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In Search of Emerging Markets for Agricultural Trade
Gopinath Munisamy and John Dyck
Economic Research Service
U.S. Department of Agriculture
The views expressed are those of the authors and should not be attributed to the Economic Research Service or USDA
Overview• How do we define emerging markets for agricultural trade?
• GDP, population, proximity and shipping routes, growth and change, preferences and dietary change
• BRIIC countries and other potential emerging markets
• Gravity factors, growth and change
• What role for policies in global agricultural trade growth?
• Bilateral and multilateral trade policy reform, other factors affecting trade costs
• Recent U.S. experience in agricultural trade
• Searching for emerging markets?
• Takeaways for Japan and other major economies
What do we mean by emerging markets?
• Large populations or economies that currently are under-represented in agricultural trade
• Regions with fast economic growth and social change, where demand for imported foods and fibers may be strong
• Consumer types, such as the urban middle class, that span the globe and have similar desires and needs for food
• Commodity segments that are becoming increasingly popular
• And more…
Where would we expect large agricultural imports?
• Large economies
• Large populations
• Relatively fast and low-cost access
The biggest GDPs
The biggest GDPs, next 15
The biggest populations, top 10
The biggest populations, next 15
Consider proximity
Consider major sea routes, offering frequent, fast, low-cost transport
North Pacific
links
• U.S.
• Canada
• Mexicoto
• Japan
• Korea
• China
• Taiwan
• Hong Kong
North Atlantic
links
• U.S.
• Canada
• Mexico
to
• Europe
Major Shipping Routes
• Size and ease of access characterize the countries with the largest agricultural trade
• Gravity models in economics use these factors to characterize trade flows
Countries among the top 10 either in terms of population or output, with global rank as agricultural importer and exporter [M, X]:
• OECD members– EU [1, 2]
– USA [3, 1]
– Japan [4, 35]
– Canada [6, 5]
– Australia [20, 7]
– Korea [8, 32]
• Non-OECD– China [2, 4]
– Brazil [23, 3]
– Russia [5, 16]
– India [10, 6]
– Indonesia [12, 9]
– Pakistan [31, 43]
– Nigeria [33, 49]
– Bangladesh [29, 54]
BRIIC
Watch for futureimport growth
Source of trade rankings: Economic Research Service, USDA, using WITS database of the World Bank.
BRIIC
• Large GDPs: China, Brazil, Russia, India• Large populations: China, India, Indonesia, Brazil,
Russia
• Among 10 Largest agricultural exporters: Brazil, China, India, Indonesia
• Among 10 largest agricultural importers: China, Russia, India
• On major sea routes: China
ERS publications on BRIIC• China’s Growing Demand for Agricultural Imports. Economic Information Bulletin 136, Feb. 2015. Fred
Gale, James Hansen, and Michael Jewison.
– http://www.ers.usda.gov/publications/eib-economic-information-bulletin/eib136.aspx
• China in the Next Decade: Rising Meat Demand and Growing Imports of Feed. Amber
Waves, April 2014. James Hansen and Fred Gale.
– http://www.ers.usda.gov/amber-waves/2014-april/china-in-the-next-decade-rising-meat-demand-and-growing-imports-of-feed.aspx
• U.S. Exports Surge as China Supports Agricultural Prices. Amber Waves, Oct. 2013. Fred Gale.
– http://www.ers.usda.gov/amber-waves/2013-october/us-exports-surge-as-china-supports-agricultural-prices.aspx
• The Expansion of Modern Grocery Retailing and Trade in Developing Countries. Economic
Research Report 122, July 2011. Sharad Tandon, Maurice Landes, and Andrea Woolverton.
– http://www.ers.usda.gov/publications/err-economic-research-report/err122.aspx
• Indonesia’s Modern Food Retail Sector: Interaction With Changing Food Consumption and Trade Patterns. Economic Information Bulletin 97, June 2012. John Dyck, Andrea Woolverton, and Fahwani Yuliati
Rangkuti.
