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AGRICULTURAL OUTLOOK
Slower Growth For U.S. Economy In 2001
(December 21, 2000) U.S. economic growth slowed markedly in the second half of 2000, ushering in the "soft landing" many analysts had hoped for. From a breakneck rate of 6 percent in the first half of 2000, forecast growth in Gross Domestic Product (GDP) decreased significantly in the second half of 2000, resulting in an average annual growth rate expected at 5.2 percent.
In 2001, GDP growth is expected to drop further, averaging 3 percent, owing to continued tightness in labor markets, a slowing of consumer income growth, and tightening credit that will slow business investment. Inflation, which rose moderately in 2000 to 2.3 percent according to the GDP deflator, will increase slightly in 2001 to around 2.5 percent due to higher labor and energy costs. Despite these trends, it is unlikely the U.S. economy will experience a recession; overall increases in productivity and investment, a reduced trade deficit, and continued gains in consumer income and jobs all point to economic growth in the coming year.
Consumer spending will likely increase by 3 percent in 2001, but it will be held in check by a tight labor market, more limited credit, and higher energy prices. Consumer spending grew at a slower rate in 2000 than in 1999; in particular, spending on durable goods such as cars, appliances, and furniture deteriorated throughout 2000 as a consequence of relatively heavy consumer spending in 1996-99. Major appliance manufacturers saw sharp declines in earnings, and auto manufacturers were forced to offer aggressive price rebates and credit discounts to prevent steep drops in sales.
Overall, consumer spending in the third quarter of 2000 grew at an annualized rate of 3.8 percent, which outpaced growth of 3.1 percent in consumers' disposable income. Although the savings rate fell, it was the smallest decline in 2 years. In 2001, growth of income from labor will be about the same as in 2000 (largely due to higher wages), and a decline in income from other sources, such as stock dividends, will be offset by lower capital gains taxes paid. This will result in disposable income growing at 3 percent, the same rate as in 2000 and directly in line with consumer spending.
Despite consistent growth in wages, workers are likely to face a slowdown in employment growth in 2001 as businesses' profit growth slackens and difficulties in finding appropriate workers persist. The trend became evident in 2000, as the low U.S. unemployment rate (4 percent) and a dearth of skilled workers led to higher labor costs for many U.S. companies. Workers' total compensation packages, which include wages plus benefits, rose at an annualized rate of 4.6 percent for the first 9 months of 2000 as employers, hamstrung by the tight labor market, were forced to absorb much of the rise in health insurance costs.
Rising energy prices remained a persistent concern for businesses and consumers alike in 2000. Although the markets for other raw materials remained relatively static, crude oil prices finished the year near $30 per barrel, up sharply from $9.39 per barrel of December 1998. The high price of oil not only drove up consumer and corporate energy bills; it also contributed to increased trade deficits. Rising natural gas prices will further contribute to rising consumer and business energy expenses.
Fortunately, the impact of oil price increases on the U.S. economy will be relatively small in 2001, thanks to a general lack of upward pressure on prices of raw materials, increased domestic competitiveness in the U.S. economy, a relative drop in the size of energy expenditures in the economy, and oil prices that, in real terms, are only $5 per barrel above the 1985-99 average. In fact, the impact of the 2001 oil market on the economy should be smaller than that of the 1974, 1979, or even 1990 oil shocks. Growth has slowed about 0.2 percent and overall inflation is about 0.3 percent higher than it would have been compared with a year with normal real crude prices.
As consumer spending dropped off in the last half of 2000, investment spending by businesses slowed. Tighter credit standards, a slowdown in profit growth, falling equity prices, and higher commercial interest rates brought the third quarter's business investment growth down from more than 19 percent in the first half of the year to low single digits. Solid consumer spending combined with strong profits should bring growth of 5 to 6 percent in business investment spending in 2001, and the profits from such investment are expected to remain substantial. However, the tight credit situation, higher commercial interest rates, and slowing profit growth will keep business investment spending below the recent double-digit growth rates of 1995-99.
Growth in business spending in 2001 will be partly offset by smaller additions from Government spending. Commercial interest rates will rise, reflecting an increase in the market risk premium. From early 2000 to the third quarter, the risk premium on junk bonds compared with Treasury bonds rose to 8 percentage points. A recent Federal Reserve survey of lending officers showed that businesses must now meet higher credit standards when they apply for loans. These new, more stringent requirements in the private market, coupled with the tight labor market, will slow capital and employment expansion.
