USDA: NAFTA -- International Agriculture and Trade -- Summary
August 30, 1999
M2 PRESSWIRE via NewsEdge Corporation : * Approved by the World Agricultural Outlook Board
NAFTA Spurs U.S. Trade with Canada and Mexico
As the North American Free Trade Agreement (NAFTA)
enters its sixth year, its influence on U.S. agriculture is more apparent than ever.
Trade with Canada and Mexico--the other signatories of the agreement--is growing in size and importance. Since NAFTA's implementation, U.S. agricultural exports to the two countries have increased from $9.0 billion in 1993 to a record $13.2 billion in 1998, while corresponding imports have grown from $7.4 billion to $12.5 billion.
In addition, U.S. exporters and importers are placing greater emphasis on the North American market. In 1998, Canada and Mexico purchased 25 percent of U.S. agricultural exports and supplied 34 percent of its agricultural imports, up from 17 percent and 25 percent in 1990.
During 1994-98, U.S. agricultural exports to Canada and Mexico expanded at an annual rate of 8.1 percent, while exports to the rest of the world rose 2.6 percent a year. Similarly, agricultural imports from Canada and Mexico grew an average of 11.1 percent a year during this period, while annual imports from the rest of the world advanced only 6.7 percent.
NAFTA's impact varies by commodity and trade partner. Among livestock products, the agreement has greatly benefited beef and pork commerce, while exerting a moderate influence on hog and poultry trade. Although the exemption of Canadian beef from the U.S. Meat Import Law has been more influential than NAFTA on U.S.- Canadian cattle trade, NAFTA tariff changes have boosted U.S. cattle exports to Mexico an estimated 15-25 percent.
U.S. corn exports to Mexico are somewhat higher due to NAFTA than they would have been otherwise. At the same time, NAFTA limited the reduction in U.S. sorghum exports to Mexico during 1995-97, when many Mexican livestock producers switched from sorghum to corn feed.
NAFTA tariff reductions have increased U.S. wheat imports from Canada above what would have occurred without the agreement, but U.S. wheat exports to Canada in the form of grains have been insignificant despite these reductions. In 1998, the United States and Canada forged an agreement on wheat trade regulations that should improve U.S. access to the Canadian market.
NAFTA has contributed to increased two-way trade between the United States and Canada in oilseeds and oilseed products-- particularly in processed goods such as vegetable oil and soybean meal. With respect to Mexico, the agreement has strengthened U.S. exports of soybeans and soybean oil, but decreased U.S. exports of soybean meal, as trade more closely reflects the relative prices of these commodities.
The impact of NAFTA on other field crops is also important. The agreement has stimulated U.S. cotton exports to Canada and Mexico through reduced Mexican cotton tariffs and reduced U.S. textile tariffs and through rules of origin that favor textiles and apparel manufactured by NAFTA members from NAFTA-produced yarn and fiber. NAFTA has also loosened the quota and tariff restrictions that govern North American sugar trade, as the United States and Mexico are gradually moving toward liberalized trade in this area.
North American trade in fruits and vegetables has generally flourished under NAFTA. However, developments in this trade are primarily due to factors other than NAFTA, including changing consumer preferences, strong consumer demand in the United States, adverse weather conditions, and the peso devaluation and subsequent Mexican recession in late 1994 and 1995.
NAFTA tariff reductions were expected to raise U.S. tomato imports from Mexico by 8-15 percent above what would have occurred without the agreement. But the effect of the reductions has been blunted by a minimum import price agreement between principal Mexican and U.S. growers. U.S. potato imports from Canada are estimated to be 5-10 percent larger under NAFTA tariff reductions than they would have without the agreements.
There are many examples of NAFTA's positive influence on U.S. fruit trade. Grape exporters have benefited from the end of Mexican import licensing. Fresh pear exports to Mexico have expanded due to tariff reductions that are relatively larger than the reductions for other fruits such as apples. U.S. imports of Mexican cantaloupe are estimated to be 17-25 percent larger than they would have been without the tariff reductions of NAFTA and the Uruguay Round agreement.
NAFTA's influence extends well beyond trade flows. The resolution of conflicts related to sanitary and phytosanitary (SPS) measures has been given growing emphasis within the trilateral NAFTA Committee on SPS Measures. In addition, producers in all three NAFTA countries have strived to fine-tune health and safety standards and to participate actively in the formulation of new standards and inspection procedures.
NAFTA has likely had a small, positive effect on U.S. agricultural employment. At the same time, employment opportunities are narrowing in some agriculture- related industries, such as textiles and apparel, in which the United States is less competitive.
In advance of NAFTA, there were concerns that capital investment in the U. S. farm sector might decline once the agreement was adopted. This has not been the case, and NAFTA has facilitated the flow of investments in agricultural production and food processing within North America.
Finally, integration of the North American market under NAFTA has spurred changes outside production agriculture. Mexico's food distribution system is undergoing major structural change, with supermarkets rapidly gaining market share. As the distribution systems of North America become more closely integrated, additional strategic alliances may be formed between Canadian, Mexican, and U.S. retail chains. Greater complementary trade-- along with harmonization of standards, contracts, and dispute resolution procedures--is likely to accompany these developments.
Printed copies of NAFTA International Agriculture and Trade Report will be available in about two weeks. |