– http://www.ers.usda.gov/publications/eib-economic-information-bulletin/eib97.aspx
• Russia’s Growing Agricultural Imports: Causes and Outlook. Outlook Report WRS-0904, May 2009.
William Liefert, Olga Liefert, and Mathew Shane.
– http://www.ers.usda.gov/publications/wrs-international-agriculture-and-trade-outlook/wrs-09-04.aspx
• Food Policy and Productivity Key to India Outlook. Amber Waves, July 2015. Maurice Landes and Kim Hjort.
– http://www.ers.usda.gov/amber-waves/2015-july/food-policy-and-productivity-key-to-india-outlook.aspx
• Specialty Crop Access to U.S. Markets: A Case Study of Indian Mangoes. Economic Research
Report 142, Nov. 2012. Peyton Ferrier, Everett Peterson, and Maurice Landes.
– http://www.ers.usda.gov/publications/err-economic-research-report/err142.aspx
Beyond the BRIIC: large emerging markets, among the top 25 in GDP or population
• Rank as global importer (M) and exporter (X) of agricultural goods[M, X]:
– Mexico-- GDP 11th, Pop 12th [7, 13]
– Turkey-- GDP 13th, Pop 18th [15, 14]
– Thailand—GDP 24th, Pop 20th [24, 10]
– South Africa—GDP 25th, Pop 22nd [32, 19]
– Colombia—GDP 22nd, Pop 25th [34, 22]
ERS publications on demand beyond the BRIIC
• Middle East and North Africa Region: An Important Driver of World Agricultural Trade. Outlook Report AES-88, July 2015. Getachew Nigatu and Mesbah Motamed.
– http://www.ers.usda.gov/publications/aes-outlook-for-us-agricultural-trade/aes-88.aspx
• U.S.-Cuba Agricultural Trade: Past, Present and Possible Future. Outlook Report
AES-87, June 2015. Steven Zahniser, Bryce Cooke, Jerry Cessna, Nathan Childs, David Harvey, Mildred Haley, Michael McConnell, and Carlos Arnade.– http://www.ers.usda.gov/publications/aes-outlook-for-us-agricultural-trade/aes-87.aspx
• NAFTA at 20: North America’s Free-Trade Area and Its Impact on Agriculture. Outlook Report WRS-15-01, Feb. 2015. Steven Zahniser, Sahar Angadjivand, Thomas Hertz, Lindesy Kuberka, and Alexandra Santos.– http://www.ers.usda.gov/publications/wrs-international-agriculture-and-trade-outlook/wrs-15-01.aspx
• Using Household and Intrahousehold Data To Assess Food Insecurity: Evidence from Bangladesh. Economic Research Report 190, Aug. 2015. Anna D’Souza and Sharad
Tandon.– http://www.ers.usda.gov/publications/err-economic-research-report/err190.aspx
• Growth and change in size, proximity, and access are important to emerging trade--changes in trade flows or prospects– Economic growth, income distribution, growth of
the middle class– Institutional development– Population growth
• Demand for food• Distribution: urban population growth (retail
proximity)– Infrastructure growth: Transportation, Cold chain
Growth and change factors affect demand:
– Desire for convenience
• Products
• Places for purchase
– Desire for variety
• Taste for protein, fats, sweets, salty products
• Meats
• Dairy products
• Fruits
• Snacks
Recent growth in agricultural trade
• Last 5 years (2010-2014)
– Global growth in value of agricultural imports about 35%
• Partly price change, not real growth
• Many measurement problems
• Regard as approximation
World average growth in agricultural imports: 35%, 2010-2014
Markets with above-average import growth, ranked by market size:
• 1-10 largest markets
– U.S. 37%
– China 64%
– Korea 38%
– Hong Kong 47%
– India 54%
– Vietnam 111%
– Indonesia 46%
– Saudi Arabia 46%
– Turkey 46%
– United Arab Emirates 38%
• 11-20 largest markets
– Iran 53%
– Thailand 43%
– Algeria 74%
– Venezuela 80%
– Norway 37%
– Bangladesh 46%
– Chile 49%
– Nigeria 51%
– Colombia 44%
– Morocco 39%
Source of trade data: Economic Research Service, USDA, using Global Trade Atlas.
