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The Importance of U.s. Food and Agricultural Trade in a New Global Market Environment

Wailes, Eric
University of Arkansas
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Determine the impacts of U.S. and foreign policies, market structures, and regulations on U.S. food and agricultural trade, the economy, and the environment. Determine the impacts of international arrangements and institutions on U.S. food and agricultural trade, the economy, and the environment.
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The principal focus of this research includesanalysis and outreachpertaining to the impacts of domestic and international policy, institutionsinterms oftrade creation and diversion, supply response, import demand, land values, price variability, agricultural value added, food safety, the environment, and emerging bio-energy issues. Improved competitiveness of the U.S. in international food and agricultural trade is expected to strengthen the employment base and increase income levels in respective states.

Methods to accomplish these objectives include econometrics, simulation, spatial and optimization models, and time series analysis. Market behavior, supply and demand along with risk and uncertainty will be studied using these methods. The economic impacts will focus on changes in output, value added, employment, the welfare of consumers and producers, and government expenditures. Measures of economic performance will focus on prices, trade, economies at the regional and national level, and the environment. In addition, we will develop new methods and extend existing methods to accomplish these objectives. Objective 1: Determine the impacts of U.S. and foreign policies, market structures, and regulations on U.S. food and agricultural trade, the economy, and the environment. Global market developments along with structural changes in those markets and policy evolution directly affect U.S. agricultural trade and the environment. Structural changes are occurring in markets important to the U.S. due to income growth, urbanization, changes in demographics, and in the environment.Recent failures in agricultural productivity in Africa and the growth in the size of their middle class indicates future increase in the demand for agricultural and food imports from the U.S. and other net agricultural exporting nations. Developments in China, Russia, and other parts of the world such as Africa and South America make it imperative that future research focus on these issues. However, the traditional trade partners like Canada, Mexico and Japan are still important trade partners. Therefore, future work must consider these countries. For Objective 1, Procedures 1A and 1B,research will focus appropriate methods on a selected trade or policy issue. In keeping with multistate collaboration, the issues were specifically selected by the committee because they represent the current state of affairs. Procedure 1.A: U.S. and Foreign Policies The team of researchers will develop models to evaluate the effects of macroeconomics conditions in the U.S. and other nations on U.S. agricultural exports. In particular this work will build on the gravity and other trade models to explore these relationships. This work will focus on bulk commodities such as rice, corn, livestock, poultry, soybeans, wheat, etc. Additional work will focus on consumer-ready processed food products. The team will investigate the impact of exchange rates both from the perspective of achieving agreements and their impact on the competiveness of agriculture particularly in the Southern U.S. within the context of free trade agreements. The team has researchers assessing the impact of domestic policies and policies of other countrieson infrastructure related to our intermodal transportation system, specifically those components related to agricultural trade. A team of researchers is proposing more fundamental research on the effect of change in consumer preferences on international trade, with a particular interest inAfrican demand. Procedure 1.B: Regulations This section will focus on tariffs, food safety, sanitary and phytosanitary regulations, biotechnology, climate change, environmental regulations, animal welfare, and country of origin labeling. Beyond tariffs most of the regulations under consideration are often categorized as non-tariff measures (barriers) and can have substantial effects on production cost and ultimately affect trade flows. The team proposes to assess barriers to acceptance and use of genetically modified (GM) rice.We will coordinate a multi-country study looking at regulatory barriers, attitudes of producers and consumers, and social media. The proposed study will use experimental auctions, contingent valuation, and global modeling of impacts of acceptance/refusal commercialization of GM rice. Also the team will consider firm-level analysis á la Helpman, et al. (2008) and Melitz (2003) and Brander (1995)to understand better the effects of policies especially non-tariff measures at the firm level. Objective 2: Determine the impacts of international arrangements and institutions on U.S. food and agricultural trade, the economy, and the environment. International institutions such as the World Trade Organization (WTO), World Bank and International Monetary Fund (IMF) are still significant players in international trade. Keeping up with changes in these institutions is vital to the movement of international trade. However, because of the inability of the WTO to move their agenda forward, we will focus on regional trade agreements (RTA) and free trade agreements (FTA). Trade agreements considered included NAFTA, APEC, DR-CAFTA, and the EU. Past work also examined the interface between regional free trade agreements and domestic policy and sought to examine bilateral trade between the United States and China. While a significant amount of work has been conducted examining the impact of regional and bilateral trade agreements on agricultural trade, much work remains to be done to show the impact of these agreements on other sectors of the economy and the economy as a whole. The impacts of new trade agreements, such as the recently signed FTAs with Columbia and Korea and the potential Trans-Pacific Partnership (TPP), U.S-EU Transatlantic Trade and Investment Partnership, remain to be considered. The project will also consider other agreements that do not include the U.S. such asECOWAS and ASEANthat may affect U.S. trade relationships. In addition, it is important to determine the impact of existing and new trade agreements on the environment. Procedure 2.A: Impact of international arrangements (Regional and Bilateral Trade Agreements) Several researchers propose to use computable general equilibrium (CGE) models, equilibrium displacement models, gravity models, global spatial equilibrium, and import demand models to assess the impacts of bilateral and regional free trade agreements on agricultural products (corn, dairy, meat, peanuts, rice, seafood, soybeans, sugar, tomatoes, tree nuts, wheat, watermelon, inter alia) relevant to their respective states. This work will assess the impacts of existing major and minor FTAs (ASEAN, COMESA, DR-CAFTA, ECOWAS, EU, MERCOSUR, NAFTA), proposed FTAs such as the US-EU Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership Agreement (TPP), and bilateral agreements of the U.S. to Colombia, Cuba, Korea, and other countries as they arise. These models will evaluate trade creation and trade diversion and trade expansion attributable to the FTAs. Additionally, these trade models will assess bilateral and global trade, price, production, and consumption effects. A number of researchers in the group use the gravity model. These researchers will explore modifications to the model and new specifications including generalized and specific gravity models, models with a power transformation. Additionally, the team of researchers will investigate new methods to deal with zero trade and non-tariff measures. Procedure 2.B: Impact of international institutions (WTO, IMF, World Bank) The team will examine the interface between regional free trade agreements and domestic policy, focusing on how these agreements might constrain U.S. policy in the future. Researchers propose to assess the impact of the WTO and its dispute mechanism and rulings, other international institutions related to agricultural trade. More generally, the team of researcher will assess the impact of the WTO on the expansion of trade.

Funding Source
Nat'l. Inst. of Food and Agriculture
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