As a result of slowing economic growth, moderate inflation, and expected easing of short-term interest rates by the Federal Reserve, yields of Treasury and AAA bonds will drop in 2001. However, the general tightness in credit markets seen in the last half of 2000 should persist in 2001, resulting in higher interest rates for junk bonds and commercial loans.
The View From Abroad
The U.S.'s powerful economic growth was reflected overseas throughout 2000. Overall, world average GDP increased by 4 percent in 2000, enhanced by a spectacular growth spurt of 7 percent in Asia. In North America, Mexico's GDP growth registered more than 6 percent; Canada's GDP came in at just under 5 percent. Profiting from rising crude oil prices, the economies of the Middle East grew nearly 5 percent. The economies of South America grew a solid 3.4 percent, despite problems in Argentina, Venezuela, and Peru.
Despite this robust global performance, growth rates of most developed nations (with the exceptions of Japan and Germany) should decline by 0.5 to 1 percent in 2001. The economies of many Asian nations will slow as well because growth rates seen in 2000, which reflect a sharp turnaround from the 1998 financial crisis, are unsustainable. High crude oil prices in early 2001 will be a major factor stunting growth not only in the developed countries and Asia, but in some of the more vulnerable developing nations as well. Higher world interest rates, a smaller U.S. trade deficit, and a weaker dollar will have a marginally negative impact on world growth.
World demand for agricultural exports played a key role in offsetting the strengthening of the dollar in 2000; even though they became more expensive in relative terms, U.S. agricultural exports saw a modest increase. The demand for dollars stemmed from uncertainty associated with the recovering economies in Asia and Latin America and a lack of confidence in Asian and developing economy stock markets, as well as foreign investors' view of the U.S. as a safe haven. However, the U.S. trade deficit (more than $400 billion in 1996 dollars), a weak U.S. stock market, and improving financial conditions in other developed countries and Asia will all serve to weaken demand for dollars in 2001. The resulting decrease of funds flowing into the U.S. will boost long-term private interest rates, even as short-term U.S. Treasury bonds stabilize and long-term U.S. Treasury bill yields fall slightly. A weaker dollar and ongoing, if slower, world growth will lead to a slight improvement in the U.S. trade deficit in early 2001. The deficit should decrease further in the second half of 2001, when slower world growth is likely to result in lower oil prices.
Challenges For U.S. Agriculture In 2001
Slower domestic and world growth in 2001, coupled with the lingering impact of a strong dollar, mean a more expensive and potentially more problematic business environment for U.S. farmers in 2001. Agricultural exports in particular will be affected, much as they were in 2000. Although the value of the dollar rose less than 2 percent in 2000, its value relative to the currencies of other countries that export farm products rose even more. As a result, prices of U.S. farm exports rose considerably compared with those of foreign competitors.
Even though the dollar is expected to weaken somewhat in 2001, agricultural exports will grow at a slower rate than exports of manufactured products. If the domestic economy were to experience a recession in 2001, world growth would decrease sharply and U.S. farm exports would decline. On the domestic front--again, barring a recession--growth in after-tax personal income will ensure that U.S. consumers keep buying domestic agricultural products at a healthy rate.
Although higher energy prices will not have a dramatic effect on the overall U.S. economy, they have triggered increases in farm expenses. While fuel prices will not likely rise as dramatically in 2001 as they did in 2000, fuel expenses for many farmers will be up from 2000. Peak farm diesel use is in the spring when prices will be up from a year earlier. Electricity and natural gas prices should rise as well, and increasing natural gas prices will in turn raise the cost of nitrogen-based fertilizer. The fertilizer price index should be up in 2001 more than it was in 2000. The tight labor market is expected to push the cost of farm labor higher in 2001 than in 2000.
Projections for farm credit in 2001 are mixed. A tighter credit market will make it harder for less financially sound farmers to get commercial credit, and interest rates for average borrowers who do qualify for short-term loans will be higher than in past years. Good customers with sound balance sheets may pay slightly less for credit. Average long-term real estate loans may be cheaper depending on institutional lending practices, as yields on Treasury bonds fall compared with 2000.
