- - AGRICULTURE CORE CURRICULUM - - (CLF1000) Advanced Core Cluster: AGRICULTURAL BUSINESS MANAGEMENT (CLF1450) Unit Title: MARKETING ______________________________________________________________________________ (CLF1457) Topic: AGRICULTURAL EXPORTS Time Year(s) AND TRADE POLICIES 2 hours 3/4 ______________________________________________________________________________ Topic Objectives: Upon completion of this lesson, the student will be able to: Learning Outcome #: (M-12) - Compare and contrast the trade policies of the United States and other important trading partners. (M-13) - Describe the importance of agricultural exports to the economy of California and the United States. Special Materials and Equipment: Student copies of Handout #1; (from previous lesson) world map References: Cramer, J. L., & Jensen C.W. (1988). AGRICULTURAL ECONOMICS AND AGRIBUSINESS (4th ed.). New York, NY: J. Wiley & Sons. Resources: Brown, E. H.(1990). TRADE SIMULATOR. (Computer program). Adelllphi, Maryland: Lumen Software. Available from Lumen Software Inc., P.O. Box 778, Adelphi, MD 20783, (301)434-4316. California Department of Food and Agriculture, (1989). California Agriculture Statistical Review and California Agricultural Exports. Available from: 1220 "N" St.,Sacramento, CA 95814. Evaluation: Quiz by instructor TOPIC PRESENTATION: AGRICULTURAL EXPORTS AND TRADE POLICIES A. Agricultural Exports and the Economy of California 1. California is the leading agricultural state in the United States and has been for the last 40 years. On 3% of the country's total farmland, California produces 50% of the nation's nuts, fruits, and vegetables. If California were a separate nation, its gross income would rank 6th in the world. 2. In 1987, cash receipts for agricultural commodities produced in California were over 15.6 billion dollars. California exports generate approximately 3.3 billion dollars annually. These exports alone generate approximately 13.2 billion dollars of economic activity in the state and over 185,000 jobs on farms and in agriculturally related fields. 3. Among the state's crops, there are 31 where more than half of the total exported from the United States come from California. Ten of these 31 crops are produced only in California. These are almonds, dates, figs, raisins, olives, kiwifruit, pistachios, prunes, artichokes, and walnuts. 4. California's top 10 agricultural exports are cotton, almonds, grapes, oranges, walnuts, beef, prunes, lemons, rice, and alfalfa. 5. The major importers of California agricultural exports, on a value basis, are: Japan 29% European Economic Community (EEC) 29% Canada 13% South Korea 11% Hong Kong 6% Taiwan 4% Mexico 2% Indonesia 1% Singapore 1% _______________________________________________________ ACTIVITY 1. Choose a commodity from the list of California's top 10 and the countries to which that commodity is shipped. On a world map, draw arrows from California to the countries where that commodity is shipped. Encourage students to choose different commodities so that all 10 are covered. At the end of the exercise, have all of the students share their map and report their findings. 2. Is there any geographical trend to the location of the countries where the commodities are shipped? Explain. 3. What methods of shipping best: ship, air, truck, train? Explain. 4. What five countries appear to be the most important to California agriculture? 5. Describe the effects of a decision by an importer of U.S. products decision to buy from a country other than the U.S. _______________________________________________________ B. Agricultural Exports and the U.S. Economy 1. The United States is an agricultural surplus producing nation and is dependent upon foreign exports for a prosperous agricultural economy a favorable balance of trade. An example of the complex a) The United States is the world's leading exporting nation and the leading agricultural exporter. More than one half of the trade that crosses international borders is from the United States. b) Over 20% of the farm products in the United States are sold abroad each year. c) United States agricultural exports account for 18% of the world total. The U.S. supplies 46% of the wheat and 25% of the rice exports in the world. Of those totals, 50% of the wheat and 75% of the rice go to developing countries. C. Agricultural exports are important to the economy of the United States; however, other countries also export many of the same products as the United States. 