For years, the United States was the indisputable global leader for agricultural exports, partly because it had a comparative advantage in farm production. But the U.S. advantage in pork, beef, corn and soybeans is waning, say two university economists, who conclude “this may have been the worst time to enter into a trade war.”
Economists John Crespi and Chen-Ti Chen of Iowa State University said the United States is “in a particularly precarious position” because of fierce competition on the world market. “The longer the disruptions last, the harder it will be to regain market share in the future,” they write in the fall issue of Agricultural Policy Review, published by the CARD think tank, based at ISU.
For their analysis, Crespi and Chen used an economic measure called the normalized revealed comparative advantage (NRCA). The United States is among the world leaders in the dollar value of its pork, beef, corn and soy exports. But its NRCA for beef and pork is not as high as other exporters; in fact, its NRCA in beef is still recovering from the “mad cow” scare of the early 2000s. “For both pork and corn, the international markets are very competitive,” say the economists.
“For corn, as the industries in other countries started to expand, the U.S. comparative advantage dropped significantly – Argentina and Brazil even surpassed the United States when a severe drought hit in 2013. We see a similar story for the soybean market, with Brazil catching up by the 2000s, and currently having a comparative advantage over the United States. The recent China-U.S. trade disputes will likely only widen the gap.”