Illinois farm journalist Alan Guebert gives an interesting U.S. perspective on free trade.
Three years after its implementation, the agricultural export value delivered to the American economy by the North American Free Trade Agreement is a negative $100 million (U.S.), according to a recently released USDA study.
Despite all the rosy, pre-NAFTA predictions and all the glowing farm-group post-NAFTA analysis, a comprehensive USDA examination of NAFTA claims it brought more Canadian and Mexican agricultural goods to the U.S. than the U.S. sent to Mexico and Canada.
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The numbers, according to the Sept. 3 report, tell the tale: “During 1993-96, U.S. agricultural trade to Mexico and Canada rose from $8.9 billion to $11.6 billion. U.S. agricultural imports from the two NAFTA partners grew from $7.3 billion to $10.5 billion.”
Simple subtraction shows U.S. agricultural exports to our neighbors grew $2.7 billion during the four year period while U.S. agricultural imports from them grew an even larger $3.2 billion.
But even as U.S. agricultural exports – and imports – climbed under the touted trade deal, NAFTA was responsible for only 20 percent of the growth; 80 percent of the two-way trade would have occurred without it, notes USDA.
“Analysis by the Economic Research Service,” the report states, “finds that NAFTA is responsible for a little more than 20% of the increase in U.S. agricultural exports to Mexico and Canada since the agreement began.”
“Slightly less than 20% of the increase in U.S. agricultural imports from the two countries can be attributed to NAFTA.”
USDA thus implies that NAFTA was responsible for only $540 million of the increased U.S. agricultural exports to Canada and Mexico.
Likewise, USDA guesses that NAFTA increased U.S. farm imports from Canada and Mexico by $640 million. Subtract the former from the latter and the impact of NAFTA on U.S. agricultural trade is clear: a negative $100 million.
The detailed, commodity-by-commodity analysis shows much of the hype offered by NAFTA-pushing farm groups is just that – hype. For example:
- U.S. corn exports to Mexico “are about 5% higher” than they would be without NAFTA and besides, much of the increased corn sales “were due to Mexican drought.” NAFTA-inspired U.S. corn exports to Canada are “negligible, less than a 1 to 2% increase.”
- Recent U.S. soybean sales to Mexico “were 2 to 5% higher because of NAFTA” but “future exports are expected to decline.”
- “NAFTA has had little direct impact on hog trade” with Mexico, says USDA.
Yet the National Pork Producers Council noted in a July 15 press release that NAFTA “is a bonanza for the U.S. pork industry.”
In fact, NAFTA’s impact on the U.S. agricultural trade balance has been the opposite of bonanza; it has been a bust.
In 1993, the last pre-NAFTA year, U.S. agriculture ran a $1.52 billion trade surplus with Canada and Mexico, notes USDA. In 1996, the trade surplus dropped to $1.04 billion.
But that was better than the peso-crash year of 1995 when the U.S. balance of agricultural trade with our two neighbors went in the hole by $81 million.
Yet in sheer volume and value, agricultural trade between the U.S., Canada, and Mexico has ballooned. So who’s making the dollars and the dineros in this deal?
USDA says it is the usual suspects. “Sales from U.S. affiliates located in Canada rose from $5.5 billion in 1987 to … an estimated $12.5 billion in 1996.” The big players, it notes, are Kraft Foods, PepsiCo, Heinz, ConAgra and Cargill.
Similarly, “Sales from U.S. affiliates in Mexico grew from $1.6 billion in 1987 … to an estimated $6 billion in 1996.” These include PepsiCo, Ralston Purina, ADM, Kelloggs, Tyson Foods and Simplot.
