Transcript International Trade Policy

International Trade Policy
A Major Influence On
The Economic Viability Of
The U.S. Cotton Industry
Trade Liberalization: Inevitable
• Proliferation of Trade Agreements:
Administration’s highest priorities
– Multilateral WTO (Doha Round)
– Bilateral
– Regional
• TPA (Fast Track) authority will facilitate
agreements
Omnibus Trade Bill
• Trade Promotion Authority (TPA)
• Caribbean Basin Trade Promotion
Act (CBTPA)
• Andean Trade Preference and Drug
Eradication Act (ATPDEA)
• African Growth and Opportunity
Act (AGOA)
• Trade Adjustment Assistance (TAA)
Effective Tariff Rates for Textiles
•
•
•
•
•
•
•
US < 9%
Argentina 40% to 50%
Brazil 40% to 70%
China 20% to 36%
India 50% to 70%
Pakistan 40% to 60%
Bangladesh 60% to 300%
Average Maximum Allowed Agricultural
Tariffs Under Current WTO
120
100
80
60
40
20
0
US
EU
Japan Korea India World
Core Problems in Ag Trade
Average allowed WTO tariff on
agriculture is 62 percent with many
exceeding 100 percent. The U.S. average
tariff is 12 percent.
EU spends $2 - $5 billion a year on export
subsidies, compared with about $20 million
the US spends
Core Problems in Ag Trade
WTO allowable trade distorting subsidies
EU $60 billion a year
Japan $30 billion a year
Canada $23 billion a year
U.S. $19.1 billion a year
Farm Policy & International Trade
Policy Must be Compatible & Fair
• Farm policy and trade policy are
interdependent especially for the U.S.
cotton industry
• Farm policy and trade policy must take
into account the interests of the US textile
industry
Farm Policy & International Trade
Policy Must be Compatible & Fair
• Economic viability hinges on:
– Agreement on core issues
– Broadening our coalition
– Aggressively pursuing our goals
Reconciling Global Farm and Trade Policy
• US farm programs cannot be
unilaterally reduced
• US agricultural and textile tariffs
cannot be further reduced until
other nations reduce their tariffs to
US levels
• Market access must be reciprocal
Reconciling Global Farm and Trade Policy
• Non-tariff barriers must be
eliminated
• Export subsidies must be eliminated,
or reduced to US levels
• Improvements must be made in
international trading disciplines and
dispute settlement procedures
US Proposal: Doha Declaration
Substantial
improvements in market
access
Reductions
of, with a view to phasing
out, all forms of export subsidies
Substantial
reductions in tradedistorting domestic support
Swiss Formula Tariff Reductions
Average of Maximum Allowed Tariffs
Percent
120
100
India
80
60
40
EU
20
U.S.
0
Japan
Korea
Export Subsidies
EU
87.0%
Rest of
World
3.0%
U.S.
1.0%
Switzerland
6.0%
Norway
3.0%
Domestic Support Proposal
Reduce non-exempt domestic support to 5
percent of total value of agricultural
production over a 5-year period


Establishes the same standard for computing
allowable trade-distorting domestic subsides
for all countries
Eliminates the blue box loophole
No limits on exempt (green box) support
Leveling the Playing Field
$Billion
80
70
67.2
EU
56.3
60
45.3
50
40
34.4
30
20
US
19.1
5%
23.4
17.3
15.5
13.6
11.8
12.5 10
10
0
2000
2006
2007
2008
2009
2010
Proposal vs. Agreement
• US proposal is long way from
agreement
• EU will resist
• Discussions will continue for several
years
Proposal vs. Agreement
• US timing goals:
– Modalities by March 31, 2003
– Agreements by January 1, 2005
• US cotton/textile industries must guard
against concessions by US negotiators
that would perpetuate existing
disadvantages
Agreement vs. Compliance
• Good agreements are worthless in
the absence of compliance
• New agreements must have strong
dispute settlement provisions
Agreement vs. Compliance
• Congress must insist that USTR be
tough on non-compliance … should
refuse to ratify additional
agreements until USTR
demonstrates a will to resolve
existing non-compliance problems
China’s Tariff Rate Quota Agreement
3.75 Million Bales
State Owned
33%
Private
6%
For Re-Export
61%
Imports From China
Eight Categories of Quota Removal
(Square Meter Equivalents)
200,000,000
180,000,000
160,000,000
140,000,000
120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0
591%
Increase
YTD_Oct/2001
YTD_Oct/2002
Imports From China
Eight Categories of Quota Removal
$ Per SME
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
71% Price Reduction
YTD_Oct/2001
YTD_Oct/2002
Trade Agreements on the Horizon
• Chile
• Singapore
• Australia
• Free Trade Area of the Americas
• Continuation of WTO Doha Round
Trade Agreements on the Horizon
• Central America
– Costa Rica
– El Salvador
– Guatemala
– Honduras
– Nicaragua
Farm Policy & International Trade
Policy Must be Compatible & Fair
• Farm policy and trade policy are
interdependent especially for the U.S.
cotton industry
• Farm policy and trade policy must take
into account the interests of the US textile
industry
Farm Policy & International Trade
Policy Must be Compatible & Fair
• Economic viability hinges on:
– Agreement on core issues
– Broadening our coalition
– Aggressively pursuing our goals
House Vote On TPA
NC
SC
GA
AL
TOTAL
Yea
Nay
4
2
7
5
18
8
4
4
2
18
Administration won votes by making
concessions on TAA. Several textile area
“holdouts” for a coalition proposal could have
won its acceptance and mitigated damage to
the US cotton and textile industries.
Regional Fabric & T-Shirt Quotas
CBTPA / ATPDEA / AGOA
Million SME
Conference Report
Coalition
Old Quotas
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2002
2003
2004
2005
FY Beginning Oct 1
2006
Producers
Ginners
Cooperatives
Crushers
Warehouses
Merchants
Manufacturers