1. Top feed grain exporters are: a. Argentina b. Canada c. South Africa d. Thailand e. Australia f. France 2. Top soybean exporters are: a. Brazil b. Argentina c. EEC (European Economic Community) 3. Top wheat exporters are: a. Canada b. Australia c. France d. Argentina 4. Top exporters of beef and pork are: a. EEC b. Australia c. Argentina d. New Zealand e. Brazil f. Canada g. Eastern Europe D. Competition between nations is dependant upon the quality and quantity of the crop being marketed. If producers have a high production year, a surplus in supply may cause prices to drop. Conversely, shortages may cause prices of specific commodities to skyrocket. In order to limit imports mand encourage greater production of a commodity within its boundaries, a government may impose restrictions on trade. 1. A good example can be found in trade between the U.S. and Japan. The United States and Japan have had long-standing trade disputes revolving around quotas and tariffs. a. Japan joined the General Agreement on Tariffs and Trade (GATT) in 1955. Japan used its trade deficit as the rationale to maintain quotas on imports. These quotas were no longer justified when the Japanese trade deficit turned into a surplus in 1963. b. Japan then began a long process of gradually opening up its market, but was slow in removing quotas. c. In 1988, a GATT-12 Agreement was signed by the United States and Japan. Under this agreement, Japan will lift quotas on twelve categories of agricultural products over a three-year period. Japan will reduce tariffs on a number agricultural products in exchange for maintaining some import controls on certain dairy products, starch, peanuts, and dried peas and beans. 2. In July of 1988, the United States and Japan signed the Beef and Citrus Agreement which is to eliminate Japanese quotas on beef and oranges over the next three years, and to eliminate the quota on orange juice concentrates over the next four years. a. When the Japanese market is completely liberalized, the U.S. beef exports are expected to double and the U.S. orange exports are expected to increase by 50 percent. However, other nations will also move into Japan's liberalized market. b. In addition to eliminating these quotas, there will be a year phase-out of the imported management operations of the Japaneese Livestock Industry Promotion Corporation, a quasi-governmental organization that maintains import controls, stabilizes domestic prices, and promotes the domestic livestock industry. ______________________________________________________ ACTIVITY 1. Choose a commodity exported from California and list the 3 major importing countries. 2. Determine if there are any tariffs or quotas levied on the choosen commodity by the importing countries information can be gathered by contacting one is more of the following organizations: a. California State Department of World Trade b. Embassy representing the countries importing c. Exporting company that markets the commodity. 4. How do trade restrictions affect the importing countries? How do they affect the United States? ____________________________________________________________ C. Balance of Trade 1. The United states sells agricultural and industrial products to other countries. In turn, the United States must import from other countries products that it cannot produce itself. The balance between exports and imports is known as the balance of trade. 2. The United States is very dependent upon other countries for minerals, metals, and raw materials used in industry. 3. The United States imports minerals, metals, and raw rubber for the automobile industry; 97% of the bauxite used in the aircraft industry is imported. Cobalt for the steel and nuclear industries is imported from developing countries. The U.S. also imports substantial amounts of columbium, tin, aluminum, petroleum products, and other nonrenewable resources. Without access to these esential materials, U.S. indistries would probably collapse. __________________________________________________________ ACTIVITY: 1. Select a specific commodity (preferrably one produced locally) that is exported internationally and research the trade climate for that commodity. Information can be gathered by contacting organizations that represent that commodity. 2. In groups or individually, have students research the trade climate between the U.S. and another country that is a trading partner. Information can be gathered by contacting the representative embassy or trade organizations that trade with that country. 3. Have students go into a store and find products imported form other countries. Which countries? Make a class tally. NOTE: Lumen Software offers an excellent trade simulation game that introduces students to the factors involved in international marketing. __________________________________________________________ 12/11/91 EEZ/ez #%&C