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The North American Free Trade Agreement and U.S.
Agriculture
By Carol Goodloe
There’s no doubt about it. The North American Free Trade Agreement (NAFTA), implemented on Jan. 1, 1994, is the world’s most comprehensive free trade agreement covering agricultural products.
The agreement will remove most barriers to trade and investment among the United States, Canada and Mexico. Already, NAFTA has brought considerable benefits to the U.S. agricultural sector.
It All Started in 1989
NAFTA’s genesis lies in the implementation of the U.S.-Canada Free Trade Agreement (CFTA) on Jan. 1, 1989.
Under this agreement, the United States and Canada agreed to eliminate all existing tariffs and most nontariff barriers. Quantitative restrictions such as quotas and licenses were left in place, to be addressed in multilateral negotiations (the Uruguay Round) that were taking place under the auspices of the General Agreement on Tariffs and Trade (now the World Trade Organization).
The agreement with Canada served as a springboard of success. Negotiations to bring Mexico into a comprehensive regional agreement began in 1991 and were completed in 1992. At the same time, the Uruguay Round was taking place, with all three countries actively participating.
Although under NAFTA the United States and Mexico agreed to eventually eliminate all tariffs and quantitative restrictions, Canada could not agree. Thus, such quantitative restrictions, which were later converted to tariff-rate quotas as a result of the Uruguay Round, were left in place between Canada and its NAFTA partners. Although the United States protested this action, in 1995 a dispute settlement panel ruled in Canada’s favor.
NAFTA’s Main Provisions
As a result of this negotiating history, NAFTA’s agricultural component comprises three separate agreements: the original CFTA, a U.S.-Mexico component, and a Canada-Mexico component. Some agricultural provisions, including the rules on sanitary and phytosanitary provisions, are trilateral.
Under NAFTA, all quantitative restrictions on agricultural trade between the United States and Mexico were eliminated. In addition, many tariffs were eliminated immediately, with others scheduled to be phased out over periods of five to 15 years. By the year 2008, all agricultural provisions will be implemented.
The agricultural provisions of the CFTA were incorporated into NAFTA. Under these provisions, all tariffs affecting agricultural trade between the United States and Canada, with a few exceptions for items covered by Uruguay Round tariff-rate quotas (dairy, poultry, eggs and sugar products), were removed on Jan. 1, 1998.
Mexico and Canada reached a separate bilateral NAFTA agreement on market access for agricultural products. The Mexican-Canadian agreement eliminated most tariffs either immediately or over 5, 10 or 15 years. Tariffs and tariff-rate quotas between the two countries affecting trade in dairy, poultry, eggs and sugar are also maintained.
. . . And How Did It All Play Out?
U.S. agricultural trade with its NAFTA partners has grown rapidly, with U.S. exports in 1997 up 44 percent and imports up 57 percent since 1993.
The share of both U.S. agricultural exports to and imports from NAFTA partners continues to grow, as might be expected from the preferential access to each other’s markets.
Nevertheless, many other factors continue to affect trade flows among the three countries, including weather, domestic policy reforms and changes in technology.
USDA analysts have determined that after the first three years of NAFTA, U.S. agricultural exports to Mexico were about 3 percent higher and to Canada, about 7 percent higher, than they would have been without the agreement.
Similarly, U.S. agricultural imports from Mexico and Canada were 3 and 5 percent higher, respectively, than they would have been without the agreement.
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Carol Goodloe is an agricultural economist with the USDA
Office of the Chief Economist. Tel.: (202) 720-5955; Fax: (202)
690-4915; E-mail: carol.goodloe@usda.gov
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