The Impact of Global Trade on Agricultural Productivity

October 15, 2019

Recent developments in the global trading environment are disrupting agricultural markets and trade flows, with potential impacts on the sector’s natural capital and resources. These disruptions have arisen from both positive sources (i.e., raising incomes, changing demand and interest in new product characteristics) and negative sources (including trade sanctions, animal disease incidents and tariff and non-tariff barriers to trade).

Producers of agricultural commodities in developed and developing countries alike have made significant progress over time in improving their productivity, competitiveness and profitability through innovation and farm management practices. However, with these recent trade disruptions, markets have become more volatile and unpredictable, leading to shifts in trade flows that impact productivity and potentially shift production toward the suboptimal use of natural capital, particularly water and land.

To navigate the complex world of international trade today, including the trade policies that are impacting trade flows and agricultural productivity, requires a basic understanding of food and agricultural trade issues, as well as a strong working knowledge of the fundamental tools of trade. 

Farm Foundation’s Food and Agricultural Trade Resource Center was created to provide clear, concise and unbiased trade information that helps to bring clarity to trade discussions and enable productive dialogue on trade policy issues. This goal is in keeping with the mission that has driven Farm Foundation’s work for more than eight decades: to cultivate dynamic, non-partisan collaboration to meet society’s needs for food, fiber, feed and energy. The Foundation connects leaders in farming, business, academia, organizations and government through proactive, rigorous debate and objective issues analysis. 

Through its home on the Farm Foundation website (www.farmfoundation.org/trade), the Resource Center serves as an electronic information hub, featuring primers on the basic tools of trade, as well as in-depth analyses of trade issues. 

An example of the work of the Resource Center is a series of papers commissioned by Farm Foundation and completed by agricultural economics at Purdue University. That body of work examined multiple trade scenarios–existing and potential–and their impact on the U.S. agricultural sector. The scenarios included estimating the economic impacts to U.S. agriculture of:  the new United States-Mexico-Canada Agreement (USMCA); the retaliatory tariffs in place on U.S. agricultural exports from global trading partners; the potential that existed for trade under the Trans-Pacific Partnership (TPP); the now-in-place Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP11); the TPP without the United States; and the trade environment should the United States terminate the existing North American Free Trade Agreement (NAFTA).

The chart below illustrates the potential economic impacts to U.S. farmers of these various trade policy scenarios: protectionism (TPP11, retaliatory tariffs and a withdraw from NAFTA); current policies (USMCA, TPP11 and retaliatory tariffs); and trade liberalization (TPP12 and USMCA).  (These three studies are available at https://www.farmfoundation.org/trade/trade-analyses/.)

The Farm Foundation’s Food and Agricultural Trade Resource Center continues to be a resource for public and private leaders to access factual, objective information and analyses, a vital tool needed in making the informed decisions required to expand and improve regional and global trade.  Objective information and analyses, as well civil discussions of evolving issues, are critical to building the vital trade relationships needed to sustain global productivity growth.

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