Texas Vegetable Assn. MidYear Meeting McAllen, Texas June 17, 2004

1
Texas Vegetable Assn. Mid-Year MeetingMcAllen,
TexasJune 17, 2004

• Central America Free TradeWhats at Stake For
  Texas Agriculture?

C
Parr Rosson, Professor Director
Center for North American Studies
Department of Agricultural Economics
Texas AM University
NAS
2
Whats At Stake?

• Access to Dominican Republic Central American
  Markets
  
• Sources of Raw Materials
• Gains/Losses to Trade
• Greater Efficiency Economies of Scale

3
15 Trade Agreements Completed or Pending
CUSTA, 89
Bahrain 04
Jordan 03
DR-CAFTA 04
NAFTA 94
Israel 85
Morocco 04
Thailand 05
Panama 05
Andean FTA 05
Singapore 03
Chile 04
FTAA 06
Australia 04
Southern African Customs Union 05
U.S. Trade Agreements-3d Largest Market
4
World Average Agricultural Tariffs, 2000

Percent
140
Bound Average
115
World Average
120
85
100
80
62
55
60
40
30
25
40
12
20
0
South Asia
United States
South America
North America
European Union
Central America
Caribbean Islands
5
Bound Tariffs for Selected Products, 2000
Percent
South America
Central America
100
86
86
Caribbean Islands
North America
80
52
52
60
40
39
40
12
10
20
0
Fruit Fresh
Fruit Preparations
Source ERS/USDA
6
Bound Tariffs for Selected Products, 2000
Percent
South America
Central America
100
86
86
Caribbean Islands
North America
80
54
51
60
41
38
40
12
11
20
0
Vegetables
Vegetable Preparations
Source ERS/USDA
7
DR-Central American Free Trade Agreement
8
Mexico
Houston, 1,300 Miles NW
Dominican Republic, 800 Miles NE
Separate Agreement with United States
North
9
CAFTA

• WHO?
• Costa Rica
• Dominican Republic
• El Salvador
• Guatemala
• Honduras
• Nicaragua
• What? Free Trade Area Between Each Country the
  United States
  
• When? Early 2005, if Approved
• How? Trade Promotion Authority

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CAFTA (cont.)

• About ½ of Markets Open to U.S. Agriculture When
  Implemented
  
• Opportunities HQ Beef, Cotton, Wheat, Soybeans
• Rest of Market Access Over 15-20 Years Pork,
  Beef, Poultry, Rice, Corn, Dairy
  

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DR-CAFTA Demographics
Total/Avg.
44.8
4,633
45.3
79.2
32.2
12
U.S. Total Trade with CAFTA, 2003
Billion Dollars
Exports
Imports
Balance
4.5
5.0
4.2
3.4
3.4
4.0
3.3
2.9
2.8
3.0
2.3
2.0
1.8
2.0
0.8
0.5
1.0
0.1
0.0
-0.2
-0.2
-0.3
-0.5
-0.7
-1.0
Honduras
Nicaragua
Costa Rica
Guatemala
El Salvador
Dominican Rep.
Source Foreign Trade Statistics, U.S. Census
Bureu
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Billion Dollars
Imports
Exports
Balance
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
1990
1995
2000
2003
Source
Foreign Agricultural Trade of The United States
, Calender Year, USDA/ERS
14
(No Transcript)
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U.S. Agricultural Exports to
Central America
Total, 1990 483 million
Total, 2003 1,339 million
Grains Feeds
Grains Feeds
218
582
Other
47
Oilseeds
Other
260
129
Beverages
Oilseeds
Cotton
37
90
47
Animals
Animals
Veg/Fruit
204
Veg/Fruit
47
44
117
Source U.S. Trade Internet System,
www.fas.usda.gov/ustrade
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U.S. Agricultural Imports from
Central America
Total, 1990 1,566 million
Total, 2003 2,654 million
Bananas
Fruit/Veg
453
527
Fruit/Veg.
Bananas
133
674
Fish
211
Fish
Other
478
264
Other
328
Sugar
Sugar
Coffee
Coffee
133
188
372
459
Source U.S. Trade Internet System,
www.fas.usda.gov/ustrade
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U.S. Onion and Melon Exports to
CAFTA
Million Dollars
Onions
Melons
5.0
3.9
4.0
2.6
3.0
2.0
1.9
1.5
2.0
1.3
1.0
0.6
0.6
1.0
0.4
0.2
0.1
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source U.S. Trade Internet System,
www.fas.usda.gov/ustrade
18
U.S. Onion and Melon Imports from
CAFTA
Million Dollars
200.0
Onions
Melons
161.1
143.0
142.1
150.0
126.2
106.6
102.5
93.9
85.7
100.0
79.0
74.4
50.0
1.3
1.2
0.8
0.8
0.8
0.9
1.1
0.8
1.2
0.8
0.0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source U.S. Trade Internet System,
www.fas.usda.gov/ustrade
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Melon Tariff Phase-Out

