AGRICULTURAL OUTLOOK                                        October 23, 1997
October 1997, AO-246
               Approved by the World Agricultural Outlook Board
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CONTENTS

IN THIS ISSUE...

BRIEFS
Field Crops: Overview--Major U.S. Field Crops
Livestock, Dairy & Poultry: Growing U.S. Supplies, Uncertain Export Outlook
Pressuring Meat Prices
World Trade: What Determines U.S. & EU Trade Market Shares?

COMMODITY SPOTLIGHT
Cranberry Supply Expands in Response to Higher Demand
What's Up, Doc?--Carrots!

WORLD AGRICULTURE & TRADE
Fast-Track Authority--Implications for U.S. Agriculture
Southeast Asian Ag Imports from the U.S.

FARM & RURAL COMMUNITIES
Multiple Jobholding Among Rural Workers

SPECIAL ARTICLES
NIS & Baltic Countries Look to Join the WTO
State Trading Enterprises--Their Role As Importers


IN THIS ISSUE...

Ag Trade: Markets and Issues

Fast-Track Authority: implications for U.S. agriculture.  Increasing access to
foreign markets is essential for a profitable and growing agricultural sector. 
Production is rising more rapidly than domestic consumption, and the value of
U.S. agricultural products sold to foreign markets has grown three times as
rapidly as domestic sales.  Comprehensively addressing agricultural trade
issues will require multilateral and regional negotiations.  Fast-track
authority would increase the effectiveness, efficiency, and speed of
negotiations.  

"Fast-track authority" enables the President to submit a trade agreement to
Congress for approval under special, expedited procedures.  The most recent
fast-track authority expired 3 years ago, after approval of implementing
legislation for the Uruguay Round (UR) agreements.  A new fast-track authority
would focus on broad World Trade Organization (WTO) issues after the UR, and
also extend to regional trade agreements. 

Markets expanding in Southeast Asia.   The economies of Southeast Asia have
been among the world's fastest growing during the 1990's, emerging as key
markets for a wide range of U.S. agricultural commodities.  Imports from the
U.S. reached a record of almost $3.3 billion in 1996.  Underlying the increase
are new consumption patterns accompanying economic growth and urbanization;
climatic and land resource constraints on the region's agricultural sectors;
expansion of textile and leather product manufacturing; and import policy
changes.  Long-term agricultural import patterns in Southeast Asia provide a
wide range of opportunities for U.S. exporters of products made from
temperate-climate crops such as wheat, corn, soybeans, and apples.

NIS and Baltics as WTO candidates.  The Baltic countries and 10 of the 12
Newly Independent States (NIS) of the former Soviet Union have begun the
application process to join the World Trade Organization.  Since these
countries are high-cost producers of agricultural goods, particularly
livestock and other high-value products, U.S. agriculture could benefit from
their accession through increased exports.  More generally, the main benefit
both to the acceding countries and to their trade partners would be to
restrain growing protectionist pressure which, if unchecked, could impede
growth in NIS and Baltic trade.  Before accession, several problematic issues
must be addressed--e.g., state trading activities, food safety and product
standards, and the level of  domestic support to the farm sector. 

State Trading Enterprises: Their Role As Importers

For many countries, the creation of a central agency, or state trading
enterprise (STE), to handle domestic procurement and to plan import needs is
perceived as essential to the achievement of government policies such as
assurance of abundant, low-cost food supplies and stable farm prices.  Such
import-oriented STE's often have considerable power to control access to
domestic markets.  

WTO member-countries committed in the Uruguay Round to increase access for
imported commodities and to reduce support for agricultural producers. 
However, trading partners have expressed concern that lack of transparency in
the operations of STE importers makes it difficult to determine whether STE
importers actually restrict trade and the extent to which they subsidize
domestic agricultural producers.  STE's in Indonesia, Japan, South Korea, and
Mexico--all countries whose governments control imports of important staple
commodities--are among the largest enterprises that can be classed as STE
importers.  State trading practices will become increasingly important as
countries with centrally planned economies or countries in the process of
privatizing their agricultural production and marketing apply for membership
in the WTO. 

Carrots and Cranberries: Popularity Growing

Carrots finding increased favor among U.S. consumers.  In the 1990's, per
capita use of fresh-market carrots has averaged 25 percent above the average
of the 1980's, while use of carrots for freezing is up 30 percent during the
same period.  Carrots are popular as snacks, side dishes, salad ingredients,
juice mixtures, and dessert ingredients  (e.g., carrot cake).  Fresh-cut and
peeled carrots have been credited as the primary driving force in the growth
of the carrot industry.  As a result of increased demand, both domestic
production and imports have soared in recent years.  After a decade as a net
exporter of fresh carrots, the U.S. has become a net importer.  

Cranberry production rises to meet demand.  Traditionally eaten only with
holiday turkeys, cranberries are now consumed year round in the U.S.,
purchased as fresh berries, sauce, juice, and dried fruit.  With growing
demand and higher prices, production has increased, and the structure of the
domestic industry has begun to change with the entry of new firms.  Along with
increased demand, environmental constraints on U.S. growing areas have
propelled the search for new production areas in nontraditional locations. 
U.S. cranberry average annual production increased 88 percent from the period
1975-79 to 1992-96.  Over the same time span, harvested acreage increased 36
percent to a record 34,200 acres in 1996.  Increased consumer demand,
competition among processors to acquire an adequate supply of cranberries, and
low beginning stocks produced record prices in 1996, despite near-record
production. 

Multiple Jobholding Among Rural Workers

In 1996, 1.7 million rural workers in the U.S. held two or more jobs, a rate
of 7.1 percent compared with 6.2 percent of urban workers.  About one in five
rural workers employed in farming, forestry, and fishing held more than one
job, and among all rural workers who held more than one job, the largest
percentage of second jobs was in farming, forestry, and fishing occupations
(19 percent).  About 37 percent of rural moonlighters were self-employed in
their second jobs, with the largest share in service industries.  The highest
overall rural multiple jobholding rates in 1996 were found in the North
Central region, perhaps because of the region's high proportion of lower
paying jobs and the large number of jobs in farming, forestry, and fishing. 
Net outmigration and low unemployment rates in many rural areas in these
states have also provided more opportunity for workers to take second jobs.


BRIEFS

Field Crops

Overview: Major 
U.S. Field Crops

Weather conditions have been mixed this year for the major U.S. field crops as
harvests near completion.  A record crop is forecast for soybeans in 1997, and
the third-highest output on record is expected for corn.  U.S. wheat
production is forecast to be the highest in 7 years--the Hard Red Winter
production region has recovered dramatically from the 1995-96 drought,
rebounding from the low yields of the past 2 years and producing a record crop
in Kansas.  Rice production is also forecast to be higher in 1997, on the
strength of a 13-percent jump in planted acreage.  

With good harvests expected, season-average prices for wheat and soybeans are
expected to drop significantly from last year.  However, corn and rice prices
are forecast to remain relatively firm in 1997/98 due to strong domestic and
export demand.  

Cotton production is forecast to be lower in 1997, as some acreage was
diverted to soybeans, but output would still be the fourth-largest on record. 

U.S. farmers are forecast to harvest a record soybean crop in 1997, with
production up 14 percent from last year.  Extremely high soybean prices during
the spring months triggered a 10-percent increase in seedings, resulting in
the largest planted area of soybeans since 1982 and the third highest on
record.  In addition, timely rains during August in several midwestern states
improved potential yields and helped to speed crop development. 

Total soybean use is forecast up for 1997/98, as crushings are driven higher
by near-record domestic use and exports of soybean meal.  In addition, soybean
exports are forecast record high in 1997/98 with a rapid pace of sales to
China, the European Union, and Brazil.  But with the largest U.S. soybean
harvest in history and abundant international supplies anticipated, the U.S.
season-average farm price is forecast down sharply to $5.75-$6.85 per bushel,
from $7.38 in 1996/97.  

U.S. corn production for 1997 is forecast up slightly from last year at 9.31
million bushels, despite the highest planted corn acreage since 1985.  After a
very promising start to the season, crop conditions generally deteriorated
from early July through the middle of August due to widespread dryness across
the Corn Belt.  Nevertheless, the 1997 corn crop is forecast to be the third
largest ever.  

Forecast total use in 1997/98 is up sharply from 1996/97.  U.S. corn exports
are expected to be 13 percent greater in 1997/98 as reduced competitor
supplies--particularly in Argentina, South Africa, and China--lessen
competition in international markets.  Lower domestic feed grain prices have
also boosted U.S. corn usage in 1997/98.  Season-average farm prices for corn
are forecast at $2.55-$2.95 per bushel, compared with $2.70 in 1996/97 and a
record $3.24 in 1995/96.

The 1997 U.S. wheat crop is forecast 11 percent above last year and the
largest in 7 years.  Much of this increase resulted from a strong recovery in
Hard Red Winter wheat production in the Southern and Central Plains.  Yields
in Kansas, Oklahoma, and Texas had been severely reduced the past 2 years
because of prolonged dry conditions during critical growing periods and large
areas of winterkill.  

U.S. wheat exports are forecast slightly higher for 1997/98, due to production
declines for several export competitors.  But most of the increase in U.S.
wheat production is forecast to build 1997/98 ending stocks, rising by 50
percent over 1996/97.  As a result, 1997/98 U.S. farm prices are projected
lower at $3.30-$3.70 per bushel, compared with $4.30 in 1996/97.

Winter wheat planting for the 1998/99 crop year is currently underway in the
Southern and Central Plains.  Conditions are presently favorable because of
abundant soil moisture in both Kansas and Oklahoma.  The first USDA forecast
of winter wheat seedings will be released on January 10, 1998.

U.S. rice production in 1997 is forecast to be nearly 5 percent larger than
the 1996 crop on the strength of a significant expansion of planted acreage--
up 13 percent.  Higher output is expected in five of the six major rice
producing states, with Texas the exception.  Cold, wet weather in Texas this
year delayed rice planting and emergence, resulting in the smallest rice crop
since 1983.  In California a record crop is expected, as a warm, dry spring
promoted early completion of plantings, while a cooler-than-normal growing
season benefited yields.  And Arkansas, which generally accounts for 40
percent of the U.S. crop, is forecast to have its second-highest yield on
record, producing a bumper crop.

Total U.S. rice use is forecast 8 percent higher in 1997/98, driven mainly by
increased exports, primarily to Latin America.  Despite greater supplies, the
projected higher use results in a stocks-to-use ratio that would be the lowest
since 1980/81.  This has helped to support the season-average farm price,
forecast at a robust $9-$10 per cwt, compared with $9.90 in 1996/97.

Cotton production is forecast to decline 3 percent in 1997 as acreage
reductions occurred in Louisiana, Mississippi, and Tennessee.  Higher prices
of soybeans relative to cotton at planting time encouraged greater soybean
area, largely at the expense of cotton.  Despite lower acreage this year, 1997
is forecast to be the fourth-largest cotton harvest on record as crop
conditions have improved continually through the growing season.    
Slightly stronger domestic mill use and exports are forecast for 1997/98,
resulting in a moderate buildup in projected ending stocks.  The pace of
cotton export sales to several major buyers to date, including Mexico, Japan,
and South Korea, has been strong.   
Mark Simone (202) 694-5312
msimone@econ.ag.gov

For further information, contact: 
Dennis Shields and James Barnes, domestic wheat; Ed Allen, world wheat and
feed grains; Allen Baker and Pete Riley, domestic feed grains; Nathan Childs,
rice; Scott Sanford and Mark Ash, oilseeds; Steve MacDonald, world cotton; Les
Meyer, domestic cotton.  All are at (202) 694-5823.Livestock, Dairy, & Poultry

Growing U.S. Supplies, 
Uncertain Export Outlook 
Pressuring Meat Prices

Increasing U.S. supplies of meats--both seasonal and year-over-year--are
pressuring prices of pork and broilers downward this fall.  At the same time,
meats continue to trade under the shadow of uncertain domestic and
international demand.  Hog and broiler prices have been hit hardest by a
combination of expected large production increases (6-9 percent) in 1998 and
current exports falling below early expectations, especially for pork. 
Although the recent cattle herd liquidation is expected to lead to a fall of
about 2 percent for beef production in 1998, beef prices will be pressured by
lower prices for pork and chicken.

U.S. hog prices fell over $10 per cwt over the last 3 months, from the high
$50's per cwt in July to the mid-$40's in October.  During the same period,
broiler prices dropped close to 10 cents per pound, from the mid-60's to the
mid-50 cents.  Choice steer prices remain steady in the mid-$60's per cwt.  In
the final quarter of 1997, hog prices are expected to remain in the mid-$40's,
and broiler prices are expected to recover slightly but remain in the 
mid-50-cents range, while Choice steers move up slightly into the high $60's 
per cwt.
 
High-value wholesale broiler and pork cut prices also declined sharply from
July to early October.  Chicken breast meat prices dropped from 99 cents to 74
cents per pound, and whole pork loin prices declined from $123 per cwt to
around $100.  These lower prices will make chicken breasts and pork chops more
attractive for retail featuring than the more expensive Choice beef cuts,
limiting the competitive position of choice beef.

Despite recent price pressure, hog and broiler producers' returns have been
relatively favorable this year, and since feed costs in 1998 are expected to
be somewhat lower than this year, expectations are for continued expansion in
both industries.  The September Hogs and Pigs report confirms the June report
that producers are planning to increase the number of sows farrowing in the
coming months--farrowing intentions for September 1997-February 1998 are up 7
percent over actual farrowings a year ago.  On September 1, the broiler
hatchery supply flock was 5 percent higher than a year ago, which would
support a large increase in production.  

In contrast, beef cow numbers were down 3 percent as of July 1, predicting a
smaller 1997 calf crop than in 1996. A smaller number of calves will tighten
feeder cattle supplies in the coming year, reducing the number of cattle
placed on feed and ultimately the supply of U.S. beef.  

Slower-than-expected increases in export sales of broilers and pork have
influenced the recent weakening of prices.  Although broiler exports in 1997
are expected to grow about 5 percent, they are well below the double-digit
growth forecast earlier this year and witnessed over the past several years. 
While export growth to Russia, other Newly Independent States (NIS), and
Mexico has shown strong gains, the overall increase has been moderated by
falling sales to many Asian markets. The forecast for 1998 is for only a 
2-3-percent increase in broiler exports, as a result of a gradual slowdown in
expansion of exports to Russia and continued strong competition in Asian
markets from China, Brazil, and Thailand.

In the six largest Asian markets (Hong Kong, Japan, China, Singapore, Korea,
and Taiwan), U.S. broiler exports fell 19 percent in the first half of 1997. 
Broiler producers in China have provided strong competition, expanding their
share of the Japanese market, especially for deboned leg meat.  Thailand,
which had been losing market share in Japan, will also become a much stronger
competitor with the large devaluation of the Thai baht.  A substantial share
of the decline in U.S. broiler product exports to the Asian markets, however,
can probably be attributed to strong competition from other U.S. poultry
products.  Gains in exports of turkey products and mature chicken (spent
laying hens) have almost totally offset the decline in broiler sales.  

Broiler exports are seeing seasonal strengthening in the second half of 1997,
with gains to Mexico and Russia offsetting lower shipments to Asia.  The chief
uncertainty in the Asian markets is whether the economic downturns and
currency devaluations in Thailand and other Southeast Asian countries will
lower overall demand for poultry meats and increase the price of U.S. products
relative to those from Thailand or China.

