Saturday, April 16, 2011

Reciprocal trade agreements, (RTA), not good for global markets


The USDA just produced a new report called Reciprocal Trade Agreements: Impacts on bilateral trade expansion and contraction in the world agricultural marketplace. The report shows the growing use of special bilateral trade agreements especially in agriculture which will restrict the flows of goods around the world. The restrictions will mean that price cannot serve as the determiner of trade flows. Those countries that set-up RTA will see a significant increase in trade at the expense of trade partners not affiliated with the RTA.

The recent talks at the BRICS meeting in China is a place where a RTA will impact the US. China has an incentive to increase RTA to lock-in imports from resource exports like Russia Brazil. Resource exporters may like to sell supply forward to ensure markets. Neither is good for the US agricultural markets.

No comments: