Washington Trade Overview 18th Annual International Legislators Forum (ILF) June 26, 2018 Hanna Abou-El-Seoud

History of Global Trading System Smoot-Hawley Tariffs (Tariff Act of 1930) Bretton Woods System Global Agreement on Tariffs and Trade (GATT), International Trade Organization World Trade Organization (WTO) Bilateral FTAs (NAFTA to TPP and TTIP) Range of trade topics: Goods, Services, Agriculture, SPS, TBT, IPR, labor, environment

How Trade has Traditionally Operated World Trade Organization Free Trade Agreements (FTA)- bilateral, multilateral and regional Tariffs- a tariff is a tax levied on an imported good Two types of tariffs: A “unit” or specific tariff An “ad valorem” tariff Historically, the main objective of a tariff was to raise revenue, however its current use tends to be about protecting a particular domestic industry from foreign competition, alongside raising revenue

Who Controls Trade? Executive Branch Authority President U.S. Trade Representative (USTR) Commerce Department Treasury Department Congressional Authority Oversight Trade Promotion Authority (TPA)

Free Trade Agreement United States has free trade agreements in force with 20 countries, these include: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru and Singapore Outstanding FTA include: Trans-Pacific Partnership (TPP) Agreement and the Transatlantic Trade and Investment Partnership (T-TIP) with the European Union.

Importance of Trade to Ag Economy In 2016 Agricultural exports totaled $134.7 billion which produced an additional $172.1 billion in economic activity for a total economic output of $306.8 billion The agricultural export surplus helps to offset the nonagricultural trade deficit Each dollar of agricultural exports stimulated another $1.28 in business activity Agricultural exports, supported 1,097,000 full-time civilian jobs, which included 764,000 jobs in the nonfarm sector. With 95 percent of the world’s consumers living outside the United States sound trade policy can open doors for farmers and rural communities to access to foreign consumers

Overview of the Farm Economy The farm economy has been struggling under years of low prices and a lack of new markets in which to sell goods Net farm incomes in the U.S. are at a 16-year low, according to USDA USDA is projecting farm income to fall 6 percent more in 2018 Corn, pork, soy and wheat -- four of the largest U.S. agricultural export products -- face domestic prices at or below the cost of production. Sound trade policy can give farmers relief from low domestic prices by opening doors to foreign consumers.

Trade Policy Challenges Current trade policy is accelerating adverse economic trends for the farm economy by increasing uncertainty and leading to tariffs on agricultural exports to our largest markets like Mexico, Canada, the European Union, and China. Issues impacting trade: North American Free Trade Agreement (NAFTA) Section 232 Steel and Aluminum Section 301 China IPR Trans-pacific Trade Partnership (TPP)/Asia Regional Trade Trans-Atlantic Trade Investment Partnership (TTIP)

Corn Price Verses Average Production Cost Corn prices are down 40% since 2013. Since 2014, corn market prices have been at or lower than the cost of production, driving farmers off their farms or into debt. The U.S. exported $3.2 billion worth of corn to Mexico and Canada last year, supporting 25,000 sector jobs. Without NAFTA, U.S. production would fall by over 150 million bushels annually. Seeing trade instability in the U.S., Mexico purchased nearly $100 million worth of Brazilian corn in 2017- up 907% from 2016. And made the first purchase of Argentinian wheat in modern history in 2017.

Pork Price Versus Average Production Cost   Pork prices have fallen about 20 percent since 2013. Farmers have cut costs to stay competitive, but still are often forced to sell below the cost of production. Pork Producers will be harmed from a loss of the Mexican and Canadian markets if NAFTA isn’t completed. Mexico is the largest export market for pork. China also represents a billion-dollar market. Pork is already facing a 25% tariff into China and is on Mexico’s retaliation list.

Wheat Price Versus Average Production Cost Wheat farmers have been reducing costs, but prices have fallen faster. Prices are now down by 33% since 2013. Wheat farmers are consistently forced to sell their crop for less than it costs to produce, losing money every harvest, driving farmers to sell the farm or go into debt. Most U.S. wheat state farmers rely on Mexico as their number one market. Without NAFTA, wheat from other competing markets such as the EU and Australia will increasingly displace U.S. wheat from the Mexican market. Wheat growers stands to lose market share when the CP-TPP goes into effect and Japan reduces Wheat consumption from the U.S.

Soybean Price Versus Average Production Cost Soy prices have fallen 30% since 2013. Farmers have reduced costs to stay competitive, but still face razor-thin profit margins. Without NAFTA, $3 billion in annual soy exports would be jeopardized as Mexico and Canada look to our competitors in South America, like Brazil and Argentina, for supply. Without Trade with China which purchases $14 billion worth of U.S. soybeans, U.S. producers would struggle to find alternate markets for soybeans.

Trade Promotion Programs Market Access Program (MAP) Funds to carry out overseas marketing and promotional activities, such as consumer promotions.  Foreign Market Development (FMD) program Provides cost-share assistance to nonprofit commodity and agricultural trade associations to support overseas market development activities that are designed to address long-term opportunities to reduce foreign import constraints or expand export growth opportunities. 

Thank You!