Aldrich, Lorna M.

English

Research Papers in Economics

ECONOMIC INTEGRATION  IN THE WESTERN HEMISPHERE
Edited by Constanza Valdes and Terry Roe
April 1997
PROCEEDINGS OF A SYMPOSIUM  SPONSORED  BY THE
INTERNATIONAL  AGRICULTURAL TRADE RESEARCH CONSORTIUM
AND THE INTER-AMERICAN  INSTITUTE  FOR COOPERATION ON AGRICULTURE
JUNE 7-9, 1995  SAN JOSE, COSTA RICASESSION  8.  EMERGING  POLICY ISSUES  AND RESEARCH PRIORITIES ON
WESTERN HEMISPHERE INTEGRATION
Analysis  for Western Hemisphere  Integration
Lorna M. Aldrich,  Economic Research Service,  U.S.  Department of Agriculture
Analysis  for Western Hemisphere Integration
This conference  has produced  a  valuable  exchange  of insights,  points  of view,  and  information  on the
Economic  Integration  of the  Western  Hemisphere.  Several  speakers  have  provided  a  broad  historical
context by describing  the transition in the Hemisphere  from the  export substitution policies  of previous
decades to more recent trade liberalization policies.  Others have provided  detailed empirical analysis  of
specific trade issues  and results of agreements.  Within this context,  Michael  Gifford and Carol Goodloe
provided  insights into  the  challenges  of bringing  trade liberalization  agreements  into  existence  and  the
further challenges,  not to be taken lightly, of monitoring  and maintaining  agreements.
What did  we learn here?  I think  one lesson  is that creating  trade  agreements  for Western Hemisphere
integration will require very specific information.  First, researchers  and negotiators  need good data. To
take one instance,  Carol Goodloe mentioned that having tariff schedules in a spreadsheet would sometimes
make  a considerable  contribution to  negotiations.  It takes  an  effort on someone's  part to  bring  such  a
spreadsheet  into existence  and transfer it to negotiators. We are all aware that maintaining useful databases
is  a time  consuming,  and  therefore  expensive,  task.  Raw  data  from  administrative  sources--customs,
international  organizations,  country program administration--must  be edited and placed in usable form.
In addition to having data, it is important for each country to understand the basic structure of its own and
its partners'  economies. Understanding  the basic structures  of these economies  is prequisite  to estimating
the consequences of an agreement for all countries.  The relative importance  of production that might need
to be adjusted as a result of a trade agreement and the existing  trade patterns  that might be  changed are
essential pieces of information for negotiators.
Finally, knowledge  of the policy  and procedures  of the countries  are essential.  Exactly  how  is  a policy
implemented and what changes  will an agreement  require?  How will  compliance  be determined?  Very
detailed  information  about negotiating  partners  is necessary.  As tariff barriers  decline,  and  as  attention
focuses on monitoring  existing  agreements  and  removing potential  administrative  barriers  to  trade,  the
information requirements  will become  much more  detailed.  The problem  of separating  necessary  health
and safety restrictions  from disguised administrative barriers  to trade  is information intensive,  to say the
least.  The  information  covers  basic  scientific  evidence,  administrative  procedures,  knowledge  of the
specific parts of industries  affected,  and the potential effects of administered barriers  to trade on them.
The list of requirements--of data, of knowledge  of each others'  economies,  of understanding policy and
procedures--  will not be  easy to meet.  How  will the  international  community  of trade researchers  and
public agencies go about providing the information?  There  will be benefits from pooling information and
knowledge through conferences  such as this one.
265Fortunately,  we face this challenge just as technology is making information exchange  easier.  The Internet
is changing accessibility  to research and,  particularly,  databases.  ERS is now putting all of its data products
and the text of scheduled reports out through the USDA Economics and  Statistics  System maintained by
Mann Library  at Cornell.  Data products  and  reports  from  the  National  Agricultural  Statistics  Service
(NASS)  and the World Agricultural Outlook Board (WAOB) also are released  through this  system.  These
materials are available  through gopher and anonymous  ftp (usda.mannlib.cornell.edu).  ERS,  NASS,  and
WAOB reports also are available through e-mail subscriptions.  (For information on how to subscribe,  send
an e-mail  message to usda-reports@usda.mannlib.cornell.edu  with no subject  and the word  "lists"  as the
body  of the message.)  These releases  include information on the countries of the Western Hemisphere  that
arises from the  recurring workload in ERS,  which I will briefly  sketch here.
The agency contributes monthly to the USDA World Agricultural Demand and Supply Estimates (WASDE)
for the marketing  year for field crops,  livestock and products,  and sugar.  Regular situation and outlook
reporting explains the forces forming  these estimates.  In addition, other reports  discuss markets  for fruits,
vegetables  and tobacco,  for which there are not WASDE estimates.  Fruits  and vegetables  account for a
significant  share of Western Hemisphere  agricultural trade.
It is evident that this recurring work requires knowledge  and anticipation  of the effects  of trade agreements
and developments in the Western Hemisphere  countries.  Clearly,  oilseed and products estimates must take
account  of policy  and  production  in Brazil,  and  the  same  is true  for  orange juice  in Brazil,  wheat  in
Argentina  and  Canada,  and fruit  in  Mexico,  Chile,  and  a number  of other  countries.  ERS  maintains
expertise  for the country/commodity  coverage required by this process.
In addition,  ERS contributes  analytical  support to the annual USDA budget baseline,  covering the same
commodities  as the  WASDE.  The international  trade  estimates behind the  baseline  include  a  series  of
country models for Argentina,  Brazil, Canada,  Mexico,  and other Central  American, Caribbean  and Latin
American  countries.
The individual country  models,  and a Rest of World  Sector,  can now be  integrated in the baseline  work
