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Texas Agriculture Archive

June 7, 2002

Conference explores trade opportunities, challenges

By Lana Robinson
Field Editor

Everyone at the recent "Free Trade Area of the Americas, the WTO, and New Farm Legislation: Responding to Opportunities and Challenges" conference in San Antonio agreed that lifting agricultural trade barriers will lead to more free and open markets. But where the rub comes is in the details of how to do it and even before that, defining what really constitutes a "barrier."

Texas Farm Bureau President Donald Patman of Waxahachie and Bryce Myrick, director of TFB Agriculture Marketing Education, were among the speakers at the two-day meeting at St. Anthony's Hotel in the Alamo City. The trade conference drew government, business and academic professionals from around the world—each with his or her own unique perspective—to discuss issues pertaining to global trade and how to improve it.

Brian Paddock, executive director of Agriculture and AgriFood Canada, said more movement towards "facilitating trade, not barricading trade" is needed. Paddock began his segment by citing "unfinished business" with respect to NAFTA (North American Free Trade Agreement).

"Since NAFTA agreements were signed, trade has significantly increased. Both imports and exports have expanded, especially finished products, such as tomato paste. But it's not just about trade, but also integration. Foreign direct investment has increased. Manufacturing plants in both Canada and the United States are setting up to be `NAFTA ready,' but three broad areas need addressing. First, there are differences in public support for agriculture, which is a sensitive point. Second, there are regulatory differences in trade law. Labeling and packing requirements are different, as well as container sizes. These are impediments to trade. Finally, trade continues to be put at risk by trade remedy law which may not be consistent with an integrated market."

Paddock said current counter-vailing law considers only subsidies of imported products. He wondered if it would make sense to look at the subsidy level relating to local products, noting that dumping is commonly found under the current situation.

"These are invitations to protectionist actions when trade is inconvenient," he suggested.

In addition to more integration and harmonization of trade laws, Paddock proposed the creation of an entity that would promote integration, to aid in moving trade along. He said more dialogue needs to take place among agricultural producers and politicians so that current trade barriers are lifted.

"What probably has to happen is the politicians need to talk with the producers on more of what needs to happen. It seems to generate some momentum," Paddock told the group.

Mexican senator shares views

Sen. Jeffrey M. Jones of Mexico said more working relationships are needed between agricultural producers and politicians in his country to encourage more trade. But hindrances to this and other agricultural advantages in Mexico arise because there are not enough groups analyzing farm legislation before it is enacted.

"I'm convinced we need to create a model, something like FAPRI (Food and Agricultural Policy Research Institute) that helps Congress make farm policy. We can create better policy with less money (in Mexico)," said Jones.

While lifting trade barriers would ease restrictions among countries, Jones questioned the response to another ongoing crisis—commodity surpluses.

"What are we going to do about the surpluses of the world? That clearly is the problem right now. That is what is driving down prices," Jones said.

Jones said Mexican farmers have difficulties competing with farmers in nations that subsidize agriculture.

"The only thing developing countries have to offer is agriculture. Then we run into these subsidy wars with the U.S and Europe. When you create artifical subsidies, the big guys take advantage of it, overproduce and drag down food prices around the world," he said.

Hinting at U.S. farm policy, Jones said he felt it was unfair, in the context of a free trade agreement, to design a new farm bill without taking into consideration its impacts on trade partners.

"In Mexico, we have a $3.5 billion ag budget. USDA spends that much to promote U.S. ag in Mexico and has $3 billion more they don't know what to do with," the Mexican senator noted. "In the U.S. three times as many people are making seven times more money. The U.S. has better, more efficient tax policy. You get 2.5 times as much for taxes and have a 45 times bigger budget than we do. Add to that the fact that 20 percent of the people in Mexico are in agriculture compared to 2 percent in ag in the U.S. That is a leverage of 450 on subsidies. Ag is a big percent of Mexico's population and very disorganized."

Jones believes there should be a clear delineation between rural development policy and the policy for agriculture and food within the context of the agreements.

"The concerns are that those (farmers) who should be in there are eased out. In Mexico, farmers are declining, down from 30 percent five years ago to 18 to 20 percent today. Now we have the problem of what to do with the people eliminated from farming," he said. "Displacement creates social chaos. In the State of Chihuahua, for example, where agriculture is being pushed out, drug trafficking comes in, migration sets in. There are a lot of social costs, for the U.S. as well."

