4 pp., 2 figures, 2 tablesInternational markets are important for many U.S. farm products and greatly affect U.S. agriculture. This publication discusses the causes of import change, the export product mix, major markets, and markets of the future

Benson, Geoffrey A.

Marchant, Mary

McCorkle, Dean

Rosson, C. Parr

Texas A&M University

U.S. Agriculture and
International Trade
Geoffery A. Benson, Mary Marchant and Parr Rosson*  
International markets are important for many U.S. farm products. Trade liberal-
ization has provided additional market opportunities for some U.S. products.
These new markets lead to higher farm prices and greater returns to producers.
Trade is also a major source of import competition and market instability for some
producers, leading to declining market prices and lower returns (Leaflet 1).
Overall, U.S. agriculture has much to gain from freer trade, but these benefits
come with added risks because trade is influenced by many factors. Changes in
trade policies and economic growth rates among countries, exchange rate fluctua-
tions, and the emergence of new competition all influence trade and make the
international market more risky for U.S. producers.
Nevertheless, with declining government support to agriculture, greater access
to international markets is crucial to the future growth and prosperity of the agri-
cultural economy of the United States. U.S. agriculture may have much to gain
from expanded trade since many countries, especially in Central and South
America, already have low duty access to the U.S. market, while U.S. access to
their markets is limited by high tariffs and nontariff barriers.
International trade has a major impact on U.S. agriculture. Exports are crucial,
providing a market for a major share of crop production and a growing share of
meat output. In 1996, 28 percent of U.S. farm cash receipts were generated by
exports, while only 7 percent of U.S. gross domestic product (GDP) was attribut-
able to exports. 
U.S. agricultural exports have varied widely rapid growth in the 1970’s, the
slump of the early 1980’s, and the subsequent export recovery. Over this period,
the value of agricultural exports has exceeded the cost of agricultural imports,
generating a trade surplus each year (Fig. 1). This surplus has contributed posi-
tively to the overall U.S. trade balance,
allowing the importation of foreign-
made cars, petroleum, electronics, and
wearing apparel.
The importance of
export markets to U.S.
agriculture is illustrat-
ed in Table 1. In
1996, more than
one-half of all U.S.
wheat production
and 48 percent of
rice production was
exported. Cotton, soy-
beans, and corn producers
also depend on exports for
large shares of their market.
Ri
sk
Ma
nagement Education
™
L-5278
RM6-4.0
5-99
*Respectively, Extension Economist, North Carolina State University,  Associate Professor, University of
Kentucky, and  Professor and Extension Economist, The Texas A&M University System.
1970 1975 1980 1985 1990 1996
  $0
$10
$20
$30
$40
$50
$60
$70 Billion Dollars
Ag. Imports Ag. Exports
Source: USDA, FATUS
Figure 1. U.S. Agricultural Trade,
1970-96.
Although beef and pork export shares are lower,
poultry exports account for 17 percent of pro-
duction.
Table 1. U.S. Agricultural Exports as a
Share of Production, 1996
Percentage of
Commodity Production Exported 
Wheat 54
Soybeans 35
Rice 48
Cotton 42
Tobacco 14
Corn 24
Poultry 17
Beef 5
Pork 4
Source: “Foreign Agricultural Trade of the United States,”
U.S. Department of Agriculture, Foreign Agricultural
Service, Jan./Feb./Mar. 1997 Final Issue.
U.S. consumers are more dependent on
imports for certain commodities than others
(Table 2). Not surprisingly, these include tropical
products not produced in the United States,
such as coffee and bananas. Broccoli, fish, and
grape imports account for relatively large shares
of consumption. The share of agricultural
imports classified as competitive with domesti-
cally produced items has increased from 66 per-
cent in 1973 to 75 to 77 percent in the 1990s.
These products represent a growing source of
import competition for many U.S. producers.
Table 2. U.S. Imports as a Share of
Domestic Consumption, 1994.
Percentage of
Consumption 
Commodity Imported
Coffee 100
Tea 100
Cocoa 100
Bananas 100
Spices and Herbs 93
Broccoli for Processing 69
Fish and Shellfish 55
Grapes 41
Frozen Orange Juice 24
Beef 10
Pork 4
Source: “Foreign Agricultural Trade of the United States,”
U.S. Department of Agriculture, Foreign Agricultural
Service, Apr./May/June 1996 issue.
What Causes Exports to Change?
An important reason for the fluctuations in
exports is changes in the value of the dollar rela-
tive to foreign currencies (Figure 2). The dollar
lost value against foreign currencies in the
1970s, making U.S. agricultural products less
