and vegetables imports from Mexico
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Vegetables Fruit
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Percent of annual Mexican fresh vegetables exports to the US by month, 2010-16
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US utilization of selected fresh vegetables
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Import penetration (%)
Per capita utilization (lbs)
TomatoesOnions
Leaf lettuce
Brocolli
Bell peppers
Cucumbers
SquashGarlic
Eggplant AsparagusArtichokes
US per capita utilization
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5.0
10.0
15.0
20.0
25.0
1980
1983
1986
1989
1992
1995
1998
2001
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2007
2010
2013
2016
pDomestic Imported
0.0
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4.0
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8.0
10.0
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1983
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p
Domestic Imported
Fresh tomatoes Fresh bell pepperslbs lbs
Food processing sales of US affiliates in NAFTA markets
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Source: US Department of Commerce, Bureau of Economic Analysis
Sales (bil USD)
Global value chains—f&v
Global value chains—livestock, 2014-16
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US meat exportsMil USD
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Canada
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Mil USDUS livestock imports
MFN applied duties
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101520253035404550
Animalproducts
Dairyproducts
Fruits,vegetableand plants
Coffee, tea Cereals &prep
Oilseeds,fats & oils
Sugar Beveragesand tobacco
Cotton Otheragricultural
products
Canada Mexico US
248.9%
Trade disputes involving the US and its NAFTA partners
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Brought by US againstCanada
Brought by Canadaagainst US
Brought by US againstMexico
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NAFTA WTO
Looking forward
• Market access gains unlikely (without substantial tradeoffs)– Big tradeoffs necessary: dairy (US, Canada), poultry (Canada), sugar (US)– Seasonal trade remedy actions would be double-edged (f&v versus pork)
• Modernizing NAFTA: – TPP (e-commerce, dispute settlement, SPS, IP)– Greater efforts to harmonize standards, reduce regulatory barriers for trade– Single Window Environments
• “Do no harm” but will the “harm” come from other areas of contention (Chapter 19, rules of origin, domestic content, softwood lumber, …) where agriculture suffers collateral damage?
• Opportunity costs of negotiations: renegotiating the past rather than negotiating the future
Google Trends: “US China Trade War”
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Google Trends: “US China Trade War”
July 2018
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US exports to China, 2015-2017 averageProduct Mil $ Product Mil $
Soybeans 12,346 Wheat 238 Coarse Grains (ex. corn) 1,333 Tree Nuts 211 Hides & Skins 1,054 Fresh Fruit 183 Cotton 796 Tobacco 177 Distillers Grains 722 Ethanol (non-bev.) 164 Pork & Pork Products 601 Processed Vegetables 135 Dairy Products 471 Prepared Food 119 Other Intermediate Products 443 Corn 118 Feeds & Fodders NESOI 343 Planting Seeds 113 Hay 342 Processed Fruit 110
US soybean exportsMil MT
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ROW
China
US soybean exports
55%
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3%23%
Export Destination
ChinaEUMexicoJapanIndonesiaOther
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55%20
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Share of production exported
One in three acres of soybeansare exported to China and Mexico.
China soybean supplies
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Imports
Production
Mil MT
China soybean imports by sourceMil MT
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Brazil + Argentina
Source: COMTRADE, GTIS
Monthly Chinese Soybean Imports by Origin
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United States Argentina +Brazil ROWSource: Global Trade Information Services (GTIS)
China vegetable oil supply
02,0004,0006,0008,000
10,00012,00014,00016,00018,000
Soybean oil
Production Imports
02,0004,0006,0008,000
10,00012,000
Vegetable oil imports
Palm oil Sunflowerseed oil
Soybean oil Rapeseed oil
Palm Kernel oil Other
China soybean supplies
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Imports
Production
Mil MT
Shortfall causedIf US exportshalted
China soybean area
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30
Area needed to offset lost US soybean exports
Mil ha
Brazil soybean area
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Area needed to make upfor lost US exports
Mil ha
Taheripour and Tyner (2018)
Brazil – US Spread ($/MT)
-40
-20
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80
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2016 2017 2018
Source: IGC
Long term effects
• 1973 soybean embargo:– Very short duration, but actions spooked our major buyers (EU and Japan)– Japan contracts with Brazilian growers– EU increases oilseed support under the CAP
• 1980 grain embargo:– Largely ineffectual for FSU as they purchased grain from other countries– US producer prices fell as US exporters scrambled to find alternative
markets => grain into FOR/CCC => PIK in 1983– Wheat area has fallen over 15 million acres since 1980
• 2018 trade war:– Accelerate BZ area expansion?
Trade wars
• Trade wars “easy to win”? Like conventional war, difficult if trade war is fought on many fronts
• Tariffs impose large costs on target country, but also on one’s own producers (who import primary and intermediate products for their manufacture) and consumers (who pay higher costs for imported products and for domestic products which depend on imported materials (eg, aluminum)
• While short term costs of trade wars (e.g., disrupted trade because of high tariffs) are high, costs of trade wars are often long-term—disruption of supply chains; perception of exporter as “reliable” supplier
• What constitutes “victory” in trade war? Tariff concession; change in policy are typical outcomes; more murky: net trade balance