What kinds of markets grew quickly?
• OECD--Only 3 of the 20 countries (U.S., Chile, Korea)
• Among the 3, growth only moderately above global average
• BRIIC--China, India, Indonesia show strong growth
• 14 other developing economies– 6 in Middle East/North Africa
– 3 in South America
– 2 in Southeast Asia
– 1 each in Sub-Saharan Africa, South Asia, East Asia• East Asia: Hong Kong imports tied to China
Another way trade emerges: reducing barriers
Barriers to trade come in many forms.
Some barriers have benefits that may outweigh trade distortions
E.g., protecting human, animal, plant health.
Some barriers are actually barriers to business activity and competition in general, and also apply to trade.
Many barriers are logistical.Physical infrastructure Regulatory efficiency
Bali agreement on Trade Facilitation
• Barriers that are easy to identify:– Tariffs
– Quotas
– Import and export licensing
– Special import or export taxes
– Bans
• International agreements often focus on the most visible barriers.
Trade agreements
• Multilateral– GATT and WTO
• Regional– EU– NAFTA– ASEAN
• Bilateral– U.S. Free Trade Agreements– Japan’s Economic Partnership Agreements– Many others
Bilateral trade agreements have proliferated
U.S. FTAs
NAFTA (1994) Israel (1996)
Chile (2004) Morocco 2004)
Singapore (2004) CAFTA-DR (2005)
Australia (2005) Bahrain (2006)
Peru (2009) Oman (2009)
Jordan (2010) Colombia (2012)
Korea (2012) Panama (2012)
Japan’s EPAs
• ASEAN (group and individual, 2006-2009)
• Chile (2007)
• Switzerland (2009)
• India (2011)
• Peru (2012)
• Mexico (2012)
• Australia (2014)
ERS has studied trade agreements• Agriculture in the Trans-Pacific Partnership. Economic Research Report 176, Oct. 2014. Mary Burfisher, John
Dyck, Birgit Meade, Lorraine Mitchell, John Wainio, Steven Zahniser, Shawn Arita, and Jayson Beckman.
– http://www.ers.usda.gov/publications/err-economic-research-report/err176.aspx
• Japan’s Agri-Food Sector and the Trans-Pacific Partnership. Economic Information Bulleting 129,
Oct. 2014. John Dyck and Shawn Arita.
– http://www.ers.usda.gov/publications/eib-economic-information-bulletin/eib-129.aspx
• Vietnam’s Agri-Food Sector and the Trans-Pacific Partnership. Economic Information Bulletin
130, Oct. 2014. Shawn Arita and John Dyck.
– http://www.ers.usda.gov/publications/eib-economic-information-bulletin/eib-130.aspx
• Selected Trade Agreements and Implications for U.S. Agriculture. Economic Research
Report 115, April 2011. John Wainio, Mark Gehlhar, and John Dyck.
– http://www.ers.usda.gov/publications/err-economic-research-report/err115.aspx
• NAFTA at 20: North America’s Free-Trade Area and Its Impact on Agriculture. Outlook Report WRS-15-01, Feb. 2015. Steven Zahniser, Sahar Angadjivand, Thomas Hertz, Lindsay Kuberka, and Alexandra Santos.
– http://www.ers.usda.gov/publications/wrs-international-agriculture-and-trade-outlook/wrs-15-01.aspx
20 years of experience: agricultural trade grew for all 3 NAFTA countries
Trade in consumer goods is just one part of international exchange
– Trade in inputs
– Trade in services
– Technology exchange
– Foreign investment
Emerging markets: the product dimension
• Global consumption changes, 2000-2011 (FAOSTAT)
– Total calories per person: +142 kcal• from vegetable oils: + 34
• from meats: + 27
• from dairy: + 22
• from fruits: + 17
• from cereals: - 21
• Rising vegetable oil use has propelled trade growth– China soybean imports
– China and India palm and soy oil imports Faster growth than for other commodities
Differences in demand and supply factors lead to intra-industry trade
• Demand factors– Differing tastes and preferences
• Meat cuts
• Supply factors– Varietal differences– Seasonal differences– Weather differences
Just comparing costs of production is not sufficient to predict trade direction.