expensive in the importing countries and, pre-
dictably, increasing sales. In the early 1980s the
dollar gained strength, making U.S. exports
more expensive to foreign buyers and causing
exports to decline. The dollar then weakened
again and exports recovered somewhat. The
exchange rate index is adjusted for inflation.
Changes in exchange rates were not the only
reason for these fluctuations in exports. For
some commodities there was increased competi-
tion from other countries, for example Brazilian
soybean production, and exports increased dra-
matically. Western European countries were a
large U.S. export market in the early 1970s. The
agricultural policies in the European
Community (EC), now the European Union
(EU), encouraged domestic production and
restricted imports. In addition, subsidized
exports of EU surpluses increased competition
for U.S. exports. Changes in U.S. farm programs
and export promotion programs also played a
part.
U. S. exports are also affected by changes in
the economies of importing countries. Rapid
economic growth creates increased demand for
all products, including imports, and the inverse
is true when economies slip into recession. The
recent economic crisis in East Asia is an exam-
ple. About 10 percent of all U.S. agricultural
exports were to South Korea, Thailand,
Indonesia, and the Philippines in 1996. Japan
accounts for nearly 20 percent of the export
1973 1980 1985 1990 1995
  $0
$20
$40
$60
$80
$100
$120
$140 Real Index
Exchange Rate Ag. Exports
Source: U.S.D.A. and Federal Reserve Board
Figure 2.  Exchange Value of the U.S. Dollar
         and U.S. Agricultural Exports
Billion dollars
  $0
$10
$20
$30
$40
$50
$60
$70
market. A major economic downturn in all these
countries would certainly result in reduced
demand for U.S. farm products. Exports of feed
grains, meats, oilseeds, and cotton would experi-
ence the biggest declines.
The animal product share of total exports
more than doubled during the 1973-94 period,
but crop products still accounted for four out of
five export dollars in 1994. Bulk commodities—
food grains, feed grains, oilseeds and their prod-
ucts—dominated crop exports during this peri-
od, but this dominance has been eroding and
the composition of crop exports changed.
Exports of high value items, such as vegetables,
fruits, and nuts more than tripled, increasing
from 5.8 percent of total exports in 1973 to 18.1
percent in 1994. These changes occurred gradu-
ally and irrespective of the fluctuations in the
value of total exports.
The Export Product Mix
The mix of agricultural products exported has
changed during the last 20 years. In 1973,
exports of crops and crop products accounted
for nine of every ten export dollars.
These changes in the export mix have region-
al implications.  The Mid-West dominates the
production of feed grains and oilseeds, an export
category that is declining in relative importance.
A similar situation holds for wheat in the Plains
states. Fruits and vegetable exports are increas-
ing and production is concentrated in the
Western and Southern states. Other specialized
commodities with localized production areas
include tobacco, rice, cotton, and poultry, all of
which are important to the Southern region.
Major Markets
The destinations of U.S. exports have changed
over the last 20 years; some have increased in
importance, while others have declined. 
Asia is both a large market and an important
growth area for U.S. agricultural exports. The
recent economic crisis in Thailand, Korea,
Indonesia and the Philippines has caused much
concern about the future prospects for these key
markets. Rapidly depreciating currencies, cou-
pled with economic reform, rising exports and
falling imports may cause U.S. agricultural
exports to decline in some markets. The final
outcome will depend upon the success of policy
reform in Asian countries.
Japan has been consistently ranked as the
number one export market and its importance
has been increasing. South Korea and Taiwan
are also important Asian markets. China has
been an erratic buyer of U.S. exports and  many
are optimistic it may become a major market.
Canada has increased in importance as an
export market and ranked second only to Japan
in 1992. To the South, Latin America, particular-
ly Mexico, also has increased in importance.
The major decline occurred in trade with the
countries of Western Europe, particularly the
members of what is now the European Union,
but these remain a significant market.
Markets of the Future?
Many factors affect exports, including popula-
tion growth and growth in personal incomes in
importing countries. Income growth, in turn, is
affected by political stability and economic poli-
cies. U.S. farm programs and trade, foreign aid
