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S1016: Impacts of Trade and Domestic Policies on the Competitiveness and Performance of Southern Agriculture (S-287)

Duration:
October 01, 2003 to September 30, 2008
Administrative Advisor(s):
Thomas Klindt (TEN)
NIFA Reps:
Henry Bahn

Statement of Issue(s) and Justification:

Statement of Problem:

Current and future domestic policy reform and changes in trade agreements are important in determining the competitiveness of agriculture in the U.S., particularly in the South. The S-287 Project: Impacts of Trade Agreements and Domestic Policies on Southern Agriculture has been the primary national cooperative research effort to assess structural adjustments, changes in international competitiveness, and international trade with respect to major agricultural commodities resulting from a dynamic, global policy environment. The proposed project: Impacts of Trade and Domestic Policies on Southern Agriculture will focus on domestic (e.g., U.S. Food Security and Rural Investment (FSRI) Act and European Union Common Agricultural Policy) and international (e.g., World Trade Organization, Free Trade Area of the Americas, and North American Free Trade Agreement).

Justification:

The influence on Southern agriculture of domestic policy reform and changes in trade agreements is important. Without a doubt, trade and competitive impacts stemming from changes in domestic agricultural and economic policies, combined with continued reforms in trade treaties and agreements, will be major factors in determining the continued competitiveness of the Southern agriculture sector. The Southern region is an important contributor to U.S. agricultural production, processing and exports. The region is the major supplier of cotton, peanuts, poultry, pecans, tobacco, cane sugar, rice, winter vegetables and citrus fruits and an important contributor to the production of grains, soybeans, feeder cattle, pork and dairy products. Changing domestic and international policies that influence Southern agriculture, as a result, influence the food and agricultural supply of the nation as a whole.

During the next five years the U.S. agricultural sector will face a number of challenges. The passage of the Farm Security and Rural Investment Act of 2002 changes the environment for agriculture from the FAIR Act. Increased attention to income stabilization will alter crop mixes, while maintaining some flexibility for planting decisions. Major changes have occurred in peanut policy as well. The FSRI Act faces significant obstacles within the World Trade Organization as the program is implemented, necessitating timely and quality research to document the potential impacts of FSRI on demand and supply of agricultural commodities. At the same time, the FSRI Act also contains significant increases in conservation provisions, which may ultimately have impacts on farm income, competitiveness, and trade.

Several questions arise regarding the impact of this new policy environment on the agricultural sector. What will be the impact on U.S. and Southern agriculture of 1) the FSRI Act and the movement toward free trade? 2) land diversion, input subsidy, and agricultural support programs of other countries? 3) domestic and foreign country macroeconomic, fiscal, environmental, biotechnology, and development policies? and, 4) reforms in multilateral and regional trade agreements? Addressing these issues is important for policy makers, farm leaders, and their constituents to have the information necessary for informed decision making and policy design.

ESCOP recognized the importance of this research in its 1995 report Opportunities to Meet Changing Needs: An Update on the Strategic Agenda for the State Agricultural Experiment Stations. In its national and regional ranking of research initiatives, AGlobal Competitiveness@ was one of eight crosscutting issues used to evaluate the program initiatives in setting the SAES strategic agenda. Thirteen of the twenty-two research initiatives fell in this category. The USDA strategic plan contains USDA Goal 1: AExpand economic and trade opportunities for agricultural producers and other rural residents.@ Also in the plan is CSREES Goal 1: AAn agricultural production system that is highly competitive in the global economy.@ The CSREES plan has the support of the National Agricultural Research, Extension, Education, and Economics Advisory Board. Sub-goals of the USDA strategic plan include improving decision-making for public policy on global competitiveness. In addition, The Joint Council on Food and Agricultural Sciences in its Fiscal Year 1996 Priorities for Research, Education, and Economics identified five high priority research areas. They include research to improve competitiveness in global markets through technology, education, and policy. One task specified to achieve this goal involves understanding how policies affect U.S. competitiveness.

