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Impacts of NAFTA and CUSTA on Agricultural Trade Flows: A Northern Great Plains Perspective. Won W. Koo Professor and Director Center for Agricultural Policy and Trade Studies North Dakota State University. Purpose. - PowerPoint PPT Presentation
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Impacts of NAFTA and CUSTA on Agricultural Trade Flows: A Northern Great Plains Perspective
Won W. Koo
Professor and Director
Center for Agricultural Policy and Trade Studies
North Dakota State University
Purpose
To evaluate changes in agricultural trade flows between the United States and Canada under CUSTA and impacts on Northern Plains agriculture
Changes in trade flows of agricultural commodities and products under CUSTA
HRS wheat durum wheat malting barley feed barley Live cattle and hog beef and pork processed products
Table 1. U.S. Trade Flows to and from Canada, Grain
(metric tons) Before After
Imports 115,596 1,201,433 HRS Wheat Exports 272 11,223
Durum Imports 90,690 394,521 Imports 107,358 644,625
Barley Exports 218 4,867
Table 2. U.S. Trade Flows to and from Canada, Livestock
(Metric tons) Before After
Imports 510,809 1,092,949 Live Cattle Exports 287,777 414,643 Imports 68,109 192,407
Beef Exports 7,820 22,579 Imports 611,585 2,032,467
Live Hogs Exports 406 2,281 Imports 183,347 166,992
Pork Exports 48,006 58,503
Spring Wheat Imports from Canada
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
met
ric to
ns
Durum Imports from Canada
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
met
ric
tons
Malting Barley Imports from Canada
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
met
ric
tons
Feed Barley Imports from Canada
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
met
ric to
ns
Live Cattle Trade with Canada
($1,000)
($500)
$0
$500
$1,000
$1,500
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
mill
ion
dolla
rs
Imports
Exports
Trade balance
Live Hog Trade with Canada
($400)
($300)
($200)
($100)
$0
$100
$200
$300
$400
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
mill
ion
dolla
rs Imports
Exports
Trade balance
Monthly Beef and Veal Trade with Canada
-40,000
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
met
ric
tons
Beef & Veal Imports from Canada Beef & Veal Exports to Canada Trade balance
Monthly Pork Trade with Canada
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
met
ric
tons
Pork Imports from Canada Pork Exports to Canada Trade Balance
Factors affecting trade flows Lower transportation costs relative to other
major markets Continuous appreciation of the U.S. dollar
against the Canadian dollar Quality of wheat and malting barely Export enhancement program Elimination of Canadian Rail subsidies
under WGTA
Empirical Model
CX= f(USDP, CDP, EXR, OTHX)
USDP=g(CX, DCS, OTHP)
HRS Durum Malting Barley Feed Barley
Export Equation Intercept -22.41
(-2.64) -3.71
(-1.27) -0.91
(-0.00) -1.15
(-0.00) Exchange Rate 2.78
(1.68) 2.06
(1.96) 1.06
(1.72) 1.68
(1.85) Variance (ER) -1.36
(-0.89) -0.10
(-0.15) -0.45
(-0.00) -0.89
(-0.00) U.S. Price 0.33
(0.35) -0.36
(-1.11) 2.39
(4.57) 1.44
(2.10) U.S. Quality -5.02
(-3.43) -0.11
(-0.29) -0.71
(-4.42)
U.S. Dom. Con. 2.60 (2.07)
0.85 (1.79)
0.04 (0.35)
0.71 (3.81)
EEP 1.10 (1.06)
1.09 (2.35)
CN. Rail Subsidy -1.43 (-1.33)
-0.69 (-1.66)
Agreement -0.66 (-2.29)
CUSTA 2.05 (5.23)
0.67 (3.06)
Quarter 1 -0.80 (-2.06)
