California and NAFTA - Myth and Reality

Roberta Cook of UC Davis had this powerpoint presentation from 2005 about "NAFTA at 11" that offers some great insights about factors influencing trade relationships.If you haven't voted in the Fresh Talk NAFTA poll yet, this may swing your vote to the option of "positive impact." She makes these summary points:

Exchange rates and the WTO have influenced California ag much more than NAFTA.
Mexico’s decision to join the GATT in 1986 had a greater impact on reducing trade barriers in the Mexican market.
Prior to joining GATT Mexico had high average tariff rates and major nontariff barriers in the form of licensing restrictions.
Mexico made a decision to “unilaterally disarm” in ’86, partly as an internal strategy for controlling food costs and inflation.
Mexican fruit and veg average tariffs were already reduced from around 50% to a max of 20% prior to NAFTA.
Licensing restrictions were removed on most ag products, including fruit/vegs. This began to open Mexico to US exports prior to NAFTA. (ag licenses: 320 in ’85, 57 in ’90)
The US trade-weighted average tariff rate for Mexican fresh vegetable imports was 7% prior to NAFTA. There were only a few fruits and vegetables facing high ad valorem tariff rates (like 25% on asparagus, 35% on melons.) Grapes were already duty free (big growth in Sonoran grape exports since NAFTA not due to improved market access).
Arguably, the US had the most to gain from improved market access since Mexico had higher average tariffs.

TK: Cook provides her take on myths and realities:

Myths and Realities
Myth:
It is an advantage to be underdeveloped.
Reality:
US ag benefits from:
enormous support in RD&D from govt. institutions such as USDA and from the land grant university system.
enormous public sector investments in transportation and infrastructure of many types, including water storage and distribution.
extensive private sector research targeting specific crop needs.
a transparent and relatively responsive govt.
unimpeded access to the largest consumer market in the world and usually a transportation cost advantage.
Myths and Realities
Myth:
Because fruit and vegetable production is labor-intensive, countries with low wage rates naturally have the advantage.
Reality:
Fruit and vegetable production is capital, technology, management, research, marketing, and infrastructure intensive.
Mexico’s advantage is generally seasonal (climatic advantage) rather than a cost advantage.
Exceptions: crops requiring bunching at harvest – green onions, radishes, asparagus, give Mexico a cost advantage; and avocados.
Myth:
A given wage rate differential is equivalent to the same differential in labor costs.
Ag labor is abundant everywhere in Mexico.
Mexican growers provide few social services to workers.
Reality:
Labor is generally less well trained and efficient, offsetting some of the wage rate advantage.
Certain areas also experience labor shortages.
Labor management can be challenging in Mexico due to social and policy issues.
Common to provide housing and schools.

Myth:
Food safety and pesticide practices are substandard in Mexico.
Reality:
Important to distinguish between domestically-oriented growers and export growers.
Although it depends on the grower/exporter, practices have improved markedly for exporters and many now are third party certified and implementing GAPS.
It is possible to find operations in Mexico with superior food safety controls.