Policy reform works

Policy reform in agriculture works. It works even when countries reshape rural policies on their own, without waiting for foreign countries to liberalize their policies. Among developed countries, New Zealand’s elimination of agricultural price and production support benefited its economy and improved the competitiveness of its agricultural sector. Subsequent investments by the New Zealand Government in infrastructure important to agriculture and rural communities helped farmers market their products and made off-farm employment more feasible. Among developing countries, Brazil and Chile have shown how dramatically farm output and income can rise when farmers are given the freedom to take advantage of global markets. China’s great surge in production of grain and livestock products in the 1980s and 1990s came when individual households were given the chance to determine what, when, and where to produce and sell.

The North American Free Trade Agreement (NAFTA) is an example of the significant effects that regional trade reforms can have. NAFTA has increased U.S. agricultural exports as well as consumer choices in the United States, Mexico, and Canada. Canada is now the largest importer of U.S. agricultural products, displacing Japan in 2002. Mexico surpassed the European Union to become the third largest importer in 2000. In spite of problems in a few markets, the farm sectors in all three countries have found that integrating their markets to take advantage of differences in resources and climate can better supply consumer demand and reduce costs. Imported Canadian hogs and Mexican cattle are being fed to market weight in the United States, while American pork and beef products are sold in Mexico and Canada. Mexican grapes are filling seasonal niches in the United States, while Mexico imports more U.S. pears than any other country.

Other reforms have come through bilateral and regional agreements among countries. The United States has negotiated bilateral free trade agreements with Israel, Jordan, Chile, Singapore, and Australia, and is engaged in discussions on agreements with Bahrain and Thailand. U.S. negotiators also recently concluded a regional trade agreement with Central American countries and are pursuing agreements with other regional groupings in South Africa and the Western Hemisphere. Such agreements give U.S. farmers access to new markets and U.S. consumers access to more products.

The 1986-94 Uruguay Round of global trade reforms led to a host of changes in agricultural and trade policies, the last of which are being implemented by developing countries this year. The Uruguay Round Agreement on Agriculture (URAA) of the World Trade Organization (WTO) imposed ceilings on producer subsidies in developed countries and substantially reduced export subsidies. In response, some countries, including the United States, have changed part of their support to agriculture so that it no longer targets production of particular commodities, thereby increasing farmers’ flexibility to produce what the market wants. Overall, the URAA has helped member countries reduce waste and distortions in the food and agriculture industries caused by earlier policies.

The URAA has let to reductions in export subsidies - graph

Experience has shown that policy reform in agriculture can produce benefits for the economy, even when it is done by one country alone. Potential benefits for the economy and agriculture, however, are greater when bilateral and regional agreements shape policy reform because many new opportunities for trade are opened. The biggest reward for the United States comes when policy reform is global, for then, the American economy and agriculture will be able to reap the greatest opportunities in the global marketplace.

	Seizing the Opportunities from Trade
	Agricultural trade is critical for U.S. Agriculture
	Inefficient agricultural policies, all over the globe
	Reform can't wait

For more information
From the Foreign Agricultural Service:
	U.S. Agricultural Trade
	Trade Policy
	Trade Agreements
	Trade News and Data
	Trade Trends
	Start Trading
From the Economic Research Service:
	The U.S. Ag Trade Balance. . . More Than Just A Number
	U.S. Food Sector Linked to Global Consumers
	Structure of the Global Markets for Meat
	North American Agricultural Market Integration and Its Impact on the Food and Fiber System

	Agricultural Outlook Forum 2004
	Seizing the Opportunities from Trade (pdf format)