ClO-Lancnter Farming, Saturday, May 7, 1994
DAVID J. SPRISSLER
Student
Delaware Valley College
Does freer trade mean econom
ic growth to the United States
agriculture industry? This is an
important question, since there is
significant skepticism among
farmers with their relationship to
the General Agreement On Tar
riffs And Trade (GATT) and eco
nomic prosperity.
In a changing global economy,
hard choices must be confronted
and compromises must be made.
The significant choices to agricul
ture prosperity can come from
either thd domestic economy, the
American taxpayer and consum
ers, or from improved farming ef
ficiency to compete in global mar
kets.
The current agriculture prob
lems will not be solved by current
governmental programs. The
United States’ economy cannot
grow rapidly enough to absorb the
output from the steady rise in farm
productivity. Trade liberalization
of global markets is very critical to
United States agriculture.
The United States was once
very dominant in exporting pro
ducts to feed the rest of the world.
Now there is strong competition
with other countries for world
markets. Trade balances, political
policies, international debt, and
growing populations make the is
sues very complex.
On December 15, 1993, the
United States concluded the
seven-year Uruguay Round nego
tiations within GATT. This multi
lateral acceptance of the historic
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Does GATT Mean Economic Growth?
GATT accord, signed on April IS,
1994, was of major significance to
United States’ agriculture. This
will become a major strategy in
promoting growth in U.S. farm in
come.
The agriculture negotiations in
the Uruguay Round focused on
the causes of unfair competition in
world agriculture trade. Increasing
levels of government supports and
protection for agriculture globally
in the mid 1980 s reinforced the
need for globalism in agriculture
trade.
Federal Budgetary
Outlays For Agriculture
United States fanners had a
large stake in the negotiations in
the trade liberalization of GATT.
Because of federal budgetary re
straints, outlays for agriculture
will continue to decline in the fu
ture years.
The Office of Management and
Budget (1994) reports that nutri
tion spending would rise, while
outlays for many farm-subsidy,
soil conservation, and other pro
grams will be eliminated or cut.
Outlays for the agriculture depart
ment’s big crop-subsidy program
would fall 30 percent to $8.5 bil
lion, a projection based on expect
ed lower harvest during calendar
1994.
These budgetary projections for
agriculture programs show a re
duction from $16.9 billion in 1994
to $13.6 billion in 1997.
With less governmental inter
vention, U.S. farmers would be in
better position to produce effi
ciently for the international mar
ket, increasing the productivity
The USDA (1994) reports that
30 percent of all U.S. crop acres
ate exported. United States farm
income has become increasingly
dependent upon agriculture ex
ports. Trade has become the key
source for growth in farm revenue
and employment
The Agricultural Outlook
(1994) reports that export subsi
dies. especially in the European
Community, have retarded U.S.
trade and reduced farm income
during the past decade. The Euro
pean Communities’ high domestic
prices have been protected by
variable levies on imports that
spur domestic production; and the
resulting surpluses have been
dumped on world markets, using
the export subsidies. As a result,
the European Community has
transformed itself from a net im
porter to a net exporter of many
commodities, including grain,
beef, and dairy products.
The Uruguay round agreement
would discipline the budgetary
outlay and die quantity of subsid
ized exports to ensure that coun
tries control the use of subsidies in
all kinds of market conditions.
The USDA (January 1994) re
ports that agricultural provisions
on the Uruguay Round GATT
agreement will emphasize the new
disciplines for international agri
cultural trade. This includes a des
cription of the principal provisions
addressing trade distortions caus
ed by market access barriers, ex
port subsidies, internal support,
and unjustified sanitary measures.
The goal of the negotiations on
agriculture would be to bring all
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culture and the nation as a whole.
As a result, this would'free scarce
federal funds for ottier purposes,
reducing taxes, or reducing defi
cits.
Structure Of The Uruguay
Round Agreement
measures affecting import access
and export competition under
strengthened and more operation
ally effective GATT rules and dis
ciplines.
Gradual cuts in GATT in years
and percentages calls for reduced
internal supports (a 20 percent re
duction from the 1986-1988 base
period during the next six years), a
reduction in export subsidies (dur
ing the next six years, a 36 percent
cut in quantities exported under a
subsidy and a 21 percent cut in the
amount of money spent), and
mote open markets (a 36 percent
cut during the next few years from
the 1986-1988 base, plus mini
mum access of 3 percent of the in
ternal consumption during the
base period, which will be
gradually increased to 5 percent).
Market Access
The USDA (1994) summariza
tion of the Uruguay Round market
access provisions calls for the fol
lowing;
• Reduction of import barriers
will improve exporter access to
overseas markets. All countries
will replace non-tariff measures
primarily with quotas, or with tar
iff equivalents (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 maintain
ed.
Under this provision, the Unit
ed States will be required to re
place the highly protective quotas
on sugar, dairy products, and pea
nuts with tariffs that provide com
parable protection. Since these
new tariffs, beginning in 1995,
will gradually be reduced during a
six-year period, stiffer comped-
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plies is expected.
Export Subsidies
As the result of the Uruguay
Round, significant cuts in export
subsidies, especially by the Euro
pean community, will reduce the
level of unfair competition in
world markets.
In the GATT agreement, export
subsidies will be reduced by 21
percent in terms of quantity and by
36 percent in terms of budgetary
outlays by the end of the six-year
period.
USDA (1994) reports only a
small portion of U.S. agricultural
exports is subsidized. This multi
lateral cut in subsidization of ex
ports will greatly benefit the Unit
ed States. By reducing the quanti
ty of exports that can be
subsidized on world markets, the
agreement will create trade oppor
tunities for the U.S. producers
who are more efficient than pro
ducers elsewhere.
Internal Support
The agricultural provisions of
the Uruguay round includes an
other major internal support.
The USDA (1994) reports that
all countries must establish ceil
ings for the amount of support af
forded producers through internal
support programs. Average sup
port provided to measures linked
to production is totaled across all
commodities for the 1986-1988
period. Developed countries must
reduce this total level of support in
equal annual installments by 20
percent by the year 2000.
Because of changes in support
programs in recent farm and bud
get legislation, the United Slates
does not need to make reductions
in internal support
Sanitary and Phytosanitary
The sanitary and the phytosani
tary (plant sanitary) agreement
will impose GATT discipline on
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