Hunt Shipman, USDA deputy undersecretary for farm and foreign agricultural services, is hopeful that President Bush's recent meeting with Mexico's President Vicente Fox , in which they laid out plans for the Partnership for Priority agreement, will yield free markets. Shipman said Jan. 1, 2003 marks the expiration of many tariffs placed on goods exported to Mexico, which should open the door for new opportunity.

U.S. farm bill criticized

Emphasis was placed on the extraordinary export opportunities the U.S. is poised to seize through special Regional Trade Agreements (RTAs) with Central America (Guatemala, Honduras and El Salvador), with over 25 million consumers, and the Andean Community, with some 119 million. But Andy Schmitz, University of Florida professor, questioned whether or not these bilateral, side agreements between the U.S. and other countries should exist at all, suggesting RTAs may cloud the issue of transparency with the WTO (World Trade Organization).

Also finding fault with U.S. farm and trade policy was Mickey Paggi, director of Fresno State University's Center for Ag Business. Paggi suggested that the U.S. had "gone backwards in moral high ground with regard to trade liberalization efforts" by increasing farm support.

"It's going to be a much tougher row to hoe with international trade. It puts the people in Geneva in the difficult position to defend our domestic farm policy," he said, adding that the U.S. can no longer point the finger at the European Union or the Japanese for trade distortions without recognizing its own transgressions. "The spirit of globalization has already been violated, and we need to live up to that. Just saying we're not as bad as the others is still a sin. We need real changes in policy that address problems big countries impose on other countries in the world community."

EU defends trade practices

Gerry Kiely, agricultural counselor for the European Union, defended the EU's trade practices, insisting that much of the criticism directed at the EU bloc is unwarranted.

"It's been said that we're a massive gravy train with our lavish subsidies and are guilty of over-production and dumping. This was our policy of 10 years ago, but not our policy of today. We have essentially moved away from the policy of the 1960s, '70s and '80s. Since 1992, we have focused more on the environment and income support more than food protection. We are more involved in rural development and have followed consistently in subsequent reform. Rural development policy is further away from commodities. How far it will go, I don't know. A lot of that was BSE (Bovine Spongiform Encephalopathy) and FMD (Foot-And-Mouth Disease) crisis driven. But I can assure you that we are absolutely committed to a comprehensive agreement on agriculture that is in total agreement in the WTO," said Kiely.

Kiely explained that much of the EU's defensiveness in the Uruguay Round of GATT (General Agreement on Trade and Tariffs) had to do with their adamance that negotiations be completed by January 2005 and that all deadlines along the way be met.

"We knew we would have a new U.S. administration and three new negotiators. Also, ag policy could change, so we were concerned about changing the negotation without the deed being done," he said.

Kiely further assured the group that the EU is fully prepared to open up markets even more. On the topic of export subsidies, which he defined as "the subject everybody loves to hate," he said, "We have respected those disciplines. For the last 12 months, we haven't granted export refunds except for rye. We are reducing export subsidies, but we will not do it unilaterally.

"Also on food aid. Please don't misinterpret. We are not against food aid, but against using it as a food disposal."

The EU ag spokesman said the EU has no deficiency payment type instruments and attempted to clear up some subsidy misconceptions.

"Fifty percent of the EU budget on agriculture doesn't represent even 4.5 percent of the federal budget," said Kiely. "The budget is fixed at 99 percent until 2006. We are showing only about 25 percent in the amber box—it was 90 percent in 1992—and still falling. We want to keep blue box measures. Finally, nontrade concerns, such as the rural development, landscape, and animal welfare are costly. European society demands it. We have very strict rules. If liberalization implied rolling back animal welfare, they would not accept it. We don't have fast track. Parliaments must vote. Farmers are already against WTO negotiators and environmentalists are joining the band. So as you can see, there simply is no `one size fits all' policy."

Won Koo, North Dakota State University professor, said trade liberalization under the WTO will decrease domestic prices of major crops produced in China, leading to reductions in the net farm income.

"The Chinese are concerned about what is going to happen to Chinese agriculture. It's not competitive in the global market," said Koo.

Koo gave an overview of China's agriculture and laid out a number of scenarios that could occur with that nation's accession to the WTO, mostly dealing with tariff levels and their impacts on world prices.

Sally Grooms Cowal, president of the Cuba Policy Foundation, in her keynote address at the Friday luncheon, discussed the potential opportunities for U.S. trade regarding policy changes with Cuba.