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International Trade PolicyInternational Trade Policy
A Major Influence On
The Economic Viability Of
The U.S. Cotton Industry
A Major Influence On
The Economic Viability Of
The U.S. Cotton Industry
Trade Liberalization: InevitableTrade Liberalization: Inevitable
• Proliferation of Trade Agreements: Administration’s highest priorities
– Multilateral WTO (Doha Round)
– Bilateral
– Regional
• TPA (Fast Track) authority will facilitate agreements
• Proliferation of Trade Agreements: Administration’s highest priorities
– Multilateral WTO (Doha Round)
– Bilateral
– Regional
• TPA (Fast Track) authority will facilitate agreements
Omnibus Trade BillOmnibus Trade Bill
• Trade Promotion Authority (TPA)• Caribbean Basin Trade Promotion
Act (CBTPA)• Andean Trade Preference and Drug
Eradication Act (ATPDEA)• African Growth and Opportunity Act
(AGOA)• Trade Adjustment Assistance (TAA)
• Trade Promotion Authority (TPA)• Caribbean Basin Trade Promotion
Act (CBTPA)• Andean Trade Preference and Drug
Eradication Act (ATPDEA)• African Growth and Opportunity Act
(AGOA)• Trade Adjustment Assistance (TAA)
Effective Tariff Rates for TextilesEffective Tariff Rates for Textiles
• US < 9%
• Argentina 40% to 50%
• Brazil 40% to 70%
• China 20% to 36%
• India 50% to 70%
• Pakistan 40% to 60%
• Bangladesh 60% to 300%
• US < 9%
• Argentina 40% to 50%
• Brazil 40% to 70%
• China 20% to 36%
• India 50% to 70%
• Pakistan 40% to 60%
• Bangladesh 60% to 300%
Average Maximum Allowed Agricultural Tariffs Under Current WTO
Average Maximum Allowed Agricultural Tariffs Under Current WTO
0
20
40
60
80
100
120
US EU Japan Korea India World0
20
40
60
80
100
120
US EU Japan Korea India World
Core Problems in Ag Trade
Average allowed WTO tariff on agriculture is 62 percent with many exceeding 100 percent. The U.S. average tariff is 12 percent.
EU spends $2 - $5 billion a year on export subsidies, compared with about $20 million the US spends
Core Problems in Ag Trade
WTO allowable trade distorting subsidiesEU $60 billion a year
Japan $30 billion a year
Canada $23 billion a year
U.S. $19.1 billion a year
Farm Policy & International Trade Policy Must be Compatible & Fair Farm Policy & International Trade Policy Must be Compatible & Fair
• Farm policy and trade policy are interdependent especially for the U.S. cotton industry
• Farm policy and trade policy must take into account the interests of the US textile industry
• Farm policy and trade policy are interdependent especially for the U.S. cotton industry
• Farm policy and trade policy must take into account the interests of the US textile industry
Farm Policy & International Trade Policy Must be Compatible & Fair Farm Policy & International Trade Policy Must be Compatible & Fair
• Economic viability hinges on:
– Agreement on core issues
– Broadening our coalition
– Aggressively pursuing our goals
• Economic viability hinges on:
– Agreement on core issues
– Broadening our coalition
– Aggressively pursuing our goals
Reconciling Global Farm and Trade PolicyReconciling Global Farm and Trade Policy
• US farm programs cannot be unilaterally reduced
• US agricultural and textile tariffs cannot be further reduced until other nations reduce their tariffs to US levels
• Market access must be reciprocal
• US farm programs cannot be unilaterally reduced
• US agricultural and textile tariffs cannot be further reduced until other nations reduce their tariffs to US levels
• Market access must be reciprocal
Reconciling Global Farm and Trade PolicyReconciling Global Farm and Trade Policy
• Non-tariff barriers must be eliminated
• Export subsidies must be eliminated, or reduced to US levels
• Improvements must be made in international trading disciplines and dispute settlement procedures
• Non-tariff barriers must be eliminated
• Export subsidies must be eliminated, or reduced to US levels
• Improvements must be made in international trading disciplines and dispute settlement procedures
US Proposal: Doha DeclarationUS Proposal: Doha Declaration
Substantial improvements in market access
Reductions of, with a view to phasing out, all forms of export subsidies
Substantial reductions in trade-distorting domestic support
Substantial improvements in market access
Reductions of, with a view to phasing out, all forms of export subsidies
Substantial reductions in trade-distorting domestic support
Average of Maximum Allowed Tariffs
0
20
40
60
80
100
120Percent
Swiss Formula Tariff ReductionsSwiss Formula Tariff Reductions
IndiaIndia
EUEU
U.S.U.S.