Over the last several years, the increase in exports to Eastern Europe and NIS
has been the central factor in overall growth of U.S. broiler exports.  The
breakup of the Soviet Union and the resulting shift from government-controlled
agricultural production to a more market-oriented structure had led to a large
decline in domestic poultry production and the need for large imports. 
Changes in the agricultural sectors in these countries will likely continue to
hold the key to growth in U.S. broiler exports.

USDA has lowered its forecast for U.S. pork exports for 1997 and 1998, due
largely to weaker Japanese import demand than anticipated.  The U.S. is
expected to export a total of 1.064 billion pounds of pork in 1997, down 22
percent from the April forecast following the foot-and-mouth disease (FMD)
outbreak in Taiwan in March.  Exports in 1998 are expected to be 1.15 billion
pounds, down 27 percent from the initial May forecast.

Higher pork prices this year in Japan and the U.S., particularly since the FMD
outbreak, have reduced Japanese pork consumption and limited U.S. exports to
Japan.  The Japanese government even took the unusual step of waiving the 
4.7-percent tariff on pork imports for the month of August to increase
available
pork supplies and moderate high domestic prices.  U.S. pork has also faced
increased competition for the Japanese import market; Canada and South Korea,
in particular, have been aggressively marketing pork to Japan since last
spring.

Additional difficult-to-measure factors may be moderating demand for U.S. pork
in Japan.  Food safety concerns may have caused a shift in demand away from
imported products.  It is difficult to determine whether reluctance to consume
imported meat products indicates a permanent shift in Japanese consumer
preferences, or whether consumers will resume more normal consumption patterns
as E. coli outbreaks decline and animal disease problems such as BSE and FMD
come under control.

Japanese pork demand may also be affected by consumer responses to differences
in appearance and taste between U.S. and Asian pork.  Pork produced in Taiwan,
for example, is darker in color, sweeter in taste, and somewhat tougher in
texture than U.S. pork.  The absence of the anticipated surge in Japanese
demand for U.S. pork products since the FMD outbreak in Taiwan, could be a
signal that Japanese consumers view U.S. pork as a distinct product rather
than a substitute for pork produced in Taiwan or Japan.  Macroeconomic factors
in Japan--continued slow income growth, an increase in the consumption tax in
the second quarter, and a continued appreciation of the U.S. dollar relative
to the yen--are also likely slowing demand for U.S. pork.

While forecasts for exports to Japan have moderated, U.S. shipments to Canada,
Mexico, and South Korea have increased so far in 1997 and are expected to
continue to rise into 1998.  U.S. pork exports have filled the gap created in
the Canadian market by exports of Canadian hogs to the U.S. and by concerted
efforts by Canadian packers to increase market share in Japan.  Exports of
Canadian hogs to the U.S. are expected to moderate in 1998, however, as
Canadian packers bid more aggressively for hogs to fill new, lower cost
packing capacity and continue their efforts to service the growing export
market in Japan.

Mexican economic growth has translated into a 38-percent increase in imports
of U.S. pork, and first-half 1997 U.S. pork imports by South Korea are 40
percent greater than in 1996.  Continued growth in U.S. exports to Korea is
expected, following Korea's July 1 liberalization of its frozen pork import
market structure in accordance with WTO commitments.

For further information, contact:  Leland Southard, coordinator; Ron
Gustafson, cattle; Shayle Shagam, beef trade; Leland Southard, hogs; Mildred
Haley, pork trade; Jim Miller, domestic dairy; Richard Stillman, world dairy;
Milton Madison, domestic poultry and eggs; David Harvey, poultry and egg
trade, aquaculture.  All are at (202) 694-5797.

LDP BOX

Wholesale Turkey Prices on the Rise

Lower whole-turkey stocks and continuing strong export sales are expected to
keep wholesale hen turkey prices above last year, although turkey production
is expected to increase 1-2 percent this fall.  Slightly lower turkey meat
production in the first half of this year, and strong exports, have pulled
down whole-bird stocks to 3 percent below last year (as of August 31).  

Although wholesale turkey prices are expected to be about 2 cents per pound
higher than last year, early November retail prices (typically loss leaders
for Thanksgiving shopping) are expected to be near those of 1996.  Retailers
will likely absorb the additional difference to guard market share against the
extremely competitive position of hams.

Turkey processing margins have been negative since January, but are expected
to turn positive as wholesale prices experience their typical rise prior to
Thanksgiving.  Average returns are still expected to be negative for the year,
but should be considerably better than last year's loss of 6 cents per pound,
in part because of lower feed costs.

The competition between hams and turkeys is usually more intense for Christmas
than Thanksgiving, but August 31 stocks of hams in cold storage were 39
percent higher than a year earlier.  Ham prices in September were down nearly
25 percent from a year ago, and pork production, expected up about 2 percent
for the remainder of the year, should keep ham prices down.

World Trade

What Determines
U.S. & EU Trade
Market Shares?

A common perception is that the European Union (EU) has become an important
export supplier of agricultural commodities solely because of the Common
Agricultural Policy (CAP) that provides large subsidies for European farmers. 
However, policies affecting supply are only part of the equation affecting
aggregate market share.  Shifts in the composition of world demand for
agricultural goods can also alter the relative importance of the U.S., the EU,
and other agricultural supplying nations.  

Income growth, technological change, and the lowering of trade barriers have
increased worldwide trade in consumer-oriented processed products, especially
since the early 1980's.  Trade of fresh produce and chilled meat among
developed countries has also sharply accelerated, because of greater
efficiencies in transportation.  Increased competition in the shipping
industry and improvements in container technology permit perishables to be
transferred seamlessly across road, rail, and water.  Expanding imports of
higher valued agricultural products by the newly industrializing countries
have outpaced expansion of wheat, rice, and other bulk-commodity imports. 
This changing commodity mix of global agricultural trade has affected the
market shares of both the U.S. and the EU.

Aggregate market shares of the U.S. and EU are weighted averages of market
shares in all foreign commodity markets.  The weights are a country's share of
the world market for a specific commodity.  Changes in the importance in world
trade of bulk commodities (unmilled grains and oilseeds), intermediate
products (feed, flour, and refined sugar), horticultural and fresh produce
(fruits, vegetables, and flowers), and consumer-ready processed products
(grain-based foods, meat, and beverages) help explain changes in U.S. and EU
market shares.

The longrun share of bulk commodities in world agricultural trade has, with
the exception of an interlude during the 1970's, steadily declined, and the
share of consumer-ready processed products has increased.  In contrast, the
relative importance of intermediate agricultural commodities did not change
appreciably throughout the 1962-94 period.

The U.S. is the world's principal supplier of wheat, corn, and soybeans.  Bulk
commodity exports comprised about 60 percent of total U.S. agricultural
shipments between 1962 and 1994.  In the early 1970's, the Soviet Union
shifted away from a policy of self-sufficiency and began importing grain.  In
the same period, floods ravaged South Asia, and droughts plagued Sub-Saharan
Africa.  As a result, the relative importance of bulk commodities in world
trade increased, and total U.S. agricultural market share soared.  Between
1970 and 1981, the U.S. market share jumped nearly 7 percentage points, and 82
percent of the gain was from bulk commodities.  In contrast, bulk commodities
contributed only 20 percent to the 5-percentage-point rise in the EU
agricultural market share during this period.

U.S. market share reached a high of 25 percent in 1981, then fell
precipitously, dropping more than 7 percentage points to just under 18 percent
by 1986.  Part of the U.S. market-share decline was due to the global
recession and debt-repayment problems which hampered many developing
countries' ability to pay for bulk-commodity imports.  As aggregate EU market
share was climbing, U.S. market share declined because the structure of world
agricultural trade moved away from bulk commodities.

Consumer-ready processed products are a significant and growing component in
EU agriculture.  Exports from this sector comprised 45 percent of total EU
agricultural exports as early as 1962.  Mirroring global trade, the
composition of EU agricultural exports has moved toward more consumer-ready
processed products.  By 1994, these products comprised 55 percent of total EU
agricultural exports.  Much of the increases in the aggregate EU market share
can be explained by shifts in world agricultural trade toward more
consumer-ready 
processed products, goods in which the EU had retained higher market
shares than for the bulk commodities.

The growing importance in world trade of consumer-ready processed products as
well as horticultural and fresh produce accelerated between 1986 and 1994. 
Collectively, these two consumer-oriented product sectors contributed more
than 3 percentage points to U.S. market share during this period.  The U.S.
also increased its shares in most bulk-commodity markets at this time, but
this improved performance did not translate into a higher U.S. aggregate share
for agricultural exports because the importance of bulk commodities continued
to decline in global trade.

Market distortions, induced by policies such as the CAP, affect the individual
commodity market shares of the U.S. and the EU.  However, the changing mix of
demand for commodities also influences aggregate shares.  Changes in aggregate
market share of the U.S. and the EU reflect not only shifts in performance in
individual commodity and product markets but also shifts in the structure of
world agricultural trade.
Thomas L. Vollrath (202) 694-5285 and Mark J. Gehlhar (202) 694-5273
thomasv@econ.ag.gov
mgehlhar@econ.ag.gov


COMMODITY SPOTLIGHT

Cranberry Supply Expands
In Response to Higher Demand

Traditionally, cranberries were eaten only with holiday turkeys.  Americans
consumers now purchase cranberries year round in many forms, including fresh
berries, sauce, juice, and dried fruit.  In 1996, Americans consumed the
fresh-weight equivalent of 1.6 pounds of cranberries per person.  With growing
demand and higher prices, production has increased, and the structure of the
domestic industry has begun to change with the entry of new firms.  Along with
the demand for cranberries, environmental constraints to new production in the
U.S. has propelled the search for growing areas in nontraditional locations.

The 1996 U.S. cranberry crop totaled 4.67 million barrels (100 pounds), close
to the record of 4.68 million in 1994, and up 11 percent from the short 1995
crop.  Despite the rebound in production in 1996, the average grower price was
a record $62.50 per barrel, up 17 percent from 1995, bringing the farm value
of the 1996 crop to $292 million.  Increase in consumer demand for a variety
of cranberry products, and competition among handlers and processors eager to
acquire an adequate supply of cranberries, produced the stronger prices.  Also
supporting strong prices were relatively low stocks of cranberries at the
beginning of the 1996 season (September-August)--22 percent below the previous
year and the lowest since 1988.

The 1997 cranberry crop is forecast to reach a record 5.04 million barrels. 
Average production increased 88 percent from the period 1975-79 to 1992-96. 
Over the same time span, harvested acreage increased 36 percent to a record
34,200 acres in 1996, despite serious limitations to new use of wetlands for
cranberry production in recent years.  The Cranberry Marketing Committee, an
agency of USDA's Agricultural Marketing Service responsible for administering
the Federal cranberry marketing order, estimates that harvested acreage in
current U.S. producing areas will reach 38,794 by 2000, when recent plantings
reach full maturity at 5 years.  

Beginning in 1995, Wisconsin production surpassed that of Massachusetts, the
traditional cranberry industry leader.  In 1996, Wisconsin accounted for 42
percent of production and Massachusetts for 37 percent.  With urban pressure
and an already highly developed cranberry industry, Massachusetts has less
land available than Wisconsin for expansion of the cranberry industry.  The
Cranberry Marketing Committee expects an additional increase of 23 percent in
harvested acreage in Wisconsin by 2000. 

New Jersey, Oregon, and Washington are the other major cranberry producing
states, with 10, 7, and 4 percent of production.  Increased interest in
cranberries may lead to commercial production in other states, including
Maine, New York, Minnesota, and Michigan.  The state of Michigan offers tax
breaks and a technical team to evaluate sites for potential cranberry
entrepreneurs in an effort to revive the industry there.  

Wetlands such as bogs and marshes are the traditional cranberry production
areas.  But concern about loss of wetlands and water quality problems has led
to Federal regulations restricting new agricultural use of wetlands.  Building
a new cranberry bed in a wetland today would violate the 1972 Clean Water
Act's wetland usage rules.  State and local regulations often further limit
agricultural use of wetlands.  As a result, cranberry producers began
developing manmade wetlands about 10 years ago.  

Virtually all expansion of cranberry acreage in the U.S. in the last 5 years
has been on these artificial wetlands.  However, yields on manmade wetlands
lag behind those on natural wetlands, leading producers to search for
cranberry varieties that perform better in this new environment.  

New Products 
& New Firms

The cranberry harvest begins in mid-September.  Fresh berries are exported to
Canada for the Canadian Thanksgiving holiday in early October.  By the end of
October most berries have been harvested.  Fresh berries for the U.S. holiday
market remain in storage and are packed later.  But only 5 percent of the U.S.
cranberry harvest in 1996 went for fresh use, continuing a steady decline
generated by weak consumer demand for fresh berries and the higher profit
margin in cranberry juice.  

The industry estimates that about 90 percent of processed cranberries
currently go to juice, and about 10 percent to sauce and other products such
as dried cranberries.  Ocean Spray, the large grower cooperative whose brand
name is synonymous with cranberries, is credited with lifting the cranberry
from its minor role as a sauce to accompany turkey to its current identity as
a product to be consumed year round.  In the late 1960's, Ocean Spray
introduced cranberry juice cocktail.  Blended cranberry juice drinks (e.g.,
cranberry-apple juice) have also become very popular.  Demand for cranberry
juice increased further after the Journal of the American Medical Association
confirmed in 1994 that drinking cranberry juice helps fight urinary tract
infections.  New products such as dried sweetened cranberries, sold by Ocean
Spray under the trademark name of Craisins, are also catching on with
consumers.

The Ocean Spray cooperative dominates the industry, with members in the U.S.,
Canada, and Chile.  In 1996 it reported sales revenue of approximately $1.4
billion.  The cooperative provides growers a wide range of services,
encompassing production planning, pesticide and environmental management
expertise, processing, marketing, distribution, new product development, and
advertising (including promotions by Sarah Ferguson, Duchess of York).

In the mid-1980's, Ocean Spray controlled 85 percent of U.S. cranberry
production. Ocean Spray has traditionally tried to maximize grower returns by
expanding markets rather than production.  Growers have renewable 3-year
marketing contracts with Ocean Spray for purchase of production from a
specified number of acres.  Ocean Spray growers can produce additional acres
of cranberries outside their contracts, but they must market the product
through other channels.  Over time, high returns have led to a growth in
production outside of the cooperative and to an increase in competition from
independent processors.  

In recent years independent processors, eager to develop market share, have
enticed some growers away from Ocean Spray.  Although Ocean Spray still
controls the majority of the U.S. cranberry crop, its share has declined.  The
cooperative recently opened membership to new producers--the first time in
many years.  

Ocean Spray's market strength is in processed products, a sector it shares
with Northland Cranberries, Tropicana, Minute Maid, Veryfine, and several
other firms that produce for the private-label market.  As Ocean Spray reduced
its production for the fresh market, opportunities developed for other firms
to target that sector.  

Northland, once Ocean Spray's largest grower, has become the largest
independent grower of cranberries in the U.S. by specializing in production of
fresh cranberries sold under its brand name.  The company estimates it now
supplies 22 percent of the fresh market.  In 1996, Northland owned 1,935
harvested acres in Wisconsin and Massachusetts, up from 958 in 1992, and
purchased cranberries under contract from additional acres.   Northland now
also markets its own brand of juice.  The company reported 1996 sales of $37.6
million and is aggressively searching for new production to increase market
share.  Decas Cranberry Sales and Hiller Cranberry Sales also market fresh
berries. 