A regional approach to this research is desirable for many reasons. First, the required research is extensive and requires the expertise of a variety of agricultural economics specializations including international trade, production economics, agricultural development, agribusiness, marketing, and policy. Except for the Economic Research Service, no single Agricultural Experiment Station has an adequate number or variety of scientific personnel for conducting the needed research. Thus, a regional effort helps assure that a critical mass will be assembled to accomplish the desired goals. Second, there are many agricultural products common to project participants where international trade effects will be significant and where collective, complementary and coordinated approaches will add more to the knowledge base than would be possible with several independent state efforts. Third, a regional effort will permit economies in data collection and analysis. An effort of the magnitude required for international trade research demands a large amount of data and a collective effort will save substantial resources compared with that needed for each station to collect and analyze the data. Fourth, a regional approach allows a coordinated effort that promotes efficiency and enhances productivity. The division of labor, among the various research participants allows all to benefit but reduces the effort of each and thus permits a larger total research effort. Finally, under S-287 a considerable body of knowledge has been developed, a set of research skills enhanced, and a cooperative research approach strengthened. This proposed regional research will build on that effort and allow a more comprehensive realization of the potential that the past effort has engendered.

Regular Hatch and state experiment station funding, grants such as those of the USDA's National Research Initiative, and other sources can and will be used for international trade research by many scientists participating in this research proposal. Such funding typically tends to be used for state specific research which does not address or promote the overlapping interests of the states nor promote cooperative activities and joint undertakings. Funding from the rural development centers is used for joint undertakings but that funding is limited in quantity and is directed to domestic rural development issues although the rural development aspects of international trade could be addressed with such funds if they were adequate for the size of undertaking this effort requires. Thus, use of regional research funds and a regional research project is required to develop the cooperative effort needed for addressing regional and national issues. A regional project permits interaction between states that produces greater results than by the same amount of funds spent carrying out a series of individual state projects. This will be especially valid for this project since a large share of the principal investigators have developed good working relationships through cooperative efforts under S-287.

The principal benefits of this Cooperative Regional Research Project include information pertaining to the impact and potential impact of domestic policy and WTO and Regional Trade Agreement reform on trade creation and diversion, supply response, import demand, land values, price variability, agricultural value added, food safety and security, and the efficiency and welfare of the economy as a whole. Relevant, timely information is necessary as policy makers prepare for the coming round of WTO negotiations. To provide this type of information, existing models must be updated to account for changing world patterns (production, consumption and trade). At the same time, new models must be developed to examine relevant issues as they come to the fore (e.g., the increased emphasis on environmental issues that is likely in future negotiations). Results will be consolidated, published, and disseminated to the many users in an effective, timely, and efficient manner that should have the greatest positive impact on the region=s agricultural sector. This will provide information to policy makers that will enhance their ability to formulate agricultural related policies and enable Southern regional farmers and agribusiness firms to exploit opportunities and avoid financial difficulties given the dynamic playing field. As investigators in this project expand and develop models to provide this information, there are several potential benefits that will further science in this area. Specifically, this project should provide new research methods to address these relevant problems as well as insights into adjustment needs. Research outlined in this proposal is expected to make a major contribution to the economic literature.

Related, Current, and Previous Work:

Related current and previous work includes the research conducted under S-287, other regional research, related work by agricultural experiment station researchers, and work by other academic and non-academic researchers. The S-287 research is covered in the Critical Review section. CRIS documentation is used for the review of other regional and experiment station activities; an examination of recent journals and other publications is used to determine related work by non-experiment station analysts. This review is limited to the period since 1998 since a thorough review of related work is contained in the S-287 project paper.

There are no regional projects, other than S-287, devoted exclusively to the analysis of international trade in agricultural products. Although NC-194 (Organization and Performance of the World Food System) which was replaced by NC-182 in 1993 includes trade as one aspect of the world=s food system, this regional project was terminated in 1996. However, as the global market has become increasingly important, trade aspects are included in a number of projects concerned with food and agricultural issues. These include NE-165 (Private Strategies, Public Policies, and Food System Performance) (which terminated in 2002), which includes international and comparative studies as a sub-procedure under one objective; S-276 (Rural Restructuring: Causes and Consequences of Globalized Agricultural and Natural Resource Systems) examines impacts of globalization on the domestic economy; and S-216 (Food Demand and Consumption Behavior) examines demand factors in countries, especially in Asia, that import U.S. agricultural products. Three regional projects on specific commodities have international components: W-177 (Domestic and International Market Strategies for Beef); NC-224 (Structural Changes in the U.S. Grain and Oilseeds Marketing System in Dynamic and Global Marketplace; and S-222 (Economic Issues Affecting U.S. Fruit and Vegetable Systems).

