Magazine article Amber Waves

NAFTA at 20: With Regional Trade Liberalization Complete, Focus Shifts to Other Methods of Deepening Economic Integration

Magazine article Amber Waves

NAFTA at 20: With Regional Trade Liberalization Complete, Focus Shifts to Other Methods of Deepening Economic Integration

Article excerpt

More than two decades have passed since the implementation of the North American Free Trade Agreement (NAFTA) in 1994. NAFTA has had a profound effect on many aspects of North American agriculture. With a few exceptions, intraregional agricultural trade is now completely free of tariff and quota restrictions and the agricultural sectors of NAFTA's member countries-Canada, Mexico, and the United States-have become far more integrated, as is evidenced by rising trade in a wider range of agricultural products and substantial levels of cross-border investment in the processed food sector.

Perhaps the most obvious indicator of this increased integration is two decades of almost uninterrupted growth in intraregional agricultural trade. Between 1993 and 2013, the total value of this trade expanded from $16.7 billion to $82.0 billion, an increase of 233 percent when inflation is taken into account. Foreign direct investment (FDI) in the processed food sectors of the NAFTA countries also translates into additional sales of agricultural products. In 2012, majority-owned affiliates of U.S. multinational food companies had sales of $32.4 billion in Canada and $13.8 billion in Mexico, and majority-owned affiliates of Canadian multinational food companies had sales of $8.3 billion in the United States, according to data from the U.S. Department of Commerce's Bureau of Economic Analysis.

A More Integrated Market in Grains, Oilseeds, and Related Products

Creation of a far more integrated North American market in grains, oilseeds, and related products is one of NAFTA's major achievements. Prior to NAFTA, Mexico maintained strict control of corn, wheat, and barley imports via licensing requirements and provided guaranteed prices to domestic producers of many field crops. Following NAFTA's implementation, Mexico transitioned to a system featuring duty-free trade with the United States and Canada and a mix of domestic agricultural supports similar to those in the United States. For the United States and Canada, trade liberalization of grains and oilseeds under NAFTA primarily involved the removal of minor tariffs on bilateral trade. Integration of the North American market advanced further with the recent elimination of the Canadian Wheat Board's (CWB) authority to actas a single buyer of wheat and barley produced in in Alberta, Manitoba, Saskatchewan, or the Peace River District of British Columbia and destined for export or domestic human consumption.

Rising demand for feed and food has created new opportunities for intraregional trade in grains and oilseeds. Poultry and hog producers in Mexico, for instance, rely heavily on imported feedstuffs as they seek to meet their country's growing demand for meat. These imports come primarily from the United States, although Canada is a regular supplier of rapeseed and rapeseed oil to Mexico. Growing feed demand in Mexico and liberalization of U.S.-Mexico agricultural trade boosted U.S. exports to Mexico of feed grains, oilseeds, and related products from an annual average of 8.3 million metric tons during 1989-92 to 17.8 million metric tons per year during 2010-14. The years 1989-92 are used as the pre-NAFTA period for purposes of comparison because U.S. corn exports to Mexico were unusually low in 1993, the last year prior to NAFTA's implementation. In 2013, these exports dropped to 14.5 million metric tons due to the adverse effects of the 2012 drought on U.S. grain and oilseed production. To make up for this shortfall, Mexico increased its imports of corn and soybeans from South America.

Feedstuff trade among the NAFTA countries encompasses a diversity of products in addition to traditional bulk commodities such as corn, sorghum, wheat, soybeans, rapeseed, and oilseed oils and meals. There is a substantial two-way trade between Canada and the United States in mixed feeds and mixed feed ingredients other than petfood. U.S. feedstuff exports to Mexico include preparations used for animal feeding and brewers' and distillers' dregs and waste. …

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