and export policies and programs all affect the
competitiveness of U.S. farm products in foreign
markets.
Trade with Mexico and Canada has increased
under North American Free Trade Agreement
(NAFTA-Leaflet 5). U.S. exports to Mexico had
been increasing, albeit somewhat erratically,
prior to NAFTA. Periodic devaluations of the
peso, changes in Mexican domestic economic
policies, and the debt crisis of the 1980s all had
an impact on trade flows. Over the long term,
certain U.S. agricultural exports will increase
significantly as high Mexican trade barriers are
phased out over a 15-year period. Recent trade
initiatives in Central and South America to cre-
ate additional free trade areas may lead to
increased U.S. export opportunities.
As developing Asia restructures, it will contin-
ue to be an important market for U.S. exports.
Population growth, along with high rates of eco-
nomic growth, will increase the demand for
food and improved diets in most countries.
Many of these countries must rely on imports to
meet this increased demand. In the near term,
this growth will occur in traditional export mar-
kets. Although China has a huge population and
limited agricultural resources, low per capita
incomes limit export opportunities. If the recent
economic reforms continue, per capita incomes
are expected to grow and agricultural imports
should increase eventually. India is another
country with a huge population and a low per
capita income. Recent changes in economic poli-
cy, away from a socialist philosophy and toward
a more open and market-directed economy,
should lead to higher imports in the years
ahead.
Western Europe likely will continue to decline
in importance as an export destination. The
Common Agriculture Policy of the European
Community, which continued under the (EU),
has a goal of self sufficiency. Farm programs
encourage higher agricultural production in vir-
tually all commodities, to the point that there
are now surpluses of many products. This
increase in production has displaced some U.S.
exports and has caused the mix of products to
change. Membership has increased from the
original six countries of the EC to the fifteen
countries who constitute the EU. Additional
countries are expected to join in the future and
these new members will, in all likelihood, con-
tribute to further surpluses of agricultural prod-
ucts, so the prospects for U.S. exports will suf-
fer.
African countries continue to be plagued by
political and  civil unrest and economic policies
that hinder the performance of their economies.
Until these problems are resolved there is little
prospect for increased commercial trade in agri-
cultural products. Similarly, the political and
economic upheavals in the countries of the for-
mer Soviet Union will not end soon and this
will be an impediment to economic growth and
expanded trade.
The most recent trade agreement under the
General Agreement on Tariffs and Trade
(GATT), the so-called Uruguay Round
Agreements (URA), is a far-reaching agreement
that covers many aspects of world trade in mer-
chandise and services. It is expected to have a
significant impact on world trade and the global
economy. The changes for agriculture are fairly
modest and are not expected to create major
changes in agricultural trade patterns. This is
the first time comprehensive agricultural trade
provisions have been included in a GATT agree-
ment, which sets important precedents that
could lead to significant changes in future
rounds of negotiations. Among the most impor-
tant URA provisions are: 1) the creation of the
World Trade Organization (WTO), providing an
effective Dispute Settlement Body (DSB) and a
continuing forum for negotiations to reduce
trade barriers in agriculture; 2) minium market
access to all WTO member countries and the
reduction of highly restrictive non-tariff trade
barriers such as import quotas; 3) reduction in
the use of export subsidies, thereby opening
more markets for U.S. grains and other prod-
ucts; and 4) the use of sanitary and phytosani-
tary regulations which are based on sound sci-
ence, not political expediency.
Produced by AgriLife Communications & Marketing, The Texas A&M System 
Extension publications can be found on the Web at: http://AgriLifebookstore.org
Educational programs of the Texas AgriLife Extension Service are open to all citizens without regard to race, color, sex, disability, religion, age or national origin. 
Issued in furtherance of Cooperative Extension Work in Agriculture and Home Economics, Acts of Congress of May 8, 1914, as amended, and June 30, 1914, in
cooperation with the United States Department of Agriculture. Texas AgriLife Extension Service, The  Texas A&M System.
1.5M, Reprint ECO
This publication was contributed by the Southern Extension International Trade Task Force.


