Implications of the shift in United States farm policy (original) (raw)
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U.S. Proposal for WTO Agriculture Negotiations: Its Impact on U.S. And World Agriculture
2006
Senator Chambliss asked FAPRI to analyze the latest U.S. proposal for WTO agriculture negotiations. This proposal includes changes in export competition, market access, and domestic support. The analysis covers the first seven years of policy changes implied by the proposal, during which the most significant reductions in tariffs and trade-distorting domestic support and elimination of export subsidies would be phased in starting in 2007/08. The proposal reduces the permitted current U.S. aggregate measures of support to 7.64billionandlimitsblueboxsupportto7.64 billion and limits blue box support to 7.64billionandlimitsblueboxsupportto4.77 billion. These limits imply lower loan rates and support prices and reduced countercyclical payments. The proposal lowers EU domestic support to € 1 1. 4 b i l l i o n , i mp l y i n g l a r g e reductions in actual domestic support for sugar, dairy, cereals, fruits, and vegetables. The proposal includes significant tariff reductions or tariff rate quota (TRQ) expansions. These market access reforms would open the protected rice, sugar, and dairy markets. All export subsidies would be eliminated, mostly affecting EU production and trade of sugar, rice, meat, and dairy products. These reforms would moderately increase world prices for most commodities, with larger increases for sugar, rice, and dairy. Direct shocks occur in the dairy and livestock sectors, which in turn affect feed sectors. U.S. export expansion is large for pork, beef, and rice and moderate for corn and wheat. U.S. cotton exports decline. The removal of coupled domestic support in the EU and the U.S. is not fully compensated in many cases by world price increases and gains in world markets. Decoupled payments could be put in place to compensate for the loss of farm income from coupled payments and would not have to be as large as the latter since distortions would be removed and world prices would be higher. U.S. corn exports and feed consumption both increase, contributing to a modest increase in U.S. corn prices (less than 3%), driven by larger net imports by the EU and South Korea. EU tariff reductions induce larger EU corn imports. Lower target prices and loan rates and a demanddriven increase in corn prices almost offset each other. U.S. corn use for ethanol and other industrial purposes falls, as do corn ending stocks. Higher U.S. corn prices contribute to an increase in prices for substitute feed grains. U.S. wheat prices increase moderately by almost 3% because of increased export demand from Japan and China and reduced export supplies of Canada, Russia, and Ukraine. Higher prices result in a slight increase in wheat production, limited by the increase in returns for feed grains. Food use and stocks decline slightly in response to higher prices. In EU wheat markets, the livestock sector decreases feed use considerably, which leads to a fall in EU wheat prices. World prices for long-grain rice increase by 8%. Medium-grain rice prices increase by 25%. These price increases are driven by greater market access in Japan and South Korea. Additional imports by Philippines, Indonesia, and the EU also increase long-grain rice trade. China, the U.S., Australia, and Egypt gain market shares in medium-grain rice trade. Long-grain rice exports increase for India, Myanmar, Pakistan, Thailand, the U.S., and Vietnam. In oilseed markets, changes are moderate. Higher prices for grain and reduced loan rates and target prices contribute to a slight reduction in U.S. soybean production in most years and slightly higher prices (1%). Reduced livestock production in Japan and the EU causes a reduction in U.S. soybean meal exports. This is offset by an increase in domestic soybean meal consumption driven by larger U.S. livestock production. The policy changes include tariff cuts for oilseeds and oilseed products in China, the EU, India, Japan, Mexico, South Korea, Taiwan, and Thailand. The world price of soybean oil increases by 4% by 2014 following these tariff cuts. The elimination of differential export taxes in Argentina results in increased export demand for soybean products relative to soybeans, contributing to improved crushing margins. Crush increases slightly, as improved crushing margins more than offset the effect of reduced soybean production. World consumption of all protein meal and animal production decline jointly. U.S. meat exports increase, driven by expanding Japanese import demand that results from lower duties. Japan has been the largest foreign consumer of U.S. beef and pork. The elimination of export subsidies and market access changes open EU meat markets. World prices of pork and beef products increase significantly while poultry price changes are moderate. World trade of livestock and poultry products increases. Pork trade has the highest increase, followed by beef and then poultry (7%, 6%, and 3%). The EU eliminates its beef export subsidy, which affects
Agricultural Policy Reform in the Wto: The Road Ahead
2001
Agricultural trade barriers and producer subsidies inflict real costs, both on the countries that use these policies and on their trade partners. Trade barriers lower demand for trade partners' products, domestic subsidies can induce an oversupply of agricultural products which depresses world prices, and export subsidies create increased competition for producers in other countries. Eliminating global agricultural policy distortions would result in an annual world welfare gain of $56 billion. High protection for agricultural commodities in the form of tariffs continues to be the major factor restricting world trade. In 2000, World Trade Organization (WTO) members continued global negotiations on agricultural policy reform. To help policymakers and others realize what is at stake in the global agricultural negotiations, this report quantifies the costs of global agricultural distortions and the potential benefits of their full elimination. It also analyzes the effects on U.S. an...
