CIAO DATE: 04/05

North American Agriculture under NAFTA

Abstract

The NAFTA agreement on agricultural trade consists of three bilateral agreements– between the United States and Mexico, the United States and Canada, and Canada and Mexico. The US-Canada agreement largely carried into NAFTA the tariff and nontariff barrier rules that had been adopted in the Canada-US Free Trade Agreement (CUSFTA). Under CUSFTA, most agriculture tariffs between the United States and Canada were to be phased out by January 1998, and this schedule was adopted by NAFTA for USCanada agricultural trade. However, Canada was allowed to maintain permanent tariffrate- quota (TRQ) restrictions on imports of dairy, poultry, and eggs; and the United States was allowed to maintain TRQs on imports of sugar, dairy products, and peanuts from Canada (see table 1). Although a tariff snapback provision remains in effect until 2008, it has rarely been used by Canada. Agricultural trade between Mexico and Canada was limited by virtually the same restrictions. As might be expected, some agriculture trade associations favored NAFTA and others opposed. Box 1 summarizes the lineup of important trade associations.

By contrast to the US-Canada agreement, Mexico and the United States took far-reaching steps towards complete liberalization of agricultural trade. In their bilateral agreement, the ultimate goal was to eliminate all import quotas and tariffs–with no exceptions. Liberalization was not, however, implemented on a rapid schedule, and the phase-out terms for sensitive products were often backloaded. Mexican tariffs on corn and dry beans were subject to a 15-year phase-out period, and the United States insisted on similar transition periods for tariffs on winter vegetables, orange juice, peanuts, and sugar. Table 1 gives duty rates on US-Mexico agricultural trade as of 2003, and box 2 summarizes the phase-out arrangements. Given these restraints, in 2000, just eight commodities–some of them minor agricultural products–represented 55 percent of the value of US-Mexico agricultural trade: beer, coffee, tomatoes, cattle, peppers, cucumbers, grapes, cauliflower, and broccoli.

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