English

U.S. Agriculture and International Trade

Texas A&amp;M Repository

U.S. Agriculture andInternational TradeGeoffery A. Benson, Mary Marchant and Parr Rosson*  International markets are important for many U.S. farm products. Trade liberal-ization has provided additional market opportunities for some U.S. products.These new markets lead to higher farm prices and greater returns to producers.Trade is also a major source of import competition and market instability for someproducers, leading to declining market prices and lower returns (Leaflet 1).Overall, U.S. agriculture has much to gain from freer trade, but these benefitscome with added risks because trade is influenced by many factors. Changes intrade policies and economic growth rates among countries, exchange rate fluctua-tions, and the emergence of new competition all influence trade and make theinternational market more risky for U.S. producers.Nevertheless, with declining government support to agriculture, greater accessto international markets is crucial to the future growth and prosperity of the agri-cultural economy of the United States. U.S. agriculture may have much to gainfrom expanded trade since many countries, especially in Central and SouthAmerica, already have low duty access to the U.S. market, while U.S. access totheir markets is limited by high tariffs and nontariff barriers.International trade has a major impact on U.S. agriculture. Exports are crucial,providing a market for a major share of crop production and a growing share ofmeat output. In 1996, 28 percent of U.S. farm cash receipts were generated byexports, while only 7 percent of U.S. gross domestic product (GDP) was attribut-able to exports. U.S. agricultural exports have varied widely rapid growth in the 1970’s, theslump of the early 1980’s, and the subsequent export recovery. Over this period,the value of agricultural exports has exceeded the cost of agricultural imports,generating a trade surplus each year (Fig. 1). This surplus has contributed posi-tively to the overall U.S. trade balance,allowing the importation of foreign-made cars, petroleum, electronics, andwearing apparel.The importance ofexport markets to U.S.agriculture is illustrat-ed in Table 1. In1996, more thanone-half of all U.S.wheat productionand 48 percent ofrice production wasexported. Cotton, soy-beans, and corn producersalso depend on exports forlarge shares of their market.RiskManagement Education™L-5278RM6-4.05-99*Respectively, Extension Economist, North Carolina State University,  Associate Professor, University ofKentucky, and  Professor and Extension Economist, The Texas A&M University System.1970 1975 1980 1985 1990 1996  $0$10$20$30$40$50$60$70 Billion DollarsAg. Imports Ag. ExportsSource: USDA, FATUSFigure 1. U.S. Agricultural Trade,1970-96.Although beef and pork export shares are lower,poultry exports account for 17 percent of pro-duction.Table 1. U.S. Agricultural Exports as aShare of Production, 1996Percentage ofCommodity Production Exported Wheat 54Soybeans 35Rice 48Cotton 42Tobacco 14Corn 24Poultry 17Beef 5Pork 4Source: “Foreign Agricultural Trade of the United States,”U.S. Department of Agriculture, Foreign AgriculturalService, Jan./Feb./Mar. 1997 Final Issue.U.S. consumers are more dependent onimports for certain commodities than others(Table 2). Not surprisingly, these include tropicalproducts not produced in the United States,such as coffee and bananas. Broccoli, fish, andgrape imports account for relatively large sharesof consumption. The share of agriculturalimports classified as competitive with domesti-cally produced items has increased from 66 per-cent in 1973 to 75 to 77 percent in the 1990s.These products represent a growing source ofimport competition for many U.S. producers.Table 2. U.S. Imports as a Share ofDomestic Consumption, 1994.Percentage ofConsumption Commodity ImportedCoffee 100Tea 100Cocoa 100Bananas 100Spices and Herbs 93Broccoli for Processing 69Fish and Shellfish 55Grapes 41Frozen Orange Juice 24Beef 10Pork 4Source: “Foreign Agricultural Trade of the United States,”U.S. Department of Agriculture, Foreign AgriculturalService, Apr./May/June 1996 issue.What Causes Exports to Change?An important reason for the fluctuations inexports is changes in the value of the dollar rela-tive to foreign currencies (Figure 2). The dollarlost value against foreign currencies in the1970s, making U.S. agricultural products lessexpensive in the importing countries and, pre-dictably, increasing sales. In the early 1980s thedollar gained strength, making U.S. exportsmore expensive to foreign buyers and causingexports to decline. The dollar then weakenedagain and exports recovered somewhat. Theexchange