Intra-industry trade: the U.S. example
0
1
2
3
4
5
6
7
Exp
ort
s
Imp
ort
s
Exp
ort
s
Imp
ort
s
Exp
ort
s
Imp
ort
s
Exp
ort
s
Imp
ort
s
Exp
ort
s
Imp
ort
s
Exp
ort
s
Imp
ort
s
Beef Pork Dairy products Grapes Wine Coffee andproducts
Billion US$; average value, 2010-14
Source: Economic Research Service, USDA, using FATUS data from Foreign Agricultural Service, USDA.
Looking at U.S. agricultural exports
• Search for emerging markets…
Gravity factors explain the top 9 markets for the U.S. (high gravity indication is in red)
GDP rank
Pop.rank
Nearby North Pacific
North Atlantic
Global importer rank
1. China 3 1 X 2
2. Canada 8 32 X 6
3. Mexico 11 12 X 7
4. Japan 4 11 X 4
5. EU 1 3 X 1
6. Korea 10 24 X 8
7. Hong Kong 28 87 X 9
8. Taiwan 18 49 X 22
9. Indonesia 12 5 12
10. Philippines 30 13 27
U.S. export markets, rank 11-20(high gravity indication is in red)
GDP rank
Pop.rank
Nearby North Pacific
North Atlantic
Global importer rank
11. Turkey 13 18 15
12. Vietnam 42 15 11
13. Egypt 29 16 16
14. Colombia 22 25 X 34
15. Thailand 24 20 24
16. Venezuela 32 39 X 26
17. Australia 9 48 20
18. Brazil 5 6 23
19. Russia 6 10 5
20. Saudi Arabia 14 37 14
U.S. exports to developing countries have grown as a share of total
0
10
20
30
40
50
60
70
0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
PercentBillion US$
U.S. agricultural exports, total and by destination
Total
Developed
Developing
China & HK
China, the largest market, shows growth of consumer-oriented products, but soybean share remains 50%
0
5
10
15
20
25
30
35
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billion US$
Source: Economic Research Service, USDA, using data from Foreign Agricultural Service, USDA, GATS database.
U.S. agricultural exports to China and Hong Kong
Soybeans
Other bulk and intermediate
Consumer-oriented
Recent ERS publications on China’s agricultural imports
• U.S. Agricultural Trading Relationship With China Grows. Amber Waves, May 2015. Fred Gale
– http://www.ers.usda.gov/amber-waves/2015-may/us-agricultural-trading-relationship-with-china-grows.aspx
• China’s Growing Demand for Agricultural Imports. Economic Information Bulletin, Feb. 2015. Fred Gale, James Hansen, and Michael Jewison.
– http://www.ers.usda.gov/publications/eib-economic-information-bulletin/eib136.aspx
• China in the Next Decade: Rising Meat Demand and Growing Imports of Feed. Amber Waves, April 2014. James Hansen and Fred Gale.
– http://www.ers.usda.gov/amber-waves/2014-april/china-in-the-next-decade-rising-meat-demand-and-growing-imports-of-feed.aspx
• U.S. Exports Surge as China Supports Agricultural Prices. Amber Waves, Oct. 2013. Fred Gale.
– http://www.ers.usda.gov/amber-waves/2013-october/us-exports-surge-as-china-supports-agricultural-prices.aspx
U.S. trade data formerly showed a long-term shift to value-added exports, which appears to have ceased
about 2000.
0%
10%
20%
30%
40%
50%
60%
70%
80%
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
20
09
20
12
Source: Economic Research Service, USDA, using data from Foreign Agricultural Service, USDA, GATS database, accessed 10-1-15.
