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United States Department of Agriculture Foreign Agricultural Service |
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Frequently Asked Questions About Agricultural Trade
Farmers in the United States produce more with the same or even fewer resources than 50 years ago. During the past 50 years, corn yields have tripled and wheat yields have doubled. Agricultural sector productivity in the United States has been rising at an annual rate of about 2 percent. This rising productivity benefits the
entire U.S. economy by releasing resources that can be used to produce
other goods and services Americans want. American farmers must look to
foreign markets because production and production capacity is increasing
faster than domestic demand. The United States is now the world’s
largest agricultural exporter. The value of agricultural exports equals
nearly one-fourth of farm cash receipts, about twice the level of the
overall U.S. economy, and 1 out of 3 acres are planted for export. American farmers export 45 percent of
their wheat, 34 percent of their soybeans, 71 percent of their almonds,
and more than 60 percent of their sunflower oil. For many food products, U.S. producers
are among the lowest cost producers in the world. But competition is
about more than costs. The competitiveness of our food and agricultural
sector results from investments made each year by our farmers, the food
industry, and our government. These investments are targeted to building
a stable framework for agricultural trade, finding answers to challenges
through research, and supporting wider use of the latest technology.
This is an efficient system that enables the United States to deliver
consistent, high quality products to demanding customers all around the
world. With rapid productivity growth and slow
growth in the domestic demand for food and fiber, U.S. agriculture must
continue to look abroad for markets, and the most promising are rapidly
growing developing countries. Unlike the mature markets in developed
countries, agricultural trade with developing counties will grow rapidly
as population, incomes, and food demand grow at a faster rate than in
developed countries during the coming decades. Consumers in developing
countries will choose different foods to eat as their incomes rise,
moving from staples to more meat, dairy products, fruits, and
vegetables. The United States has proposed changes to agricultural and trade policies that continue to block access for our producers and distort the world’s agricultural markets through unfair competition. Trade policy reform has the potential to boost prospects for food and agricultural markets in developing countries by stimulating economic growth and development. With access to growing markets, American producers will have greater opportunities to grow and develop their businesses. For developing country consumers,
agricultural policy reform will mean better and more diverse diets and
rising incomes as liberalization and policy reform fosters development
and growth. For American consumers, successful agricultural trade policy
reform will mean even greater access to the bounty of global markets. Agricultural tariffs still average 62 percent, far above the 4 percent level for manufactured goods. U.S. agricultural markets are relatively open for most products, averaging only 12 percent, while EU tariffs average 30 percent, and Japan’s average 50 percent. Many developing countries also have very high tariffs. For example, India’s average bound tariff is 114 percent. Similar disparities appear in the levels
of domestic support for farmers. The United States proposal deals with
these inequities and is designed to steer other countries to complete
liberalization of agricultural trade. The U.S. proposal is clearly
focused on the elimination of huge disparities in tariff levels,
domestic support, and export competition that plague global markets
today. Two major trade agreements, both taking effect in the mid-1990s, shape agricultural trade today:
Back to top The North American Free Trade Agreement (NAFTA), enacted in 1994. Regional and bilateral trade agreements
form an integral part of the U.S. approach to international trade
reform. Through NAFTA, Canada, Mexico, and the United States have
eliminated numerous barriers to the economic integration of these three
countries. The United States has much closer economic ties with Canada
and Mexico as a result of NAFTA. With the hope of building on NAFTA’s
success, the United States has entered negotiations with 33 other
democracies in the Western Hemisphere to form a Free Trade Area of the
Americas (FTAA). The United States has forged bilateral free trade
agreements with Israel, Jordan, Singapore, and Chile, and it is
committed to securing similar bilateral or regional agreements with
Morocco, Central America, and South Africa, among others. The Uruguay Round Agreement on Agriculture (URAA), enacted in 1995. The Uruguay Round was an important first step by members of the WTO toward liberalizing agricultural trade policies. Prior to the Uruguay Round, agriculture had generally been excluded in trade negotiations. The Uruguay Round made four major contributions to liberalizing agricultural trade:
Also, new rules for sanitary and
phytosanitary (SPS) measures were established by the Uruguay Round, as
well as other technical regulations in the SPS and the Technical
Barriers to Trade (TBT) Agreements. The U.S. Proposal for Agricultural Trade Reform is built around the following three points: Export Competition: Phase-out of direct export subsidies during five years, then eliminated completely. Disciplines would also be applied to export credit guarantees, a holder from the Uruguay Round. Market Access: Elimination of megatariffs, opening markets around the world to exports from both developed and developing countries. This would be accomplished by reducing the highest tariffs the fastest, lowering the world average tariff from 62 percent to 15 percent in five years. Domestic Support:
Hold trade-distorting domestic support to 5 percent of the total value
of agricultural production during the first phase, followed by setting a
date for complete elimination of trade-distorting domestic support. U.S. agriculture will likely experience lower
returns, restructuring and downsizing; and a continuing dependence on American
taxpayers. No. Agricultural trade reform will not be
painless, but with multilateral reform the costs of adjustment will be lower,
and they will be shared. We are asking as much of ourselves as we are asking of
our partners. Our proposal will require the United States to increase market
access and reduce the level of protection for the products we import. Similarly,
our proposal will require us to further limit the levels of trade-distorting
domestic support for our farmers. With multilateral reform, however, higher
world prices will help to minimize the necessary adjustments. Since the WTO ministers failed to reach consensus in Cancún
(September 2003), how will the United States proceed in its efforts to
liberalize trade? Although the outcome of the Cancun meeting was disappointing, the United
States remains deeply committed to agricultural trade liberalization.The success
of U.S. efforts to liberalize agricultural trade, however, is dependent on
consensus and support from other countries. While the United States pursues trade reform in the WTO negotiations, U.S.
agricultural and trade officials are also moving to improve the climate for U.S.
agricultural trade by completing regional and bilateral trade agreements.
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