CHAPTER 5 International Trade and the Road Ahead for California Agriculture

his chapter surveys California’s agricultural trade environment and prospects. We pay particular attention to the impacts of the 2002 United States (US) Farm Bill, the Farm Security and Rural Investment Act (FSRIA) on California’s trade in agricultural products and the prospects for California agriculture from further agricultural trade liberalization. We argue that foreign markets are extremely important to California agriculture, and that increased trade liberalization will be beneficial to most California producers since they competitively supply specialty products and continue to face barriers to trade in important markets. We also discuss the benefits of subsidies provided to agriculture in California and agricultural exports in particular. While a quantitative comparison of this support versus the potential benefits of increased trade liberalization is beyond the scope of this chapter, there is suggestive evidence that California agriculture would be better off with reduced subsidies to U.S. agriculture and concomitant increased access to markets abroad. Thus, to the extent that the political fallout from the Farm Bill results in less ambitious World Trade Organization (WTO) negotiations, the 2002 Farm Bill is costly for the California agricultural sector.