Domestic and International Trade
http://trmep.tamu.edu/cg/factsheets/rm6-8.html
RM6-8.0
5-98
Parr Rosson, Geoffrey A. Benson, Kirby S. Moulton and Larry D. Sanders*
The use of trade agreements to achieve both domestic and international trade policy objectives is increasing. As a result, some U. S. producers have experienced more market access and rising exports for their products, while others have faced more import competition and lower prices. Along with new trade opportunities, producers can expect more risk, such as the 1995 Mexican peso devaluation. This leaflet provides a long-term view of U.S.-Mexico trade and the implications of the North American Free Trade Agreement (NAFTA).
NAFTA, negotiated between the United States, Canada and Mexico, was implemented on January 1, 1994. It created one of the world's largest free trade areas. The three member countries have a combined population of 385 million people, $8.5 trillion in annual economic output, and annual trade exceeding $2.0 trillion.
NAFTA is designed to expand the flow of goods, services and investment throughout North America by (1) the full, phased elimination of import tariffs and (2) the elimination or fullest possible reduction of nontariff trade barriers, such as import quotas, licensing schemes, and technical barriers to trade. Trade restrictions applied by the three countries to imports from all other countries will remain in effect unless modified through World Trade Organization (WTO) negotiation or other trade agreement. In agricultural trade, NAFTA contains two separate bilateral agreements, one between the United States and Mexico and another between Mexico and Canada.
Potential for Agricultural Trade
NAFTA builds on previous reductions in Mexican trade barriers. Mexico became a member of GATT in 1986 and tariffs on many U.S. exports were reduced from as much 100 percent to 10 to 20 percent before NAFTA. Lower tariffs, coupled with stronger economic growth in Mexico, led to an upsurge in trade.
Mexico has become the third largest market for U.S. agricultural exports, purchasing food and fiber valued at $5.4 billion in 1996. Major U.S. agricultural exports to Mexico include grains, meats and livestock products, fruits, nuts, vegetables and other horticultural products. Exports of beef, poultry, pork, corn, and soft fruits increased during 1994, NAFTA's first year (Fig. 1).
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