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On December 15, 1993, the United States concluded the seven-year Uruguay Round negotiations within the General Agreement on Tariffs and Trade (GATT). This historic agreement will result in significant improvements for U.S. agricultural trade.
U.S. farmers will gain from the increase in world income that will arise from the Uruguay Round agreement. Studies suggest that the increase in world income could be as much as $5 trillion over ten years. The growth in world income will increase the demand for agricultural products, particularly for income-sensitive commodities like meat, fruits, vegetables and other specialty crops. Increased demand for beef, pork and poultry means that U.S. feed grain and soybean producers will gain as well.
U.S. agricultural exports are expected to increase by $1.6 to $4.7 billion in 2000 and by $4.7 to $8.7 billion in 2005. Grains and animal products account for almost 75 percent of the increase.
Increased exports mean more export-related jobs, particularly for high-value and value- added products. Agricultural export-related employment is expected to increase by as much as 112,000 jobs in 2000, and by as much as 190,000 jobs in 2005.
Increased exports will raise farm prices, increase farm income, and lower government outlays on price and income support programs. The Uruguay Round agreement is expected to raise net farm sector income by as much as $1.3 billion in 2000 and by as much as $2.5 billion in 2005. Government outlays in 2000 could decline by almost $1.3 billion and in 2005 could be as much as $2.6 billion lower.
While the American agricultural industry has naturally focused on immediate improvements in market access as a result of the Uruguay Round, it is important to recognize the longer-term benefits of this agreement.
Specific disciplines agreed to in the Uruguay Round will cover the areas of market access, export subsidies, internal support, and sanitary and phytosanitary measures.
MARKET ACCESS
Reduction of import barriers will improve exporter access to overseas markets. All countries will replace non-tariff measures with ordinary tariffs (tariffication). All agricultural tariffs will be bound and reduced.
The replacement of non-tariff measures with tariffs will include two complementary disciplines: countries will open up minimum access opportunities where there has been little or no trade, and countries will ensure that current access opportunities are maintained.
Each tariff, including those established under tariffication, will be subject to a minimum reduction (15% for developed countries, 10% for developing countries). Moreover, each country must make an overall average reduction (36% for developed countries, 24% for developing countries).
EXPORT SUBSIDIES
As a result of the Uruguay Round, cuts in export subsidies, most significantly by the European Union, will reduce the level of unfair competition in world markets. Export subsidies will be reduced by 21% in terms of quantity and by 36% in terms of budgetary outlays by the end of the 6-year implementation period.
Because only a small portion of U.S. agricultural exports is subsidized, this multilateral cut in subsidization of exports will greatly benefit the United States. By reducing the quantity of exports that can be subsidized on world markets, the agreement will create trade opportunities for U.S. producers who are more efficient than producers elsewhere.
In addition, the Uruguay Round establishes a strong framework for further reduction of export subsidies in future negotiations.
Products that did not receive export subsidies in the 1986-90 period will not be eligible for export subsidies in the future.
INTERNAL SUPPORT
All countries must establish ceilings for the amount of support afforded producers through internal support mechanisms. Average support provided to measures linked to production is totaled across all commodities for the 1986-88 period. Policies that are deemed to be non-trade distorting are not included in the total measure of support and are not subject to reduction.
Developed countries must reduce this total level of support in equal annual installments by 20% by the year 2000. Developing countries must reduce the total level of support by 13% by the year 2004.
Due to changes in support programs in recent farm and budget legislation, the United States need not make reductions in internal support.
SANITARY & PHYTOSANITARY MEASURES
The Sanitary and Phytosanitary (SPS) Agreement will impose GATT disciplines on the use of health-related measures which restrict imports, and it will encourage the use of international standards.
Under the new system, any trade-restrictive measures taken by an importing country for the purpose of protecting human, animal or plant health must be based on science, including the use of risk assessment techniques.
A measure stricter than an international standard may be used in a country, but only if the country has a scientific justification for taking the measure. Transparency in the development and implementation of SPS measures will now be required.
June 1994
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