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Global Policy Analysis DivisionOffice of Global Analysis
TPA, TPP, and TTIP … oh my!
Jason HafemeisterTrade Policy CoordinatorForeign Agricultural ServiceUS Department of Agriculture
1. Global economic growth and the rise of the “middle class” in developing countries
2. Value of the U.S. dollar3. Worldwide biofuels production4. Role of trade and trade liberalization5. Agricultural input prices and its effect on profitability6. Additional crop land7. Biotech developments
By 2025, 53% of the world’s households will have joined the middle class (greater than real PPP incomes of $20,000/yr).
Global economy emerged from worst recession in decades in 2010. Despite recent challenges, developing countries performed better and growing faster than developed countries.
Impact on global food demand will be significant due to higher income elasticities for food in developing countries.
Opportunities Beyond Our Borders
95% of the world’s consumers are
outside our borders80% of the world’s purchasing power isoutside our borders
4
Most of the increase will be in developing countries, particularly in Asia
100
300
500
700
900
1100
Millions of H
ouseho
lds
Households w/real PPP incomes greater than $20,000 a year
Middle class in developing countries projected to increase 92% by 2023 vs. 11% in developed countries
Developing countries
Developed countries
Source: IHS Global Consumer Markets data as analyzed by OGA
Lower income countries spend much of that additional income on food
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Co
ngo, Dem
. Rep
.Niger
Gam
bia, The
Zambia
Ghana
Nigeria
India
China
Morocco
Nam
ibia
Paraguay
Jordan
Peru
Brazil
Bosnia
Kazakhstan
Mexico
Macao
Israel
Malta
Italy
Australia
Canada
United States
Other
Education
Recreation
Transport &communicationHealth
Furnishings
Housing
Clothing
Food
Source: USDA, Economic Research Service using International Comparison Program 2005 data.
‐75
‐65
‐55
‐45
‐35
‐25
‐15
‐5
5
15
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Agricultural Trade Balance
+$20 b
GTA
‐$70 b
India
China
Billion
$ USD
China and India had a lot of similarities in 2002 (big, growing countries pursuing self‐sufficiency.) But then China decided to become more integrated in the world trading system, including by joining the WTO and committing to relatively low ag tariffs. It has prospered: stronger economic growth, food security, and rural development.
7
U.S. Ag Exports and Imports 2014
The United States is an export powerhouse. All sectors export, most have a trade surplus.While we are big importers, most imports are complementary.
0
2
4
6
8
10
12
14
Corn
Tree
Nuts
Whe
atDa
iryVe
getables
Fruit
Beef
Pork
Misc
Hort
Poultry
Cotton
Rice
Sugar/confec
Cocoa/choc
Wine
Tobacco
Coffe
eBe
erRu
bber
U.S. Exports U.S. Imports
0
5
10
15
20
25
30
35
40
Oilseeds & Products
Billion$
USDA/FAS/GATS FATUS categories. CY data.
Agriculture Trade is Important in the United States
8
Global agricultural trade has grown sharply over the past decade with the growth in food demand and trade liberation (bilateral and regional FTAs).
This will continue over the next decade but at a slower pace than previous decade. Still, global ag trade should reach a record $1.2 trillion by 2023 – up from over $900 million in 2013.
Most countries’ agricultural imports have increased substantially, esp. China and East/Southeast Asia. U.S. and EU imports growing, too particularly for consumer‐oriented, high value foods (including processed food and beverage products).
Almost all major agricultural exporters have seen sharp gains in recent years – not just the U.S.
FTAs have proliferated worldwide improving market access for participating countries, thereby boosting import demand. This trend will continue ‐‐ with or without the U.S.
0
20
40
60
80
100
120Ho
ng Kon
g, China
Singapore
New
Zealand
Peru
Mon
golia
Chile
Kyrgyz Rep
ublic
Haiti
Bahrain, Kingdom
of
Botswana
Swaziland
Guatemala
Paraguay
Hond
uras
Croatia
Mon
tene
gro
Bosnia and
Herzegovina
Tonga
El Salvado
rSeyche
lles
FYR of M
aced
onia
Guine
aNep
alBu
rund
iMadagascar
Sene
gal
Vene
zuela, Bolivarian Re
p. of
Colombia
China
Saint Lucia
Chinese Taipei
Pakistan
Malaw
iGrenada
Jordan
Ecuado
rZambia
Ugand
aBe
lize
Cameroo
nCo
ngo
Ethiop
iaJapan
Sri Lanka
Sudan
Morocco
Korea, Rep
ublic of
Myanm
ar
WTO Tariff Profiles. 2012
USA EU China Canada Mexico Japan
Korea
VietnamMalaysia
India
%
U.S. tariffs are much lower than our trading partners.Trade agreements help level the playing field.
10
Trans Pacific PartnershipJapan – U.S. Tariff Comparison
0
100
200
300
400
500
600
700
800
Japan U.S.
%
Simple average, using DDA ad valorem equivalents
TPP could help U.S. regain lost market share
U.S.
China
EUAustralia
Canada
Thailand
Others
Japan’s Suppliers, 2003
U.S.
China
EUAustralia
Canada
Thailand
Others
Japan’s Suppliers, 2013
Trans Atlantic Trade & Investment PartnershipU.S. – EU Ag Trade Balance
‐10
‐5
0
5
10
15
201991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
U.S. Exports U.S. Imports Surplus/Deficit
Trans Atlantic Trade & Investment PartnershipEU – U.S. Tariff Comparison
Simple average, using DDA ad valorem equivalents
0
20
40
60
80
100
120
140
160
180
EUU.S.
%
Trans Atlantic Trade & Investment PartnershipU.S. – EU Ag Trade Balance: Billion $
0
1
2
3
4
5
6
7
Oilseeds
Nuts
Processed
Other Hort
Fruit
Wine
Veg
Whe
at
Tobacco
Beef
Sugar &
…
Dairy
Corn
Poultry
Rice
Cotton
Beer
Pork
US ExportsEU Exports
Standing Still is not a Winning Strategy
160
50
100
150
200
250
1958 1965 1972 1979 1986 1993 2000 2007 2014
Total World Trade Agreements
Total U.S. Trade Agreements
NUMBE
ROFFR
EETR
ADEAG
REEM
ENTS(FTA
S)
Trade is important for U.S. agriculture.
Market growth focused in developing countries. Developed countries: market share is driving force.
Trade agreements can remove barriers to U.S. exports, like tariffs, and promote economic growth, expanding demand for food products.
Trade agreements continue globally, standing still is falling behind.
TPP offers opportunity to gain share in one of the most attractive markets (Japan) and lock in access to growing markets in Asia (Vietnam, Malaysia, others.)
TTIP offers opportunity to address problems in EU.
Success in TPP and TTIP will create opportunities with other countries.
TPA, TPP, TTIP, … oh my!
