Linking of U.S. monetary policy and exchange rates to world soybean markets

The linkage between macroeconomic policies and agricultural commodity trade has become an important research issue of agricultural economists. This paper investigates the macroeconomic linkage of soybean trade competition between the exporting countries of the United States, Brazil, and Argentina in the EC-12 and Japan import markets. It is argued that U.S. monetary growth may have important impacts on the competitive position of U.S. soybean exports through exchange rates. Two relationships are investigated: (a) the effects of U.S. monetary growth on the agricultural trade weighted exchange rates, and (b) the responsiveness of agricultural commodity prices and U.S. exports to exchange rate movements. Results indicate that a weak dollar increases imports of soybeans and soymeal significantly which serves to increase the equilibrium world price and increase both U.S. and Brazil/Argentina exports in the long run. However, during periods of more expansionary U.S. monetary policy there is little evidence of significant increases in market share position for U.S. soybeans and soymeal in world markets.     

An Analysis of Removal of Agricultural Trade Barriers between the United States and Canada with Emphasis on the Southeast

A four-region, 23-commodity small world agricultural trade liberalization model within the SWOPSIM framework is used to measure the impact of tariff removal between the United States and Canada. The tariffs are simply defined as negative import subsidy equivalents in the model and are then removed from the trade prices. The model recalculates domestic supply and demand levels in all regions, rebalancing world trade, production, consumption and prices. In summary, the impacts of the Canada-U.S. Trade Agreement on selected commodity groups are significant. Canadian imports of beef and veal, poultry meat, soybean oil and fresh strawberries increase. Furthermore, the results indicate larger trade flows for selected products and declines in producer and consumer prices in Canada, U.S. and Southeast regions. Since the U.S. share of Canadian agricultural imports averaged 60% in the 1980s, the impact of trade liberalization will be greater in Canada in selected commodities than in the U. S. or the southeastern region, and Canadian dependence on the U.S. market will be increasing in the future. The tariff phaseout, together with a reduction in nontariff barriers and harmonizing of domestic agricultural policies, will create more export opportunities in selected commodities for both the United States and Canada, and will create the world's largest free trade market.     

A Spatial Equilibrium Analysis of U.S.–Canadian Disputes on the World Softwood Lumber Market

This paper utilizes a world spatial equilibrium model to examine the effects of U.S.–Canadian softwood lumber disputes on U.S., Canadian, and other exporters' and importers' lumber markets. Results show that the U.S. import tariff on Canadian softwood lumber impacts prices, supply, demand and trade flows not only in the United States and Canada but also in the other countries. Though the goal of U.S. trade restriction is to limit imports from Canada and protect its producers, the United States cannot fully accomplish this goal as non-Canadian exporters fill the void left by the reduced imports from Canada. Canadian producers lose from the U.S. policy, but their loss is mitigated as Canada redirects its exports to other importers. Importing countries such as Japan and the European Union benefit from the U.S. trade restrictions as Canada seeks to sell its softwood lumber to these countries.     

Dairy Tariff-Quota Liberalization: Contrasting Bilateral and Most Favored Nation Reform Options

A highly disaggregated, "tariff line," source-differentiated, partial equilibrium model of U.S. specialty cheese imports is developed to investigate reform options for tariff-rate quotas (TRQs). A mixed-complementarity framework is used to represent bilateral and most favored nation (MFN) tariff quotas. The impacts of liberalizing U.S. specialty cheese imports via bilateral and MFN quota expansions, out-of-quota tariff cuts, and simultaneous liberalization scenarios are evaluated. We find that the path of liberalization is quite different, depending on the reform approach undertaken, particularly if the United States adopted an MFN quota administration mechanism for specialty cheese imports.     

Alternative U.S. and EU Sugar Trade Liberalization Policies and Their Implications

This study analyzes the impacts of alternative trade liberalization policies in the United States and the European Union (EU) on the U.S. sugar industry. A global sugar policy simulation model was used for this analysis. The study results indicate that the U.S. sugar industry may be able to survive if both the United States and the EU liberalize their sugar trade. However, if only the United States eliminates its sugar programs, all U.S. sugar-producing regions would be threatened.     

The New Tomato Suspension Agreement: What Are the Implications for Trade Flows?