A substantial number of Hatch projects and/or competitive and special grants by individual or groups of researches at several agricultural experiment stations are concerned with international trade in specific agricultural commodities or general trade issues. Among these are projects for rice (Arkansas and California), cotton (Texas Tech), poultry (West Virginia), pork (Illinois), soybeans (Iowa, Ohio, Wisconsin), dairy (Wisconsin, 2), grains (North Carolina, Iowa), wheat (North Dakota, Oklahoma), watermelons (South Carolina), livestock and meat (Kansas, Kentucky, Iowa, Missouri), processed foods (Indiana), wine and cherries (California), peanuts (Georgia). Some projects analyze trade issues for commodities important in a region or state (UtahCproducts important to Utah, Washington Cagricultural products important to the Pacific Northwest, North CarolinaCproducts important to NC and the U.S., North DakotaCGreat Plains products, IowaCMidwestern products, WashingtonCagricultural and forestry products, OregonCnatural resource based products). A few projects examine general trade in agricultural products (Ohio, Washington, North Dakota, North Carolina, and the Economic Research Service, USDA). A few are directed at specific areas: the Carribean (Florida); Asia (Indiana, Kentucky, North Dakota, Washington, Vermont), LDCs (Indiana), Western Hemisphere (North Carolina), Europe (USDA). Some are specifically related to the objectives of this project (policies and trade agreements) include: trade barriers (Virginia), GATT (Indiana), liberalization and privatization (Indiana), risk and policy reform (North Carolina), trade assistance (Virginia), policy and trade (Arkansas, California), trade and small and minority businesses (North Carolina A&T), trade implications of exchange rates (California). To the extent that potential duplication may exist, which should be limited, participants on this project will engage individual researchers across the U.S. to avoid duplication of efforts.

A review of the general trade literature indicates that a large amount of research has been and is being done in the area of international trade, although the volume devoted to agricultural trade is considerably smaller than for industrial and other trade issues. This body of work of greatest relevance to this proposal is summarized briefly by major topics. Trade agreement work is relatively vast, but representative work as it relates to agricultural trade includes Hassan (1996), Josling (1993), Lee (1995), Makki, Tweeten and Glecker (1994), and Silvis and Van der Hamsvoort (1996). The effects of trade liberalization is another major research and publications on this topic include: Devadoss and Kropf (1996), Greenway et al. (1993), Pinckney (1993), Jiriyengwa (1993), and Rusek (1996). Some typical policy studies include: Babula, Ruppel and Bessler (1995), Behgin, Brown and Zaini (1997), Chambers and Pick (1994), Diakosavvas (1995), Gopinah et al. (1997), Le Moukl (1995), Mahi and Roe (1996), Paarlberg (1995), and Paarlberg and Orden (1996) Taylor et al. (1996). Macroeconomic policy, while very important in international trade, appears to have received relatively little attention in agricultural trade literature; examples are Bilginsoy (1997) and Valdis (1993). A growing area of research is the inter-relationships between trade and the environment, although there are relatively few specific references to agricultural trade and the environment; some relevant references include Copland and Taylor (1995), and Espinosa and Smith (1995). Studies also have been performed which examine the impacts of monetary and exchange rate adjustments on international trade (Gilbert 1991; Fleisig and VanWillingham 1985; Jabara and Schwartz 1987; Labys and Maizels 1993; Labys, Thomas, and Gisbers 1989). A final group of relevant studies are those that focus on methodology such as Abbott and Kullio (1996), Kennedy, von Witzke and Roe (1996), Liu, Yao and Greener (1996), Makki, Tweeten and Glecker (1994), Gunter, Jeong and White (1996) Peterson et al. (1994), and Yang and Koo (1993). A recent book also is devoted to a methodology for trade analysis (Hertel 1996).

