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 218
Trade worries tank markets Source: CME Group
Top US feed grain markets, 215-17 Corn Rank Country Exports 215-17 (mil MT) Other feed grains Rank Country Exports 215-17 (Mil MT) 1 Mexico 13.439 1 China 6.36 2 Japan 11.769 2 Mexico.477 3 Colombia 4.564 3 Japan.136 4 Korea, South 4.97 4 Sudan.122 5 Peru 2.549 5 Canada.85 6 Taiwan 2.243 6 Kenya.82 7 Saudi Arabia 1.568 7 Pakistan.7 8 Canada.996 8 Djibouti.66 9 Guatemala.886 9 South Africa.62 1 Costa Rica.78 1 Somalia.45 Source: US Dept Commerce
Top US feed grain markets, 215-17 Corn Rank Country Exports 215-17 (mil MT) Other feed grains Rank Country Exports 215-17 (Mil MT) 1 Mexico 13.439 1 China 6.36 2 Japan 11.769 2 Mexico.477 3 Colombia 4.564 3 Japan.136 4 Korea, South 4.97 4 Sudan.122 5 Peru 2.549 5 Canada.85 6 Taiwan 2.243 6 Kenya.82 7 Saudi Arabia 1.568 7 Pakistan.7 8 Canada.996 8 Djibouti.66 9 Guatemala.886 9 South Africa.62 1 Costa Rica.78 1 Somalia.45 Source: US Dept Commerce
Top 1 export markets for US soybeans and products Rank Soybeans Mil $ Soybean oil Mil $ Soybean meal Mil $ 1 China 12,346 Mexico 213 Mexico 727 2 EU 1,822 Dom Republic 14 Philippines 74 3 Mexico 1,493 Korea, South 14 Canada 39 4 Japan 1,8 Colombia 53 Colombia 33 5 Indonesia 895 China 47 Thailand 212 6 Taiwan 582 Venezuela 41 Dom Republic 196 7 Thailand 352 Peru 41 EU 191 8 Bangladesh 35 Guatemala 36 Venezuela 154 9 Vietnam 298 Morocco 33 Guatemala 141 1 Korea, South 248 Canada 24 Ecuador 113
Top 1 export markets for US soybeans and products Rank Soybeans Mil $ Soybean oil Mil $ Soybean meal Mil $ 1 China 12,346 Mexico 213 Mexico 727 2 EU 1,822 Dom Republic 14 Philippines 74 3 Mexico 1,493 Korea, South 14 Canada 39 4 Japan 1,8 Colombia 53 Colombia 33 5 Indonesia 895 China 47 Thailand 212 6 Taiwan 582 Venezuela 41 Dom Republic 196 7 Thailand 352 Peru 41 EU 191 8 Bangladesh 35 Guatemala 36 Venezuela 154 9 Vietnam 298 Morocco 33 Guatemala 141 1 Korea, South 248 Canada 24 Ecuador 113
Top US wheat markets, 215-17 Rank Country Exports 215-17 (mil MT) Rank Country Exports 215-17 (Mil MT) 1 Mexico 3.24 11 Thailand.712 2 Japan 2.863 12 Guatemala.532 3 Philippines 2.397 13 Peru.444 4 Nigeria 1.549 14 Yemen.432 5 Korea, South 1.254 15 Algeria.425 6 Taiwan 1.81 16 Dominican Republic.364 7 China.972 17 Ethiopia.354 8 Indonesia.954 18 Venezuela.347 9 Colombia.785 19 Chile.339 1 European Union-28.733 2 Morocco.321
Top 1 export markets for meat products Rank Beef Mil $ Pork Mil $ Poultry Mil $ 1 Japan 1,561 Japan 1,581 Mexico 964 2 Korea, South 1,34 Mexico 1,381 Canada 521 3 Mexico 1,16 Canada 79 Hong Kong 434 4 Canada 818 China 61 Taiwan 147 5 Hong Kong 79 Korea, South 437 Angola 117 6 Taiwan 364 Hong Kong 352 Cuba 115 7 European Union-28 268 Australia(*) 186 Guatemala 19 8 Egypt 18 Colombia 123 Chile 89 9 United Arab Emirates 65 Philippines 85 Vietnam 8 1 Philippines 6 Dominican Republic 6 Philippines 79
Google Trends: TPP 12 1 8 6 4 2 2/1/213 2/1/214 2/1/215 2/1/216 2/1/217
Google Trends: TPP 12 1 8 TPP negotiations concluded Conventions US pulls out of TPP 6 4 2 2/1/213 2/1/214 2/1/215 2/1/216 2/1/217
