Since President Trump’s election, there have been many questions surrounding the future of trade agreements. Already the new administration has withdrawn from the Trans-Pacific Partnership, the multi-national that President Obama would be the cornerstone of his last year in office. During the campaign, then-candidate Trump consistently spoke of TPP and other trade agreements that should be restructured or dismantled, like the North American Free Trade Agreement (NAFTA). Trade agreements are important to farmers. Exports account for a considerable amount of a farmer’s bottom line. To highlight this need, we’ll take a look at an article from 2011 that shows the importance of trade agreements like NAFTA.
In honor of World Health Day, check out this post on world food trade and the positive benefits of free trade agreements from IL Corn!
The Economic Research Service of USDA has released its latest report on the effects of NAFTA on U.S. agriculture, NAFTA at 17: Full Implementation Leads to Increased Trade and Integratio. It concludes that most of North American agriculture has achieved a high degree of market integration for cross-border flows of trade and investments with the removal of almost all barriers.
For Illinois, this information is important. Half of the Illinois corn crop is exported due to our unique position along the Mississippi River system (including the Illinois and Ohio Rivers); Illinois corn farmers continue to be interested in expanding opportunities to export their goods.
Through NAFTA, the U.S. and Mexico have eliminated all tariffs on agricultural products, unique among U.S. free trade agreements (FTA). The Canada-U.S. FTA began in 1989, but U.S. restrictions remain on imports of dairy products, peanuts, butter, and cotton, and Canadian restrictions remain on dairy products, poultry, eggs, and margarine.
U.S. exports of wheat and rice to Mexico have quadrupled in the NAFTA era, while exports of feed grains, oilseeds, and related products to Mexico have increased by 134 percent from an annual average of 8.3 million metric tons to an average of 19.5 million metric tons. These have allowed livestock and poultry producers to lower their costs of production, expand output and compete more effectively with meat imports.
U.S. livestock and meat trade is highly integrated with Mexico, but Mexican integration with the U.S. market is rated medium to low due to animal health import restrictions on pork and poultry. U.S. and Canada are highly integrated with cattle, beef, hogs and pork, but have low integration in poultry and dairy because they continue to have barriers to trade.
Illinois corn farmers look forward to this sort of growth in opportunity if the recently negotiated Colombia Free Trade Agreement passes in the House and Senate later this year. Other Free Trade Agreements that will impact agriculture are the Korea Free Trade Agreement which would increase exports of various agricultural commodities by up to 46 percent while the Panama Free Trade Agreement could mean increased U.S. agricultural exports to Panama of more than $195 million per year by full implementation.
Read more analysis of the ERS report on NAFTA here.