In summary, there is a substantial body of literature concerning agricultural trade. Much of this body is due to the contributions of the S-287 researchers. However, the growing importance of international trade, trade agreements, and rapidly evolving domestic agricultural and general economic policies require that the expertise and cooperative endeavors developed under S-287 continue to be utilized in addressing emergent problems and issues. Attention to these issues will extend and expand the knowledge base through the generation of critical information for the policy process and the development of new and improved models and modeling techniques.

Objectives

  1. To determine the impacts of changes in domestic policies on the competitiveness of Southern agriculture.
  2. To determine the impacts of international institutions and trade agreements on the competitiveness of Southern agriculture.
  3. To determine the impacts of market behavior, performance, and expansion on the competitiveness of Southern agriculture.

Methods:


All procedures to be used in this Project emphasize cooperative efforts of the individual states and agencies involved in the activities. While researchers from the individual state experiment stations will be working on the products of interest to each, common methodologies will be used so that the results can be combined for regional applications and publications. This approach requires collaboration in collecting data, conducting the analyses and presenting the results, which can be utilized by all states that have an interest in the particular product without having to actually designate scientist years to the analyses.

Procedure 1.A: Changes in U.S. Policies

The 2002 Farm Security and Rural Investment (FSRI) Act marks a major shift in U.S. agricultural policy from the 1996 FAIR Act by providing an environment in which environmental payments are more pronounced and payments are more closely tied to production. The FSRI Act maintains some of the planting flexibility found in the FAIR act, but alters payment criteria for producers of wheat, corn, grain sorghum, barley, oats, rice, and cotton. Under the new Act, some government payments are decoupled, while other government payments are dependent on the level of production. The FSRI Act complicates the payment program for producers by combining these decoupled and production dependent payment schemes. The overall level of income support is expected to increase under the FSRI Act and the Act potentially alters the relative competitive position of different crops within given production regions.

Procedures: The impacts on competitiveness, trade flows, producer incomes, consumer welfare stemming from changes in U.S. domestic agricultural policies will be determined by the development of new models or modification of existing models. The analyses will determine direct impacts on the commodities affected and the indirect impacts on commodities which may be affected through competition for resources or where crop products serve as inputs into the production of other commodities, e.g., grains used in livestock production. Econometric, simulation, and other economic models will be used to accomplish these policy evaluations.

Specific procedures include to (1) estimate supply response models for wheat, rice, cotton, peanuts and sugar based on alternative agricultural policies, (2) revise the world wheat and policy simulation models on the basis of re-parameterized supply response equations, and (3) compare the simulation results with the base solution to evaluate the impacts of the agricultural policies on the U.S. wheat, rice, cotton, peanuts and sugar industries and their competitiveness in global markets. Wailes (Arkansas) will coordinate the collaborative effort for rice, Hudson (Mississippi) for cotton, Fletcher (Georgia) for peanuts, and Koo (North Dakota State) for wheat. Kennedy (Louisiana State) and Koo will collaborate in the sugar modeling. VanSickle (Florida) will examine U.S. policies related to fruits and vegetables. Henneberry and Sanders (Oklahoma State) will research the impact of domestic and trade liberalization policies on trade and growth while Hudson (Mississippi State) will examine the impacts of changing U.S. policy on farm structure and international competitiveness. Rosson (TAMU) will assess the potential economic impacts of Cuba trade sanctions removal on southern agricultural exports and the rural economies of the South. Jolly (Auburn) will provide support and access data bases for agricultural policy. Collaborators from the Economic Research Service will provide input on the historical distribution of farms. Gunter (Georgia) will examine relationships between U.S. agricultural policies and trade agreements, including their differeing regional impacts on U.S. agriculture.

