Economic Impacts of Trade Agreements: CAFTADR

1
Economic Impacts of Trade Agreements CAFTA-DR

• Parr Rosson, Sarah McMahon and Flynn Adcock
• Center for North American Studies
• Department of Agricultural Economics
• Texas AM University

2
Overview

• Background Trade Patterns
• Methods Economic Impacts
• Conclusions Implications

3
Background Trade Patterns
4
CUSTA, 89
Bahrain 05
Jordan 01
CAFTA-DR 05
NAFTA 94
Israel 85
Morocco 04
Thailand 05
Panama 06
MEFTA 06
Andean FTA 06
FTAA 06
Singapore 03
Chile 04
Australia 05
Southern African Customs Union 06
7 In Place 9 Pending
U.S. Trade Agreements
5
U.S. Tariffs, 1789-2004
Percent
70
70
Tariff of Abominations, 1828
Smoot-Hawley Tariff, 1930
60
60
World Ag. Average
Morrill Act, 1861
50
50
Generalized System of Preferences, 1968
40
40
30
30
WTO, 1995
20
20
Fordney-McCumber Tariff, 1922
10
10
GATT, 1947
0
0
1789
1816
1820
1840
1860
1880
1900
1920
1940
1960
1980
2000
Statistical Abstract of the United States
6
CAFTA-DR Tariffs and Proposed Phase Out
Range of 2004
Maximum
Product
Applied
TRQ/Time
Bound Tariff
Tariffs
Y/15
Beef
15-30
79
Years-HQ
N/Immediate
Cotton
1
60
N/Immediate
Rice
15-60
90
Y/20 Years
Soybeans
1-5
91
N/Immediate
7
Bound Tariffs for Selected Products
Percent
100
86
86
86
86
86
80
55
55
50
50
60
46
42
40
39
39
37
40
25
25
23
19
18
20
0
Total
Grains
Grain Products
Feed
Oilseeds
South America
Central America
Caribbean Islands
North America
Source ERS/USDA
8
Bound Tariffs for Selected Products
Percent
91
90
90
100
88
87
86
85
80
80
68
68
55
60
49
48
43
43
43
41
41
34
40
21
20
0
Live Animals
Meat Fresh
Meat Frozen
Meat Prepared
Dairy
South America
Central America
Caribbean Islands
North America
Source ERS/USDA
9
Mexico
Houston, 1,300 Miles NW
Dominican Republic, 800 Miles NE
North
10
CAFTA-DR Demographic Overview
11
US Agricultural Trade with CAFTA-DR
Exports
Imports
Balance
Billion
3.0
2.5
2.3
2.2
2.1
2.1
2.0
2.0
1.9
1.9
1.8
1.7
1.6
1.6
1.6
2.0
1.5
1.4
1.3
1.3
1.3
1.2
1.1
1.1
1.0
1.0
0.9
0.8
0.7
0.6
0.6
1.0
0.5
0.0
-0.7
-0.7
-0.8
-0.8
-0.8
-0.8
-0.8
-0.8
-0.8
-0.9
-0.9
-0.9
-1.0
-1.0
-1.0
-1.2
-2.0
1990
1995
2000
2004
12
U.S. Ag Trade with CAFTA-DR, 2004
Million Dollars
903
1000
Exports
Imports
Balance
783
800
461
600
383
282
264
261
246
220
400
200
158
134
112
101
200
0
-44
-46
-200
-400
-400
-600
-621
-800
Honduras
Nicaragua
Costa Rica
Guatemala
El Salvador
Dominican Rep.
Source Foreign Trade Statistics, U.S. Census
Bureau
13
CAFTA-DR Ag. Trade, 2004
US Exports 1,705 million
US Imports 2,469 million
Meats
Other
Coffee
15.1
3.6
Sugar
Veg/Fruit
20.5
Oilseeds
10.3
6.9
15.1
Cotton
2.8
Other
Fish
12.7
12.0
Bananas
27.5
Fruit/Veg/Nuts
Grains Feeds
26.1
47.3
USDA, FATUS.
14
CAFTA-DR Prospects

• With Passage, U.S. Ag. Export Gains of 1.5
  Billion Annually After Phase-In (AFBF Study)
• Immediate Access HQ Beef, Wheat Soybeans,
  Cotton
• Long Term Rice, Dairy, Pork, Poultry Corn
• Challenges Sugar, Cantaloupe, Honeydew
• Limitations Infrastructure, Income
  Growth/Distribution, Plant Animal Health
• 20 Year Phase-In for Dairy/Poultry/Rice, Corn
  (10-15), Other Beef/Pork (15)

