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ERS analyzes data collected by different national (U.S.
trade data from the U.S. Department of Commerce) and international
organizations (the World Trade Organization, United Nations
trade data, and consumer expenditures and other economic
indicators from the World Bank) to examine how various
trade regulations impact global food markets.
After a period of slow growth during 1996-2002, global trade of bulk, intermediate, and consumer-oriented food products has expanded. Similarly, with the exception of fresh high-value products, U.S. exports of bulk and high value-products products are surging. Even as U.S. exports of high-value products have been growing, however, imports of similar products have remained high, resulting in a negative U.S. trade balance (see Excel
table). While trends
in global food demand promote processed food sales,
food trade is impacted both by consumer demand and by
coordination between local food manufacturers and retailers.
Although there are a number of factors that impact global
food trade, trade policy and barriers to international
food trade remain an import feature of global food markets.
Tariffs on agricultural products (see Excel
table) are generally higher than on other products.
Tariff protection is highly uneven across both countries
and products, with many countries having a large proportion
of their agricultural tariffs set at low or duty-free
levels while maintaining high tariffs, often in excess
of 100 percent (referred to as megatariffs),
on import-sensitive products. While agreeing to reduce
tariffs as required by the Uruguay
Round Agreement on Agriculture, World Trade Organization
(WTO) member countries tended to cut their tariffs on
fully processed products by smaller amounts than on semiprocessed
or primary products, a practice known as tariff escalation
(see Excel table).
In addition to tariffs, WTO member countries use sanitary
and phytosanitary and other technical
measures to affect the trade flow of food products.
WTO members also have a number of instruments at their
disposal to further regulate the flow of imports. These
include safeguard mechanisms allowed under the WTO
Agreement on Safeguards and those allowed under the
Special Safeguards
(SSG) provision of the Agreement on Agriculture, as well
as other contingency protection measures such as anti
dumping (AD) and countervailing
duties (CVD).
Safeguards are specifically designed to protect domestic
industries from injuries due to import surges. If increased
imports threaten or cause "serious injury" to
a domestic industry, the importing country can impose
various remedial measures. Agriculture accounts for more than one-quarter of all safeguard and countervailing duty investigations initiated in the WTO. Anti-dumping measures are used for agricultural products; however, they are not as prevalent as they are in other sectors, such as metals and chemical products.
The Uruguay Round Agreement on Agriculture also allows
those countries that converted nontariff
barriers on agricultural commodities to tariffs to
make use of Special Safeguards, provided they reserved
this right in their tariff schedules. SSGs are activated
when either a sudden surge in imports or drop in price
exceed preset trigger levels. While 39 WTO members have
reserved the right to use SSGs on numerous tariff lines
(see Excel table),
SSG implementations have primarily been on a few commodities
by a few countries (see Excel table). The right to use special agricultural safeguards
will lapse if there is no agreement for continued use
in the current Doha Round of WTO negotiations.
AD and CVD measures are meant to offset "unfair
trade" created by foreign firms dumping goods in
the international market (AD) or by foreign governments
subsidizing exports (CVD). Before a country can impose
either AD or CVD measures, they must show that the dumped
or subsidized imports cause, or threaten to cause, material
injury to the domestic industry. Although the number of
CVD investigations has declined somewhat since 1994, AD
investigations have risen sharply as the use of trade
remedy measures by WTO members has increased. Fully processed
agricultural products account for a bulk of the total
measures against agricultural products.
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