U.S. agricultural exports: composition
Bulk
Intermediate
Consumer-oriented
U.S. soybean exports have grown, especially to China
0
5
10
15
20
25
30
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Billion US$
Source: Economic Research Service, USDA, using FATUS database of the Foreign Agricultural Service, USDA.
U.S. soybean exports
Other
EU
China
Ethanol byproduct, DDGS, is a growing part of feed exports
0
2
4
6
8
10
12
14
16
18
Billion US$
Source: Economic Research Service, USDA, using FATUS database of the Foreign Agricultural Service, USDA.
U.S. corn and DDGS exports
Corn DDGS
China’s Market for Distillers Dried Grains and the Key Influences on Its Longer Run Potential. Outlook report FDS-12G-01,
Aug. 2012. Michael Jewison and Fred Gale. http://www.ers.usda.gov/publications/fds-feed-
outlook/fds12g-01.aspx
U.S. meat exports grow despite disease outbreaks and trade barriers
0
5
10
15
20
25
Billion US$
Source: Economic Research Service, USDA, using FATUS database of the Foreign Agricultural Service, USDA.
U.S. exports of poultry meat, red meat, and products
BSE bans begin
HPAI
PEDv
U.S. meat exports to developing countries are growing fast
0
5
10
15
20
25
Billion US$
Source: Economic Research Service, USDA, using FATUS database of the Foreign Agricultural Service, USDA.
U.S. exports of red meats, poultry meats, and preparations
Developed Developing
Barriers to U.S. meat exports remain
China won’t import U.S. beef, citing BSE Hong Kong imports twice as much U.S. meat as China
0
200
400
600
800
1,000
1,200
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Million US$
Source: Economic Research Service, USDA, using FATUS data from Foreign Agricultural Service, USDA, GATS database.
U.S. meat and offal exports to China
Offals
PoultrymeatPork
Beef
0
500
1,000
1,500
2,000
2,500
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Million US$
Source: Economic Research Service, USDA, using FATUS data from Foreign Agricultural Service, USDA, GATS database.
U.S. meat and offal exports to Hong Kong
Offals
PoultrymeatPork
Beef
U.S. dairy product exports grow, especially to Mexico, China, and Southeast Asia
0
1
2
3
4
5
6
7
8
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
Billion US$
Source: Economic Research Service, USDA, using FATUS database of the Foreign Agricultural Service, USDA.
U.S. dairy product exports
Other
Canada
China
SE Asia
Mexico
U.S. nut, vegetable, and fruit exports: all are growing
• Sent to many foreign markets
– Except fresh vegetables--primarily to Canada
• Rely on U.S.
– Land
– Climate
– Water
– Labor
– Shipping and cold chain
– Inspection services
U.S. horticulture-based exports doubled in value, 2006-2014
0
5
10
15
20
25
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Billion US$
Source: Economic Research Service, USDA, using FATUS database of the Foreign Agricultural Service, USDA.
U.S. horticulture-based exports
Fruits & prep.
Veg. & prep.
Nuts & prep.
U.S. horticultural exports rising faster to developing-country markets
0
5
10
15
20
25
Billion US$
Source: Economic Research Service, USDA, using FATUS database of the Foreign Agricultural Service, USDA.
U.S. horticulture-based exports
Developed Developing
Takeaways from U.S. Experience
• Gravity factors along with trade policy reform in importing countries substantially explain U.S. agricultural trade
• Exports have been adapting to strong growth in emerging markets: increased exports of high-value (horticultural) and processed products (meat, dairy)
• Despite temporary slow downs, these medium-and long-terms trends are likely to continue
• Future opportunities: focus not only on countries, but also on products/inputs, services and investments
Extras
Largest 10 countries by population
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Billion people, 2014
Source: Economic Research Service, USDA, International Macroeconomic Data Set.
Largest 10 countries by nominal GDP, average 2012-14
0
2
4
6
8
10
12
14
16
18
20
EU28 U.S. China Japan Brazil Russia India Canada Australia
Trillion U.S. $
Source: Economic Research Service, International Macroeconomic Data Set.