The sharp devaluation of the Mexican peso reduced short-term export opportunities. U.S. exports of most food products declined 25 to 35 percent because the prices of most U.S. goods nearly doubled. U.S. imports of Mexican products surged as the peso's value dropped. For example, tomato imports increased 60 percent in 1 year and most other vegetable exports to the U.S. also increased. Mexican economic recovery was rapid, with U.S. agricultural exports setting a new record in 1996.
With a growing population, more two-income families, and diversification of diets, Mexico is poised to become a major market for U.S. food and fiber. An estimated 84 percent of Mexico's 93 million people have per capita incomes below $865 per year, severely limiting consumer demand. Market potential is also limited by underemployment, slow economic development, and lack of improvement in the efficiency of transportation, storage and handling infrastructure.
U.S. agricultural imports from Mexico were valued at $3.8 billion in 1996, up 31 percent since 1994. Major imports were vegetables, live animals (mainly feeder cattle), coffee, fruits, nuts and malt beverages. Competitive imports have increased since NAFTA was implemented, accounting for 81 percent of total agricultural imports from Mexico and leading to more competition for some U.S. producers.
Impacts on Selected Commodities
NAFTA is expected to have a positive overall impact on U.S. agriculture. The USDA estimates that U.S. agricultural exports to Mexico could increase by $2 billion per year after NAFTA is fully implemented. Gains in grains, meats, poultry and cotton are likely to offset losses expected in the fruit and vegetable sectors. Most changes will be small because of the long length of the transition period and the relatively low level of many pre-NAFTA duties.
Benefits to the United States will arise as exports increase, creating additional business activity and more jobs. Costs will be incurred in both countries when domestic production is supplanted by imports and jobs are lost.
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