Going Abroad
To Grow Cranberries

Cranberry prices in the U.S. remain high, but the industry faces environmental
constraints to expanding production.  As a result, many processors, handlers,
growers, and entrepreneurs are looking into the potential for cranberry
production in other countries.  

Canada's wetland use regulations for agriculture are less restrictive than in
the U.S., allowing the industry there to grow in response to high demand
across the border.  Traditionally, British Columbia dominated Canadian
production, accounting for 98 percent of bearing acres in 1994.  Between 1994
and 1997, Canadian bearing acres in cranberry production increased 42 percent
to 3,761 acres, and Quebec became a significant production area with 20
percent of total acreage, leaving British Columbia with only 78 percent.  

Almost all producers in British Columbia belong to Ocean Spray, and their
production is shipped fresh to the U.S.  When Ocean Spray recently increased
membership, British Columbia gained a large share of the new contracts--bearing 
acres increased 13 percent from 1994 to 1997.  British Columbia
production for 1996 was 399,500 barrels, compared with 73,934 barrels in
Quebec.  In 1997, production area in Quebec is 702 acres, up 29 percent from
1996, with an additional 598 planted, nonbearing acres.  About 50 percent of
the cranberry acreage in Quebec belongs to the Ocean Spray cooperative.

Cranberry production is increasing in Newfoundland, Prince Edward Island, Nova
Scotia, New Brunswick, and Ontario.  Production in these provinces rose from
45 bearing acres in 1994 to 118 bearing acres in 1997.  The Canadian
government offers tax incentives for new production in some areas.

Producers and investors have also looked to Chile as a source of commercial
production.  Chile exported a very small amount of fresh cranberries to the
U.S. in 1994 but apparently now intends to focus on the cranberry juice
concentrate market.  Chile's third harvest in 1996, following years of
research and pilot efforts, produced 441 barrels from 700 planted hectares. 
In 1997, planted acreage is estimated at 1,000 hectares, and plans call for
expanding to 1,500 hectares by 2000.  

Cranchile, owned by a U.S. businessman and the largest company producing
cranberries in Chile, has built a large juice concentrate plant with a
capacity of over 30,000 metric tons.  Northland Cranberries has agreed to
purchase 20 percent of Cranchile's production.  The industry in Chile is so
new, however, that its potential for commercial supply remains uncertain.

Northland also has a joint venture with the Irish Peat Board--a 7-acre project
in its fifth year of testing and evaluating--but there may be a problem with
inadequate sunshine in Ireland for cranberry production.  Other areas that
appear to have potential for cranberry production include Russia, the Baltics,
and Eastern Europe.   

Trade--A Small Part
Of U.S. Cranberry Market

Canada has been the primary source of U.S. cranberry imports.  In calendar-year 
1996, fresh imports from Canada totaled 424,437 barrels, over 99 percent
of all U.S. fresh cranberry imports and 78 percent of total Canadian cranberry
production.  Denmark and Russia supplied the remaining fresh cranberry imports
in 1996.

Cranberry imports from Europe are generally assumed to be the European
cranberry, Vaccinium oxycoccus, not the North American cranberry, Vaccinium
macrocarpon, grown in the U.S.  The Food and Drug Administration allows both
the North American and European varieties to be labeled as cranberry.  The
European cranberry grows wild in northern Europe, and when U.S. prices are
high the wild berries are harvested and sent to the U.S.  The majority of
imports from Europe arrive as juice concentrate rather than as fresh or frozen
berries.  

The U.S. imports only a small amount of frozen cranberries--13,058 barrels in
calendar year 1996.  Canada has been the traditional source, accounting for at
least 95 percent of all frozen imports from 1992 to 1995, with the remainder
supplied by Sweden.  In 1996, however, Estonia and Russia entered the market. 
As imports of Canadian frozen cranberries fell 11 percent, Estonia captured 52
percent of U.S. imports, leaving Canada with only 40 percent, with the
remaining 8 percent split between Sweden and Russia.

No official trade statistics exist for cranberry concentrate, but concentrate
imports for the 1996 crop year are estimated at a record 107,200 barrels,
fresh-fruit equivalent, a small amount compared with the 4.3 million barrels
of U.S. production used for processing.  Imports of concentrate began in the
early 1990's.  From 1993 to 1996, 43 percent of concentrate imports came from
Sweden, 24 percent from Finland, 15 percent from the Netherlands, 8 percent
from Austria, 4 percent from Germany, 3 percent from Russia, and 2 percent
from Chile.  Sweden and the Netherlands both serve as concentrate processing
centers for berries grown in other places.

Although U.S. cranberry exports are growing, consumers in most countries are
not very familiar with the North American berry.  According to the Cranberry
Marketing Committee, exports as a percent of U.S. production increased from 3
percent in marketing-year 1987 to 10 percent in 1996.  As late as 1990, most
cranberries were exported in fresh form, but by 1996, less than 4 percent of
exports were fresh.  Sales to Canada have always dominated fresh cranberry
exports, and the United Kingdom has become an important new market.  No
official U.S. trade statistics exist for processed cranberry exports.  
Linda Calvin (202) 694-5244
lcalvin@econ.ag.govWhat's Up, Doc?--Carrots!

Carrots have found increasing favor among U.S. consumers.  In the 1990's, per
capita use of fresh-market carrots has averaged 25 percent above the average
of the 1980's, while use of carrots for freezing is up 30 percent during the
same period.  Carrots are popular as snacks, side dishes, salad ingredients,
juice mixtures, and ingredients in desserts (e.g., carrot cake).  As a result
of the increase in demand, both domestic production and imports have soared in
recent years.  The U.S. is now the second-largest producer of carrots in the
world behind China--Russia is third.

California Dominates
U.S. Carrot Production

Underscoring the rising popularity of carrots is an expansion in both the
acreage and the number of farms producing this root crop.  According to the
Census of Agriculture, carrots were produced on 2,039 farms in 1992--up 29
percent from the previous Census in 1987.  California accounts for 73 percent
of the fresh-market carrot crop, followed by Colorado and Michigan with about
5 percent each (USDA statistics include baby carrots and other fresh-cut
products in fresh-market output).  On the processing side (canned, frozen,
juice, dehydrated), Washington state produces about a third of the U.S. crop,
followed by California with 25 percent and Wisconsin with 13 percent.  

Fresh-market carrots account for 70 percent of total U.S. carrot output. 
Fresh-market volume is heaviest during the spring months (March May) and
lowest during the late-summer months (August September).  California produces
carrots for the fresh market year round.  Kern County, 90 miles northeast of
Los Angeles, is the center of California carrot production, followed by
Imperial and Monterey Counties.  With a constant supply of quality product,
California shippers are the price leaders in the carrot market throughout the
year.  Although California is the volume leader each month, other states such
as Michigan (during the fall) and Texas (late winter and early spring) have
also carved out market niches.

The shipping side of the fresh market is highly concentrated.  Although there
are eight shippers of fresh carrots in California, the two largest California
firms reportedly control 90 percent of the market for California fresh
carrots.  These large integrated grower/shippers contract with other growers
to produce carrots.  Similar to the processing side of the business, the
majority of fresh-market carrots are produced under contract or agreement with
a shipper or processor prior to planting.  Because of the concentration of
shippers and the cost of establishing a packing/processing plant, contracting
is more prevalent in the carrot industry than in most other fresh produce
industries where many growers also act as shippers.  

Carrot production in the U.S. is highly mechanized.  With few exceptions,
carrots for both the fresh market and for processing are machine harvested. 
Fresh-market carrots are harvested when most of the roots are 1 to 1.5 inches
in diameter near the top.  Different varieties tend to be used for processing
than for fresh consumption.  While the fresh market favors long slender
carrots with high sugar content, many processors can use short, thick
varieties since they are going to be diced, sliced, or otherwise cut.  In some
areas, processing carrots tend to be left in the ground longer to increase
size, dry matter, and color.

Over the past decade, carrot production has become increasingly segmented
between carrots for the fresh-market (including fresh-cut products) and those
for processing.  Because of their characteristics, the short, thick carrot
varieties have always been geared toward the frozen, canned, juice, or
dehydration markets.  However, in years past, some of the carrots destined for
fresh use ended up being processed when low fresh-market prices encouraged
diversion to the processed market. 

The rise of the fresh-cut industry has meant some of the misshapen and
otherwise imperfect carrots have an alternative profitable outlet.  Carrots
that would not have made the grade in a standard cello pack of fresh carrots
do not have to be sent to freezers or canners to be cut, diced, or juiced. 
Today, the cutting and peeling process for various fresh-cut carrot products
allows a majority of the raw carrots destined for the fresh market to become
fresh-market products.  One of the largest food processing facilities in the
world is a California fresh-cut carrot cutting/peeling/packing operation.

Domestic Demand
Surges in the 1990's

U.S. consumers have significantly increased consumption of carrots during the
1990's.  In terms of domestic use, carrots are now the seventh-largest fresh
vegetable (including melons) and third among frozen vegetables.  Use of 
fresh-market carrots totaled 10.2 pounds per person in 1996 up 23 percent since
1990, the highest per capita use since the 1940's and the third largest on
record.  Per capita use of carrots for freezing between 1990 and 1996 rose 22
percent to 2.8 pounds tied for the highest on record.  Although there is no
production or pack data for canned carrots, evidence suggests that canned
carrot use may have expanded as well during the 1990's.

What is driving carrot consumption higher?  A combination of several factors
are at work including: 

o  convenience of fresh-cut and peeled (baby) carrots;

o  rising nutritional awareness of consumers;

o  continued popularity of salads and salad bars;

o  economic expansion and life-style changes that fuel increases in away-from-
   home meals;

o  consumer interest in new organic products;

o  development of sweeter, more tender carrot varieties; and

o  new marketing approaches.

Why eat carrots?  A privately funded annual consumer produce survey ("Fresh
Trends," by Vance Research) consistently indicates that carrots are the
leading vegetable snack item--celery is usually second.  The annual surveys
have also shown that carrots are consumed for a variety of health-related
reasons including cancer prevention, vitamin/mineral intake, calorie control,
and fiber content.  For years, consumers have strongly associated carrots with
vitamin A.  In fact, 51 percent of the respondents to the 1994 survey
considered carrots the most nutritious vegetable, ahead of broccoli and
potatoes.

Always popular in salads, carrots have also consistently been identified in
consumer surveys as the most popular raw vegetable.  At the same time, carrots
were cited as lacking convenience because of time required for peeling and
cutting.  In response to this finding, "baby carrots" were introduced in 1988. 
However, possibly because of concern over cost and quality, the new product
did not catch on with consumers until the early 1990's.  Today, fresh-cut and
peeled carrots have been credited as the primary driving force behind growth
in the fresh and frozen carrot industries.  Baby carrot products are not tiny
carrots but are selected long and slender fresh-market carrots that have been
trimmed, grated, polished, and shaped into small uniform sizes.  

The kind of creative marketing that devised baby carrots is still at work. 
Recently, some airlines have decided to offer a new in-flight snack.  A small
pack of mini baby carrots produced by industry leader Grimmway Farms will be
offered on some flights as an alternative to peanuts.  In addition to carrot
sticks, baby carrots, and mini baby carrots, fresh carrot snacks also come in
the form of crinkle-cut pieces and "coins" small round shapes that are easy to
eat on the go.  Finally, demand for organic carrots is on the rise.  Organic
carrots, for example, may account for as much as 10 percent of the carrots
sold in the Boston wholesale market despite a strong price premium.

After a decade as a net exporter of fresh carrots, the U.S. has become a net
importer.  Although imports and exports have both been trending higher  in the
1990's, import growth has been stronger (up 82 percent since 1990 versus 32
percent for exports).  Much of the import growth reflects a combination of
rising demand for fresh-cut product and the 1994/95 peso devaluation which
caused imports from Mexico to jump 300 percent between 1994 and 1995.  Imports
of fresh-market carrots account for 8 percent of U.S. supply, up from 5
percent in 1990.

The popularity of fresh-cut carrots has spilled over into the import market as
producers in Canada and Mexico seek to replicate the success of U.S.
companies.  Imports from Canada and Mexico make the U.S. the world's 
third-leading importer of carrots.  The leading importer is Belgium-Luxembourg,
a primary point of entry for Europe.

Ninety percent of U.S. fresh carrot exports go to three countries Canada, the
United Arab Emirates (UAE), and Japan.  Shipments to Canada account for 84
percent of exports and help make the U.S. the world's fourth leading exporter
of fresh carrots.  The Netherlands is first, followed by Italy and
Belgium-Luxembourg.  Exports now account for 7 percent of U.S. supply and are
valued at $44 million.

Japan has slowly been opening as a market for U.S. fresh carrots.  The uniform
appearance and consistent high quality of today's fresh-cut and peeled
products is more appealing to Japanese consumers than a standard cello pack of
carrots.  Although accounting for just 3 percent of U.S. fresh carrot exports,
shipments to Japan totaled 6.9 million pounds in 1996 up from an average of
only 500,000 pounds in the early 1990's.  If this growth continues, Japan will
soon overtake the UAE as the second-leading export market for U.S. fresh
carrots.  
Gary Lucier (202) 694-5253
glucier@econ.ag.gov

COMMODITY SPOT BOX

Purple Carrots?

Carrots, a cool-season crop, are members of the parsley family and are
believed to have originated in western Asia near Afghanistan.  Originally,
carrots did not have the familiar orange hue of today.  Centuries ago, carrots
were various shades of white, purple, and yellow, with today's orange carrot
an apparent aberration reportedly developed in the sixteenth century by the
Dutch.  When carrots arrived in England and France soon after, the lacy green
tops were prized as an adornment for women's hats and hair.  And when early
European settlers came to Virginia, they brought carrot seeds to the New World
to grow the root for food. 

Carrots were reportedly used for medicinal purposes before becoming a popular
consumer vegetable.  Long ago, the Greeks are said to have used carrots to
cure stomach ailments.  Carrots also have other traditional roots.  During
Rosh Hashanah, the Jewish New Year, carrots are traditionally served--sometimes 
in round forms to look like coins--as a symbol of future prosperity.

Virtually devoid of fat, carrots are also low in calories and sodium and
provide dietary fiber, potassium, and vitamin C.  However, the carrot's
nutritional claim to fame is as a leading source of a carotenoid called beta-
carotene (other carotenoids measured by scientists and found in carrots are
alpha-carotene and lutein).  Beta-carotene is found in most yellow/orange
vegetables and melons (e.g., carrots, sweet potatoes, squash, and cantaloupe),
as well as in dark green leafy vegetables such as spinach and broccoli.  The
human body converts dietary beta-carotene as needed to vitamin A, a fat-soluble 
vitamin stored in the body.  Vitamin A is essential for normal vision,
regulation of cell development, healthy skin, and proper immune-system
response.


WORLD AG & TRADE

Fast-Track Authority:
Implications for 
U.S. Agriculture

A global proliferation of trade agreements is having an increasing impact on
U.S. and world trade patterns.  In the past decade, the U.S. negotiated 20
multilateral, 2 plurilateral, and over 180 bilateral trade agreements.  Of
these, one-fourth directly affect U.S. agricultural interests.  The effects
range from multilateral reductions in trade distortions such as export
subsidies, import tariffs, and domestic support, to increased U.S. access to a
specific foreign market for a specific product--e.g., beef in Japan.