rate index is adjusted for inflation.Changes in exchange rates were not the onlyreason for these fluctuations in exports. Forsome commodities there was increased competi-tion from other countries, for example Braziliansoybean production, and exports increased dra-matically. Western European countries were alarge U.S. export market in the early 1970s. Theagricultural policies in the EuropeanCommunity (EC), now the European Union(EU), encouraged domestic production andrestricted imports. In addition, subsidizedexports of EU surpluses increased competitionfor U.S. exports. Changes in U.S. farm programsand export promotion programs also played apart.U. S. exports are also affected by changes inthe economies of importing countries. Rapideconomic growth creates increased demand forall products, including imports, and the inverseis true when economies slip into recession. Therecent economic crisis in East Asia is an exam-ple. About 10 percent of all U.S. agriculturalexports were to South Korea, Thailand,Indonesia, and the Philippines in 1996. Japanaccounts for nearly 20 percent of the export1973 1980 1985 1990 1995  $0$20$40$60$80$100$120$140 Real IndexExchange Rate Ag. ExportsSource: U.S.D.A. and Federal Reserve BoardFigure 2.  Exchange Value of the U.S. Dollar         and U.S. Agricultural ExportsBillion dollars  $0$10$20$30$40$50$60$70market. A major economic downturn in all thesecountries would certainly result in reduceddemand for U.S. farm products. Exports of feedgrains, meats, oilseeds, and cotton would experi-ence the biggest declines.The animal product share of total exportsmore than doubled during the 1973-94 period,but crop products still accounted for four out offive export dollars in 1994. Bulk commodities—food grains, feed grains, oilseeds and their prod-ucts—dominated crop exports during this peri-od, but this dominance has been eroding andthe composition of crop exports changed.Exports of high value items, such as vegetables,fruits, and nuts more than tripled, increasingfrom 5.8 percent of total exports in 1973 to 18.1percent in 1994. These changes occurred gradu-ally and irrespective of the fluctuations in thevalue of total exports.The Export Product MixThe mix of agricultural products exported haschanged during the last 20 years. In 1973,exports of crops and crop products accountedfor nine of every ten export dollars.These changes in the export mix have region-al implications.  The Mid-West dominates theproduction of feed grains and oilseeds, an exportcategory that is declining in relative importance.A similar situation holds for wheat in the Plainsstates. Fruits and vegetable exports are increas-ing and production is concentrated in theWestern and Southern states. Other specializedcommodities with localized production areasinclude tobacco, rice, cotton, and poultry, all ofwhich are important to the Southern region.Major MarketsThe destinations of U.S. exports have changedover the last 20 years; some have increased inimportance, while others have declined. Asia is both a large market and an importantgrowth area for U.S. agricultural exports. Therecent economic crisis in Thailand, Korea,Indonesia and the Philippines has caused muchconcern about the future prospects for these keymarkets. Rapidly depreciating currencies, cou-pled with economic reform, rising exports andfalling imports may cause U.S. agriculturalexports to decline in some markets. The finaloutcome will depend upon the success of policyreform in Asian countries.Japan has been consistently ranked as thenumber one export market and its importancehas been increasing. South Korea and Taiwanare also important Asian markets. China hasbeen an erratic buyer of U.S. exports and  manyare optimistic it may become a major market.Canada has increased in importance as anexport market and ranked second only to Japanin 1992. To the South, Latin America, particular-ly Mexico, also has increased in importance.The major decline occurred in trade with thecountries of Western Europe, particularly themembers of what is now the European Union,but these remain a significant market.Markets of the Future?Many factors affect exports, including popula-tion growth and growth in personal incomes inimporting countries. Income growth, in turn, isaffected by political stability and economic poli-cies. U.S. farm programs and trade, foreign aidand export policies and programs all affect thecompetitiveness of U.S. farm products in foreignmarkets.Trade with Mexico and Canada has increasedunder North American Free Trade Agreement(NAFTA-Leaflet 5). U.S. exports to Mexico hadbeen increasing, albeit somewhat erratically,prior to NAFTA. Periodic devaluations of thepeso, changes in