No. 4 - Agriculture and the WTO: Subsidies in the Cross Hairs
2004
September 2003 saw trade talks pursuing the Doha Development Agenda at the Cancún WTO Ministerial Meeting collapse, primarily over the disagreements between rich and developing countries regarding agriculture. Despite the great pessimism that ensued, on August 1, 2004, WTO negotiators from 147 countries announced a breakthrough in negotiations to liberalize trade in agricultural products. The most striking aspect of this new framework agreement is the proposed elimination of agricultural subsidies by rich countries in return for developing countries opening up their markets to more imports. At the same time, WTO dispute resolution panels have delivered stunning decisions against the U.S. cotton subsidy program and the European Union's sugar subsidies. Clearly agriculture trade policy will be a pivotal issue determining the failure or success of the Doha round. This conference featured noted experts from senior levels of government, the private sector, and the legal profession addressing current developments in multilateral negotiations and the WTO cases on agriculture and analyzing their impact on the future of the world agricultural market. It was presented on November 16, 2004, at the
Agricultural Economics Research Review, 2014
This study has critically examined different aspects of Counter-Cyclical Payments (CCPs) in the context of commitment of United State of America (US) under the Agreement on Agriculture (AoA) and future obligations under recent Doha Round Negotiations. The study has highlighted the shortcomings in domestic support notifications of US to WTO and their impact on product-specific support to the agriculture sector. Earlier, US has argued that CCPs are not a trade distorting support but a decoupled support. However, due to the upland cotton case, the US notified CCPs as Amber Box support, but as a non-product specific support. The US notifications on domestic support have given a distorted picture of the product-specific support to various crops. In Doha Negotiations, the US seeks flexibilities so that CCPs can be placed under Blue Box. In WTO Notifications, the US has treated CCPs as a non-product specific support, but in Doha Negotiations, CCPs are treated as a product-specific Blue Box support. The study has concluded that it is a clear case of box shifting under Doha Round Negotiations. Key words: Subsidy, Blue Box, counter-cyclical payments, Doha negotiations, Agriculture, WTO notifications, Upland cotton JEL Classification: F 51, Q17, Q 18
Directions of U.S. Farm Programmes under a Freer Trade Environment
2001
For the new round of WTO multilateral trade liberalisation negotiations to be successful, the world will need to be more enthusiastic and flexible about opening markets. Partisans will need to submerge their self-interests, and the U.S. will need to take the initiative for more open markets. This paper makes the case that only modest changes in the U.S. domestic grain, oilseed, and cotton programmes are needed for compatibility with global free trade. The Federal Agricultural Improvement and Reform (FAIR) Act of 1996 and related policy changes in the 1990s brought fundamental reforms compatible with freer domestic and foreign markets. Chief among these were a shift from coupled deficiency payments to decoupled direct payments, an end to supply management, and less engagement of government in commodity stock accumulation and export subsidies. Converting commodity price support to recourse loans while ending all but administrative cost subsidies to crop insurance would go far to liber...
Determinants of farm policies in the United States, 1996-2008
This paper focuses on the political economy of U.S. farm policy since the Uruguay Round trade negotiations concluded in 1994 and established the WTO. The continued ability of the powerful farm lobby in the United States to elicit support in the political arena is evident from this analysis. Yet there have been some substantial changes in policy that have reduced their distortionary effects, as well as some setbacks to liberalizing reform. New Doha Round commitments could put further constraints on subsidies provided by some U.S. policy instruments. And despite the ability of the farm lobby to retain its support programs through 2012, there are several political uncertainties about the alignments that have allowed U.S. farm support to endure.