CAES professor helping U.S. agriculture get the right take on trade

NAFTA and TPP aren’t just acronyms that baffle most of us. They are actual policies that affect our well-being.

But how, particularly for agriculture, do the accords, trade agreements and pacts, like the North American Free Trade Agreement (NAFTA), the Paris Accord and the Trans-Pacific Partnership (TPP), benefit or change our lives?

That’s a question that Osei Yeboah, Ph.D., a researcher in the College of Agriculture and Environmental Sciences, is trying to answer.

In the fourth year of a five-year project titled “U.S. Agricultural Trade and Policy in a Dynamic Global Market Environment,” Yeboah and a multi-state team are deep diving into the policies and how they affect farmers and other agricultural community members. The U.S. depends on international trade and has been a proponent of developing new opportunities using multilateral, bilateral and regional trade agreements.

With a grant from the Southern Regional Trade Committee (S-1072), teams of researchers from across the Southern region are examining the ways trade agreements, market structures and policies impact the U.S. economy.

First, they are looking at U.S. and foreign policies, regulations, market structures and productivity on U.S. food and agricultural trade, the economy and the environment. Specifically, the impact of foreign investment and multinational firms, international and national events and policies, like the Farm Bill, immigration and labor issues, food fraud and labeling laws and food security and trade with developing and emerging economies.

Then, their scrutiny will take in the effects of international trade agreements and institutions on U.S. food and agricultural trade, the economy and the environment. Specifically, they are examining the potential implications of renegotiating preferential trade agreements, like AGOA (African Growth Opportunity Act) and NAFTA.

They’re also examining the implications of not engaging in preferential trade agreements, like TPP, and future trade agreements.

Each of the participating universities signed on to examine an area from each objective. Specifically, Yeboah’s interest is on the effect on small and limited-resource farmers and rural communities whose growth depends on agriculture.

While the separate teams examine specific issues, they each make annual reports to a director and all the information in gleaned into one report.

Under objective one, Yeboah and his team, including undergraduate and graduate students working through A&T’s L.C. Cooper International Trade Center, looked at the effects of the Supplemental Nutritional Assistance Program (SNAP) on low-income families and the association between food security and the health status of U.S. adults.

Using an econometric model, they found that SNAP participation increases as families become more insecure, although SNAP enrollment reduces the household’s labor participation.

But an increase in household income doesn’t necessarily mean participation in SNAP decreases, he said.

“Because of the variations in the amount of income threshold in different geographical locations that qualify a household to participate in SNAP, an increase in income does not increase household food security,” Yeboah said.

But families who participate in SNAP are more likely to be food secure and families with a high number of tobacco smokers are less likely to be food secure at some point in a given year. Additionally, people living in rural areas are more likely to be food secure than their urban counterparts.

“This is probably related to the fact that the cost of living is cheaper in rural areas compared to urban areas,” he said, adding that their work continued to show that poverty, more than other inputs, is the greater contributor to food insecurity.

Once the federal government sent out economic stimulus checks during the COVID-19, food insecurity across the country shifted, he said.

“If policymakers want to address food insecurity, they have to fight poverty,” Yeboah added.

Also, as a part of the first objective, they conducted a third study on global food security as it relates to international trade, for selected low-income and low-to-medium-income counties.

Using similar econometric models, Yeboah’s team looked at the trade variables like the exchange rate; the Gross Domestic Production; input prices, like fertilizers and chemicals; and population on the prices of two key agricultural food commodities: feed grains and fruits. They found that these variables have a “significant effect on these countries’ access to food globally.”

With the second objective, the teams wanted to determine the effects of the NAFTA renegotiation on the U.S. beef industry. They used a computable general equilibrium that estimates how an economy might react to changes in policy, technology or other external factors. They assumed full employment, competitive pricing and the ability of workers to move across physical space and sets of jobs. They looked at four classes of workers – managers, professionals, service and production – across manufacturing, services, agriculture and beef.

One of the significant changes in the NAFTA renegotiation was the removal of the mandatory country of origin labeling, which livestock producers found to be an added cost.

What we found, Yeboah said, was that the NAFTA renegotiations showed a “modest economic output decline” in the beef section, meaning a loss in production. The returns to capital for the U.S. beef section would also be reduced, meaning the profit gained compared to the capital invested was reduced. However, the rest of agriculture would realize an increase in outputs—meaning losses for beef farmers but a slight increase in production and capital for agriculture overall.

Yeboah also examined the African Growth Opportunity Act (AGOA) under objective two. Despite the growing importance of AGOA as a trade agreement that has enhanced agricultural trade between the 39 member countries and the U.S., there have been very few studies on the effects of the growth of agricultural exports, especially to the U.S., as a result of the agreement.

Yeboah used a dynamic shift analysis to determine the growth of member countries’ exports, focusing on the four major agricultural commodities. He performed analyses pre-AGOA (1980-2000), post-AGOA (2000-2019) and for the overall period (1980-2019). The results suggest member countries’ exports have grown from a deficit of $436 million pre-AGOA to $1.487 billion post-AGOA.

Bulk commodities contributed the most, $754 million, consumer was responsible for $417 million, while intermediate and ag-related contributed $249 million and $67 million, respectively. Also, since the commencement of AGOA, U.S. exports to sub-Saharan Africa (SSA) have grown by 23%, attaining $21 billion in exports, while the exports from the U.S. to the rest of the world increased by only 15%, showing a relative increase in exports to Africa compared to the rest of the world.

The total bilateral trade between the U.S. and SSA also increased by 5.8%, from $36.9 billion in 2015 to $39 billion in 2017. U.S. imports from SSA region have also increased more than three times, reaching $26.7 billion in 2014.

The research shows that exports have grown, which opens new markets for farmers and other agricultural producers. Additionally, they found that trade restrictions reduce U.S. exports, while free trade agreements increase exports, especially with countries that don’t produce the same commodities the U.S. is trading. This is good news for farmers and other producers.

The information gleaned from these types of focused studies should provide policymakers with the data they need to make sound policy decisions, Yeboah said.

“This should free them from the pressures they get from anti-free trade groups who hide behind environmental quality to oppose any trade agreement,” he said. “In any of these policy decisions, there are some winners and some losers. We want to look at the totality of the welfare changes and provide the information. We want to look at the economics and how it relates to the agricultural industry and leave the politics to others.”

Since production agriculture workers only make up 2% of the total U.S labor force, agriculture may not factor in the policymakers’ final decisions without this kind of research, Yeboah added. This research is critical to protect agriculture from global competition.

“The other 98% of the labor force is consumers, and policies are made to protect the consumers,” he said.