ERS reviews NAFTA as the trade agreement celebrates 20 years

ERS reviews NAFTA as the trade agreement celebrates 20 years

ERS explains impacts of 1994's North American Free Trade Agreement

Now more than 20 years old, the North American Free Trade Agreement has had a substantial impact on the trade of food and agricultural goods in the U.S., the USDA Economic Research Service says in a new report.

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Chartered between the U.S., Canada and Mexico in 1994, the agreement has effectively integrated ag trade in North America, ERS said. Agricultural trade between the three member countries has doubled – moving from $16.7 billion in 1993 to $82 billion in 2013.

When measured in quantity rather than value, however, U.S. exports to Canada and Mexico of certain bulk agricultural commodities have slowed over the past decade.

ERS explains impacts of 1994's North American Free Trade Agreement (Photo by Justin Sullivan/Getty Images)

Corn exports to Mexico have fluctuated greatly since 2008, without exhibiting a clear upward or downward trend, while sorghum and soybean exports to Mexico and corn and soybean exports to Canada have been on the decline for more than a decade.

According to ERS, factors behind these developments include periods of drought that adversely affected crop and livestock production in the U.S.; increased Canadian production of corn, rapeseed, and soybeans; competing buyers for ag commodities in countries outside NAFTA; and the use of large quantities of U.S.-grown corn as an ethanol feedstock.

Expanded exports of distillers dried grains with solubles and a partial shift by Mexican livestock producers from sorghum to corn are also transforming factors, ERS said.

NAFTA also has resulted in a broader availability of fresh produce and a greater variety of foods, the report said. Two of the most notable items that are now more available are grape tomatoes and avocados from Mexico.

Likewise, Mexican consumers have more opportunities to access apples, pears, and grapes from the United States, to the point where Mexico is a larger consumer of U.S. apples and pears than Canada.

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The number of U.S. jobs supported by U.S. agricultural exports to Canada and Mexico has also increased during the NAFTA period, in large part because these exports grew faster than labor productivity, the report said.

ERS reviews NAFTA as the trade agreement celebrates 20 years

Intraregional ag trade has expanded in the Canadian/U.S. Trade Agreement & NAFTA period.

Though there have been disagreements and negotiation – as illustrated by the NAFTA trucking dispute with Mexico and other issues – the ERS report said NAFTA remains significant for its role in ending tariffs, quotas and other trade barriers that may restrict opportunities for intra-regional trade and investment.

The agreement opened "another chapter in which the member countries work more closely together to develop such economic relationships and to seek similar relationships with other parts of the world," the report said.

Read the full report, NAFTA at 20: North America’s Free-Trade Area and Its Impact on Agriculture

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