U.S. agriculture is increasingly linked to the rest of the world.  Production
is growing more rapidly than domestic consumption, and the value of U.S.
products sold to foreign markets has risen three times as fast as domestic
sales.  Increasing access to foreign markets, through reductions in foreign
trade barriers and trade-distorting policies, will be essential for a
profitable and growing agricultural sector.  Comprehensively addressing
remaining agricultural trade issues will require multilateral and regional
negotiations addressing nontariff trade barriers and related regulatory
matters (e.g., sanitary and phytosanitary restrictions, agricultural
subsidies, antidumping and countervailing duties, and government procurement
or supply management).  U.S. ability to credibly and effectively negotiate
such treaties will require some form of  "fast track authority."

Fast-track authority explicitly enables the President to submit a trade
agreement with implementing legislation for congressional approval under
special, expedited procedures.  Congress retains the right of final approval
of the agreement and of the implementing legislation that makes necessary
changes in Federal laws or regulatory statues.  

Under past fast-track procedures, the President could submit to Congress the
text of a trade agreement with one or more foreign nations, along with draft
implementing legislation to make any "necessary and appropriate" changes in
U.S. laws.  Congress then had a maximum of 60 legislative days (90 for
legislation involving revenue) to approve or disapprove the complete package,
with no amendments permitted.  The most recent fast-track authority expired 3
years ago after approval of implementing legislation for the Uruguay Round
agreements.

Fast track is intended to strengthen the President's negotiating authority and
credibility by reassuring foreign trading partners that implementation of
agreements will be considered expeditiously by Congress and not be subjected
to changes that would force a return to the bargaining table.  The negotiators
of most other nations have the authority to make binding commitments for their
countries.  

In the past, fast-track authority has stipulated general and specific
negotiating objectives for the U.S. and included such requirements as advance
notification of Congress and advance consultations with relevant House and
Senate committees before an agreement could be concluded.  Lawmakers, in
effect, used these consultative requirements as informal legislative markups
to address, in advance, the various policy issues that otherwise might be
debated during enactment of the implementing legislation.

Not all U.S. initiatives to reduce trade distortions and gain increased access
to foreign markets require fast-track authority.  The President can negotiate,
without prior congressional approval, executive agreements with foreign
nations, although Congress must be notified of the intent.  Congress has also
granted authority, through legislation, to the Secretary of Agriculture to
ensure U.S. food safety, including negotiating with foreign governments the
rules governing inspections of agricultural products and processing
procedures.  

The Office of U.S. Trade Representative (USTR) also has authority to pursue
unfair trade practices and remedies and to enter into trade agreements that
will benefit U.S. trade, although any agreements requiring changes in Federal
law require congressional approval.  The Secretary of Agriculture and USTR
have effectively used their authorities to negotiate trade agreements
involving food safety and the removal of unfair barriers in specific foreign
markets.  

Farm trade initiatives negotiated bilaterally by the U.S. that did not require
changes in Federal law have achieved significant trade gains by enhancing
market access through reductions in both tariff and nontariff  barriers. 
Estimated U.S. net farm export gains from eight such agreements implemented in
the early 1990's amounted to about $3.3 billion.  The U.S. can continue
without fast-track authority to negotiate directly with trading partners to
lower specific high tariff and/or technical barriers remaining after the
Uruguay Round, but is limited in the range of concessions it can make.

However, extensive trade agreements requiring changes in Federal law have to
be submitted to Congress for approval.  Without fast-track authority, such
legislation would be subject to the normal uncertainties of the legislative
process.  The agreement or implementing bill might not come to a vote at all,
or would be subject to committee and floor amendments that might be
inconsistent with the agreement's provisions and significantly delay action. 


Potential Uses for
New Fast Track Authority

The fast-track process was first adopted in the Trade Act of 1974 and has been
used to enact bills to implement a number of trade agreements, beginning with
the Tokyo Round in 1979.  Implementing legislation for the U.S.-Israel Free-
Trade Area Agreement (1985), the U.S.-Canada Free-Trade Agreement (1988), 
and the North American Free Trade Agreement (1993) were all enacted under 
fast-track procedures.  The most recent use of fast-track authority was the
Uruguay
Round Agreements Act (1994) which provided implementing legislation for a
package of 54 multilateral and plurilateral agreements, understandings, and
ministerial decisions and declarations.

A new fast-track authority with more limited negotiating objectives would
focus on broad World Trade Organization (WTO) issues remaining after the
Uruguay Round:  tariff reductions, market access, export subsidies, and
domestic support.  A new fast-track authority would also extend to regional
trade agreements and issues such as state trading, sanitary and phytosanitary
barriers, and technical barriers to trade.  In addition, some groups advocate
incorporating environmental and labor concerns that may affect competitiveness
in trade. 

The Uruguay Round's (UR) Agreement on Agriculture requires that negotiations
for continuing the reform process be initiated 1 year before the end of the
implementation period (1995-2000).  A new round of WTO agriculture
negotiations is scheduled to begin in late 1999.  The agenda will most likely
cover issues defined in the Agreement on Agriculture, particularly those
relating to market access, domestic support, and export competition.   In
addition, new issues have surfaced with implementation of the Agreement on
Agriculture, such as tariff-rate quotas used by importing countries to
administer their market access commitments.  Other issues not directly
addressed by the Agreement on Agriculture, including the use of state trading
enterprises and technical barriers to trade, may be added to the negotiating
agenda.

Chile and the U.S. began negotiations for Chile's accession to the North
America Free Trade Agreement (NAFTA) in 1995, but talks were suspended, in
part because Chile wanted the U.S. to renew fast-track authority before
discussing what it views as sensitive issues.  Meanwhile, Chile has negotiated
its own trade agreements with several other individual countries, including
Canada and Mexico, and with the Common Market of the South (MERCOSUR).  
As a result, U.S. food and agricultural products headed for Chile face tariffs
11
percent higher than those encountered by MERCOSUR countries (Argentina,
Brazil, Paraguay, Uruguay).  Although Chile is not a major U.S. trading
partner, its accession to NAFTA is considered a significant step toward
broader economic integration in the Western Hemisphere.

Formal negotiations among 34 Western Hemisphere nations for a Free Trade Area
of the Americas (FTAA) are to begin in 1998.  Already more than 30 bilateral
and regional trade agreements are operating in the Western Hemisphere, and the
U.S. is party to only one--NAFTA.  At the same time, the European Union is
discussing a trade agreement with MERCOSUR, and Japan and China are sending
trade delegations to MERCOSUR countries.  With the spread of preferential
agreements that exclude the U.S., competition in these markets will become
more difficult for U.S. exporters.

Many of the Asia and Pacific Rim countries that are experiencing the most
rapid growth in incomes and consumer demand for U.S. food and farm products
belong, with the U.S., to the Asia-Pacific Economic Cooperation forum (APEC). 
APEC is seeking to establish free trade and investment arrangements by 2010
among members with industrialized economies and by 2020 among those with
developing economies.  

Such an agreement could have a significant influence on U.S. trade, since it
could reduce trade barriers for many U.S. products sold to the fastest growing
markets in the world.   A general commitment to a comprehensive agreement
means that agriculture would be included as a key element.  Other alliances in
the region, notably the Association of Southeast Asian Nations (ASEAN), also
have agendas for trade liberalization in which the U.S. and its agricultural
community will have a major stake.

In the past, fast-track authority has been limited to international agreements
focused on trade and trade policies.  Some interest groups would like
fast-track 
authority to allow inclusion of labor and environmental standards in
trade agreements.  These groups argue that unfair labor practices or lax
environmental standards in other countries would give them a competitive
advantage over the U.S.  Potential economic gains from trade agreements could
then be outweighed by the prospect of U.S. capital and jobs being exported to
countries where labor standards and environmental requirements are weaker. 
Conversely, opponents of including such issues under fast-track authority
argue that fast track might be used to force new labor and environmental
regulations for the U.S. through Congress, or to erect unfair barriers to
imports from developing countries.

Trade agreements may not be the most effective way to remedy most
environmental problems, since they are designed to reform trade policies, not
to provide disincentives to pollute.  International agreements focused on the
environment are the preferred, although often more difficult, method of
achieving gains in international or transboundary environmental goals.

The Unfinished Business
Of Trade Liberalization

Export markets are critical to U.S. farm prices and farmers' prosperity. 
Domestic production is increasing more rapidly than consumption, with U.S.
agricultural exports growing three times as fast as domestic demand for food.
Agricultural exports have risen from 18 percent of gross farm cash receipts in
1986 to 30 percent in 1996, and the share is expected to increase in the
future.

With an efficient agricultural sector, abundant natural resources, and an
excellent physical and institutional marketing infrastructure, most of U.S.
agriculture can effectively compete in a liberalized world trade environment. 
But trade liberalization for agriculture is far from complete.  U.S.
producers, processors, and exporters continue to face tariff and nontariff
barriers, unfair trading practices, and preferential trading arrangements in
key markets around the world.

Preferential trade agreements like MERCOSUR in South America, ASEAN in Asia,
and the Canada-Chile trade agreement provide members preferential access to
each other's markets for a broad range of agricultural products.  Without
similar access, U.S. producers and suppliers face constrained sales
opportunities in some of the world's most dynamic regional markets.  

State trading enterprises in some of the world's major trading nations
monopolize sales or purchases, creating unfair competition or restricting U.S.
access to their large markets.  In a number of countries, agricultural
products face high import tariffs, low tariff-rate quotas, and/or state
trading agencies that resell at high markups.  Agricultural products also face
sanitary and phytosanitary barriers based on questionable scientific
standards.  

Successful efforts to open international markets will contribute to sustaining
export growth.  Such efforts include negotiation of trade agreements that
reduce tariffs, address technical barriers to trade such as sanitary and
phytosanitary issues, curtail the use of trade-distorting domestic and export
subsidies, and generally provide a more transparent world market.  Export
growth advanced by further liberalization of agricultural trade will also
benefit off-farm income earners, taxpayers, and consumers.  U.S. agricultural
exports generate close to a million jobs, many of them off the farm.  Reduced
U.S. subsidies for exports would lower tax burdens.  Finally, consumers will
benefit from a wider variety of available products and the stimulation of
general economic growth.

Despite significant progress in opening markets over the past several years,
agriculture remains one of the most protected and subsidized sectors of the
world economy.  Because U.S. agricultural producers are among the most
competitive in the world, trade distortions in agriculture that limit access
to markets are a particularly pressing issue for the U.S.  Although bilateral
trade agreements and trade disputes pursued under a WTO framework by the U.S.
government will remain important means of opening foreign markets,
multilateral negotiations through the WTO process are necessary to
comprehensively address issues such as high tariffs, trade-distorting
subsidies, and other non-tariff trade barriers.  

If the U.S. leaves it to other nations to form new trade pacts and write
future rules for trade, U.S. producers, processors, and exporters could be at
a major disadvantage in the competitive marketplace of the 21st century.  For
the U.S. to continue to play a major role in writing the rules of
international agricultural trade, it will need to participate in these
negotiations.  Fast-track authority would increase the effectiveness,
efficiency, and speed of such negotiations. 
Ronald G. Trostle (202) 694-5280
rtrostle@econ.ag.gov

WORLD AG & TRADE BOX

Agricultural Trade Issues 
For Future Negotiations

High tariffs.  High tariffs in importing countries impede trade by reducing
the ability of lower cost producers in exporting nations to compete.  In some
cases, tariffs are high enough to completely shut exporters out of markets. 
The Uruguay Round Agreement on Agriculture generally required governments to
convert nontariff barriers to tariffs, but lacked strong guidelines for
establishing the tariff rates.  Many countries set tariffs at very high or
prohibitive levels.  Further reductions in tariff rates will increase market
access for U.S. goods.

Tariff-rate quotas (TRQ's).  To administer market access commitments made
during the UR's Agreement on Agriculture, many countries have established
TRQ's, which allow specific quantities of products to be imported at zero or
low tariff rates.  But there are a variety of ways to allocate quotas, some
more trade distorting than others, and the WTO guidelines are not precise. 
Small quota quantities and high duties for out-of-quota amounts--quantities
above the quota limits--effectively cap U.S. exports, and restrictive methods
of administering TRQ's also impede trade.  Renewed multilateral trade
negotiations could increase TRQ's to allow greater imports and could establish
rules that ensure TRQ's will be administered in a more transparent,
predictable manner.

Export subsidies.  Efficient producers do not require export subsidies to
compete as long as other countries are not driving them out of markets with
subsidized products.  Further reductions in export subsidies will likely be a
focus of the next round of negotiations.

Domestic support.  Domestic policies that encourage production of specific
commodities distort trade.  Policies that indirectly support agricultural
producers, such as disaster relief, selected environmental programs, and
regional and rural development programs, can also distort production and
trade.  The trade agreement disciplines on output-enhancing producer subsidies
are likely to be controversial in future negotiations.

State trading.  State trading enterprises (STE's) in some of the world's major
trading countries monopolize purchases or sales.  The activities of importing
or exporting STE's lack transparency and can be used to disguise protection or
support.  More rigorous disciplines could be imposed on the activities of
STE's in future negotiations.

Sanitary and phytosanitary (SPS) barriers.  SPS impediments to imports that
are not based on sound science and risk assessments can result in
protectionism disguised as concerns for public health.  SPS measures are
increasingly being used as barriers to trade.  Further trade negotiations
could increase the transparency of SPS rules and clarify the standard for
scientific justifications underlying those rules.

Regional trade agreements.  Preferential trade agreements among other
countries that exclude the U.S. represent a growing threat to U.S. export
prospects.  MERCOSUR is increasing its presence in Western Hemisphere trade,
ASEAN in Asian trade, and an expanded European Union in European trade.  Chile
has signed trade agreements with a number of countries.  Regional trade
agreements generally provide preferential access for members' exports, making
it more difficult for U.S. products to compete in these markets.  

Southeast Asian Ag Imports 
From the U.S.

The economies of Southeast Asia are among the fastest growing in the world in
the 1990's, emerging as key markets for a wide range of U.S. agricultural
commodities.  Imports from the U.S. totaled a record of almost $3.3 billion in
1996.  

Together the Philippines, Indonesia, Thailand, and Malaysia--the largest
markets in the region--increased imports of U.S. agricultural products at an
annual rate of 17 percent from 1990 to 1996, and this growth accounted for 10
percent of the expansion of U.S. agricultural exports over this period.  The
Philippines and Indonesia are the largest U.S. markets among the four
countries, but Malaysia has been growing the fastest.

Southeast Asia emerged in the 1990's as a market for U.S. agricultural
exports, despite its substantial agricultural sector.  The region remains a
strong producer and exporter of tropical products, but has become an importer
of commodities grown in temperate climates, such as wheat, corn, soybeans, and
apples.  A variety of factors--principally rapid economic growth--have driven
the demand for U.S. agricultural products.  However, the recent currency
devaluations in the region, which sharply boost import prices, are likely to
curtail import growth in the short run.

Rising Incomes Create
Trade Opportunities

Long-term economic forces have led to a sharp increase in U.S. agricultural
exports to Southeast Asia.  Underlying the increase are the effects of
economic growth and urbanization on consumption patterns; climatic and land
resource constraints on the region's agricultural sectors; expansion of
textile and leather product manufacturing drawing on the region's low-cost
labor; and import policy changes.

