AAEA Annual Meetings Montreal, Canada July 28, 2003 Parr Rosson and Flynn Adcock

1. The Use of Technical Barriers to Trade in Response to Increased Competition in North American AgriculturePrepared for the Organized Symposium:North American Free Trade and Responses to Increased Competition: A Look at Trade Disputes and Technical Barriers to Trade AAEA Annual Meetings Montreal, Canada July 28, 2003 Parr Rosson and Flynn Adcock Texas A&M University

2. Overview • Types of Technical Barriers to Trade • Increased Competition Created by NAFTA Trade • Uses of TBTs in Response to Increased Competition

3. Technical Barriers to Trade • WTO Definition: Technical Regulations are documents which lay down product characteristics or their related processes and production methods with which compliance is mandatory • Includes administrative provisions • Includes terminology, symbols, packaging, marking or labeling requirements

4. NAFTA SPS Agreement • Designed to Prevent Use of SPS Measures as Disguised Restrictions to Trade • SPS Measures Must be Based on Scientific Principles and Include a Risk Assessment • Measures Cannot Restrict Trade Beyond a Country’s Chosen Level of Protection • Does Not Allow Unfair Discrimination • Does Allow Protection of Human, Animal or Plant Life and Health

5. Increased Competition Createdby NAFTA • Agricultural Trade among NAFTA has More than Doubled since 1989 • U.S. NAFTA Exports Grew from $5.0 Billion to $16.0 Billion • U.S. NAFTA Imports Grew from $5.2 Billion to $15.8 Billion • Increased Trade in Grains, Animal Products, Fruits, and Vegetables

6. U.S. Exports of Grain to Mexico, 1993-2002 6.3 5.6 5.3 5.2 5.1 5.1 5.0 4.7 4.2 4.0 3.6 3.4 3.2 3.1 2.9 2.6 2.3 2.1 2.1 2.1 2.0 1.8 1.7 1.6 1.6 1.1 1.0 0.8 0.7 0.6 0.6 0.5 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 Source: USDA/FAS Million Metric Tons Corn Sorghum Wheat Rice 6 5 4 3 2 1 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

9. Reactions to Increased Import Competition • Technical Barriers to Trade • Labeling • SPS Measures • Food Safety Standards • Licensing Regimes • AD/CVD Cases – Not Discussed Here

10. TBTs and Grain Trade • U.S. Sorghum Exports to Mexico Average 3.4 MMT per Year Since 1989 • In 1996, Mexico Slowed Issuance of Sorghum Import Permits • Lowest U.S. Sorghum Exports for the Period Resulted - 1.97 MMT • Issue Resolved and Exports Reached Highest Level Ever in 2001 – 5.01 MMT

11. TBTs and Grain Trade • U.S. Corn Exports to Mexico Averaged 3.7 MMT since 1989, 4.6 MMT since NAFTA • Mexican Corn TRQ Allows for Slightly More than 3 MMT – U.S. Exports Almost Double Since 1996 • Distribution of Quota ViaCupos Politically Sensitive, but No New TBTs Recently • Mexico Delayed Release of Rail Cars Containing U.S. Paddy Rice for a Month During Late 1998

12. TBTs and Fruit and Vegetable Trade • U.S. Exports of Apples, Grapes, and Peaches to Mexico Growing Since 1995 • Apples: In 1998, Mexico Filed Labor Non-Compliance Complaint and Washington State Apple Shippers Balked at Mexican Inspection Process • U.S. Apple Exports Stopped During October 1998, But Have Grown Since • Grapes: Mexico Began Requiring COOL in Spanish in 1997 – Industries Working Together • Peaches: One Oriental Fruit Moth Caused Declines in U.S. Peach Exports from 1998-99

13. TBTs and Fruit and Vegetable Trade • Long Standing Phytosanitary Issues Regarding U.S. Avocado Imports from Mexico • Mexico Gained Partial U.S. Market Access in 1997 – Now Negotiating for Longer Time Period and More States – CA not Supportive • FDA Banned Imports of Mexican Cantaloupes in October 2002 Until Certification of Sanitary Production Conditions • Several Mexican Producers Have Met the New Requirement

14. Other NAFTA TBT Issues • Timing of Mexican Import Permit Auctions for Dry Beans Has Slowed U.S. Exports Since 1999 • Phytosanitary Issues & Under Invoicing by Exporters Noted As Problems by Mexico • Canadian Issues Regarding Pseudorabies in Slaughter Swine from Certain U.S. States – Corrective Regulations Considered Overly Burdensome • Avian Influenza (1999) and Exotic Newcastle Disease (2003) Affecting U.S. Poultry Meat Exports to Mexico • Recent BSE Situation with Canadian Cattle

15. Country of Origin Labeling • States that Certain Fresh/Frozen Fruits, Vegetables, Meats, and Seafood Sold at Retail Level Must be Labeled by Country of Origin • Supporters Say “Consumers have a right to know” and that COOL Will Assist in Addressing Food-borne Illness Outbreaks • Opponents Think it is Too Costly and that it is Nothing but a Protectionist Measure • COOL Implementation May Lead to WTO Compliant • Complete Implementation not Assured

18. Summary and Conclusions • Increased North American Agricultural Trade Has Led to Increased Competition • TBT’s Have Been One Way Countries Attempt to Protect Industries from Competitive Pressures • While Important to Maintain Animal and Plant Health, SPS Measures Can be Used as TBT • Licenses and Other Administrative Measures Also Increase Cost and Reduce Pace of Trade

19. Summary and Conclusions • Border Procedures Such as Inspection Practices and Timeliness of Administrative Processes Can Negatively Impact Trade Flows • Country-of-Origin and Other Labeling (Nutrition, GMO) Can be Used as a Trade Barrier • As Tariffs Continue to Decline, Use of Non-Tariff Barriers, Including TBTs, Will Likely Increase