Procedure 1.B: Changes in Domestic Policies of Foreign Countries

Through years of negotiation in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) and now in the World Trade Organization (WTO), the U.S. and the European Union (E.U.) had major differences over agricultural policy reform including methods of domestic support and export competition. Resistance to reform in several countries, including the U.S. and the E.U., was partially responsible for delaying a GATT Uruguay Round agreement and now threaten WTO negotiations. By understanding why regions choose the policies they do, the relative importance of key variables affecting policy choice are identified and can be used to anticipate policy responses to major developments, such as the WTO.

Procedures: The foreign policies to be analyzed include those of the European Union and other countries or regions that compete with U.S. agricultural exports, as well as the policies of importers of U.S. farm products, since their domestic agricultural policies can affect the competitiveness of U.S. agricultural products. The impacts of policies in other countries will be developed through the evaluation of changes in policies, collection of data on production, prices, trade and related factors from sources such as the OECD, European Union, World Bank, FAS, FAO, and individual countries; through the development and estimation of appropriate econometric and simulation models (including political economy models of policy choice in the European Union), and through cooperative efforts with economists in the other countries. Marchant (Kentucky) will coordinate the collaborative effort in modeling dairy policy choice in the E.U. using political economy theories. Kennedy (Louisiana State) will coordinate the effort in the use of public choice and coalition formation theories to analyze the formulation of domestic agricultural policies in Central and Eastern Europe. Hudson (Mississippi State) and Malaga (Texas Tech) will lead the collaborative effort in modeling cotton policies in other cotton producing countries, Fletcher (Georgia) will lead the effort for peanuts, and VanSickle (Florida) will lead the efforts for fruits and vegetables. Henneberry (Oklahoma State) will analyze the impact of changes in domestic policies of US major wheat and meat trading partners on US exports of these commodities/products. Wailes (Arkansas) will use the Arkansas Global Rice Model (AGRM) to assess changes in domestic policies of our major rice export competitors and importers. Koo (North Dakota State) will update and use the global wheat and sugar simulation models at North Dakota State University to determine the impacts of changes in the domestic policies of foreign countries on competitiveness. Labys (West Virginia) will examine poultry and energy. Jolly and Thompson (Auburn) will use a CGEE model to evaluate the impact of domestic policies of U.S. main competitors affect the competitiveness of the U.S. agricultural and forest products from the Southeastern States of the U.S. Kinnucan (Auburn) will determine the welfare effects of non-price export promotion of foreign countries on U.S. producers and consumers. Hudson (Mississippi State) will examine the changes in agricultural policy in foreign countries on the competitiveness of Southern agriculture, especially cotton. The opportunity cost of irrigation water used in the Mexican state of Chihuahua will be estimated by Rosson (TAMU) and compared to costs in the Lower Rio Grande Valley of Texas (LRGV). Rosson (TAMU) will also analyze the status of livestock competition, trends in Canadian production regions, and impacts on U.S. livestock markets.

Procedure 2.A: Impacts from provisions of the World Trade Organization (WTO) and other international institutions.

The more important provisions issues of the WTO that will be addressed in this sub-objective include tariffication, market access, and tariff rate quotas; green, amber and blue box provisions; trade dispute settlements; preferences for developing countries, accession of China, the former Soviet republics, eastern European countries, and other developing countries; food safety, sanitary, and phytosanitary provisions; biotechnology impacts on trade; environmental issues, labor problems, and other nontariff barriers to trade.

Procedures: Econometric, simulation, and spatial equilibrium models will be used. In addition, export demand equations will be developed and estimated to analyze import behavior of agricultural commodities and products in major importing countries. Researchers involved in this procedure will consult in the initial stages of the project and periodically to develop appropriate methods, to coordinate activities and to avoid duplication.

The stations and their primary commodities are: Arkansas (Wailes), rice; Florida (Van Sickle), citrus fruits and vegetables; Georgia (Fletcher), peanuts; Kentucky (Marchant), dairy and wood products; Louisiana State (Kennedy), rice and sugar; Mississippi State (Allen and Hudson), corn, cotton, soybeans and poultry; Texas A&M (Rosson), animal protein and related products; North Dakota State (Koo), wheat and sugar; West Virginia (Labys), poultry and energy; Texas Tech (Malaga), cotton. (Work on trade in other commodities will be undertaken by individual researchers as problems and issues arise.) In addition to research on specific commodities Mississippi State (Allen) will analyze the impacts of intellectual property rights provisions as they apply to soybeans; Oklahoma State (Henneberry) will look at the new WTO rulings and the alignment of domestic policies with the rulings.