through ERS's system linked country models.  This system supports  the baseline  by presenting  internally
consistent results that incorporate major factors,  such as agricultural policy,  income,  and cross-commodity
changes.  The  tabulated  country  projections  and prices  help  to  provide  starting  points  for  discussions
between  country  and  commodity  analysts.  The  country-link  system  has  also  been  adapted  for  use  in
analyzing the impacts of Western Hemisphere  and other regional trade integration scenarios on world and
U.S.  commodity prices  and trade.
The  models  require  a large data gathering  effort,  which  generates  valuable  information  on trends  and
patterns  of trade.  At this  conference,  the  paper on  "Patterns of Trade for Agricultural  Products  in the
Western Hemisphere,"  by Constanza Vald6s and John Wainio draws from this source.
Finally, the recurring work on the Western Hemisphere  includes  reports focusing on the progress under
NAFTA.  These  are  a quarterly  monitoring  report  focusing  on  the  most recent  trade  data  and policy
developments,  and  an annual  situation and  outlook  report  focusing  on  more  basic  trends  as  well  as
discussions of the details of the agreement  itself.  The contents heading of the forthcoming annual speak
for themselves:  "The Agricultural  Provisions of NAFTA,"  "The First Year of NAFTA Shows Expanded
Trade,"  "North American Trade Vital for the United  States,"  "Factors Affecting Future Development of
Trade,"  and  "Outlook for Agricultural Supply and Demand in 2005."
266Although  this  recurring  work  in  ERS,  and  recurring  work  elsewhere--in  universities,  international
organizations,  other  governments,  and  other  parts  of the  U.S.  government--provides  some  basis  for
negotiations leading to Western Hemisphere  integration,  an important current task on Western Hemisphere
is to  expand  the information  base.  One  early  step  in  ERS  is the  preparation  of a  report  on Western
Hemisphere  integration which covers the relevant issues. Some of these are anticipated  to be infrastructure-
-especially  transportation  links,  tariff and  non-tariff barriers  to  trade,  exchange  markets,  sanitary  and
phyto-sanitary  regulations,  the  provisions  of existing  and  proposed  regional  trade  agreements  in  the
Hemisphere,  and differences  in consumer  demand among  countries.  However,  we  anticipate  that some
issues that are not now being  emphasized will emerge as significant  as the study proceeds.  The exchanges
among professionals  at  this meeting  and  others  are an important  link in this process  of giving  the right
emphasis  and recognition  to each issue.
Another step is assembling basic information.  Following the model established with the Canada  and Mexico
negotiations  and with  our support  for the  upcoming  Chile negotiations,  we  are  starting  the process  of
developing briefing books for MERCOSUR  countries  and most likely following that with briefing  books
for Andean Pact countries and Venezuela.  The briefing books will be the first step in assembling  the data,
policy information,  etc. necessary to  improve the structure of the models.
Some new issues are becoming  integral to trade discussions.  ERS  also is turning  its attention to technical
barriers  to  trade  (TBT),  "the  new  protectionism."  These  may  include  restrictions  arising  from
environmental  and safety concerns, but extend to packing restrictions,  labeling,  and product standards.  The
agency has started to  collect data on technical barriers to trade and to study the  importance  of economic
interests,  scientific evidence,  public  opinion,  and precedent as determinants  of TBT's.  The  goal  of this
research is to build a knowledge base for understanding the dispute  mechanisms for TBT's under  NAFTA
and the WTO and their effects on the post-Uruguay  round environment.
Environmental  and labor issues are another  important component  of ERS  work on Western Hemisphere
issues.  ERS initiated  work on the link between agricultural trade  and the environment  a  few years  ago,
preparing  several papers on the linkages between Western Hemisphere  trade and the environment:  general
issue papers  include  a description of the environmental provisions of NAFTA and its  environmental side
agreement  and the projected environmental  consequences  of NAFTA;  and specific  issues papers  include
environmental  impact  of increased horticulture  production  in the Mexican  state  of  Sinaloa  , costs  and
benefits  of irradiation quarantine  treatments  for Western Hemisphere  fruit and vegetable  trade,  and the
linkage  between  worker  safety  regulations  and  fruit  trade.  Some  of this  work  has  been  presented  at
previous IATRC  meetings  and published by ERS.
ERS  has been preparing  a major project that  catalogues  resource  and environmental  policies  of various
countries,  with an  emphasis  on policies  affecting  agricultural  production  and trade.  The  project breaks
policies  into  four  categories:  water,  land,  agricultural  chemicals,  and  wildlife  and  natural  areas.  The
"water" volume  was published a year ago.
One paper was prepared for this conference,  "Western Hemisphere Integration:  Trade Policy Reform and
Environmental  Policy Harmonization,"  by Denice Gray and Marinos Tsigas.
We  expect to  continue to monitor and examine the effects  of changes  in multilateral and  regional trade
agreements  ( GATT,  NAFTA,  extended-NAFTA)  and environmental  policies.
267The program of analysis  and research that ERS and its clients have chosen is extremely broad--in coverage
of topics,  in the number of countries to be analyzed,  and in the nature of the information  and analysis  we
intend  to  provide.  Therefore,  our  collaboration  with  colleagues  and  other  institutions  continues  to  be
essential  to  success.  We  hope  that  collaboration  with  us  is  equally  important  to  those  colleagues  and
institutions  because  we  will  all  face  challenges  that  strain  our  individual  resources  as  we  analyze  and
anticipate  the evolution  of Western Hemisphere  integration.
268

Analysis for Western Hemisphere Integration

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