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Rice. Exports to Mexico should expand moderately as Mexico lowers its current 10 percent duty on rough rice and a 20 percent duty on milled rice. Both duties will be phased out over 10 years. U.S. rice exports have increased since 1990, to 390,000 tons in 1996. This represents about 10 percent of total U. S. exports.

Cotton. U.S. cotton producers should benefit from increased exports and slightly higher prices as Mexico's 10 percent duty is reduced over 10 years. Since 1990, U.S. cotton exports to Mexico have expanded from 204,500 bales to 689,000 bales in 1996. Mexico will gain greater access to the U.S. market as the Section 22 quota is replaced by a tariff rate quota. U.S. cotton imports from Mexico reached 47,000 bales in 1996, up from almost nil in 1990.

Peanuts. NAFTA was projected to have a small positive impact on U.S. peanut producers. A stronger Mexican peso, coupled with more production, reduced U.S. peanut exports to 4,500 tons in 1996. U.S. exports can be expected to increase moderately to about 25,000 tons. The U.S. will use a tariff-rate quota to limit shipments from Mexico. NAFTA provisions allow only Mexican grown peanuts to be processed into peanut butter and paste for low duty shipment to the U.S. market. However, it is also likely that higher consumer incomes in Mexico will lead to increased demand for U.S. grown raw peanuts, resulting in additional exports.

Fruits and Vegetables. NAFTA is expected to have mixed impacts on the U.S. fruit and vegetable industry. U.S. imports of Mexican products such as broccoli, cucumbers, melons and onions, which have been protected by high duties (17 to 35 percent ad valorem), will increase. U.S. fresh and frozen vegetable imports increased 32 percent, from 1.4 million metric tons in 1994 to 2.1 million tons in 1996. Tomato imports increased to 686,000 tons, carrot imports doubled to 35,000 tons, cauliflower was up 28 percent to 200,000 tons, lettuce imports increased four-fold to 10,000 tons, squash was up 10 percent to 135,000 tons, and pepper imports were up 28 percent to 249,000 tons.

Because of the low level of protection prior to NAFTA and the long phase-out period, it is expected that NAFTA will have only a slightly negative impact on U.S. citrus producers. In fact, as the Mexican economy expands, it is possible that U.S. fresh orange exports to Mexico will increase.

Additional imports have led to increased concerns about food safety and the presence of chemical residues on fresh products, even though imports must meet U.S. food safety standards. Higher import volumes are likely to lead to increased concerns about imported animal and plant diseases and pests. Taxpayer costs to monitor and inspect more imported food from Mexico will increase.

Dairy Products. Under NAFTA, there is the potential for more commercial exports of milk powder and evaporated milk to Mexico. During 1996 nonfat dried milk exports to Mexico were 5,000 tons, down from 34,000 tons in 1994. Evaporated and condensed milk exports increased from 1,500 tons to 30,000 during the same period, however. In the past, Mexico has imported large quantities of subsidized dairy products from the U.S. In the short run, it is likely that U.S. government export programs will continue to be an important factor affecting the level of Mexican dairy imports.

U.S. cheese producers will probably benefit from NAFTA because the Mexican cheese import licensing scheme will be replaced with a 20 percent tariff to be eliminated over 10 years. This will open a larger market for U.S. cheese and cheese products. U.S. cheese exports have grown from 1,000 tons in 1990 to more than 4,732 tons in 1996.

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