Exchange Rate Indexes And U.S. Agricultural Trade
The value of the dollar has increased sharply in the last several years. Between April 1995 and September 2000, the U.S. real agricultural trade-weighted exchange rate (based on bilateral exchange rates weighted by share of exports) appreciated by 25 percent, reversing about 10 years of a declining dollar value. In addition, the U.S. Dollar has appreciated even more against currencies of trade competitors, making U.S. producers less competitive in world markets. Between April 1995 and September 2000, the U.S. Dollar appreciated 42 percent relative to currencies of U.S. competitors.
The exchange rate--the price of a currency in terms of another currency--is arguably the single most important variable in determining the economic environment for trade sectors. Exchange rates affect trade by determining the relationship between international and domestic prices. Changes in the real (inflation-adjusted) exchange rate result in the raising or lowering of prices of U.S. goods in local currency terms around the world. An appreciating dollar raises the price of U.S. goods on the international market, while a depreciating dollar lowers these prices. Exchange rate movements are particularly important for agriculture sectors in countries like the U.S., where exports account for a major portion of agricultural production.
Historically, movements in exchange rates have accounted for approximately 25 percent of the change in U.S. agricultural export value. Other factors, such as the income growth rate in developing countries, the growth and productivity of foreign agriculture sectors that compete with the U.S., and weather conditions accounted for much of the rest. But in the last 5 years, the appreciation of U.S. Dollar has become a handicap for U.S. agricultural exports. Continuing appreciation has allowed competitors to gain market share and in turn expand their production. Losses in U.S. market share may have been even greater if low world prices had not deterred growth in foreign production.
A major event contributing to appreciation of the dollar was the 1997-99 international financial crisis. As countries in Asia and elsewhere experienced the crisis, their economies contracted sharply while the U.S. economy continued to expand rapidly. The differential between the robust growth of the U.S. economy and slow or negative growth in other countries led to large inflows of capital into the U.S., generating demand for dollars that simultaneously appreciated the dollar and depreciated local currencies around the world.
This recent period of appreciation has been a major contributor to lower U.S. agricultural exports in recent years. From a peak of nearly $60 billion in fiscal 1995, U.S. agricultural exports declined to $49 billion in 1999. World demand is improving, though, and U.S. exports are forecast at $53 billion in 2001, up from $51 billion in 2000.
Appreciation of the dollar was a major factor in the 2-percent decline in global share of all U.S. agricultural exports between 1992 and 1998. The export performance of specific U.S. goods, however, varied depending on the relative exchange rate movements of competitors and importers and on specific foreign market conditions. U.S. wheat's market share, for example, lost 10.5 percentage points between 1992 and 1998. The global market share of U.S. corn declined by about 3 percentage points over the same period. In contrast, the global market share of fresh and frozen U.S. poultry exports increased over 8 percentage points between 1992 and 1998. The export market share of U.S. cotton increased 1.6 percentage points during this period.
Exchange rates can be used to assess shifts in the competitiveness of U.S. agricultural products as the value of the dollar changes relative to other currencies. Bilateral rates measure the value of the dollar against another currency. These are helpful in understanding what affects exports to particular markets. The "value" of the dollar becomes more complex when considering overall U.S. agricultural exports or even a single commodity--each commodity is generally exported to several countries. The analyst needs a measure of value that accounts for the dollar's performance against currencies of the countries that are important in trade of a specific commodity. In economics, such a measure is referred to as an effective exchange rate index, which takes weighted averages of several bilateral exchange rates and combines them into a single index.
Market and competitor weighting schemes are the two most frequently used when calculating indexes for trade analysis. For market indexes, the weights are shares of U.S. exports for a particular commodity. For competitor indexes, weights are country shares of world exports (excluding U.S. exports) for a particular commodity. Both market and competitor indexes are constructed so that an upward movement indicates a rise in the dollar's value and a subsequent loss of price competitiveness for U.S. exports.
For example, the U.S. cotton market index reflects the overall level of the dollar relative to currencies of U.S. cotton importers. The U.S. cotton competitor index reflects the overall level of the dollar relative to currencies of U.S. competitors in the world cotton market. Between 1970 and 2000, foreign cotton exporting countries maintained their competitiveness with low-valued currencies relative to the U.S. Dollar, except in1987-94.