TPP 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 Dade and Ciuriak 218, CanadaWest Foundation `
Google search NAFTA 12 1 8 Election Inauguration President announces intent to withdraw from Nafta 6 4 2 4/28/213 4/28/214 4/28/215 4/28/216 4/28/217
US-Canada agricultural trade Bil USD 25 2 15 1 5 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 US exports to Canada Canada exports to US
US-Mexico agricultural trade Bil USD 25 2 15 1 5 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 US exports to Mexico Mexico exports to US
Bilateral flows with the United States, 214-16 Bil USD 18 16 14 12 1 8 6 4 2 US-Canada Canada-US Bil USD 2 18 16 14 12 1 8 6 4 2 US-Mexico Mexico-US
Bilateral trade with Canada, 214-16 Soybean Meal Chickens, Fr/Froz Essential Oils Pork, Prep/Pres Pork, Fr/Froz Wine Lettuce, Fr Other Veg Oils/Waxes Other Dairy Prods Other Veg, Fr Related Sugar Prod Berries, Fr Chocolate & Prep Coffee Beef & Veal Fr/Froz Other Veg, Prep/Pres Beverages Ex Juice Other Feeds & Fodder Misc Hort Products Other Grain Prods US exports to Canada. 1. 2. Bil USD US imports from Canada Planting Seeds Feeds & Fodders Sugars, Sweeteners, Bev Bases Wheat Roasted & Instant Coffee Coarse Grains Other Bulk Commodities Fresh Vegetables Processed Fruit & Vegetables Live Animals Other Vegetable Oils Other Intermediate Products Red Meats, FR/CH/FR Other Consumer Oriented Snack Foods. 2. 4. Bil USD
Bilateral trade with Mexico, 214-16 US exports to Mexico US imports from Mexico Feed Grain Prods Beef Variety Meats Turkeys, Fr/Froz Rice-Paddy, Milled Beverages Ex Juice Seeds, Field/Garden Other Grain Prods Cotton, Ex Linters Cheese Chickens, Fr/Froz Nonfat Dry Milk Other Feeds & Fodder Wheat, Unmilled Related Sugar Prod Misc Hort Products Beef & Veal Fr/Froz Soybean Meal Pork, Fr/Froz Soybeans Corn 1 2 Bil USD Other Dairy Products Other Bulk Commodities Roasted & Instant Coffee Bananas and Plantains Other Vegetable Oils Coffee, Unroasted Other Intermediate Fruit & Vegetable Juices Raw Beet & Cane Sugar Sugars, Sweeteners, Bev Live Animals Tree Nuts Other Consumer Oriented Red Meats, FR/CH/FR Processed Fruit & Snack Foods Wine and Beer Other Fresh Fruit Fresh Vegetables 2 4 6 Bil USD
US fresh fruit and vegetables imports from Mexico Bil USD 6 5 4 3 2 1 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Vegetables Fruit
Percent of annual Mexican fresh vegetables exports to the US by month, 21-16 14% 12% 1% 8% 6% 4% 2% %
US utilization of selected fresh vegetables Per capita utilization (lbs) 25 1993-95 213-15 2 Onions Tomatoes 15 1 Leaf lettuce Brocolli Bell peppers Cucumbers 5 Squash Eggplant Garlic Artichokes Asparagus 1 2 3 4 5 6 7 8 9 1 Import penetration (%)
US per capita utilization lbs 25. Fresh tomatoes lbs 12. Fresh bell peppers 2. 1. 15. 1. 8. 6. 4. 5. 2... 198 1983 1986 1989 1992 1995 1998 21 24 27 21 213 216 p 198 1983 1986 1989 1992 1995 1998 21 24 27 21 213 216 p Domestic Imported Domestic Imported
Food processing sales of US affiliates in NAFTA markets Sales (bil USD) 5 45 4 35 3 25 2 15 1 5 29 21 211 212 213 214 Mexico Canada Source: US Department of Commerce, Bureau of Economic Analysis
Global value chains f&v