KoreaKoreaJapanJapan
EU87.0%
Norway3.0%
Switzerland6.0%
U.S.1.0%
Rest of World3.0%
Export SubsidiesExport Subsidies
Domestic Support ProposalDomestic Support Proposal
Reduce non-exempt domestic support to 5 percent of total value of agricultural production over a 5-year period
Establishes the same standard for computing allowable trade-distorting domestic subsides for all countries
Eliminates the blue box loophole
No limits on exempt (green box) support
67.2
56.3
45.3
34.4
23.4
12.519.1 17.3 15.5 13.6 11.8 10
0
10
20
30
40
50
60
70
80
2000 2006 2007 2008 2009 2010
$Billion
EU US
Leveling the Playing FieldLeveling the Playing Field
5%
Proposal vs. AgreementProposal vs. Agreement
• US proposal is long way from agreement
• EU will resist
• Discussions will continue for several years
• US proposal is long way from agreement
• EU will resist
• Discussions will continue for several years
Proposal vs. AgreementProposal vs. Agreement
• US timing goals:– Modalities by March 31, 2003
– Agreements by January 1, 2005
• US cotton/textile industries must guard against concessions by US negotiators that would perpetuate existing disadvantages
• US timing goals:– Modalities by March 31, 2003
– Agreements by January 1, 2005
• US cotton/textile industries must guard against concessions by US negotiators that would perpetuate existing disadvantages
Agreement vs. ComplianceAgreement vs. Compliance
• Good agreements are worthless in the absence of compliance
• New agreements must have strong dispute settlement provisions
• Good agreements are worthless in the absence of compliance
• New agreements must have strong dispute settlement provisions
Agreement vs. ComplianceAgreement vs. Compliance
• Congress must insist that USTR be tough on non-compliance … should refuse to ratify additional agreements until USTR demonstrates a will to resolve existing non-compliance problems
• Congress must insist that USTR be tough on non-compliance … should refuse to ratify additional agreements until USTR demonstrates a will to resolve existing non-compliance problems
China’s Tariff Rate Quota Agreement 3.75 Million Bales
China’s Tariff Rate Quota Agreement 3.75 Million Bales
For Re-Export61%
For Re-Export61%
State Owned33%
State Owned33%
Private6%
Private6%
Imports From ChinaEight Categories of Quota Removal
591% Increase
Imports From ChinaEight Categories of Quota Removal
71% Price Reduction
Trade Agreements on the HorizonTrade Agreements on the Horizon
• Chile
• Singapore
• Australia
• Free Trade Area of the Americas
• Continuation of WTO Doha Round
• Chile
• Singapore
• Australia
• Free Trade Area of the Americas
• Continuation of WTO Doha Round
Trade Agreements on the HorizonTrade Agreements on the Horizon
• Central America
– Costa Rica
– El Salvador
– Guatemala
– Honduras
– Nicaragua
• Central America
– Costa Rica
– El Salvador
– Guatemala
– Honduras
– Nicaragua
Farm Policy & International Trade Policy Must be Compatible & Fair Farm Policy & International Trade Policy Must be Compatible & Fair
• Farm policy and trade policy are interdependent especially for the U.S. cotton industry
• Farm policy and trade policy must take into account the interests of the US textile industry
• Farm policy and trade policy are interdependent especially for the U.S. cotton industry
• Farm policy and trade policy must take into account the interests of the US textile industry
Farm Policy & International Trade Policy Must be Compatible & Fair Farm Policy & International Trade Policy Must be Compatible & Fair
• Economic viability hinges on:
– Agreement on core issues
– Broadening our coalition
– Aggressively pursuing our goals
• Economic viability hinges on:
– Agreement on core issues
– Broadening our coalition
– Aggressively pursuing our goals
House Vote On TPAHouse Vote On TPA Yea Nay
NC 4 8
SC 2 4
GA 7 4
AL 5 2
TOTAL 18 18
Yea Nay
NC 4 8
SC 2 4
GA 7 4
AL 5 2
TOTAL 18 18
Administration won votes by making concessions on TAA. Several textile area “holdouts” for a coalition proposal could have won its acceptance and mitigated damage to the US cotton and textile industries.
Regional Fabric & T-Shirt QuotasCBTPA / ATPDEA / AGOA
Regional Fabric & T-Shirt QuotasCBTPA / ATPDEA / AGOA
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Mill
ion
SME
2002 2003 2004 2005 2006
FY Beginning Oct 1
Conference Report Coalition Old Quotas
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Mill
ion
SME
2002 2003 2004 2005 2006
FY Beginning Oct 1
Conference Report Coalition Old Quotas
MerchantsMerchantsGinnersGinners CrushersCrushers
ProducersProducers
CooperativesCooperatives
WarehousesWarehousesManufacturersManufacturers