-0.44 (-2.56)
-0.18 (-0.95)
0.01 (0.04)
Quarter 2 -0.37 (-1.89)
-0.06 (-0.69)
0.23 (2.40)
0.10 (0.59)
Quarter 3 -0.10 (-0.82)
-0.11 (-1.96)
-0.21 (-3.15)
-0.12 (-0.98)
HRS Durum Malting Barley Feed Barley
Price Equation Intercept 0.78
(1.37) 0.68
(0.92) 0.17
(0.74) 0.23
(2.64) CN. Export -0.03
(-2.38) -0.11
(-1.15) 0.21
(4.98) -0.01
(-1.90) U. S. Export 0.16
(2.12) 0.05
(0.81) 0.05
(2.75) 0.03
(3.39) U.S. Dom. Carry Over
Stock -0.22
(-2.02) -0.11
(-1.00) 0.02
(0.39) -0.06
(-2.85) Lagged U.S. Price 0.75
(7.83) 0.80
(4.99) 0.59
(8.34) 0.96
(38.43) U.S. Quality 0.16
(4.23)
Quarter 1 -0.01 (-0.38)
-0.05 (-0.83)
0.05 (1.36)
-0.02 (-1.59)
Quarter 2 -0.004 (-0.22)
-0.01 (-0.37)
-0.05 (-2.89)
-0.001 (-0.20)
Quarter 3 -0.02 (-1.89)
-0.03 (-1.74)
0.05 (3.98)
-0.01 (-2.86)
System Weighted R2 0.81 0.82 0.62 0.90
Live Cattle Beef Live Hogs Pork Estimated Coefficients (p-values in parentheses) Export Equation
Intercept 9.747 (0.0001)
11.843 (0.0023)
-59.305 (0.0001)
-9.174 (0.0221)
Price difference 0.174 (0.0001)
-0.236 (0.148)
0.006 (0.7745)
0.241 (0.0473)
Real Exchange Rate 1.036 (0.0001)
3.719 (0.0001)
0.634 (0.0883)
-0.279 (0.2068)
Canadian Production/ Inventory -0.828 (0.4084)
7.593 (0.0001)
1.343 (0.0001)
CUSTA 1.032 (0.0001)
0.343 (0.0001)
Pre-1983 dummy variable -1.635 (0.0001)
Post-1993 trend 0.095 (0.0191)
Drought dummy variable 1.015 (0.0001)
Seasonal dummy variables 1 0.150 (0.0026)
0.201 (0.0115)
0.220 (0.0076)
0.036 (0.4461)
Seasonal dummy variable 2 -0.150 (0.0423)
-0.398 (0.0001)
-0.266 (0.0003)
0.078 (0.1009)
Live Cattle Beef Live Hogs Pork Estimated Coefficients (p-values in parentheses) Price Equation
Intercept 9.057 (0.0001)
4.670 (0.0001)
20.296 (0.0001)
9.388 (0.0001)
U.S. Production/ Supply -0.518 (0.0001)
-0.456 (0.0001)
-1.229 (0.0001)
-0.925 (0.0001)
Imports from Canada -0.092 (0.0001)
-0.082 (0.0001)
-0.053 (0.0291)
-0.285 (0.0001)
Imports from Canada lagged 4 months
-0.112 (0.0001)
Imports from Canada lagged 6 months
-0.085 (0.0001)
Pork price 0.256 (0.0001)
Beef price 0.542 (0.0001)
March-May dummy variable 0.035 (0.0214)
April-June dummy variable 0.024 (0.0106)
System Weighted R2 0.736 0.831 0.881 0.708
Effect of Canadian Exports on Price
Beef Live Cattle Pork Hogs
HRS Wheat
Durum
Price Flexibiliy Coefficient -0.082 -0.092 -0.285 -0.072 -0.03 -0.11
Percentage Price Changes 1989-90 -0.7% 3.7% 0.3% 0.6% -20.2% -3.0% 1990-91 -0.6% -0.3% 2.9% -1.4% -2.2% -4.1% 1991-92 -4.0% -2.7% 0.9% 2.6% -8.9% -4.0% 1992-93 -2.0% 0.8% -0.1% -1.8% -1.0% 1.6% 1993-94 -1.2% 1.0% -0.2% -0.7% -2.0% 1.1% 1994-95 0.0% -1.5% -1.4% -6.6% 1.3% 4.0% 1995-96 -2.6% -2.5% 0.9% -4.3% 0.4% 0.5% 1996-97 -1.5% 0.8% -0.1% -1.0% -2.0% -8.4% 1997-98 -0.8% 0.5% -4.5% -2.1% 0.4% -0.5% 1998-99 -1.2% 2.3% -7.1% 0.0% 0.0% -4.6%
Conclusion (1)
CUSTA has had a significant influence on trade flow of agricultural goods, mainly Canadian exports to the United States.
Conclusion (2) Trade flows of livestock and livestock
products are influenced by exchange rate between the two countries and price differences, while those of wheat and barley are influenced by not only exchange rate and price differences, but also quality of U.S. grain, the EEP, and Canadian rail subsidies.
Conclusion (3) Canadian exports of grain and livestock to
the U.S. have negatively affected U.S. price of grain and livestock, but the price effects are not significant for all agricultural goods except wheat and pork.