This paper examines the implications of the new tomato suspension agreement (signed on March 4, 2013, by the U.S. government and Mexican tomato producers) for trade in fresh tomatoes and processed tomato products. The empirical analysis is performed through a gravity model that accounts for vertical linkages between primary and processed goods. The estimated gravity parameters are used to implement suspension agreement scenarios. The results show that the new suspension agreement leads to considerable decreases in Mexico's exports of fresh tomatoes to the United States. These decreases are accompanied with various trade diversion and deflection effects. There are increases in Mexico's exports of processed tomato products to the United States and other countries, and in Mexico's exports of fresh tomatoes to non‐U.S. destinations. These increases do not amount, however, to considerable compensations of the decreases in Mexico's fresh tomato exports to the United States. The results also suggest that the initial 1996‐based suspension agreement has significantly smaller impacts on trade flows over the period that preceded the implementation of the new suspension agreement.     

Macroeconomic policy impacts on United States agriculture: A simulation analysis

United States monetary and fiscal policies influence the domestic agricultural economy directly and, through international linkages, indirectly. This study estimates the magnitude and statistical influence of coefficients relating U.S. macroeconomic policy to the U.S. agricultural economy through domestic and foreign markets. Specific objectives are to specify and estimate a general equilibrium quarterly econometric model of the U.S. macroeconomy and simulate the impact of federal deficit spending on real interest rates, real exchange rates, and net exports of agricultural products. Three hypotheses were tested. The first hypothesis that an increase in federal deficit spending increases the real interest rate could not be rejected; a $100 billion reduction in the U.S. deficit was estimated to reduce real interest rates by two percentage points or more. The second hypothesis that an increase in real interest rate increases the real value of the U.S. dollar in foreign exchange markets had strong support and could not be rejected. A third hypothesis that a rise in the real value of the dollar reduces net exports of U.S. farm products also could not be rejected. Results indicate that the U.S. agriculture would benefit from the lower exchange value associated with an ‘optimal’ macroeconomic policy. That policy initially made the overall U.S. economy perform less satisfactorily but that performance improves over time.     

How sensitive is U.S. agricultural trade to the bilateral exchange rate? Evidence from bulk,intermediate, and consumer‐oriented products

This article examines the dynamic effects of changes in bilateral exchange rates on changes in bilateral trade of bulk, intermediate, and consumer‐oriented agricultural products between the United States and its 10 major trading partners. We find that, for consumer‐oriented products, U.S. exports are highly sensitive to bilateral exchange rates in both the short and long run, while U.S. imports are mostly responsive only in the short run. For bulk products, on the other hand, U.S. exports and imports are relatively insensitive to exchange rate changes in both the short and long run. For intermediate products, exports and imports are responsive to exchange rate changes in the short run, but not in the long run. It is also found that income of the United States and its trading partners has a significant effect on U.S. exports and imports of the three types of agricultural products in both the short and long run.     

Macroeconomic Policy Impacts on United States Agriculture: A Simulation Analysis

United States monetary and fiscal policies influence the domestic agricultural economy directly and, through international linkages, indirectly. This study estimates the magnitude and statistical influence of coefficients relating U.S. macroeconomic policy to the U.S. agricultural economy through domestic and foreign markets. Specific objectives are to specify and estimate a general equilibrium quarterly econometric model of the U.S. macroeconomy and simulate the impact of federal deficit spending on real interest rates, real exchange rates, and net exports of agricultural products. Three hypotheses were tested. The first hypothesis that an increase in federal deficit spending increases the real interest rate could not be rejected; a $100 billion reduction in the U.S. deficit was estimated to reduce real interest rates by two percentage points or more. The second hypothesis that an increase in real interest rate increases the real value of the U.S. dollar in foreign exchange markets had strong support and could not be rejected. A third hypothesis that a rise in the real value of the dollar reduces net exports of U.S. farm products also could not be rejected. Results indicate that the U.S. agriculture would benefit from the lower exchange value associated with an ‘optimal’ macroeconomic policy. That policy initially made the overall U.S. economy perform less satisfactorily but that performance improves over time.     