Mexican domestic economicpolicies, and the debt crisis of the 1980s all hadan impact on trade flows. Over the long term,certain U.S. agricultural exports will increasesignificantly as high Mexican trade barriers arephased out over a 15-year period. Recent tradeinitiatives in Central and South America to cre-ate additional free trade areas may lead toincreased U.S. export opportunities.As developing Asia restructures, it will contin-ue to be an important market for U.S. exports.Population growth, along with high rates of eco-nomic growth, will increase the demand forfood and improved diets in most countries.Many of these countries must rely on imports tomeet this increased demand. In the near term,this growth will occur in traditional export mar-kets. Although China has a huge population andlimited agricultural resources, low per capitaincomes limit export opportunities. If the recenteconomic reforms continue, per capita incomesare expected to grow and agricultural importsshould increase eventually. India is anothercountry with a huge population and a low percapita income. Recent changes in economic poli-cy, away from a socialist philosophy and towarda more open and market-directed economy,should lead to higher imports in the yearsahead.Western Europe likely will continue to declinein importance as an export destination. TheCommon Agriculture Policy of the EuropeanCommunity, which continued under the (EU),has a goal of self sufficiency. Farm programsencourage higher agricultural production in vir-tually all commodities, to the point that thereare now surpluses of many products. Thisincrease in production has displaced some U.S.exports and has caused the mix of products tochange. Membership has increased from theoriginal six countries of the EC to the fifteencountries who constitute the EU. Additionalcountries are expected to join in the future andthese new members will, in all likelihood, con-tribute to further surpluses of agricultural prod-ucts, so the prospects for U.S. exports will suf-fer.African countries continue to be plagued bypolitical and  civil unrest and economic policiesthat hinder the performance of their economies.Until these problems are resolved there is littleprospect for increased commercial trade in agri-cultural products. Similarly, the political andeconomic upheavals in the countries of the for-mer Soviet Union will not end soon and thiswill be an impediment to economic growth andexpanded trade.The most recent trade agreement under theGeneral Agreement on Tariffs and Trade(GATT), the so-called Uruguay RoundAgreements (URA), is a far-reaching agreementthat covers many aspects of world trade in mer-chandise and services. It is expected to have asignificant impact on world trade and the globaleconomy. The changes for agriculture are fairlymodest and are not expected to create majorchanges in agricultural trade patterns. This isthe first time comprehensive agricultural tradeprovisions have been included in a GATT agree-ment, which sets important precedents thatcould lead to significant changes in futurerounds of negotiations. Among the most impor-tant URA provisions are: 1) the creation of theWorld Trade Organization (WTO), providing aneffective Dispute Settlement Body (DSB) and acontinuing forum for negotiations to reducetrade barriers in agriculture; 2) minium marketaccess to all WTO member countries and thereduction of highly restrictive non-tariff tradebarriers such as import quotas; 3) reduction inthe use of export subsidies, thereby openingmore markets for U.S. grains and other prod-ucts; and 4) the use of sanitary and phytosani-tary regulations which are based on sound sci-ence, not political expediency.Produced by AgriLife Communications & Marketing, The Texas A&M System Extension publications can be found on the Web at: http://AgriLifebookstore.orgEducational programs of the Texas AgriLife Extension Service are open to all citizens without regard to race, color, sex, disability, religion, age or national origin. Issued in furtherance of Cooperative Extension Work in Agriculture and Home Economics, Acts of Congress of May 8, 1914, as amended, and June 30, 1914, incooperation with the United States Department of Agriculture. Texas AgriLife Extension Service, The  Texas A&M System.1.5M, Reprint ECOThis publication was contributed by the Southern Extension International Trade Task Force.

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U.S. Agriculture and International Trade

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U.S. Agriculture and International Trade

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Texas A&M University

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