NAFTA s Impact on U.S. Agricultural Policy. Lloyd Day Foreign Agricultural Service U.S. Department of Agriculture
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1 NAFTA s Impact on U.S. Agricultural Policy Lloyd Day Foreign Agricultural Service U.S. Department of Agriculture 1
2 Benefits of NAFTA Ag. exports under NAFTA = 258,000 U.S. jobs Average annual growth = $800 million Dismantling trade barriers = market integration Canada is # 1 U.S. export market Mexico is # 3 U.S. export market U.S. is #1 export market for both Canada and Mexico Integration fueling investment $10.7 billion invested by U.S. in Canada and Mexico s food and agriculture sector 2
3 NAFTA Has Accounted For 59% of U.S. Ag Export Growth Since NAFTA began in 1994 OTHER 41% NAFTA 59% 3
4 Growth in U.S. Agricultural Exports Under NAFTA Under NAFTA, exports of U.S. food and agricultural products reached a record $17.2 billion in '93 '95 '97 '99 '01 '03 Mexico Canada 4
5 NAFTA Agricultural Exports to U.S. Canada and Mexico s agricultural exports to the U.S. reached a record $16.6 billion in B i l l i o n s '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 5
6 NAFTA and Economic Integration NAFTA countries attract foreign direct investment Increased trade and investment has spurred economic integration Unifying standards, procedures and regulations have enhanced market efficiency and growth in North America 6
7 U.S. Ag Exports to Canada Under NAFTA B i l l i o n s '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 Exports to Canada have increased 75%, reaching $9.3 billion in 2003 Canada is our largest agricultural market 7
8 Top U.S. Ag Exports to Canada 2003 M l n U S $ Fresh Vegetables Fresh Fruit Snack Foods Red Meats Proc. Fruit & Veg Coarse Grains Fruit & Veg Juices Pet Food Poultry 8
9 U.S. Ag Exports to Mexico Under NAFTA B i l l i o n s '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 U.S. ag exports to Mexico have doubled under NAFTA, reaching $7.9 billion in 2003 Mexico is our third largest agricultural market 9
10 Top U.S. Ag Exports to Mexico M l n U S $ Red Meats Soybeans Coarse Grains Cotton Wheat Proc. Fruits and Vegs Poultry Dairy Products Planting Seeds 10
11 What s s Next for NAFTA? Eliminated most formal tariff barriers on North American trade Produced for the average U.S. household of four an income gain of between $350 and $930 a year.but Impediments to North American commerce remain. 11
12 What s s the Problem? Differing standards, regulations, and business practices increase the cost of doing business on a continental scale, hindering productivity growth and impairing the competitiveness of North American businesses and workers vis-à-vis those elsewhere, and disadvantaging consumers and businesses 12
13 What s s a Potential Solution? Integration of North American Food Chain Eliminate arbitrary impediments and unnecessary costs Governments are suspicious of the misuse of regulations, inspection standards, and food safety standards as non-tariff barriers to protect domestic producers. Harmonizing these regulatory regimes, perceived barriers would be eliminated making agricultural trade more predictable This would spur economic growth and the integration of the North American food chain 13
14 Case Study: BSE Canadian finding in April 2003 North American trade halted temporarily Partial opening in August 2003 APHIS rulemaking process begins Trinational approach to the OIE 14
15 Case Study BSE US positive BSE finding on December 23 Borders closed USDA/FDA Measures Rulemaking suspended North American Harmonization Committee Canada opens to US beef with conditions Mexico opens to US beef with conditions What s the moral?. Do unto others 15
16 What s s at Stake? Mexico is the second largest market for U.S. exports of beef and beef offals U.S. beef exports 200 increased to $ million in M l n U S $ '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 16
17 Next Steps Finalize APHIS rule on live cattle and beef from cattle over 30 months of age Complete harmonization discussions Risk mitigation measures Identification of low-risk products Present North American solidarity to ROW Continue to pry open markets 17
18 Relevance to Integration Harmonized approach to plant or animal disease findings would/might: Prevent trade disruptions Establish common procedures Build confidence Reduce risk and increase certainty for business to invest Allow markets to work efficiently Lead to deregulation 18
19 NAFTA s Impact on U.S. Agricultural Policy Lloyd Day Foreign Agricultural Service U.S. Department of Agriculture 19
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