agri 2312 chapter 16 agriculture and international trade

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

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Agriculture andInternational

Trade

Chapter 16

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Discussion Topics

Growth and instability in agricultural trade

The importance of agricultural tradeThe composition of agricultural tradeDirection of U.S. agricultural tradeU.S. agricultural trade performance

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Page 314

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Trade LiberalizationCreation of WTO to implement URA

provisions, settle disputes, and review policyConvert quotas to tariff equivalents and phase

in reduction of tariffs by 36% over timeReduce export subsidies by 36% over timeLower domestic subsidies by 20% over timeUse accepted international standards for food

safety and plant health regulations, harmonize standards and establish disease free zones

Page 316

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Importance of Trade

Crop agriculture in U.S. has become export dependent.

More than one-half of annual cotton, rice and soybean production is exported

Livestock agriculture less dependent on foreign sales for sustainable demand

Greater dependence on imports as well

Page 317

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Page 320

U.S. agricultural exports generate jobs inboth the farm and nonfarm sectors…

U.S. agricultural exports generate jobs inboth the farm and nonfarm sectors…

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

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Page 321

Bulk commodities dominated U.S. agricultural exports until the early 1990’s when value-added sales began to-increase.

Bulk commodities dominated U.S. agricultural exports until the early 1990’s when value-added sales began to-increase.

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Page 323

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

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Page 324

U.S. agricultural exports by region and selected countries.Note the growing importance of Asian markets (36%).Canada (15.6%) accounts for more than all of Western Europe.

U.S. agricultural exports by region and selected countries.Note the growing importance of Asian markets (36%).Canada (15.6%) accounts for more than all of Western Europe.

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Page 327

U.S. agricultural imports by region and selected countries.Western Europe is a more significant supplier of imports to theU.S. than it was a source of export sales for U.S. agriculturalexports. Latin America is largest supplier to U.S.

U.S. agricultural imports by region and selected countries.Western Europe is a more significant supplier of imports to theU.S. than it was a source of export sales for U.S. agriculturalexports. Latin America is largest supplier to U.S.

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Balance of TradeThe balance of trade is a measure of overall trade performance.

Trade Surplus = Exports > Imports

Trade deficit = Imports > Exports

Page 328

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Balance of TradeThe balance of trade is a measure of overall trade performance.

Trade Surplus = Exports > Imports

Trade deficit = Imports > Exports

A trade surplus provides capital since the nation is sellingmore than it is buying. A trade deficit, on the other hand,can reduce a nation’s capital reserves over time, forcing itto either limit imports or borrow capital.

Page 328

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Balance of TradeThe balance of trade is a measure of overall trade performance.

Trade Surplus = Exports > Imports

Trade deficit = Imports > Exports

A trade surplus provides capital since the nation is sellingmore than it is buying. A trade deficit, on the other hand,can reduce a nation’s capital reserves over time, forcing itto either limit imports or borrow capital.

U.S. agriculture has recorded trade surpluses since the 1950s.

Page 328

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

SummaryTrade distortions have prompted nations to seek general

agreements on tariffs and trade (GATT).U.S. agriculture becoming increasingly dependent on

export sales.Imports supplying a growing share of domestic food and

fiber consumption.Developing countries are supplying a growing share of

world exports.U.S. agriculture generates a trade surplus each year,

partially offsetting the trade deficit in other merchandise.

Introduction to Agricultural Economics, 5th edPenson, Capps, Rosson, and Woodward

© 2010 Pearson Higher Education,Upper Saddle River, NJ 07458. • All Rights

Reserved.

Chapter 17 focuses on exchange rates and their impact on trade….