A major study on the U.S. proposal in the Doha Round of the WTO negotiations will be conducted by Wailes (Arkansas) in assessing impacts of the U.S. proposal and other countries proposals on competitiveness of the U.S. rice industry. Rosson (TAMU) will develop an analytical framework to estimate the qualitative impacts of freer trade likely to result from the recently implemented negotiations in the World Trade Organization (WTO) and Free Trade of the Americas (FTAA). This will be a joint activity of cooperating members of S-287.

Allen (Mississippi State) will use econometric and spatial equilibrium models to determine the factors that affect the reasons why countries join or become part of trade agreements or regional economic integration institutions such as the proposed FTAA. Thompson and Jolly (Auburn) will use a small-scale general equilibrium model to determine Southern agricultural production and income distribution and determine its adjustment to WTO policies. Kinnucan (Auburn) will examine the domestic producer impacts of targeted tariffs on U.S. agricultural producers. Malagas (Texas Tech) efforts will be focused on the modeling and simulation of the impact of WTO related provisions on the Cotton/Textile/Apparel complex. Fairchild (Florida) will examine issues related to non-tariff trade barriers.

Procedure 2.B: Effects of regional free trade and related agreements.

NAFTA and other free trade agreements are affecting many agricultural commodities important to the Southern Region, some favorably and others unfavorably. The proposed Free Trade Area of the Americas (FTAA) will have additional effects when it is negotiated and implemented. Similarly, the European Union, MERCOSUR, APEC and other agreements and trading blocks have impacts on Southern agriculture. Thus, it is important to determine actual and potential impacts of such agreements and to assess strategies to meet the challenges and/or to take full advantage of opportunities from such developments so that U.S. and Southern producers benefit as much as possible. Many of the issues and needs are similar to those described in objective 2A, but other research issues are different. For example, the movement toward complete free trade for agricultural products between the U.S., Canada and Mexico under NAFTA will affect Southern agricultural producers more rapidly than will the slower movements toward freer trade in the WTO.

Procedures: Various econometric and simulation models will be developed to evaluate U.S. and Southern exports to its NAFTA partners as well as U.S. imports from those countries. Both econometric trade and spatial equilibrium models will be developed to investigate trade effects of free trade agreements such as the European Union, MERCOSUR, and APEC. During the first year of the project, researchers from the various stations involved in this subobjective will meet to evaluate methodological issues and to coordinate their activities to assure that the research is complementary and not duplicative.

While the research effort will not be not limited to these products, Arkansas (Wailes) will concentrate on rice; Florida (Van Sickle) on citrus and winter vegetable issues with a focus on competitiveness; Georgia (Fletcher) on peanuts; Louisiana State (Kennedy) will develop and estimate multi-commodity models that include cotton, rice, soybeans, and sugar (Fletcher and Kennedy will develop a trade model for peanuts in the FTAA); Mississippi State (Allen, Hudson, and Herndon) will consider corn, cotton, soybeans and soybeans products, and poultry; North Dakota State (Koo) will develop and estimate models for wheat and processed agricultural products; TAMU (Rosson), animal protein and related products; West Virginia (Labys) will concentrate on poultry and specialty products.

Kinnucan (Auburn) will examine the domestic producer impacts of targeted tariffs of FTAA members and Henneberry (Oklahoma State) will analyze the economic impacts of NAFTA. Hudson (Mississippi State) 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. Wailes (Arkansas) will study the trade creation and diversion effects of regional trade agreements for rice, including the FTAA, NAFTA, and APEC. Both econometric models and the policy simulation models will be used by Koo (North Dakota State) to analyze effects of the WTO and regional free trade agreements on U.S. agricultural competitiveness for all agricultural commodities and products. Jolly (Auburn) will examine how the FTAA will affect the economies of the smaller nation states of the FTAA. Jolly (Auburn) will also determine how changes in trade shares will affect their purchasing power and hence imports from the U.S.A. Thompson (Auburn) will study the implications of FTAA and NAFTA on agricultural and forest production in the south. Malaga (Texas Tech) will undertake the continuous analysis of the NAFTA impacts on the US-Mexico trade in cotton/textiles, grain sorghum, and livestock/beef, with emphasis on rising marketing/transportation issues.