Retail Demand for Natural Dye Plants and Dye Plant Products: A Conjoint Analysis

Herbalists, fiber artists, and herb growers are increasingly interested in growing, marketing, and using local plants as natural dyes. As the market in the United States and Canada develops, fiber art and quilting stores are the primary retail market outlets for natural dye plants and dye plant products. Conjoint analysis was used to evaluate U.S. and Canadian retailer interest in natural dye plants/dye plant products and to estimate market shares. The largest retail market share was for dyed materials, such as yarn or fabric, that are dyed in primary colors, using certified organic plants, and grown on farms in the United States or Canada.     

SPS and TBT agreements and international agricultural trade: retaliation or cooperation?

In this article, we investigate whether the Brazilian notifications to the TBT and SPS agreements are characterized as retaliation or as cooperation in international agricultural trade in the period 1996–2008. A Generalized Method of Moments (GMM) model is used to estimate game models of bilateral trade between Brazil and its major partners (United States, European Union, and Japan). From the viewpoint of strategic games, the results suggest that the Brazilian notifications are forms of retaliation against the United States, and, regarding the European Union, the best result for Brazil was conciliation. On the other hand, if the results are interpreted as equilibria of bargaining games, they suggest that Brazil has great bargaining power in trade with the United States and that cooperation characterized agricultural trade between Brazil and the European Union in the period analyzed. In the case of agricultural trade between Brazil and Japan, only Japan has characteristics of a country with significant bargaining power.     

The effects of the Yuan‐dollar exchange rate on agricultural commodity trade between the United States,China, and their competitors

The United States claims that the undervaluation of Chinese currency, the Yuan, causes U.S. exports to China to decrease and imports from China to increase. Furthermore, because the Yuan is undervalued only against the dollar, U.S. competitors have an advantage in exporting to China and China has an advantage over its competitors in exporting to the United States. This study develops a theoretical model to analyze the effect of the Yuan undervaluation on prices, supply, demand, and trade in the United States, China, and their competitors. This study applies a cointegration/error‐correction model to empirically quantify the short‐run and long‐run effects of the devaluation of the Yuan on important agricultural commodities traded between the United States, China, and their competitors. These commodities include Chinese imports of milk, soybeans, and cotton from the United States and U.S. imports of beans, fruit juice, and fruit from China. The results show that Yuan devaluation causes Chinese imports of U.S. milk, soybeans, and cotton to decline and U.S. imports of beans, fruit juice, and fruit from China to increase in the short run and in the long run.     

Effect of Sugar Price Policy on U.S. Imports of Processed Sugar-containing Foods

The relationship between U.S. and world sugar prices, and U.S. import demand for four categories of sugar-containing products is examined. Results from econometric estimation indicate that U.S. intervention in the sugar market has helped to increase U.S. imports of some sugar-containing products, but that increased disposable income has played a more important role. Although some developing countries have benefitted from U.S. sugar policy by increasing their exports of sugar-containing products to the United States, U.S. sugar policy has helped imports from developed countries proportionately more than those from developing countries as a whole.     

Impacts of foreign policies on the gains from research and promotion

This paper compares llie direct and indirect effects of rest-of-the-world (ROW) policy on welfare in country A: the direct effect due to the change in world price caused by (he policy in (he absence of research/promotion-induced shifts in supply/demand, and the additional (or indirect) effect of the policy on (he welfare gain to country A from its investment in research and promotion. The results showed that the reduction in aggregate economic benefits from research/promotion due to a world price-reducing policy in ROW could be in the range of 25-50% of the direct reduction in social welfare due to the ROW policy. In the case of Australian beef/veal, it is possible for the welfare impact of the ROW policy via research payoff in country A to exceed the direct welfare cost.     

Agriculture in the United States,Mexico, Canada Agreement: Agreeing to keep things pretty much the same

North American Free Trade Agreement (NAFTA) was referred to by U.S. President Trump as one of the worst trade deals ever made. Given this billing, one might have expected the result of its renegotiation to be a major change to the trading relationship between the United States and Canada. The new United States, Mexico, Canada Agreement (USMCA), however, retains a great deal of its predecessor. This is particularly true for agricultural trade. Canadian market access into the United States remains virtually unchanged. No major domestic regulatory changes were agreed to by Canada. While there were concessions made on market access for U.S. products into Canada's heavily protected sectors where the supply management policy applies, they do not appear to threaten the system. While the value of the compensation has not yet been announced, compensation for losses that will be suffered by farmers producing under supply management is agreed in principle. The USMCA is an agreement to keep things pretty much the same.     

