Free Trade of the Americas: What's at Stake for Agriculture John E. Link Mary E. Burfisher Economic Research Service USDA Thanks for inviting us….. This presentation is based on work that ERS has been doing for the past couple of years

FTAA: Implications for Agriculture The effects of trade liberalization Influence of regional trade pacts on the FTAA FTAA and the WTO 3 aspects of an FTAA are important. ---- 1st ---- the effects of an FTAA on agricultural trade -- those effects were looked at using a static & a dynamic CGE model ---- 2nd ---- look at the influence of regional trade pacts on the FTAA ---- & 3rd -- look at the FTAA & the WTO Keep in mind that the Western Hemisphere is unique in having numerous trade pacts.

Change in Agricultural Exports by Country These are the results of a “static” CGE model -- it does not reflect any changes in productivity or investment, just effects of tariff removal. Numbers refer to changes in annual level of trade.

Effects on U.S. Agricultural Exports, by Destination Canada should see an improvement in trade balance -- more export growth than import growth.

Change in Agricultural Imports by Country

Effects on U.S. Agricultural Imports, by Source

Dynamic Effects of FTAA Lower trade barriers promote imports that embody technological change and productivity improvements Lower trade barriers stimulate trade and investment, helping to raise productivity Dynamic gains could be greater than static gains 2 channels for “dynamic effects”.

RTA's in the Hemisphere Hemisphere has long history of RTAs. While earlier agreements were often protectionist, more recent ones have a different character.

Features of RTA's in the Western Hemisphere Some exclude agriculture (CACM, ALADI, G-3) Some include agriculture (NAFTA, MERCOSUR, CARICOM) Some are negotiating as blocs (MERCOSUR, Andean Group, CARICOM) So an FTAA will go much further, “all tariffs are on the table”, including those in agriculture. U.S. agriculture may be hurt as an outsider to the agreements

Blocs within the FTAA Blocs within the FTAA are solidifying some issues (small economies) Some blocs (Andean group, CARICOM) could face more export competition with expansion to FTAA (but so far remain committed to FTAA) “small economies” are concerned with issues like special & differential treatment and technical assistance in handling negotiations & implementing SPS (sanitary & phyo-sanitary)

FTAA and the WTO Interrelated but distinct processes, FTAA maintains own timetable FTAA as bloc within WTO promotes: WTO action on export subsidies Full inclusion of small economies Full implementation of Uruguay Round Active multilateral WTO negotiations Maintaing its own timetable, the FTAA process will continue despite some faltering of WTO. The FTAA is beginning to solidify as a bloc, altho the U.S. is negotiating independently.

Conclusions FTAA continues to make progress toward achieving a Hemisphere-wide free trade area in which “all tariffs” are subject to negotiation. RTA’s like the FTAA may become a more important path to free trade as WTO process slows.