Weights for individual indexes depend on performance in countries that are important for trade in that commodity. For cotton, China accounts for the largest share of U.S. exports at 25 percent (northeast Asia accounts for 54 percent). Nearly 60 percent of U.S. corn exports go to northeast Asia, with Japan accounting for 30 percent. Exports of U.S. soybeans are shipped mostly to Europe (40 percent) and northeast Asia (37 percent). U.S. rice exports are less concentrated: to Europe (26 percent), Latin America (18 percent), Mexico (9 percent), Canada (8 percent), and to North Africa/Middle East (13 percent). Because of the size of their market shares, bilateral exchange rates of these nations and regions are the most significant components of the respective commodity trade-weighted exchange rate indexes.
Variations in these market shares lead to different trends in trade-weighted exchange rates across commodities and commodity groupings. For instance, long-term exchange-rate patterns for wheat, corn, and cotton have been quite different due to differences in destination countries--major wheat markets are Asia and North Africa, major corn markets are Asia and Mexico, and major cotton markets are Asia and Latin America. Long-term appreciation in the wheat exchange rate may be one factor in the long-term stagnation of U.S. wheat exports. Also, trade-weighted exchange rates for bulk commodities and processed intermediate products have more closely tracked overall U.S. agricultural exchange rates than have those for horticulture and processed products and high-value processed products.
Ag Economy
U.S. Ag Markets Show Signs Of Improvement
U.S. agricultural markets continue to show some improvement from the large supply/weak demand conditions of the late 1990's. Although markets for major field crops continue to have plentiful supplies, export demand is improving slowly and market prices appear to be picking up. Markets for livestock are generally stronger than for field crops, as 2000 witnessed gains in average prices for cattle and hogs.
Despite continued weak market prices for field crops in 2000, net farm income for the year has been forecast in the mid-$40 billion range, up from $43.4 billion in 1999. Producer income was bolstered in 2000 by direct payments to producers of major field crops under the 1996 Farm Act (e.g., production flexibility contract, loan deficiency, and Conservation Reserve Program payments) and a third infusion of emergency government assistance. Record government payments in 2000 helped keep farm income near the 1990-99 average. Even with the addition of recently enacted emergency assistance (fiscal 2001 appropriations), government payments to the sector will decline in 2001, likely resulting in lower farm income.
As in recent years, government loan deficiency payments (LDP's), which provide government support payments to major field crop producers when farm prices drop below local loan rates, will continue to supplement returns from the marketplace.
Fuel expenses for the U.S. farm sector in 2000 were over $8 billion, about 40 percent above 1999. Total production expenses were up 5 percent to $178 billion. Costs for fuel and other energy-related inputs will continue to concern producers in 2001.
Agricultural exports are forecast at $53 billion in fiscal 2001, up from $51 billion in 2000. Tonnage is forecast up for bulk commodities, but large global supplies of many commodities continue to limit price gains. Cotton is the exception. A major drag on U.S. exports has been the rising value of the dollar, which has boosted the price of U.S. farm exports in foreign markets.
A main reason for continued low domestic prices for major field crops is favorable weather in major U.S. producing areas and many foreign countries. The markets reflect record corn and soybean crops harvested in 2000. Domestic use of most crops is anticipated to remain strong in 2000/01, and exports should improve somewhat. Nevertheless, ending stocks will expand for soybeans and corn, keeping downward pressure on prices for the fourth consecutive year.
A key exception to favorable weather in 2000 was in the southern and central Great Plains, where hot and dry weather last summer and fall produced severe drought conditions. Many crop producers in this region (particularly cotton) lost a substantial portion of their production and income. Cattle producers in the region encountered animal losses due to the heat and lack of water and experienced rising costs for feed as local feed supplies dried up.
Red meat and poultry production is forecast to reach a record high in 2000, and output is projected to edge even higher in 2001. Feed costs remain relatively low, keeping production expenses in check for many livestock producers.
Despite record total meat supplies, the robust U.S. economy continues to fuel demand and sustain farm prices. Hog prices are expected to average in the lower $40's per cwt in 2001, after a $10 rebound in 2000 ($44 average). Likewise, cattle prices, despite large supplies of competing meats at relatively low prices, have rebounded from the lows reached in the mid-1990's. Modest gains in broiler production in 2000 and 2001 will lead to slightly lower prices--forecast in the mid-$0.50's per pound for both years, down from $0.58 in 1999.
World Ag And Trade
Global Agricultural Negotiations Underway At The WTO
Global trade negotiations on agriculture, opened by the World Trade Organization (WTO) in Geneva in March 2000, are expected to address three areas of national agricultural policy. The three areas are market access limits (tariffs, tariff-rate quotas, and other trade barriers), domestic support to agricultural producers, and export subsidies.