Acceptance of genetically modified food: comparing consumer perspectives in the United States and South Korea

This study examines public perceptions of biotechnology, specifically the consumer approval of genetically modified food products, from plant as well as from animal origin, based on data collected from national surveys conducted in both the United States and South Korea. South Korean consumers reported better understanding of food production, science, and technology relative to U.S. consumers. South Korean consumers also recalled having heard more about genetic modification than did U.S. consumers. Findings also suggest that consumers in the United States and South Korea who possessed an accurate knowledge of the applications and outcomes of genetic modification technology were more likely to approve of its use for the creation of foods than those who had inaccurate or no knowledge of the technology. Results also indicate that consumers who considered labeling of genetically modified foods to be necessary are less likely to approve of the genetic modification of foods than those who did not. Consumers in both countries are less approving of genetic modification of animals than the genetic modification of plants. However, U.S. consumers are more approving of using genetic modification technology to create animal‐derived foods than are South Korean consumers.     

The Wheat War of 1994: Comment

The opinions expressed are those of the authors and not those of the United States International Trade Commission or any of its Commissioners. This article is a U.S. Government work and, as such, is in the public domain within the United States of America.     

The Wheat War of 1994

Following the signing of the 1989 Canada–United States Free Trade Agreement, sales of Canadian wheat to the United States grew rapidly. This resulted in a series of trade disputes, culminating in an investigation by the U.S. International Trade Commission (USITC) into the impacts of U.S. imports of Canadian wheat on the U.S. wheat farm program. A USITC finding of "material interference" would have led to a recommendation to implement tariffs or quantitative restrictions against Canadian wheat under Section 22 of the U.S. farm program legislation. The U.S. Department of Agriculture (USDA) claimed such material interference, but the U.S. flour millers, pasta makers and grain handlers, along with Canadian grain industry interests, testified that the true effects of imports are in the order of one–tenth of the effects claimed by the USDA. USITC staff analysis led to intermediate estimates of effects. This study explores the impacts of Canada–U.S. wheat trade on U.S. wheat prices and program costs, explains some of the differences in measured effects, and reports the outcome of the dispute.     

Implications of the Comprehensive Economic and Trade Agreement for Processed Food Markets

Canada and the European Union (EU) recently completed the Comprehensive Economic and Trade Agreement (CETA) to liberalize bilateral trade. Processed food trade between Canada and the EU is one of the fastest growing markets, in spite of large trade restrictions due to high tariffs and egregious nontariff barriers (NTB). The processed food sector is characterized by firms which differ in size, productivity, produce differentiated products, and engage in monopolistic competition. We implement a four‐region (Canada, the EU, the United States, and the Rest of the World) model of the processed food industry, incorporating these firm characteristics to study the effects of CETA. The results show Canadian and EU bilateral trade flows expand, the number of exporting firms rises, and net welfare in both these countries increases. Though CETA does not liberalize NTBs, we examine the impacts of a 40% cut in NTBs to highlight the benefits that would have accrued had CETA also covered NTBs. Under this scenario, the trade flows would have expanded significantly, and, more importantly, Canadian and EU welfare would have risen by 11.8‐ and 39.4‐fold, respectively. Since CETA excludes the United States, the U.S. processed food industry loses due to greater competition in Canadian and the EU markets, and the net U.S. welfare declines.     

Variability in wheat export demand elasticity: Policy implications

Agricultural economists and policy makers in the United States believe that the magnitude of the export demand elasticity is one of the most important parameters used in farm policy decisions. However, past empirical estimates show wide variation in the size of the U.S. export demand elasticity. Reasons for this wide variation go beyond differences in model specification, estimation methods, and period of estimation to involve factors such as trade policies and changes in the supply and demand conditions of foreign countries. In view of the continual variation in magnitude, the elasticity of export demand should be viewed as a variable rather than as a parameter. In this study, U.S. wheat export demand elasticities are computed using a world wheat trade model. The estimates show that the elasticities vary significantly over time. They also reveal that elimination of trade barriers would more than double wheat export demand elasticities.