Procedure 3.A: Examine the impacts of changes in market behavior, including global supply and demand, risk, and uncertainty on competitiveness of Southern agriculture. The research approach to analyzing international commodity markets continues to emphasize, supply, demand, prices, inventories and trade. While this framework addresses issues in competitive markets, there are also needs to analyze noncompetitive market behavior. Thus market structure and performance become important ingredients of this analysis. The problems of interest relate to globalization, impacts of the international macroeconomic environment on commodity markets, market efficiency and commodity price behavior, and short and long-term aspects of cyclical movements in agricultural markets. The policy issues that will be analyzed in this framework relate to important provisions of the WTO, agricultural trade agreements, market regulation and market access, international commodity agreements, price stabilization mechanisms, monetary and exchange rate adjustments, and domestic commodity policies.

Procedures: Commodities under study are corn, cotton, rice, soybeans, sugar, wheat and others related to the South. Methods used by Labys (West Virginia) to analyze problems of commodity markets important to Southern agriculture include time series and econometric methods. Market behavior, including supply and demand, risk and uncertainty will be studied by Wailes (Arkansas) using stochastic simulation methods of the global rice econometric model, AGRM. The global wheat policy simulation model and sugar model will be used by Koo (North Dakota State) to examine the impacts of changes in market behavior, including global supply and demand, risk, and uncertainty. Barnett (Georgia) will examine how changes in the federal crop insurance program affect the competitiveness of Southern agriculture. Additional research efforts will focus on developing new crop insurance products that meet the unique needs of Southern agricultural producers. Hudson (Mississippi State) will examine the impacts of changes in consumer demand on U.S. agricultural producers. Factors such as GMOs, changing demographics, and consumer perceptions about branded products will offer both opportunities and challenges to Southern agriculture. Seale (Florida) will examine the impacts of consumer demand on competitiveness of U.S. agricultural products. Gunter (Georgia) will examine trade models for Southern agriculture with an initial focus on poultry trade. Lohr (Georgia) will examine markets for organic crops.

Corruption and imperfect contract enforcement dramatically reduce international trade. Miljkovic (Missouri) will estimate the reduction in US agricultural exports using a structural model of import demand in which insecurity acts as a hidden tax on trade. Rosson (TAMU) will refine analysis of market potential for animal protein in China. Descriptive analysis, along with excess demand simulation will be utilized. Initial elasticity estimates will be collected from secondary sources and supplemented with econometric estimates where necessary. Rosson (TAMU) will also monitor U.S. imports from Mexico and the potential impacts on Texas prices for onions, melons, and citrus, and live cattle.

Procedure 3.B: Examine the role of food safety and food security on the performance of Southern agricultural markets.

Food safety and food security have been important research topics in the past. Given current events, threats of bioterrorism heighten the importance of food safety and security. In addition, food safety and security regulations have been used as non-tariff trade barriers. Thus, a focal point of research in this project will be to address the impacts of food safety and security regulations on the performance of Southern agricultural markets.

Procedures: Henneberry (Oklahoma State) will analyze the impact of food safety information on consumer demand. Hudson (Mississippi State) will examine issues of traceability and food quality assurance on the competitiveness of Southern agriculture. An econometric model will be developed by Koo (North Dakota State) to analyze the role of food safety on agricultural competitiveness for all agricultural commodities and products. Jolly (Auburn) will use econometric analysis to evaluate the impact of mycotoxin regulations in EU and other importing countries on grain exports from southern states. Fletcher (Georgia) will analyze the impact of food safety on trade in peanuts. Rosson (TAMU) will assess the economic consequences of trade disruption due to agrifood terrorism or the intentional introduction of harmful diseases, insects, noxious plants, or pathogens into the U.S. food supply or at border crossings. Miljkovic (SW Missouri State) will analyze the effect of published scientific findings in the area of GMO on trade policies (SPS measures) and public opinion.