Since 1990, income growth as measured by gross domestic product rose 6.8
percent annually in Southeast Asia, and most of this growth was concentrated
in urban centers.  Rising incomes and urbanization explain much of the import
consumption increases occurring in Southeast Asia.  Higher incomes allow for
consumption of more expensive foods such as meat and fruit products.

From 1984 to 1994, meat consumption increased more than 4 percent annually,
compared with an annual increase of less than 1 percent in cereal consumption. 
Also, wealthier households purchase more processed foods, such as instant
noodles and bread made from wheat, to save time spent in food preparation. 
Finally, urban residents have easier access than rural residents to a wider
variety of food choices, including imported items.

Changes in the population's consumption patterns are outpacing the capacity of
domestic agricultural producers.  Land resources of the region are best suited
for tropical crops.  Thailand is a significant producer and exporter of rice,
cassava, sugar, poultry meat, and rubber.  Malaysia and Indonesia are large
producers and exporters of palm oil.  The Philippines produces and exports
coconut oil and sugar.

To meet the demands of rising meat consumption, more corn and soybean imports
are needed to supply the feed requirements for expanding livestock sectors. 
Although corn and soybeans are grown in Southeast Asia, yields are low
compared with temperate climate standards because suitable varieties have not
been developed for tropical environments.  Consequently, output expansion tied
to rising yields will be limited.

Converting forest land to agricultural use is one possibility for output
expansion.  Land conversion in the 1980's was an important factor in the
expansion of agricultural output as more than 12 million hectares (about 30
million acres) were converted to agricultural production.  But environmental
constraints and the rising cost of new land development have slowed expansion. 
In Thailand, in particular, extensive clearing of upland areas for growing
corn for export has led to severe erosion and flooding problems.  

The largest country in the region, Indonesia, still has large areas in
tropical forests, and large-scale projects are planned to convert more forest
land to field crop and tree crop production.  One particularly large project
involves converting 1 million hectares of forests to crop production on the
island of Kalimantan.  The peat soils of the area, however, will slow the
conversion process because these soils are not very fertile, cannot hold
moisture easily, and tend to subside.

Besides constraints on expanding production, domestic supplies of several key
agricultural inputs for manufacturing are also limited, thereby heightening
the role of imports.  As high wages in East Asia reduced the competitiveness
of their clothing and leather goods industries, these labor-intensive
manufacturing operations shifted to lower-wage Southeast Asia and China.  With
this shift, Southeast Asian imports of U.S. cotton and cattle hides increased
sharply over the last decade, especially for Thailand and Indonesia.  Cotton
is not a competitive crop in tropical climates, and domestic supplies of
cattle hides are generally of low quality from old draft animals whose hides
have been damaged over a long life or through inappropriate slaughtering
practices.

The region's policy regimes affecting imports vary, but generalizations can be
made across three broad categories of imported items; staple foods,
intermediate inputs for manufacturing, and consumer products.  Southeast Asian
governments have typically protected their domestic producers of staple foods--
particularly rice and soybeans--and have sometimes controlled the import of
wheat, an increasingly important foodstuff.  The import of intermediate
inputs--feedstuffs, cotton, and cattle hides--is generally less regulated than
staple foods.  The import of consumer products, particularly livestock
products, is highly regulated and/or taxed to protect domestic production. 

Trade & Consumption
Begin to Shift

Rice is the region's traditional staple food.  But with diet diversification,
the substitution of other foodstuffs for rice is leading to changes in import
patterns.  Wheat imports are rising as bread and noodle consumption increases. 
Feedstuff imports are expanding to produce the needed livestock products for
increased consumption of meats.  Horticultural imports are up as higher
incomes--and sometimes lower import tariffs--make these consumer items
affordable to a wider range of consumers.

Staple foods.  Most Southeast Asian countries have traditionally placed a high
value on self-sufficiency in rice.  However, these countries have been
significant importers during periods of unexpected production shortfalls.  For
example, poor weather conditions forced Indonesia to import 3 million tons of
rice in 1995, more than three times the level of imports in 1994.  While these
imports made the country the world's largest rice importer, they were still
only 9 percent of its total rice consumption.  Droughts caused by the current
El Nio may result in larger-than-normal rice imports by both Indonesia and
the Philippines.  When rice imports are needed, these countries use their
government-controlled state trading enterprises to limit imports to target
levels.

Wheat-based products are an increasing part of Southeast Asian diets.  In the
Philippines, Indonesia, Thailand, and Malaysia, wheat's share of total wheat
and rice consumption has increased from 12 to 19 percent over the past decade. 
The region's consumption pattern of wheat has also changed.  Demand for 
wheat-based oriental noodles has rapidly increased.  For example, in Indonesia,
the
largest wheat importer in Southeast Asia, consumption of noodles as a share of
wheat consumption has doubled to 55 percent in the past decade.

For the region as a whole, oriental noodles now account for about 42 percent
of wheat use.  The increasing consumption of oriental noodles is noteworthy
because Australia's white wheat is often favored over U.S. hard red wheat for
certain popular types of oriental noodles--particularly in Thailand and
Malaysia, where the U.S. share of the wheat market is relatively small.

Soybean products are an important source of protein for people in Southeast
Asia, particularly in Indonesia.  The tendency has been for governments to
protect their domestic soybean producers from lower cost producers outside the
region by restricting imports and assessing import duties.  But as the
region's livestock sector expands, these policies are coming under increasing
challenges from local feed manufacturers and livestock producers looking for
cheaper feedstuffs to fuel rapid development.

Feedstuffs.  Corn is important as both foodstuff and feedstuff in Southeast
Asia.  However, the region's trade in corn is related primarily to feed use. 
Across the region, food use is becoming a smaller proportion of use as
livestock industries expand rapidly.

The value of livestock amounted to only 15 percent of total agricultural
output in Southeast Asia in the late 1970's and 1980's.  Growth in livestock
output began outpacing crops in 1990, achieving a 20-percent share by 1995. 
Although the region's domestic corn production will increase, it is not
expected to keep pace with the rapidly expanding livestock sector, a trend
sharply reinforced when Thailand--the region's only major corn exporter--
recently switched from exporter to importer of corn.

To ensure adequate feedstuff supplies, these countries are expected to give
their feed manufacturers easier access to low-cost imported corn and soybean
meal.  For example, to reduce feedstuff costs, Indonesia deregulated soybean
meal imports in 1996.  BULOG, the country's state trading enterprise, no
longer controls the import of meal, and feed manufacturers can directly import
soybean meal as needed.  Thailand replaced its system of approving corn and
soybean meal imports on a case-by-case basis with a tariff-rate quota system
in early 1997.

U.S. exporters are sometimes at a disadvantage in supplying feedstuffs in the
region because U.S. exporters use larger ships than some of the region's ports
can handle.  Chinese corn exports, for example, are transported in smaller
ships more suitable for such ports.

Consumer products.  The leading horticultural exports to the region are
apples, grapes, frozen potatoes (french fries), and citrus.  Markets for these
temperate climate products have grown rapidly as trade barriers and tariffs
have been reduced.  For example, fruit imports by Indonesia, with the lowest
average income of the four countries, have grown rapidly since limits on fruit
imports ended in 1991.  Tariffs have been cut twice and U.S. fresh fruit
exports to Indonesia have increased more than twenty-fold from 1990 to 1996.

Temperate-climate product imports by these tropical countries are likely to
continue to expand as incomes rise.  Imports of frozen french fries should
continue to grow with the expansion of western-style fast-food restaurants. 
Although potatoes are an important crop in Southeast Asia, many Asian
consumers prefer the characteristics of  U.S. french fries.

U.S. meat exports to Asia have expanded rapidly, but not to Southeast Asia. 
Import markets for U.S. meats in Southeast Asia are limited mostly to hotel
and restaurant sectors, partly because of government policies that restrict
meat imports for other domestic uses.  Indonesia, the Philippines, and
Thailand regulate meat imports through trade restrictions and licensing, and
Malaysia licenses importers.

In addition to these policy barriers to trade, the lack of refrigeration
infrastructure often limits the import of perishable products, such as fresh
fruit and meats.  Without refrigeration, it is difficult to transport
perishable products inland from ports without excessive spoilage.

Long-term agricultural import patterns in Southeast Asia have provided a wide
range of opportunities for U.S. exporters of products made from temperate-
climate crops.  The currency crisis in Southeast Asia will slow import growth,
particularly for consumer products, in these countries for the near term.  But
the devalued currencies could boost the competitiveness of Southeast Asian
textile and leather exports, resulting in increased demand for cotton and
cattle hides.  Once the region's economies stabilize, more trade opportunities
will develop as consumption patterns continue to evolve with rising incomes,
increasing urbanization, and changing trade policies.
Gary Vocke (202) 694-5241
gvocke@econ.ag.gov

WORLD AG & TRADE BOX #1

Southeast Asia's Currency Crisis

Since July of this year, the countries of Southeast Asia have been the focus
of the world's financial markets.  Country after country in the region has
been forced to devalue its currency, lowering estimates of economic growth in
the near term.  The disarray in the financial markets has also dimmed U.S.
export prospects to the region for the near term.

Economic growth in Thailand, Indonesia, Malaysia, and the Philippines has been
fueled by export expansion, largely of processed agricultural products and
nonagricultural products.  The principal markets for these exports have been
the U.S., Japan, and Western Europe.  Many of these export products are from
facilities financed by foreign investors taking advantage of low-cost labor. 
Malaysia, Indonesia, and Thailand have been among the top 12 recipients of
foreign direct investment among developing countries since the 1970's.

Most Southeast Asian countries had pegged their currencies to the U.S. dollar. 
When the dollar dropped relative to the yen in the 1980's, Japanese
investments, in particular, flowed in and cheap exports flowed out.  Southeast
Asian countries' policies of linking their currencies to the U.S. dollar
partially underlies the financial crisis that has swept through the region
since July of this year.  As the dollar gained in exchange value against the
yen and European currencies, Southeast Asia lost export competitiveness over
the past year.

The exchange rates of these countries are now floating after large
devaluations against the U.S. dollar.  The currencies of Thailand, Indonesia,
Malaysia, and the Philippines (as of mid-October) had dropped 31, 33, 23, and
22 percent since early July.  This crisis is still unfolding, and its
consequences for Southeast Asian national economies are uncertain.

WORLD AG & TRADE BOX #2

Regional Agricultural Profile

Agriculture is still a key sector in the economies of Southeast Asia.  In
Indonesia, the Philippines, and Thailand, rice and corn account for 50-60
percent of the area harvested.  Malaysia's crop production is dominated by two
tropical tree crops--oil palm and rubber.  Tropical tree crops are also
important in Indonesia (coconut, rubber, oil palm), Thailand (rubber), and the
Philippines (coconut).  Rice is the principal staple food in all the
countries, with corn, cassava, and soybeans having minor roles, except in the
Philippines and Indonesia where these three crops have been important
foodstuffs since colonial times.

Corn has been grown primarily as livestock feed in Thailand, and now
increasingly for feed in the Philippines and Indonesia.  Corn supplies
livestock sectors dominated by poultry and swine.  Poultry is the largest
livestock sector everywhere, except for the Philippines where swine are
dominant.  Livestock in the region is produced to supply domestic demand,
except in Thailand, which is a major exporter of poultry meat.   For the
region as a whole, the expansion of poultry and pork production occurred
within a structure of large-scale commercial farms and intensive livestock
operations.  Pork production is limited in the predominantly Muslim countries
of Indonesia and Malaysia.

Cattle feeding is limited, as the region lacks extensive grasslands for
cow-calf 
herds.  The Philippines and Indonesia import range cattle from Australia
(more than 500,000 head in 1996) for short-term intensive feeding.  Dairy
production is also limited.

The two major feedstuffs in Southeast Asia are soybean meal and corn.  Soybean
meal is crucial in the region despite the production of large amounts of palm
kernel meal and copra meal.  Because of their high fiber and low protein
content, these tree crop meals are unsuitable for nonruminants such as poultry
and swine which predominate in the region.  As poultry and swine production
expands, demand for imported corn and soybean meal will rise, providing
increased opportunities for U.S. trade.


FARM & RURAL COMMUNITIES

Multiple Jobholding
Among Rural Workers

During the 1980's the multiple jobholding rate for the nation increased
significantly from 4.9 percent of the work force in 1980 to 6.2 percent in
1989.  Since 1989, the overall multiple jobholding rate has held steady at
around 6.2 percent.  In rural areas, however, the rate remains higher than in
urban areas, although the nearly 8-percent rate of the late 1980's has fallen
in the 1990's.  In 1996, 1.7 million rural workers held two or more jobs, a
rate of 7.1 percent.

While farming remains important as a source of jobs and income in many rural
areas, it is no longer the dominant rural industry, and even for the remaining
farm households, the nonfarm rural economy is a critical source of employment
and income.  The largest share of rural jobs and recent employment growth has
occurred in the service sector, mirroring the urban employment picture.  Rural
workers are employed in a wide range of occupations related to recreation,
retirement, and natural amenities, as well as in the financial, insurance,
real estate, telecommunications, and retail industries. 

About one in five rural workers employed in farming, forestry, and fishing
held more than one job in 1996.  Some of these workers were farmers who held
off-farm jobs.  Others were workers who took seasonal farm jobs in addition to
their primary employment.  Among rural workers who held more than one job, the
largest percentage of second jobs was in farming, forestry, and fishing
occupations (19 percent).  Farming was the most common second job for
moonlighters in blue-collar occupations including protective service (20
percent), precision production and craft (42 percent), machine operation and
assembly (23 percent), and transportation (37 percent), and among handlers,
cleaners, helpers, and laborers (33 percent). 

Professional specialty occupations accounted for 13 percent of second jobs
held by rural workers, and rural workers whose primary occupations were in
professional specialty fields were the most likely to hold more than one job. 
Many of these occupations have flexible work schedules, or regular time off,
allowing workers to take on other jobs.  

Rural elementary and secondary school teachers were the most likely to hold a
second job, with a rate of 12 percent.  Teachers also accounted for the
largest absolute number of rural multiple jobholders.  Other professional
specialty occupations such as health assessment and treatment (9 percent),
technicians (11 percent), and college and university teachers (10 percent) had
high multiple job holding rates, as did rural workers in administrative
support (8 percent), technicians (11 percent), and police and firefighters (10
percent).   

Many rural workers in services and sales occupations also held second jobs (18
and 15 percent).  About 37 percent of rural moonlighters were self-employed in
their second job, with the largest share in service industries.  In contrast,
only about 15 percent of workers who held a single job were self-employed.  

Most rural workers took a second job in the same occupation as their primary
job, or in a related field, but many second jobs were seasonal or low-paying
jobs that supplemented earnings to meet basic living expenses.  Workers most
often claim financial reasons for holding two or more jobs.  About 44 percent
of rural workers with more than one job in 1989 and 42 percent in 1991 held
multiple jobs to meet household expenses or to pay off debts.  Evidence
suggests financial reasons have remained a primary motivation.  Rural workers
whose median weekly earnings were in the lowest fifth had the highest multiple
jobholding rate (8 percent) in 1996.  

The Demographics of
Multiple Jobholding

The greater the educational levels a rural worker reported, the greater the
likelihood that the worker held a second job.  Only 4 percent of high school
dropouts held multiple jobs, compared with 10 percent of workers with a 4-year
college degree.  Workers with high levels of education may find it easier to
get a second job because they have more specialized knowledge and skills that
are in demand.  