Agricultural trade barriers and producer subsidies inflict real costs, both on the countries that use these policies and on their trade partners. Trade barriers help keep inefficient domestic producers in operation, result in forgone opportunities for more efficient allocation of national resources, and lower demand for trade partners' products. Domestic subsidies induce an oversupply of agricultural products and keep some resources in agriculture that could be employed more profitably in other sectors.
Oversupply of agricultural commodities leads to low prices and increased competition for producers in other countries and can create the need for export subsidies to dispose of excess domestic production. Consumers are harmed not just by the direct effect of tariffs in raising the cost of imports, but also by inefficiencies in their economy that result from tariffs and subsidies. When an economy is performing below its potential, consumers' income and welfare are reduced.
The new negotiations present an opportunity to achieve further reductions in global trade--distorting agricultural policies. Under terms of the Uruguay Round Agreement on Agriculture (URAA), the negotiations will also include some "built-in" agenda items--i.e., member countries' experiences with implementation of Uruguay Round commitments; effects of URAA reduction commitments on world trade in agriculture; nontrade issues such as environmental concerns, rural development, and food security; and provisions for special and differential treatment of less developed countries.
Gains Of URAA Have Proven Fragile
The Uruguay Round of the General Agreement on Tariffs and Trade (GATT) ended in 1993 having fundamentally altered the treatment of national agricultural policies under multilateral rules of global trade. In the Agreement on Agriculture, members determined that trade-distorting agricultural policies should be disciplined or constrained, so that market forces rather than government intervention can increasingly drive agricultural markets.
In committing to greater market access, members agreed to reduce tariffs by 36 percent (24 percent for developing countries) and to convert most nontariff barriers to tariffs or to a two-tier tariff system called tariff-rate quotas (TRQ's). TRQ's allow a limited quantity of imports to enter a country at a relatively low tariff, with higher tariffs imposed on over-quota imports.
Member countries also agreed to reduce their aggregate levels of domestic support to agriculture by 20 percent (13 percent for developing countries). In addition, both the value and volume of subsidized exports were placed under limits scheduled to decline through the end of the URAA implementation period. Developed countries implemented URAA reform commitments during 1995-2000, and less developed countries will continue the process through 2004.
The experience to date from implementation of the URAA has demonstrated that policy reform is difficult to achieve. Global agricultural tariffs remain high, and there is substantial disparity in tariffs among countries and across commodities. For example, the average U.S. agricultural tariff is relatively low (12 percent) compared with 21 percent for the European Union, 24 percent for Canada, 33 percent for Japan, and 152 percent for Norway. The global average rate is 62 percent. High import tariffs imposed by U.S. trade partners are a significant impediment to U.S. agricultural export growth.
Disparities across commodities within countries' tariff codes can intensify the distorting effects of tariffs. For example, escalation of a country's tariffs between bulk commodities and processed agricultural products--i.e., a higher effective rate of tariff protection on the final product than on inputs--can significantly affect trade in processed products, a fast growing but price-sensitive component of global agricultural trade. And while tariff-rate quotas have replaced many nontrade barriers, many have complicated import regimes, often with rules that are not easy to understand, and some have very high upper tier rates.
Domestic farm support levels declined early in the implementation period, helped by strong world prices. Also, many countries chose to adopt less distorting types of domestic subsidies that are exempt from URAA limits. For example, some countries have reduced their reliance on subsidies that are directly linked to the production of specific crops, and instead provide payments that are not dependent on farmers' current decisions about which crop or how much to produce. The shift toward less distorting (exempt) programs has been influenced at least in part by URAA principles. However, since 1998, global expenditures on nonexempt types of domestic support have increased in response to low world prices.
The URAA placed limits on export subsidies for individual commodities, but allowed for some flexibility. Lower usage levels early in the URAA implementation period, when prices were high, enabled some members to bring forward unused levels and recently apply the subsidies when prices were low and ceilings had been reached.
Sources Of Global Agricultural Distortions
Despite gains made by the URAA, remaining global agricultural policy distortions impose substantial costs on the world economy. Agricultural tariffs, domestic support, and export subsidies push world agricultural prices to about 12 percent below what they would otherwise be, according to recent analysis by USDA's Economic Research Service. Over the long term (about 10-15 years), trade-distorting farm policies will result in a reduction in world welfare (loss in consumer purchasing power) of $56 billion annually, which represents about 0.2 percent of global GDP.
