More free trade perspective

As you know, the Fresh Talk poll question this week tries to survey the impact of the NAFTA on the U.S. produce industry. So far, those who believe the impact has had a negative impact are leading in the early voting. Ask the Mexican sugar producer and the Florida tomato grower and you may get one answer. Ask the Northwest apple shipper, Ontario greenhouse operator and the Mexican avocado grower and you may get another. To offer more perspective on this issue, here is a link to a Congressional Research Service report on the impact of free trade agreements on U.S. agriculture. From the "just the facts, ma'am" August 2007 report:

Canada......

Canada is the leading agricultural trading partner of the United States, and accounted for almost 19% of two-way U.S. agricultural trade in 2006. Since the Canada-U.S. Trade Agreement (CUSTA) took effect in 1989, bilateral trade in agricultural and food products has increased more than six times (from an average $4 billion in 1986-1988, to $25.4 billion in 2006). For comparison, during this same period, U.S. two-way agricultural trade with the rest of the world slightly more than doubled. U.S. agricultural exports to Canada increased almost seven times (from an average $1.8 billion in 1986-88 to $11.9 billion in 2006). Imports from Canada rose six times (from an average $2.2 billion in 1986-88 to $13.4 billion in 2006). In 2006, the main U.S. exports to Canada in terms of value were: vegetables — fresh, processed, frozen and dried ($1,732 million), fresh fruit ($1,122 million), breakfast cereals and baked goods ($709 million), food preparations ($495 million), beef and veal ($424 million), fruit juices ($406 million), pet food ($393 million), pork ($365 million), cocoa ($317 million), coffee ($274 million), and confectionery products ($186 million). In 2006, main U.S. imports from Canada were live cattle ($1,032 million), bakery products and snacks ($966 million), beef and veal ($923 million), pork ($889 million), fresh vegetables — primarily greenhouse tomatoes, peppers, and cucumbers ($724 million), chocolate ($690 million), frozen vegetables ($664 million), live hogs ($579 million), rapeseed oil ($424 million), confectionery products ($380 million), wheat ($304 million), food preparations ($278 million), beer ($275 million), and cheese mixes and doughs ($232 million). Under the CUSTA’s agricultural provisions (incorporated into NAFTA in 1994), almost all agricultural products have traded freely between both countries since 1998. Exceptions are those commodities that each country still subjects to tariff-rate quotas ( TRQs). Canada uses TRQs to limit imports from the United States of its import-sensitive commodities (dairy products, margarine, poultry, turkey, and eggs). The United States uses TRQs to restrict imports of Canadian dairy products, peanuts, peanut butter, cotton, sugar and certain sugar-containing products (SCPs). Both countries also retain the option under CUSTA to apply temporary safeguards on bilateral trade in selected fruits, vegetables, and flowers through year-end 2007. Since mid-2003, the discovery of BSE on both sides of the border has significantly affected bilateral trade in live cattle and beef products.


Mexico........


Mexico is the second largest agricultural trading partner of the United States, and accounted for almost 15% of two-way agricultural trade in 2006. Since NAFTA went into effect in 1994, two-way bilateral trade in agricultural and food products has more than tripled (from an average $6 billion in 1991-1993, to $20.3 billion in 2006). For comparison, during this same period, U.S. two-way agricultural trade with the rest of the world nearly doubled. U.S. gricultural exports to Mexico rose by more than three times (from an average $3.5 billion in 1991-93, to $10.9 billion in 2006). In 2006, sales of corn ($1,472 million), soybeans ($906 million), beef and veal ($778 million), food preparations ($483 million), wheat ($418 million), cotton ($412 million), beef variety meats ($388 million), grain sorghum ($323 million), pork ($309 million), soybean meal ($255 million), and decidious fresh fruit ($245 million) accounted for more than one-half of U.S. agricultural exports to Mexico.
Agricultural imports from Mexico have almost quadrupled (from an average $2.5 billion just before NAFTA took effect, to $9.4 billion in 2006). Purchases of fresh vegetables, primarily tomatoes, chili and peppers, cucumbers, squash and onions ($2,573 million); beer ($1,600 million); fresh fruit, primarily avocados, melons, grapes, limes, mangoes, and strawberries ($1,149 million); live cattle ($524 million); confectionery products ($385 million); sugar ($320 million); and baked goods and snacks ($312 million) accounted for almost three-quarters of U.S. agricultural imports from Mexico. Under NAFTA, tariffs and quotas on most traded agricultural products were eliminated in 2003. However, the United States and Mexico still impose border protection on a few products subject to a 15-year transition period to free trade. All such protection will end on December 31, 2007. U.S. agricultural products that then will be eligible to freely enter the Mexican market will be: corn, dry beans, milk powder, sugar, dried onions, chicken leg quarters, and high-fructose corn syrup (HFCS); and under specified tariff lines, processed vegetables, frozen concentrated orange juice (FCOJ), and melons. Products imported into the United States from Mexico that then will be allowed to enter freely will be FCOJ, peanuts, and sugar; and under specified tariff lines cucumbers, asparagus, broccoli, melons, and processed vegetables. All other agricultural products now enter each other’s market freely, except for those that at times have become embroiled in trade disputes. Most of the bilateral disputes that have arisen since 1993 — when tariffs and quotas were eliminated for those agricultural commodities that fell in the 10-year staging category — have affected several U.S. agricultural commodities exported to Mexico (rice, beef, pork, apples, soy oil, and HFCS). At the same time, Mexican farmers and some Mexican commodity groups began pressuring the Mexican government to renegotiate certain NAFTA provisions. Calls for renegotiating NAFTA, particularly those provisions that apply to Mexico’s most sensitive agricultural commodities (dry beans and corn), were an election issue in Mexico’s 2006 presidential race. Though top Mexican officials under the previous presidential administration stated that reopening NAFTA was not possible and would not occur, current President Calderon continues to face heavy public pressure to revisit this position. Separately, sugar that enters from Mexico is the main sensitive product for the United States. The fact that sugar imports from Mexico will be unrestricted beginning in 2008 is already affecting the dynamics of the debate on the future U.S. sugar program as Congress considers the 2007 farm bill.