Although workers with more education may have financial reasons for
moonlighting, nonfinancial reasons may strongly affect their decision to work
a second job.  For example, a second job may provide experience needed to
enhance a worker's primary occupation.  In addition, workers with higher
levels of education may have more flexible schedules that permit taking a
second job.  For example, occupations like teaching and nursing that demand
relatively high levels of education and have relatively flexible schedules
also have high rates of moonlighting.

The multiple jobholding rate was the same for rural men and women--7 percent. 
Men outnumbered women slightly in the absolute number of multiple jobholders,
comprising 54 percent of all rural multiple jobholders.  Married men were more
likely than single men to be multiple jobholders, while married women were
less likely to work at a second job than single women.  

While the multiple jobholding rate for rural men and women was virtually the
same, their work schedules were not.  About 83 percent of rural men who worked
more than one job in 1996 usually worked full-time on their primary job and
part-time on their secondary job.  About 14 percent of rural men worked
part-time 
in both primary and secondary jobs, while about 5 percent worked full-time in 
both jobs.  In contrast, only 55 percent of rural female multiple
jobholders worked full-time in their primary jobs and part-time in their
secondary jobs.  About 42 percent held multiple part-time jobs.  

Middle-aged rural workers, 45 to 54 years, had the highest multiple jobholding
rate of any age group, at 8 percent.  The multiple jobholding rate increased
with each working-age group, up to ages 45-54: 6 percent for teens, 7 percent
for workers age 20-24 and 25-34, and 8 percent for ages 35-44.  The rate
declined after age 54.  In urban areas, in contrast, workers age 45-54 had the
lowest multiple jobholding rate--6 percent--and those age 20-24 the highest--7
percent.

The moonlighting rate for rural whites was 7.5 percent, followed by blacks at
5 percent and Hispanics at 4 percent.  But blacks worked an average of 51
hours per week at their multiple jobs, compared with just over 50 hours for
Hispanics and just under 50 hours for whites, paralleling the pattern found in
urban areas.

In the North Central region, rural multiple jobholding rates were higher
across all major occupational and demographic categories.  A high proportion
of lower paying jobs and a large number of jobs in farming, forestry, and
fishing in these states likely contributed to the high multiple jobholding
rate.  Net outmigration and low unemployment rates in many rural areas in
these states have also provided more opportunity for workers to take a second
job.  The highest rates of multiple jobholding in this region were in
Minnesota and Wisconsin (both 12 percent); Nebraska, Montana, and Kansas (11
percent each); and Iowa and South Dakota (10 percent each).

The states with the lowest rates of rural multiple job holding were in the
South and Southwest.  South Carolina and Arizona had the lowest rate at 3
percent, followed by Tennessee and Georgia at 4 percent.  High inmigration and
unemployment rates in these states, relative to other regions, may have helped
keep the multiple jobholding rates low. 
Timothy S. Parker (202) 694-5435
tparker@econ.ag.gov

FARM & RURAL COMMUNITIES BOX

The Current Population Survey

This analysis draws on data from the 1996 Current Population Survey (CPS),  a
monthly survey of households conducted by the Bureau of the Census for the
Bureau of Labor Statistics. The CPS provides detailed information on the labor
force, employment, unemployment, and demographic characteristics of  the rural
and urban population.  

The CPS derives estimates based on interviews of about 47,000 households that
are representative of the U.S. civilian noninstitutional population 16 years
of age and over.  Labor force activity is based on respondents' activity
during the third week of each month.  Primary job is defined as the job at
which the respondent worked the most hours.  As a result of these survey
specifications, farm work may be recorded as a secondary job if more hours
were devoted to an off-farm occupation during the survey week, even when the 
worker would identify him/herself as a farmer.

Estimates of the basic demographic statistics in this article are based on the
full CPS monthly samples, while detailed information on occupations is based on 
surveys of a quarter-sample of respondents each month.  Because of changes
in the CPS during 1994-95, the 1996 survey marks the first time since 1993 that 
annual rural and urban data have been available, and the first time since 1991 
that multiple jobholding data have been collected.


SPECIAL ARTICLE

NIS & Baltic Countries 
Look To Join the WTO

Twenty-nine countries are currently in the process of accession to the World
Trade Organization.  Nearly half of the 29 are the Newly Independent States
(NIS) of the former Soviet Union and the three Baltic countries--Estonia,
Latvia, and Lithuania.  The accession has great potential to increase trade
that would benefit current WTO members as well as the acceding countries.  

The Baltic countries and 10 of the 12 NIS--Russia, Ukraine, Kazakstan,
Belarus, Uzbekistan, Kyrgyzstan, Moldova, Armenia, Azerbaijan, and Georgia
(Turkmenistan and Tajikistan are the exceptions)--have begun the application
process.  Since these countries are high-cost producers of agricultural goods,
particularly livestock and other high-value products, U.S. agriculture could
benefit from this trade expansion through increased exports.  With exports to
these countries already expanding, the main benefit of WTO accession, both to
the acceding countries and to their trade partners, would be to restrain
growing protectionist pressure which, if unchecked, could impede growth in NIS
and Baltic trade.  As the NIS and Baltic nations establish more market-oriented 
economic systems integrated into the world economy, their producers
are increasingly exposed to foreign competition, and the producers' response
has been to lobby strongly for protection. 

The U.S. and other WTO members would also benefit from more transparent and
predictable trade regimes in the acceding countries, based on WTO rules. 
Specific membership advantages to the NIS and Baltic countries are
most-favored-nation trade status vis--vis all other WTO members, access to the
WTO dispute resolution process, and the right to participate in future
negotiation rounds. 

However, joining the WTO is a lengthy, involved procedure.  An applicant
country's trade regime, economic policies, and laws must be reviewed by a WTO
working party to determine its compliance with WTO rules, and bilateral
negotiations on market access for trade in goods and services must be
completed.  Out of the working party meetings and bilateral negotiations
(between the acceding country and individual WTO members) come the applicant's
terms of membership--i.e., its Protocol of Accession.

Assessment of NIS and Baltic policies in the context of WTO rules is
complicated by the transitional nature of these countries' economies.  For
agriculture, several problematic issues--e.g., state trading activities, food
safety and product standards, and the level of  domestic support to the farm
sector--are common to most NIS and Baltic accessions.  These issues arise
mainly because the countries' policies are still to a large degree geared to
the nonmarket system of the former Soviet Union.

Trade Gains From 
WTO Accession 
Are Potentially Large 

The basis for mutually beneficial trade between countries based on comparative
advantage is that a country benefits from exporting those goods which it
produces relatively efficiently--i.e., at a lower cost--and imports goods it
produces less efficiently.  But during the Soviet regime the state was not
very interested in trade gains that could be obtained by specializing in the
production and export of goods with significant international cost advantages. 


The USSR's goal was to be as economically self-sufficient as possible--imports
were used to fill shortfalls in the economywide plan of production, and
exports were used to pay for needed imports.  The Soviet economy was not well
integrated into the world economy, and its production technologies were
typically inferior to those of the West.  As a result, large differences in
relative costs of production for goods inevitably existed with other
countries i.e., strong potential existed for increasing mutually beneficial
trade based on comparative advantage.

The USSR was a low-cost producer of natural gas relative to world market
prices, a medium-cost producer of machinery and equipment, and a generally
high-cost producer of agricultural goods--especially meat.  The USSR would
clearly have benefited from trading more low-cost goods for high-cost
products.  For example, for an additional unit of meat not produced (a unit of
a good is defined as the amount that would sell for $1 on the world market),
the USSR could have used the 2.5 rubles of resources saved to produce 25 more
units of natural gas.  If exported, the gas would have earned $25 on the world
market.  With this money, the USSR could then have imported 25 units of meat,
resulting in a substantial net gain from trade of 24 units of meat.  Although
the Soviet Union was a fairly large exporter of natural gas, it would have
benefited from producing and exporting even more gas, and from producing less
and importing more meat.  

Just as the USSR was a low-cost producer of natural gas and a high-cost
producer of grain and meat relative to the world market, a number of non-USSR
countries that produced for export were high-cost producers of natural gas and
low-cost producers of agricultural goods relative to the USSR.  These
countries would have gained from exporting more meat to the USSR in order to
purchase more natural gas.

The greater the difference between relative production costs for various
goods, the greater was the potential for the USSR to expand profitable trade
based on comparative advantage.  Economywide, Soviet relative costs of
production differed substantially from the prices of goods traded on the world
market, indicating that the country's foreign trade was far below the level
that would have maximized the gains from trade based on comparative advantage.

A good example of Soviet trade at odds with comparative advantage involved
agriculture.  Although the USSR was a high-cost producer of meat relative to
grain, during the 1980's the country imported large amounts of grain rather
than meat.  This behavior was inconsistent with its comparative advantage, but
was initiated as a matter of state policy beginning in the early 1970's when
the Soviet regime decided to substantially increase the livestock sector. 
From 1970 to 1990, Soviet output of meat and other livestock products rose by
about 50 percent.  The increase was achieved, however, only at very high costs
of production.  The Soviets were pushing the growth of livestock production
throughout the country, but particularly in northern regions.  These areas
lack agriculturally rich land, have cold climates, which means a shorter
agricultural season as well as high heating costs for livestock, and are
grain-deficit producers, requiring most feed to be transported in from other
areas.

Since economic reform began in the early 1990's, the NIS and Baltic countries
have substantially reduced both their livestock sectors and their grain
imports, and have increased meat imports.  In 1996 these countries imported
over 2 million tons of meat from outside the region, compared with average
annual meat imports of about 850,000 tons during the 1980's.  

Although the NIS and Baltic region as a whole appears presently to have a
comparative disadvantage in agriculture, favorable land and climate in certain
countries within the region probably give those countries some comparative
advantage in agriculture.  Ukraine and Kazakstan in particular are likely to
be net agricultural exporters, especially of grain.

Since reforms began, the structure of NIS and Baltic trade has been changing,
especially in agriculture, but the region has not yet exploited its full
potential for expanding trade according to comparative advantage.  In real
terms, aggregate NIS trade with nations outside the region is not much greater
than during the Soviet period, and has actually fallen in real terms for most
imported items.

One reason trade has not grown more is the general political and economic
disruption that followed the breakup of the Soviet Union, as well as the
disturbance to trade created by countries having to establish their own
currencies.  Also, in the years immediately following independence, all NIS
countries restricted exports severely, imposing complete bans for some goods,
particularly foodstuffs.  Fearing material shortages, governments wanted to
keep output within the country.  The drop in imports was largely the result of
two developments: a fall of more than 50 percent in consumer real income
following price liberalization--the lead policy of economic reform--and weak
currencies that kept import prices high.

However, the conditions impeding trade in the post-independence years are
gradually being corrected.  Political and economic uncertainty has diminished,
new national currency markets are functioning better, and most export controls
have been eliminated.  Real incomes in most NIS countries are rising, and
national currencies have been appreciating in real terms.  

Since economic conditions for trade expansion are improving, the main benefit
to both the world economy and the NIS and Baltic countries from the latter's
membership in the WTO would be to check growing pressure within the acceding
countries for trade protectionism.  Currently, import restrictions in most NIS
and Baltic countries are not particularly onerous--for agriculture or
economywide.  In Russia and Ukraine, tariffs for most agricultural imports
range from 10-30 percent, and quantitative restrictions on imports are
virtually nonexistent, at least for now.  

The relatively moderate nature of official trade controls is a legacy of the
Soviet period.  Under central planning, the state's strict monopoly over
foreign trade insulated domestic producers from the world economy, making
conventional trade policy instruments such as tariffs and quantitative
controls irrelevant.  However, market reform has exposed producers, not only
in agriculture but throughout the economy, to new pressures, requiring them to
sell their own output, find their own financing, and meet the challenge of
foreign competition.  Faced with these pressures, agricultural and industrial
producers throughout the region are lobbying actively for greater protection. 
Tariffs on agricultural imports have been growing, and several countries have
enacted legislation that provides for the introduction of agricultural import
quotas and other nontariff barriers to trade. 

WTO accession would counter protectionist pressure and encourage the
restructuring and growth of trade along the lines of comparative advantage. 
WTO membership would lock the NIS and Baltic countries into maximum allowable
tariffs for agricultural imports, forbid most types of quantitative trade
controls, and set upper bounds for state support to agriculture.  Accession
would also make NIS and Baltic trade policies more transparent and
predictable.

WTO membership would also bring the acceding countries some specific
advantages: instant most-favored-nation treatment and access to the WTO
dispute mechanism, an important tool for smaller countries with less economic
"muscle."  For example, access to the WTO dispute mechanism would be useful
given the charges of dumping made by various countries against NIS nations,
often resulting in import restrictions--as in the case of Russian fertilizer
exports to the EU.  Entry into the WTO would also provide a seat for the
acceding countries at the negotiating table, allowing them to influence future
WTO trade rules.

The growth of NIS and Baltic agricultural trade that WTO membership would
promote would benefit U.S. agriculture.  The severe contraction of the NIS and
Baltic livestock sectors during reform has substantially reduced the region's
large imports of grain, soybeans, and soybean meal used as animal feed, which
has hurt U.S. exporters of agricultural bulk products (AO January-February
1997).  However, the region has become a fast-growing market for processed and
consumer-ready high-value food products, particularly meat.  Since 1992, U.S.
annual exports of processed agricultural goods to Russia have risen in value
from less than $100 million to about $1.2 billion.  For the past 2 years
Russia has been the top destination for U.S. poultry meat exports, which in
1996 reached nearly 1 million tons.

Accession Linked 
To Market Reform

To a large degree, progress in WTO accession is correlated with the extent to
which NIS and Baltic countries have implemented market reforms.  Estonia and
Latvia, two of the most reformist countries in the region, have made the most
progress in their accession bids and have already begun to formulate their
Protocols of Accession.  Russia and Ukraine, two of the largest NIS countries
involved in WTO accession, have already had several working party meetings and
bilateral consultations, and the next working party meetings are scheduled for
the end of 1997.  However, countries which are moving much more slowly on
reform, such as Belarus and Uzbekistan, are only beginning the accession
process. 

Several potentially problematic issues involving agriculture are common to
most of the NIS and Baltic accessions.  These issues, which arise largely
because of the transitional nature of the economies of these countries, can
make it difficult to evaluate their agricultural policies in a WTO context. 
Two of the main areas of concern are market access--i.e., the extent to which
a country permits imports--and internal support for domestic agriculture.

Market access.  Most NIS and Baltic countries, including Russia and Ukraine,
have not imposed quantitative restrictions on agricultural imports.  Instead,
current official restrictions consist primarily of tariffs.  This is
consistent with the spirit and rules of the WTO. 

Although in some NIS and Baltic countries agricultural tariffs have been
rising, they are not yet overly restrictive.  As mentioned earlier, in Russia
and Ukraine tariffs for major agricultural imports range from 10 to 30
percent.  However, some NIS and Baltic countries, including Russia and
Ukraine, have introduced minimum per-unit tariffs in addition to ad valorem
taxes.  The combined tariffs may raise the effective ad valorem rates, which
creates difficulties in negotiating and then policing the eventual bound
tariff rates (set at a rate that cannot be exceeded).  In addition, several
countries have enacted legislation providing for introduction of import quotas
and other nontariff barriers to trade, measures which generally violate WTO
rules.  

Another area of concern involving market access is state trading.  In WTO
parlance, state trading is the exercise of special rights and privileges
granted to government or nongovernmental enterprises, which alter the
direction or level of trade.  All WTO members are required to report their use
of state enterprises to conduct trade (AO December 1996).