15
Methods and Economic Impacts
16
Methods

• Export Baseline, 2001-2003
• Economic Impacts from IMPLAN, 2001-2003
• Total Business Activity
• Value Added
• Income
• Employment
• Two Scenarios for CAFTA-DR
• With Without Costa Rica
• Beef Export Impacts
• Total U.S. Beef Exports, 2003 vs. 2004 (BSE)

17
Baseline U.S. Exports to CAFTA-DR
Annual Average, 2001-2003
1,000
250,000
184,966
200,000
150,000
83,967
100,000
48,068
43,900
50,000
9,031
0
Beef
Cotton
Rice
Soybeans
Total
18
IMPLAN Impacts of US Exports to
CAFTA-DR, 2001-03
Jobs
1,000
7000
6320
600,000
537,946
6000
500,000
5000
4000
400,000
3000
300,000
2000
200,000
138,918
120,513
1000
100,000
0
0
Output
Value Added
Labor Income
Employment
19
IMPLAN Impacts by Product
Baseline Average, 2001-2003
Jobs
1,000
3000
Output
227,778
2709
250,000
Value Added
2500
Labor Income
Employment
200,000
2000
1781
150,000
1500
120,639
119,060
1327
1000
100,000
39,537
500
316
50,000
0
0
Beef
Cotton
Rice
Soybeans
20
U.S. Exports to CAFTA-DR, 2004
1,000
Beef
Cotton
Rice
Soybeans
Total
93,322
Costa Rica
2,263
2,418
45,744
44,999
Dom. Republic
3,395
1,227
35,738
0
38,278
El Salvador
244
25,689
15,581
0
41,428
Guatemala
3,460
33,834
17,531
764
53,641
Honduras
285
3,270
33,063
0
37,064
Nicaragua
361
0
36,585
0
36,704
Total
10,008
66,438
184,242
45,763
306,451
Beef exports are for 2003.
21
Economic Impacts of US Exports to
CAFTA-DR, 2004
Jobs
1,000
12,000
1,000,000
873,262
10,126
10,000
800,000
8,000
600,000
6,000
4,000
400,000
196,056
226,449
2,000
200,000
0
0
Output
Value Added
Labor Income
Employment
FATUS and IMPLAN, Beef data are 2003.
22
NEI, US Exports to CAFTA-DR w/o
Costa Rica, 2004 (Beef 2003)
Jobs
1,000
500
50,000
0
-500
0
-1000
-62,375
-62,487
-50,000
-1500
-100,000
-2000
-2500
-150,000
-3000
-200,000
-3500
-248,005
-3354
-250,000
-4000
-300,000
Output
Value Added
Labor Income
Employment
23
NEI, US Beef Exports to CAFTA-DR
AFBF Beef Export Estimate of 74.3 Million
Jobs
1,000
2,000
Change from 2001-03 Baseline to Full Phase In
350,000
1,647
300,000
1,500
250,000
190,449
1,000
200,000
150,000
500
100,000
35,828
28,124
50,000
0
0
Output
Value Added
Labor Income
Employment
24
Net Economic Impacts of US Beef
Export Decline Due to BSE
Jobs
Million
20,000
Change from 2001-03 Baseline to 2004
2,000
0
0
-1,275
-20,000
-2,000
-2,253
-40,000
-4,000
-60,000
-6,000
-8,000
-80,000
-10,000
-100,000
-90,701
-10,492
-12,000
Output
Value Added
Labor Income
Employment
25
Conclusions and Implications
26
Conclusions Implications

• Some Gains to Trade w/o CAFTA-DR, But Limited
• Long Phase-In Back Loaded Tariff Reductions
  Postpone Gains
• Costa Rica Major Source of Market Potential
• CAFTA-DR Countries Gain Permanent Access to US
  Market

27
Conclusions Implications

• Trade Disruptions Have Large Potential Impacts
• Need to Examine Economic Impacts of Sugar,
  Increased Competition in Some Horticulture Crops
• Market Window Analysis to Determine Extent of
  Competitiveness or Complementarity
• Trade Reform is at a Crossroads Protectionism or
  Progress?
• If Doha Stalls, CAFTA-DR Takes on Added
  Importance
• If US Wants More Market Access, Trade Agreements
  Provide An Opportunity

28
Thank You!
Questions?
Parr Rosson Department of Agricultural
Economics Texas AM University College Station,
TX 77843-2124 E-mail prosson_at_tamu.edu Telephone
979-845-3070