U.S. AGRICULTURAL TRADE WITH LATIN AMERICAN COUNTRIES AND EFFECTS OF THE FREE TRADE AREA OF THE AMERICAS ON SPECIFIC COMMODITIES

Trade with Latin American countries is an increasingly important issue, as negotiations progress for a Free Trade Area of the Americas (FTAA). The objectives of this study are to analyze U.S. agricultural trade with Latin American countries, determine factors influencing agricultural trade with these countries, and estimate possible effects of trade liberalization under the FTAA on U.S. agricultural trade. This study analyzes U.S. exports of wheat, corn, rice, soybeans, soybean meal, beef, pork, and poultry meat to 16 Latin American countries; U.S. imports of bananas, coffee, grapes, fruit and vegetable juice, sugar, pineapples, avocados, mangos, prepared or preserved meat, crustaceans, and fish fillets or meat from these countries are also analyzed. An econometric model is developed and estimated to determine factors influencing U.S. agricultural trade with these countries. Results from the model show that there is a negative relationship between U.S. exports and foreign tariffs, price, exchange rates, and foreign production, while there is a positive relationship between U.S. exports and foreign real GDP. U.S. imports have a negative relationship with U.S. tariffs and price and a positive relationship with the exchange rate. U.S. tariffs on imports of agricultural products from Latin American countries, though, are small or nonexistent in many cases. This would suggest that trade liberalization could have a larger effect on U.S. exports than on imports. Trade creation and trade diversion effects of tariff removal under the FTAA are calculated. Trade creation effects, overall, are higher for U.S. exports to these countries than they are for U.S. imports. The trade diversion effects, especially for exports, are small because most agricultural imports in the hemisphere are from other countries within the hemisphere, indicating that the FTAA will not significantly affect trade of the agricultural commodities under analysis with third-party, non-member countries. The United States could significantly increase exports of meat products, corn, and rice, and imports of fruit juice and grapes, under the FTAA