Almost all countries in the region have abandoned complete state control over
agricultural trade.  However, in the less reformist countries such as Belarus
and Uzbekistan, the state maintains strong influence over both the direction
and volume of agricultural trade, often through agencies privatized in name
only.  In Russia and certain other countries, many of the foreign trade
organizations that handled trade under the Soviet regime have been converted
to joint-stock companies in which the government continues to hold (sometimes
majority) shares.  In Russia, this relationship has given impetus to granting
tax exemptions for such companies, as well as exclusive buying/selling rights
and concessional credit tied to specification of import sources.

Since these privileged organizations are largely importers rather than
exporters, the concessions granted them have probably increased, rather than
decreased, the region's imports of foodstuffs.  However, as the array of
policy instruments to protect domestic producers declines, the relationship
between the state and these organizations, as well as other types of state
trading arrangements, could be used as an indirect way to reduce imports.

Agricultural trade among NIS countries also raises questions of state trading. 
Much of this trade is conducted through interstate agreements that specify
trade volumes.  Frequently an NIS country will authorize a single company or
agent to fulfill an interstate trade agreement.  The use of a sole agent to
trade on a noncommercial basis may constitute state trading, while inter-state
barter trade agreements raise questions of trade discrimination.

Sanitary and phytosanitary (SPS) issues and technical barriers to trade (TBT)
are further areas of concern regarding market access.  The NIS food safety and
standards systems, largely retained from the Soviet period, might not fully
comply with WTO rules.  Most of these countries lack a single inquiry point
for information on standards and SPS requirements, and there is currently
inadequate transparency in the adoption and notification of measures, as
required in the Uruguay Round SPS and TBT agreements.  

For example, Russia has introduced new labeling requirements (scheduled to go
into effect on May 1, 1997) for foodstuffs and a holographic mark of
conformity for certain items.  These regulations were not introduced in a
manner consistent with WTO provisions on TBT's, as the transparency
requirements were not observed and a transition period was not included in the
original legislation. 

A final problem concerning market access in some countries, particularly
Russia, is the issue of regional controls on agricultural flows, which are
often tied to the continued power of procurement by local authorities.  While
most controls in Russia and Ukraine have been on the export side, some
localities (such as the Sverdlovsk and Magadan regions in Russia) are turning
to tariffs or other import restrictions.  Although most of these practices
violate federal law, central-government weakness vis-a-vis the regions has
made enforcement difficult.  WTO members will seek assurances that regional
policies will not undermine trade concessions negotiated with the federal
government.

Internal support.  The NIS and Baltic nations will be required to commit to
reductions in domestic support of agricultural production.  Each country must
quantify its level of domestic support by calculating and submitting to the
WTO an annual Aggregate Measure of Support (AMS).  

Each country commits to reduce domestic support from a base-period AMS.  For
acceding countries the base period is the three most recent years of available
data.  For each succeeding year, a country's AMS calculation must not exceed a
negotiated, gradually declining limit expressed as a percent of the base-period
AMS. 

Several problems common to most NIS and Baltic countries make it difficult to
compute the annual AMS, particularly for the base-period years.  These
complicating factors include high inflation, capturing support at the
sub-national level (which is sizable in Russia), and handling the writing off
of state loans to agriculture.  Russia's inflation rates in 1993, 1994, and
1995 were 840, 215, and 130 percent, and the rates in most other NIS countries
were higher.  With inflation, the calculated level of support can differ from
year to year, not only because support has changed in real terms, but because
prices and monetary values in general have been inflated.  If the AMS for a
country is to be expressed in its own currency, a common approach to adjust
for inflation has been to express all annual values in constant value of a
given year.

It is not likely that support to agriculture will prove a major sticking point
in accession negotiations, despite the difficulties encumbering AMS
calculations.  Most NIS and Baltic countries are fiscally weak, with little
funds available for agricultural support.  Furthermore, state support in the
region has fallen substantially from the Soviet period.  During the late
1980's, total Soviet budget subsidies to the agriculture and food economy were
estimated at about 10 percent of GDP.  In contrast, Russia's agricultural
support in 1995 from governmental budget expenditure (including tax breaks and
soft loans) is estimated at 2-3 percent.

The specific terms of WTO accession are important for U.S. agriculture. 
Emphasis in negotiations will be on ensuring market access opportunities
through tariff bindings (setting rates that cannot be exceeded) and the
removal of all nontariff barriers to trade.  Transparency in how state trading
enterprises conduct trade is vital, so that their activities do not circumvent
market access commitments.  And commitments to comply with rules on SPS
measures and TBT's will be sought, to ensure that such barriers to U.S.
products are based on science or international standards.
William Liefert (202) 694-5156
wliefert@econ.ag.gov

SPECIAL ARTICLE BOX

How Countries 
Join the WTO

The WTO builds on its predecessor, the General Agreement on Tariffs and Trade
(GATT), by incorporating the results of the Uruguay Round (UR) of trade
negotiations, which strengthened existing rules and introduced new disciplines
in the areas of trade in services and intellectual property rights (AO
December 1996).  All UR agreements plus the amended version of the GATT (known
as GATT 1994) form the basis for accession negotiations.  As a result,
accession to the WTO has become more complex. 

Article XII of the Final Act--the legal document containing the texts of all
provisions agreed upon during the UR--states that any country or separate
customs territory with full autonomy in formulating trade and economic policy
can accede to the WTO, under conditions negotiated by the acceding country and
WTO members.  The accession process begins when a country requests the
formation of a working party to consider its application.  The working party,
open to all WTO members, reviews the applicant's trade and economic policies
to assess their consistency with WTO rules and to develop the terms of
accession.  This process helps member countries better understand the
applicant's policy regime and its ability to abide by WTO trade rules.  The
working party also provides a forum for members to identify areas where the
applicant should make changes to conform with WTO rules.

Simultaneous with the working party process, bilateral negotiations are held
between the acceding country and interested individual WTO members.  In
agriculture, these talks focus on establishing commitments for market access,
internal support, and export subsidies, and on related issues such as sanitary
and phytosanitary (SPS) measures.  Generally speaking, the working party
process does not end until all bilateral negotiations are completed.

The U.S. government, in preparation for bilateral negotiations, posts a
request in the Federal Register for public comments on a country's accession
and consults with the private sector to identify priority areas.  Based on
responses, an interagency committee, chaired by the Office of the U.S. Trade
Representative, develops a formal U.S. request on tariffs and other trade
measures, which forms the basis for negotiations.

Once bilateral negotiations have ended and the working party has concluded its
review, a protocol package is prepared which consists of the working party
report and a draft of the Protocol of Accession--i.e., the terms of accession
and any accompanying special provisions.  After the working party approves
these documents, they are submitted to the WTO membership for final approval,
with a two-thirds vote needed for approval.  The applicant country becomes a
member 30 days after its acceptance of the terms of accession, either by
signature or by submitting proof of ratification, if the country requires
legislative approval.

The terms of WTO membership are contained in the Protocol of Accession, which
sets out a country's commitments to meet the requirements of all WTO
agreements and the GATT 1994.  Annexes to the Protocol generally contain
special provisions, such as schedules to phase out policies that must be
terminated by the date of membership.

Commitments to bind and reduce tariffs on agricultural products, which are
negotiated bilaterally, are consolidated into the Agricultural Country
Schedule and annexed to the Protocol.  This schedule also contains commitments
on export subsidies and domestic support.  An acceding country must negotiate
market access commitments for trade in other goods and for services, which are
also annexed to the Protocol.
Sharon Sheffield (202) 694-5167 
Sheffiel@econ.ag.gov
State Trading Enterprises: 
Their Role As Importers

For many countries, the creation of a central agency, or state trading
enterprise (STE), to handle domestic procurement and to plan import needs is
perceived as essential to the achievement of government policies such as
assurance of abundant, low-cost food supplies and stable farm prices.  Most
discussions of STE's involve the export marketing boards, e.g., the Canadian
Wheat Board, that stabilize and support farm prices by encouraging trade
expansion.  But the import STE's that can control or restrict trade are
important as well, and often have considerable power to control access to
domestic markets.  In addition, in periods of bountiful supplies these STE's
may also export agricultural commodities to support domestic farm prices.

Under the Agreement on Agriculture in the Uruguay Round of multilateral trade
negotiations (completed in 1994), participating countries agreed to increase
access to their markets by converting quotas and other quantitative import
restrictions to tariffs and subsequently reducing the tariffs over several
years.  Recognizing the importance of STE's in controlling access to import
markets, the Agreement on Agriculture explicitly prohibits countries from
reverting to non-tariff restrictions, including "non-tariff measures
maintained through state trading enterprises."  

WTO member-countries also committed to reducing their support for agricultural
producers.  However, trading partners have expressed concern that lack of
transparency in the operations of STE importers makes it difficult to
determine whether STE importers actually restrict trade, and the extent to
which they subsidize domestic agricultural producers. 

Reviewing the Classification Scheme for Importer STE's.  A classification
scheme which compares and contrasts the chief characteristics of STE importers
provides some indication of an STE's potential to distort trade.  This
framework was previously applied to STE exporters (AO June 1997).

Ownership regime provides insights into the objectives of an STE, its reasons
for existence, its management, and its financial linkages to the national
treasury.  Most STE importers are government agencies or corporations that
were established to support and stabilize domestic consumer and/or producer
prices.  Some STE importers, such as Japan's Food Agency, contribute "monopoly
rents"--i.e., profits that result from buying on international markets at
world prices and selling at much higher prices in tightly controlled domestic
markets--to their national treasuries.  Import revenues gained by STE's may be
transferred to other agricultural agencies to support domestic farm prices or
subsidize consumer prices.  Government funding may provide insurance against
risk for STE importers. 

The product regime--i.e., range of products covered--defines an STE's ability
to differentiate its products and regulate the use of substitutes.  Some STE
importers control trade in only one commodity, while others control trade in a
variety of commodities and their semi-processed products.  If an STE imports a
variety of commodities and their processed products, it has more potential to
affect market access opportunities.

Market regime refers to an STE's control of exports, imports, domestic
procurement, and domestic marketing.  If an STE controls all four of these
activities, its potential to distort trade is likely to be much greater than
if it controlled fewer, or none.  Many STE importers, for example, control
both imports and domestic markets.  An STE that controls its domestic market
and imports may choose to protect administered domestic prices by discouraging
imports.  Most STE importers either import the commodities themselves or
contract with private traders for imports either directly or through a tender
system.  

Policy regime refers to the policies available to or administered by an STE to
control the flow of imports.  In the past, trade policies such as quotas and
outright bans were the primary policy tools used to restrict imports.  In
today's post-UR environment, non-tariff restrictions must be converted to
tariffs, which will become the principal tools of the trade (AO December
1996).  Domestic policies range from supply control and procurement to the
marketing of imported goods.  For many STE importers, market regime and policy
tools are inseparable. 

The list of major STE importers is headed by Japan's Food Agency and
Indonesia's Badan Urusan Logistik (BULOG).  STE's in Indonesia, Japan, the
Republic of South Korea, and Mexico--all countries whose governments control
imports of certain important staple commodities--are among the largest
enterprises that can be classed as STE importers.  The major STE's from these
four countries--the Korean Ministry of Agriculture and Forestry (MAF) and the
Korean Livestock Products Marketing Organization (LPMO); Japan's Food Agency;
Indonesia's Badan Urusan Logistik (BULOG); and Mexico's Compania Nacional de
Subsistencias Populares (CONASUPO)--are government agencies or corporations. 
An exception among the major STE's is Japan Tobacco, Incorporated, the second-
largest STE importer, which was recently privatized.

Japan.  Japan uses price supports supplemented by strict border measures to
maintain income for its agricultural producers.  Since November 1995, the Food
Agency of Japan's Ministry of Agriculture, Forestry, and Fisheries has
controlled production, pricing, and marketing of domestic wheat and rice, as
well as the importation and pricing of imported rice and most imported wheat.

Japan reported to the WTO three STE's--Japan's Food Agency, Japan Tobacco,
Inc., and the Agricultural and Livestock Corporation--for a range of
agricultural products.  Japan's Food Agency was the sole importer of rice,
wheat, and barley, and now administers Japan's WTO market access commitments
for those products.  Imports of wheat and wheat products by the Food Agency
averaged $1.14 billion from 1993 through 1995; wheat imports accounted for
about 77 percent of domestic supplies--beginning stocks, imports, and domestic
production--for this period. 

From 1993 to 1995, Japan's rice imports accounted for 10 percent of domestic
supplies.  Prior to the Uruguay Round, a ban limited Japan's total annual rice
imports to 20,000-30,000 tons, destined for Okinawa, although the MAFF
purchased rice when needed.  Rice and rice product imports jumped temporarily
to 2.5 million tons in 1994, valued at $1.48 billion, due to a major rice crop
failure.  

In the Uruguay Round, Japan agreed to open its rice market to imports of
379,000 tons (4 percent of base-period consumption) beginning in 1995. 
Japan's minimum access commitment will double by 2001, the end of the
implementation period.  Japan also negotiated a maximum mark-up of 292 yen per
kilogram (about $2,500 a ton) for rice imports sold in the domestic market. 

Japan also has a WTO tariff-rate quota for wheat of 5.65 million tons in 1995,
which will rise to 5.74 million in 2001.  Japan's maximum mark-up for wheat
imports of 53 yen per kilogram (about $457 a ton), will fall to 45.2 yen per
kilogram (about $390 a ton) in 2001.  Japan also has an over-quota tariff for
wheat of 65 yen per kilogram, which will fall to 55 yen per kilogram in 2001.
The mark-ups reflect Japan's support for its domestic rice and wheat
producers.  High mark-ups for wheat and rice are encouraging importers to
purchase more highly processed wheat and rice products such as prepared dough.

The Food Agency conducts general tenders for its rice imports as well as
tenders under a Simultaneous Buy-Sell System (SBS) which allows private firms
to propose rice purchases that fit their specifications.  From April 1996
through March 1997, SBS rice imports accounted only for about 5 percent
(22,000 metric tons) of Japan's rice imports under its minimum access
commitment.

Registered Japanese and international trading firms bid for wheat imports
under tenders conducted by the Food Agency.  The Food Agency confers with
flour millers and other wheat users to establish tender specifications.  For
import quantities above the WTO tariff-rate quota, private firms are allowed
to import wheat directly.  Over-quota wheat imports amounted to more than 1.5
million tons in 1995, or 25 percent of total wheat imports, but dropped to
almost zero in 1996.  Wheat flour millers also are permitted to import wheat
directly if they plan to export the flour.  On average, about 300,000 tons of
wheat flour has been exported annually.
 
Japan's Ministry of Agriculture, Forestry, and Fisheries (MAFF) controls the
domestic marketing and pricing of rice and wheat.  Japan's rice growers sell
their rice to local agricultural cooperatives which, in turn, market the rice
to prefectural cooperatives.  Two official channels dominate national-level
procurement--the Food Agency, which procured about 15 percent of domestically
produced rice in 1996, and two major associations of cooperatives.  About half
the rice produced in Japan is marketed through these two official channels.

The MAFF specifies the total quantity of rice marketed to official buyers in
its annual rice distribution plan and allocates quotas to farmers through
their local cooperatives.  Farmers who sell rice outside the official
marketing channels must report their sales in advance to the MAFF.