• US Tariffs Eliminated Immediately
• Most CA Tariffs Eliminated Immediately
• Exception Dominican Republic May Impose 20
  Safeguard Duties
  
• 5 Years for Watermelon
• 10 Years for Other Melons

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Onion Tariff Phase-Out

• US Tariffs Eliminated Immediately
• CA Tariffs Eliminated Over 10 to 15 Years
• All But El Salvador Have Some Type of Safeguard
  or Tariff-Rate Quota

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CAFTA Base Tariffs
for Yellow White Onions
Percent
120
97
100
80
47
60
40
15
15
15
15
20
0
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Dom. Rep.
Denotes Tariff-Rate Quota
22
CAFTA Phase-Out Period
for Yellow White Onions
Years
18
15
15
15
15
16
14
12
12
10
10
8
6
4
2
0
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Dom. Rep.
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Monthly U.S. Cantaloupe Shipments and Imports
Million Pounds
/CWT
400
30
Texas
Other U.S.
CAFTA
Mexico
Price
25
300
20
200
15
10
100
5
0
0
Jan 01
Jan 02
Jan 03
Jan 04
May 01
May 02
May 03
Source Agricultural Marketing Service, USDA
24
(No Transcript)
25
(No Transcript)
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Monthly U.S. Onion Shipments and Imports
Million Pounds
/CWT
500
50
Other U.S.
Texas
Mexico
CAFTA
Other Imports
Price
400
40
300
30
200
20
100
10
0
0
Apr
Apr
Apr
Jan 01
Jan 02
Jan 03
Jan 04
Source Agricultural Marketing Service, USDA
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Shipping Trends

• CAFTA Poses Biggest Threat to Texas Cantaloupe
  Honeydew
  
• Other US Bigger Threat in Some Years
• Mexico Beneficiary of Higher Prices for Onions
  Cantaloupe
  
• Texas Benefits from Higher Prices for Cantaloupe,
  Watermelon Onions
  
• Declining Shipments from Texas

-42.5
-33.8
-34
Million Pounds
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Summary

• Negotiations Completed
• DR-CAFTA May Go To Congress Soon
• Labor Environmental Interests Important to the
  Debate
  
• DR-CAFTA Tariff Reductions Will Open Markets,
  Over Time
  
• Dr-CAFTA Major Supplier of Honeydew and
  Cantaloupe to U.S. Market
  
• Texas Season Overlaps with Rest of United States
  DR-CAFTA
  
• Mexico Other US Major Competition in Watermelon
  Onions
  

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Issues for Texas

• Are More Trade Agreements a Desirable Outcome?
• Without DR-CAFTA, U.S. Market Access Limited
• Even with DR-CAFTA, No Guarantee of Market
  Growth, Some Countries Need Economic Development
  Income Growth
  
• Investment in CA May Spur Production
  Development of Infrastructure
  
• SPS Problems May Arise, More Trade Disputes
  Likely
  
• Recent Declines in Shipments of Texas Cantaloupe,
  Honeydew Onions Troublesome

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Center for North American Studies
C
NAS

Informed Decisions for Global Change

• Parr Rosson
• Ph 979-845-3070
• E-mail prosson_at_tamu.edu