Most of the agricultural market distortions, as measured by world price effects, are attributed to a small number of countries. Developed economies account for nearly 80 percent of world price distortions. The European Union (EU) accounts for 38 percent, the U.S. 15 percent, Japan plus Korea 13 percent, and Canada 2 percent. These countries typically employ different mixes of price-distorting policies. For example, export subsidies are an integral part of the EU's domestic price support system. As a result, the EU alone accounts for more than 90 percent of global export subsidy expenditures.
The EU and the U.S. together account for most of the global distortions related to domestic producer support. Most other countries rely mainly on tariffs to support their farm sectors. Particularly in developing countries, tariffs are a more practical farm support policy because they raise government revenue, while domestic programs entail government expenditure. But tariffs are a potentially more distorting type of farm support than domestic producer subsidies, because they directly affect consumers as well as producers.
There are two dimensions in calculating potential welfare gains to an economy from further policy reform. The first relates to removing distortions in consumption and production decisions. These are the "static" gains in welfare (purchasing power) that accrue after producers and consumers fully adjust to changes in prices when tariffs and subsidies are removed. Despite higher world food prices, consumers in most countries would benefit from static gains because tariff elimination lowers consumer prices of imported foods and because policy reforms increase overall economic efficiency. Static welfare gains worth about $31 billion annually to the world economy would accrue over time and reflect increases in income (wages and return on investment) relative to expenditure.
Most static gains from trade liberalization would accrue to countries with the largest initial policy distortions. Developed countries receive most of the global static welfare gains from full policy reform ($28.5 billion annually), compared with potential welfare gains for developing countries of about $2.6 billion. Some agricultural importing countries that face higher world prices but have few domestic policy distortions would realize static welfare losses from full trade liberalization.
The second dimension in calculating the benefits of global policy reform involves dynamic gains--i.e., the long-term effects of increased investment, and the opportunities for increased productivity that are linked to more open economies. All countries can benefit from the potential dynamic gains of global policy reform. Reforms lead to greater investment by increasing potential returns, and additional investment increases the productive capacity of economies. Developing countries in particular, which have substantial potential for productivity gains from technological change, stand to benefit directly from more openness to the rest of the world.
If developing countries eliminate their own agricultural import barriers and are thereby more exposed to products and competition from more advanced economies, they can increase their economy-wide productivity by accelerating their rate of learning new skills and the adoption of more advanced technologies that are embodied in imports from more developed countries. Reflecting their greater dynamic potential for growth, these economies are expected to draw increased global investment, increasing their resource availability. Developed countries will benefit by enhanced investment opportunities. Dynamic gains--investment and productivity growth--due to policy reform account for about 45 percent of total benefits from full trade liberalization.
Over the long term, full elimination of agricultural price distortions would lead to an increase in world welfare, or consumer purchasing power, of $56 billion annually, with nearly one-fourth accruing to the U.S. alone. Because U.S. tariffs, domestic support, and export subsidies are relatively low, most of the benefit for the U.S. would come from policy reforms in U.S. trade partners.
Because of its technological maturity, the U.S. will not enjoy substantial direct benefits from dynamic gains. But U.S. agriculture will benefit from dynamic gains in developing countries that import U.S. farm products as growth in demand increases in those economies. In the long run, full policy reform could lead to higher world prices for U.S. farm exports, the real value of U.S. agricultural exports could be 19 percent higher each year, and U.S. agricultural imports could be up 9 percent.
Movement toward a more market-oriented and orderly global agricultural trading system is important for the U.S. because of the large and increasing role of trade in U.S. agricultural production and food consumption. As technological advances and increased productivity lead to higher levels of production, expanding export markets provide an outlet for U.S. food and agricultural products. For consumers, trade rules help to ensure access to a safe, varied, and abundant year-round supply of food.
Global policies that distort agricultural trade impose substantial long-term costs on U.S. producers, consumers, and the world economy. U.S. agricultural tariffs and subsidies are relatively low, suggesting that U.S. domestic adjustments to its own reform commitments are likely to be small relative to the potentially large benefits of global reform. Furthermore, reforms of U.S. policies within a global framework can help to ensure the overall, long-term competitiveness of the U.S. farm sector in world markets.
December 21, 2000 Economic Research Service USDA, Washington, D.C. 202-219-0515
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