Although Japan's wheat producers have the option of marketing their wheat and
barley privately, almost all domestically produced wheat is purchased by the
Food Agency.  Local cooperatives and consigned brokers may act as intermediary
purchasers.

Japan's MAFF establishes producer and resale prices for domestically produced
rice and for domestic and imported wheat after lengthy consultations with
other government agencies and producer cooperatives. 

Korea.  The South Korean government developed its agricultural policies to
maximize self-sufficiency and foster parity between urban and farm incomes. 
Orderly marketing of agricultural products is also an important objective for
Korea.  Major differences between world prices and Korea's domestic prices for
agricultural commodities have led to controls on imports to prevent producer
price declines. 

The Republic of South Korea designated eight STE's to import 18 agricultural
products including rice, unhulled barley, beans, buckwheat, red pepper,
ginger, ground nuts, onions, potatoes, sesame seeds, food-use soybeans,
oranges, beef, garlic, natural honey, raw silk, ginseng, and pine nuts. 
However, as Korea has liberalized trade in certain commodities, it also has
begun to allow private firms to import those commodities.  For example, in
1995, the Cheju Citrus Cooperative was designated as the importer for almost
all imports under Korea's WTO minimum access commitment on fresh oranges.  
On July 1, 1997, the Korean market for fresh oranges was liberalized, allowing
private firms greater opportunities to import fresh oranges.

Access to Korea's beef market is scheduled for total liberalization by 2001. 
Prior to 1991, the Livestock Products Marketing Organization controlled all
beef imports as a means of supporting domestic cattle prices.  In bilateral
negotiations with the U.S. and other major trading partners, the Korean
government agreed in the early 1990's to allow some private-sector
participation in beef imports.  The Korean government does not procure
domestic beef or directly control the marketing of domestically produced beef. 
While Korea's import policy has maintained domestic beef prices at more than
double world price levels, it has not helped domestic production keep pace
with demand.

Korea's imports of beef and veal grew from zero in 1987 to an average of 42
percent of domestic supplies from 1993 to 1995.  In a 1993 Record of
Understanding (ROU) between Korea and the U.S., the Korean government set a
final date for liberalization of its quantitative and institutional barriers
to imports, which was incorporated into its WTO commitments.  In the Uruguay
Round, Korea agreed to continue increasing beef imports, while reducing beef
import tariffs.

The 1993 and earlier ROU's also required that the LPMO allow industries to
participate in importing through a Simultaneous Buy-Sell System (SBS), which
allows selected industry groups to contract directly with foreign sellers for
the cuts of beef desired, rather than by anonymous bidding through the LPMO. 
For 1997, the LPMO will import 50 percent of Korea's WTO beef minimum access
commitment, while private-sector groups will participate in SBS imports of 50
percent of the beef minimum access commitment.  The private groups include
beef producers, cold storage firms, tourist, hotel and restaurant suppliers,
and the meat industry association.  SBS imports will increase to 70 percent in
2000.  After 2000, the LPMO will no longer control imports of beef, and
private sector importers will have complete autonomy to import, and to market
imported products.

Access to Korea's rice market is progressing much more slowly.  The Korean
government gave the Ministry of Agriculture and Forestry the exclusive right
to control imports of rice because of its importance as a staple crop.  The
MAF buys lower quality rice from farmers at high prices and releases it at
lower prices, although the rest of the domestic rice market is relatively free
of government control.  The MAF procured 30 percent of Korean rice production
from 1993 through 1995.  The remaining 70 percent of the rice produced in
Korea was sold on the open market.  MAF procurement fell to nearly 23 percent
of Korean rice production in 1996.
 
Korea first opened its rice market to imports in 1995 under its WTO market
access commitments, when it purchased rice equal to 1 percent (or about 51,000
metric tons) of its base period (1986-88) domestic consumption.  Korea's
minimum access commitment for rice will rise to 4 percent of domestic
consumption in 2004.  

Korea's rice imports in 1996 were valued at more than $50 million.  In letters
to the WTO, the MAF is designated as the sole importer of rice under Korea's
WTO commitment to open its rice market.  The MAF decides how much rice to
import, schedules tenders for rice imports, and tends to base import purchases
on price alone.  Chief suppliers of rice were India and China in 1995, China
in 1996, and China and Thailand in 1997.

Indonesia.  Indonesia reported Badan Urusan Logistik to the WTO as an STE in
1995.  BULOG was established as a government corporation in 1967 to stabilize
agricultural commodity prices at the producer and consumer levels.  To carry
out its price stabilization responsibilities, BULOG is authorized to import,
export, and manage stocks, to procure domestic production, and to engage in
marketing of domestically produced and imported agricultural commodities. 
BULOG's activities are financed through Indonesian state banks at commercial
interest rates.  

BULOG uses price and procurement policies to support producers and maintain
affordable consumer prices for rice.  BULOG does not have a monopoly in the
domestic rice market, and procures only about 3 percent of domestic rice
production.  However, BULOG owns grain storage facilities which it uses to
hold a national rice reserve for emergencies, and buffer stocks to stabilize
rice prices between and within years.  BULOG establishes rice prices for sales
by farm cooperatives and retail prices.  In years of excess supplies,
Indonesia has exported rice. 

Indonesia produces no wheat, but imported an average of 3.3 million tons
between 1993 and 1995.  BULOG is the exclusive importer of wheat, and controls
the distribution of imported wheat.  Domestic flour millers act as agents for
BULOG to import wheat and flour.  The mills receive a processing fee for the
wheat.

The domestic flour market also is highly controlled by BULOG, which determines
the allocation of wheat to each mill and licenses flour distributors.  Import,
mill, and retail prices are established by BULOG.   BULOG's monopoly fostered
and supported the growth of one large flour milling company.  This firm had a
monopoly on flour milling until 1997.  In 1997 and 1998, three smaller mills
will begin operating.

BULOG is the exclusive importer of refined sugar, but in a concession to
private importers, the Indonesian government announced on July 7, 1997 that
private firms with sugar refining capacity could import raw sugarcane and
sugar beets.  Licensed agents conduct BULOG's imports and are paid a
commission for their purchases.  From 1993 to 1995, BULOG imported an average
of 311,000 tons of raw and refined sugar annually.

BULOG also purchases much of the domestically produced sugar and has
considerable control of its distribution through the Association of Indonesian
Sugar and Flour Distributors.  Only association members may obtain sugar
supplies from BULOG. 

BULOG also is the sole importer of soybeans, which are used exclusively for
food use.  In 1996, following the closing of the only soybean crushing
facility, the importation of soybean meal, primarily for poultry feed, was
completely opened to private traders.

In the Uruguay Round, Indonesia agreed to import a minimum of 70,000 tons of
rice annually.  Indonesia's rice imports averaged 1.27 million tons annually
from 1993 to 1995, although annual imports varied widely during that period. 
Imports in 1993 of 24,000 tons contrast sharply with 1995 imports of 3.15
million tons.  Indonesia has no import tariffs on wheat, soybeans, and sugar,
although sugar is subject to a 10-percent value-added tax.

Mexico.  Prior to the late 1980's, Mexican agricultural policy sought to
support farm prices and incomes and to guarantee consumers an accessible,
reasonably priced food supply.  To achieve these objectives, the Mexican
government subsidized agricultural producers and consumers through direct
government intervention at every link in the marketing chain--production,
storage, marketing, and distribution of agricultural commodities, and
processed food.  Among the creations of Mexico's support system was its chief
agricultural corporation, the Compania Nacional de Subsistencias Populares,
established in March 1965. 

In the late 1980's Mexico began to decrease its domestic support programs and
consumer subsidies in response to an external debt crisis, peso depreciation,
and high domestic inflation.  Today, CONASUPO no longer intervenes in all
aspects of Mexican agricultural production and marketing, but continues to
purchase domestically produced corn, edible beans, and raw milk for its
subsidized sales of staple food commodities.

Prior to implementation of the North American Free Trade Agreement (NAFTA) in
1994, CONASUPO was the sole importer of milk powder.  Based on its historical
role as exclusive importer, CONASUPO received all of the licenses for imports
of milk powder under NAFTA and WTO tariff quotas.  As a result, CONASUPO
continues to act as sole importer of powdered milk.  
The annual value of Mexico's nonfat dry milk and whole milk powder imports
averaged $317.5 million from 1993 through 1995 and represented about 35
percent of world trade in nonfat dry milk.  Mexico would have needed to
produce 20 percent more raw milk from 1993 to 1995 to replace milk powder
imports.  CONASUPO directs 60 percent of milk powder imports to its affiliate,
LICONSA (Leche Industrializada Conasupo, S.A.), for subsidized milk sales to
low-income families.  CONASUPO then resells to private processors 30-40
percent of the milk powder which it has imported.

Under NAFTA, Mexico allowed duty-free access for up to 40,000 tons of U.S.
milk powder in 1994, and this access increases by 3 percent annually through
2008.  The maximum over-quota tariff for U.S. milk powder under NAFTA was
$1,160 per ton or 139 percent ad valorem in 1994, but will decline to zero in
2008.

Mexico's WTO tariff-quota schedule grants duty-free access for 40,000 tons of
U.S. milk powder and 80,000 tons of imports by countries other than the U.S. 
Tariff-rate quota levels are fixed through 2004.  In 1995, Mexico imported
134,646 tons of milk powder, or 15,000 tons more than its total WTO quota. 
However, the U.S. supplied only 34,000 tons--6,000 less than the U.S. quota.

On July 2, 1997, Mexico announced a small and carefully monitored exception to
CONASUPO's monopoly on milk powder imports--private firms in the province of
Quintana Roo (the Yucatan Peninsula) and along the Guatemalan border could
apply for licenses to import 2,914 metric tons of milk powder in 1997 under
the WTO duty-free tariff-rate quota for "Other countries."  CONASUPO would
continue as the sole importer under the U.S. tariff-rate quota (40,000 tons)
and the remaining 77,086 tons of the WTO "Other country" tariff-rate quota. 
The Mexican government announcement also required that the importing private
firms not reship milk powder imported under the quota to other parts of
Mexico.  Private hotels, restaurants and other private businesses in the
designated areas likely had been importing small amounts of milk powder in
years prior to the recent announcement.

Despite significant opportunities for U.S. and other milk powder exporters,
CONASUPO's control of powder imports raises concerns about the satisfaction of
public sector and private sector demand for milk powder.  If CONASUPO chooses
to reduce its imports of milk powder for subsidized sales to low-income
consumers, will CONASUPO continue to import adequate quantities of milk powder
to be able to sell to commercial users?

Future directions for STE importers.  The STE importers described in this
article, all government corporations or recently privatized companies, have
used their statutory authorities to influence or control imports.  Their
national governments have committed to increase access for imported
commodities in the Uruguay Round and are testing increased private sector
participation in the new market opportunities.  

Korea, for example, has committed to turn over imports of beef to the private
sector in 2001.  Indonesia opened its raw sugar imports to the private sector
this summer and may forsake some of BULOG's monopoly rents from wheat,
soybeans, and refined sugar imports in order to open imports of those
commodities to private trade.  However, for countries where an STE import
monopoly has accommodated objectives of domestic price support and has
complemented domestic market control, the opening of imports to private
traders will likely come more slowly.

Of interest will be the continuing role of STE's in administering countries'
import regimes, particularly for staple agricultural commodities.  Market
liberalization has not been easy for Japan and Korea, but their STE's have
cushioned the impacts of market openings by storing imported rice.  Japan has
also exported a limited amount of imported rice as food aid to developing
countries.  BULOG likely will remain the sole importer of rice in Indonesia
due to the government's interest in controlling rice supplies.

Other WTO member countries--such as India, a major consumer of wheat, rice,
and vegetable oil--also champion the control of agricultural markets by STE's. 
India's Food Corporation and other STE's continue to monopolize India's
sporadic imports of staple commodities.

WTO laws require that the non-tariff restrictions maintained by import
monopolies be converted to tariffs.  State trading practices will become
increasingly important as countries with centrally planned economies or
countries that are in the process of privatizing their agricultural production
and marketing apply for memberships in the WTO.
Karen Ackerman (202) 694-5264
ackerman@econ.ag.gov

SPECIAL ARTICLE BOX #1 

STE's & the WTO

STE's have been in existence for several decades.  The General Agreement on
Tariffs and Trade (GATT), the body of international law which preceded the
World Trade Organization (WTO) in regulating global trade in goods and
services, recognizes STE's as legitimate participants in international trade
but establishes guidelines on their behavior, contained in Article XVII of
GATT 1947.  These guidelines require STE's to conduct their export or import
trading activities according to the principles of nondiscriminatory treatment. 


In 1994 the Uruguay Round (UR) of multilateral trade negotiations, conducted
under the auspices of the GATT, was completed.  Article XVII was incorporated
into the GATT of 1994. The UR's "Understanding on Article XVII" added a
working definition of STE's to guide WTO member countries in their reporting
of STE's.  The "Understanding on Article XVII" defines STE's as "governmental
and non-governmental enterprises, including marketing boards, which have been
granted exclusive or special rights or privileges, including statutory or
constitutional powers, in the exercise of which they influence through their
purchases or sales the level or direction of imports or exports."

SPECIAL ARTICLE BOX #2

China's Import STE's

The value of STE imports by the People's Republic of China, which is seeking
accession to the WTO, likely eclipses that of all STE's in current WTO member
countries.  China requested membership in the WTO in 1986, but accession
negotiations were not completed in time for China to become a founding member
of the WTO.  WTO members have expressed concern about the lack of transparency
in China's trade regime, including its discriminatory import licensing
procedures, import substitution policies, and state trading.  China's
STE's--the 
China National Cereals, Oil and Foodstuffs Import and Export Corporation
(COFCO), and the China National Textiles Import and Export Corporation
(Chinatex)--dominate agricultural trade of major grains and cotton, but
compete with other state-owned enterprises (SOE's) for imports of vegetable
oils, sugar, and rice.  SOE's also handle trade in wool.
Suchada Langley (202) 694-5227
slangley@econ.ag.gov

SPECIAL ARTICLE BOX #3

Tobacco & Liquor 
Import Monopolies

A number of countries reported to the WTO that they or their states/provinces
maintain monopolies on the import of liquor and tobacco.  In some cases, the
monopolies were established to support domestic producers.  In others,
protection of public health and the financing of public services such as
health care are important objectives of national and state import monopolies. 
For example, the revenues garnered by Colombia's departmental liquor
monopolies finance local health services and education.

The largest tobacco monopoly reported to the WTO is Japan Tobacco Incorporated
(JTI), a recently privatized corporation, which was established to promote the
sound development of the tobacco industry in Japan.  Other private firms also
may import leaf tobacco, but since JTI is the sole cigarette manufacturer,
those importers would have to sell to JTI, thus giving JTI an effective
monopoly.  

JTI imports leaf tobacco and processes it into cigarettes and other tobacco
products.  JTI also contracts with domestic tobacco growers for purchases of
domestically produced tobacco.  JTI sets the price and the quantity allotted
for each tobacco grower.  JTI's imports of leaf tobacco averaged $613 million
annually from 1993 to 1995.  Other countries that reported tobacco monopolies
are Iceland, Morocco, and Thailand.

Liquor monopolies control imports of distilled liquors, wine, and beer to
raise money for national treasuries and to protect public health.  Many
countries reported to the WTO that they or their provincial authorities
control liquor imports and regulate the distribution of domestic and imported
liquors.  Reporting countries included Canada, Colombia, Iceland, and Turkey. 

END_OF_FILE