Procedure 3.C: Examine the role of market access strategies and market expansion and development for Southern agricultural products.

Several U.S. policies and corporate strategies attempt to promote market access and expansion. Issues such as export subsidies, generic advertising for market expansion, foreign direct investment, and the role of multinational corporations in agribusiness are all key issues in expanding demand for and trade of Southern agricultural products. This project will examine market access and expansion strategies and determine their impact on Southern agriculture.

Procedures: Henneberry (Oklahoma State) will analyze the impact of promotion programs on import demand for US products. Supply chain management and market expansion activities will be examined by Hudson (Mississippi State). The rapid changes occurring in Latin American food retailing/distribution systems will be analyzed by Malaga (Texas Tech). Kennedy (Louisiana State) will analyze the potential role of foreign direct investment to counter the effects of increased Mexican market access in the U.S. as a result of NAFTA.

Measurement of Progress and Results:

Outputs:
Outcomes or projected Impacts:
Milestones:

(2005): Organize and conduct a major conference outlining the changes occurring in trade agreements and their effects on southern agriculture.

(2007): Provide a comprehensive set of briefing documents on major changes in trade agreements and their effects on important clientele groups and commodities in the southern United States.

Projected Participation:

Include a completed Appendix E form

Outreach Plan:

Information will be made availabe to uses through refereed and non-refereed, techinal publications, as well as through professional meetings and books. In addition, the committee regularly sponsors, participates in, and/or organizes major conferences with both web access to proceedings and popular press coverage.

Organization and Governance:

The Regional Technical Committee organization and functioning follow that suggested in the Manual for Cooperative Regional Research, pages 18-22 (1992). The membership includes the regional administrative advisor (non-voting); a Cooperative State Research Education and Extension Service (CSREES) representative (non-voting); and a technical representative from each participating agricultural experiment station appointed by the Director.

Other agencies and institutions may participate at the invitation of the Administrative Advisor. More than one representative of a participating agricultural experiment station, agency, research group or institution may serve on the technical committee and serve as officers of the committee. However, each agricultural experiment station, agency, research group or institution is limited to one vote regardless of the number of participants.

All members of the Technical Committee are eligible for office, regardless of the sponsoring agency affiliation. This organization is as follows:

Officers: The chairperson is elected by the voting members to a two-year term and may be reelected for additional terms of office. The chairperson, in consultation with the administrative advisor, notifies the technical committee members of the time and place of meetings, prepares the agenda, and presides at meetings of the technical committee and executive committee. He or she is responsible for preparing the annual report of the regional project. The existing S-287 chairperson will serve as the chair of the new committee for a one-year term (through Fall 2004). At that time, a new chairperson for the new committee will be elected for a two-year term.

Secretary: The secretary records the minutes and performs other duties assigned by the technical committee or the administrative advisor. He or she is elected by the voting members to a two-year term and may be reelected for additional terms of office. The existing S-287 secretary will serve as the secretary of the new committee for a one-year term (through Fall 2004). At that time, a new secretary for the new committee will be elected for a two-year term.

Subcommittees: The Project has an executive committee that is designated to conduct the business of the committee between meetings and perform other duties as assigned by the technical committee. It consists of the Project chairperson, secretary, and two other members of the committee. These two members are elected by the voting members of the technical committee to two-year terms and may be reelected for additional terms of office. They serve staggered terms with one member being elected each Fall. One of these members will serve as the liaison between this Project and the Southern Extension Policy and Trade Committee. Other subcommittees are named by the chairperson as needed for specific assignments such as developing procedures, planning conferences, and preparing publications.

Literature Cited:

Abbott, P.C. and P.K.S. Kullio. 1996. AImplications of Game Theory for International Agricultural Trade.@ Am. J. Ag. Econ. 78(Aug):738-44.

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