Assessment of Biotechnology Policies and International Trade in Key Markets for U.S. Agriculture

Journal of Agricultural and Applied Economics, Aug 2005 by Marchant, Mary A, Song, Baohui

The United States leads the world in agricultural biotechnology research, adoption, commercialization, and exports. Our biotech commodities are highly dependent on international markets. Thus, any biotech policy changes by key importing countries may affect U.S. agricultural biotech product exports. This article identifies key markets for U.S. agricultural exports including biotech commodities and discusses current and proposed biotech policies in key markets for U.S. agricultural exports focusing on Canada, Mexico, Japan, the European Union (EU), and China. Among these markets, labeling of biotech products is voluntary in Canada and Mexico but is mandatory in Japan, the EU, and, most recently, in China. For the EU, U.S. corn exports were almost completely shut out, while U.S. soybean exports also declined because of the EU's biotech policies. The World Trade Organization dispute filed by the United States has yet to be finalized. China's biotech regulations raised concern by U.S. agricultural exporters. However, through U.S. Department of Agriculture education programs, U.S.-China negotiations, and China's domestic soybean shortage, China's biotech regulations do not appear to have had long-run impacts on U.S. soybean exports to China.

Key Words: biotechnology, biotech policy, corn, cotton, international trade, soybeans, U.S. agricultural exports

JEL Classifications: Q13, Q17, Q16, Q18

Around the world, scientists are working to develop new varieties of crops that can resist pests, use less water and generally thrive in less than optimal growing conditions. Hand-in-hand with scientific research, countries must adopt policies that allow their farmers to take advantage of new products being developed through research. Government policies should encourage the safe use of new technologies, not cause farmers and consumers to fear it.

-U.S. Secretary of Agriculture

Ann M. Veneman, 2001-2004

Agricultural biotechnology has been advancing and spreading rapidly throughout the world. In 2004, the global area of biotech crops continued to grow for the ninth consecutive year at a double-digit growth rate of 20% (James). In 2004, the estimated global area of biotech crops was 200 million acres, farmed by approximately 8.25 million farmers in 17 countries. Among these countries, the United States produced biotech crops on 118 million acres, accounting for 59% of this global total. The main U.S. biotech varieties include soybeans, cotton, and corn. In 2004, 85% of soybeans, 76% of cotton, and 45% of corn planted in the United States were biotech varieties as shown in Table 1 (U.S. Department of Agriculture, Economic Research Service [USDA-ERS 2004a]).

The United States leads the world in agricultural biotechnology research, adoption, commercialization, and exports of biotech products. Since 2000, soybeans have been the number one commodity for U.S. agricultural bulk exports. In 2003, U.S. soybean exports totaled 31 million metric tons, accounting for 46% of U.S. soybean production (U.S. Department of Agriculture, Foreign Agricultural Service [USDA-FAS 2005a]). For corn, the United States exported 43 million metric tons, 17% of corn production; and for cotton, U.S. exports totaled 3 million metric tons, 67% of cotton production.

In this article, our research (1) provides an overview of global export markets, (2) identifies key biotech commodities and their leading export markets for U.S. agriculture, (3) discusses biotech polices in key U.S. export markets, and (4) assesses the impacts of these biotech policies on U.S. agricultural exports.

Outlook of U.S. Agricultural Exports

Global-Top Agricultural Exports by Country

In 2003, U.S. agricultural exports reached $62 billion, accounting for 12% of world agricultural exports, which totaled $522 billion (Food and Agricultural Organization of the United Nations [FAO]). Globally, the United States leads all other countries as the number one agricultural exporter, followed by France, the Netherlands, Germany, and Italy as shown in Figure 1.

Although the United States leads global agricultural export markets, its market share declined annually from 19% in 1981 to 12% in 2003 as shown in Figure 2 (FAO). Figure 2 indicates that world agricultural exports increased over this time period, while U.S. agricultural exports remained stable, especially in the last two decades. This implies that other countries entered the global agricultural market and effectively competed with the United States.

Destinations-Top U.S. Agricultural Export Markets by Country

Since 2002, Canada has become the number one market for U.S. agricultural exports, surpassing the historic leaders of Japan and the European Union (EU; USDA-FAS 2005b). Thus, the current top five U.S. agricultural export markets include Canada, Japan, Mexico, the EU, and China. Among these markets, U.S. agricultural exports to Canada and Mexico grew, and continue to grow, rapidly beginning in 1990, while similar growth occurred in China beginning in 1999. In contrast, the volume of U.S. agricultural exports to Japan and the EU remains large and stable.