NAFTA 20 years later: Are we better off today?

05/15/2014 08:49:00 AM
Tom Karst

Tom KarstIt has been more than 20 years since the North American Free Trade Agreement took effect, and there are several online stories looking back in retrospective fashion at the trade treaty.

A USA Today story asks, “NAFTA: 20 years later: Success or failure?

That coverage focused on the effects of NAFTA within Mexico, observing that while there has been improvement in Mexico’s economy (auto, electronics and agriculture), the treaty has not solved Mexico’s poverty problem and the wage gap between the U.S. and Mexico is still wide. Yet more good than bad has come from NAFTA, and Mexico would be in a worse position today without the trade deal, one Mexican economist said in the article.

An opinion piece by Jim Kolbe in Azcentral.com also pointed out the positives from the trade pact.

Headlined “NAFTA working despite dire predictions,” Kolbe writes:

It became the first free-trade agreement among developed and developing countries. It was the first trade agreement to include all agricultural products and allow their free movement to consumers in the region. It created a regional market in excess of $19 trillion — much larger than any market created by other regional trade agreements before or since.

It helped to nearly quadruple trade flows among the three countries, from just under $300 billion annually to over $1 trillion each year. It has made Canada our largest trading partner, supporting 8 million jobs in this country, and Mexico our second-largest trading partner, supporting about 6 million jobs here at home.

The USDA FAS also published a 20-year review of NAFTA relative to agricultural U.S. agricultural trade.

Called “NAFTA - 20 years of successful U.S.-Mexico Agricultural Trade” the report is entirely upbeat about the agreement. From the report:

Initiated on January 1, 1994, the North American Free Trade Agreement (NAFTA) between the United States, Mexico, and Canada redefined the economic relationship of said three countries. Eliminating trade barriers and giving preferential treatment to imported goods manufactured within the region, translated into an increase (both in volume and value) of goods and services, including agricultural and food products. Some strategic commodities were reserved by each member for additional periods of time, but 20 years after NAFTA’s inception, virtually every product can be traded among the three partners, giving way to not only a bigger market, but industry integrations that allow the North American bloc to compete into foreign markets as one unit.

 Despite two serious economic difficulties (the Mexican crisis by the end of 1994 and the financial crisis in the United States in 2008), trade between the two countries has quadrupled since 1994. When NAFTA began, the United States exported roughly $5 billion in agricultural products to its southern neighbor; in 2013, agricultural exports totaled almost $20 billion. In NAFTA’s 20 year span, Mexico has imported over $200 billion worth of agricultural products from the United States. It is worth mentioning that similar growth has been experienced by Mexican agricultural exports to the United States, its main commercial partner, a reflection of the positive benefit of free trade.

 As part of NAFTA’s reshaping of agricultural trade, one noticeable trend is that the United States specialized its exports to Mexico in grains, meat, and dairy products, while Mexico focused on exporting beverages, food preparations, and fresh fruits and vegetables. In this last category, while Mexico continues to register record exports of tomatoes, peppers, cucumbers, watermelons, avocados, citrus, and grapes, the United States has exported almost 3 billion MT of fresh apples (worth $2.6 billion) since the beginning of NAFTA. It is worth mentioning that apples and pears are the only fruit categories that since 1995 have surpassed the $1 billion in accumulated exports to Mexico.

TK: To borrow a phrase from a political campaign, are growers better off under NAFTA? That depends on who you ask. I would suspect most would answer in the affirmative.

There is no doubt that both countries can boast success stories for NAFTA. 

USDA trade figures indicate that U.S. imports of Mexican tomatoes have risen from 376,000 metric tons in 1994 to 1.38 million metric tons in 2013. At the same time, U.S. exports of apples to Mexico have risen from 153,000 metric tons in 1994 to 279,000 metric tons in 2013. But the post-NAFTA era has seen more growth in agricultural exports for Mexico than the U.S. Total U.S. agricultural exports to Mexico have increased from $5.1 billion in 1994 to $19.5 billion in 2013. U.S. imports of Mexican agricultural products have climbed from $3.2 billion in 1994 to $19.1 billion in 2013.

While all not all trade gains(or losses) are strictly related to NAFTA - removal of phytosanitary barriers plays a critical role - a clearer picture of winners and losers in the 20 years since NAFTA can be found on the spreadsheets below. I put these numbers together from trade figures published by USDA.

 U.S. Ag Exports to Mexico 1994 to 2013

U.S. Ag Imports from Mexico 1994 to 2013



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