Global value chains livestock, 214-16 Mil USD 1,6 US livestock imports Mil USD 1,6 US meat exports 1,4 1,4 1,2 1,2 1, 1, 8 6 Canada Mexico 8 6 Canada Mexico 4 4 2 2 Cattle and calves Swine Beef Pork
MFN applied duties 5 45 248.9% 4 35 3 25 2 15 1 5 Animal products Dairy products Fruits, vegetable and plants Coffee, tea Cereals & prep Oilseeds, fats & oils Sugar Beverages and tobacco Cotton Other agricultural products Canada Mexico US
Trade disputes involving the US and its NAFTA partners 1 9 8 7 6 5 4 3 2 1 6 88 Brought by US against Canada 16 42 Brought by Canada against US 6 55 Brought by US against Mexico 9 2 Brought by Mexico against US 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 12 1 Inauguration 8 6 4 2 2/1/213 2/1/214 2/1/215 2/1/216 2/1/217 Feb 218
Google Trends: US China Trade War 12 1 Steel and aluminum tariffs announced 8 6 4 2 July 218
US exports to China, 215-217 average Product Mil $ Product Mil $ Soybeans 12,346 Wheat 238 Coarse Grains (ex. corn) 1,333 Tree Nuts 211 Hides & Skins 1,54 Fresh Fruit 183 Cotton 796 Tobacco 177 Distillers Grains 722 Ethanol (non-bev.) 164 Pork & Pork Products 61 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 11
US soybean exports Mil MT 7 6 5 4 3 ROW China 2 1 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217
US soybean exports 55% 5% 45% 4% 35% 3% 2/21 Share of production exported 22/23 24/25 26/27 28/29 21/211 212/213 214/215 216/217 3% 23% 4% 6% 9% Export Destination 55% China EU Mexico Japan Indonesia Other One in three acres of soybeans are exported to China and Mexico.
China soybean supplies Mil MT 1 9 8 7 6 5 4 3 2 1 2/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/21 21/211 211/212 212/213 213/214 214/215 215/216 216/217 217/218 Imports Production
China soybean imports by source Mil MT 9 8 7 6 5 4 3 Other US Brazil + Argentina 2 1 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Source: COMTRADE, GTIS
Monthly Chinese Soybean Imports by Origin 12 1 Million Metric Tons 8 6 4 2-1/21 4/21 7/21 1/21 1/211 4/211 7/211 1/211 1/212 4/212 7/212 1/212 1/213 4/213 7/213 1/213 1/214 4/214 7/214 1/214 1/215 4/215 7/215 1/215 1/216 4/216 7/216 1/216 1/217 4/217 7/217 1/217 United States Argentina +Brazil ROW Source: Global Trade Information Services (GTIS)
China vegetable oil supply Soybean oil Vegetable oil imports 18, 16, 14, 12, 1, 8, 6, 4, 2, 12, 1, 8, 6, 4, 2, Palm oil Sunflowerseed oil Soybean oil Rapeseed oil Production Imports Palm Kernel oil Other
China soybean supplies Mil MT 1 9 8 7 6 5 4 3 2 1 2/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/21 21/211 211/212 212/213 213/214 214/215 215/216 216/217 217/218 Shortfall caused If US exports halted Imports Production
China soybean area Mil ha 3 25 2 Area needed to offset lost US soybean exports 15 1 5
Brazil soybean area Mil ha 5 45 4 35 3 25 2 15 1 5 Area needed to make up for lost US exports
Taheripour and Tyner (218)
Brazil US Spread ($/MT) 8 6 4 2-2 216 217 218 Source: IGC -4 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul
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 198 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 198 218 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
Thanks! j.glauber@cgiar.org