BY C.W. “BILL” HERNDON, JR.

The North American Free Trade Agreement (NAFTA) was implemented by Canada, Mexico and the United States on January 1, 1994 and established mechanisms to reduce and/or eliminate trade barriers and tariffs for most goods, including agricultural products. NAFTA has many passionate opponents and proponents that either blame this trade pact for many economic problems or credit it for various aspects of economic growth. While NAFTA has influenced many different dimensions of our nation’s and state’s general economy and agricultural sectors, this trade agreement has neither been the sole cause of the ills nor of the benefits realized during the past seven-plus years. It is important to note that NAFTA is really a combination of three bilateral accords: one between Canada and the U.S., another involving Mexico and the U.S. and, a third between Canada and Mexico. Each treaty strives to liberalize and, thus, increase trade.
NAFTA is now being recognized as the primary reason for a fundamental shift in U.S. agricultural exports toward the Western Hemisphere during the past decade. During 1995, government statistics show that Western Hemisphere countries ranked third behind Asia and the rest of the world making up only 25 percent of total U.S. agricultural exports. Exports to Canada, Mexico and the rest of Latin America for 2000 grew to 36 percent of this total while Asia’s share fell to 35 percent and the rest of the world’s share dropped to 29 percent. Canada and Mexico now rank second and third, respectively, behind Japan as the largest importers of U.S. agricultural products and the value of agricultural exports to our immediate neighbors continue to grow both in absolute size and in importance each year. For Mississippi, Canada and Mexico remains the state’s top two export markets accounting for over one-third of the state’s total exports each year.
A brief review of selected statistics indicates that agricultural trade among the NAFTA countries has grown substantially since 1994 with the inception of these trade bilateral agreements. Data reported in Foreign Agricultural Trade of the United States (FATUS) publications show that total value of U.S. agricultural exports to Canada has increased from $5.3 billion in 1993 to $7.6 billion in 2000, while exports to Mexico grew more than 80 percent from $3.6 billion to $6.5 billion between 1993 and 2000. At the same time, the value of U.S. agricultural imports grew where imports from Canada expanded from $4.7 billion to $8.7 billion while Mexican imports increased from $2.7 billion to $5.1 billion between 1993 and 2000, respectively. A quick analysis of these FATUS statistics found that most of the growth in trade between Canada and the U.S. has been in high-value, processed products. Conversely, expansion in Mexican exports to the U.S. has been comprised of increased U.S. imports of Mexican fruit and vegetables along with increased U.S. exports of corn and soybeans to Mexico.
For principal Mississippi agricultural crops, the FATUS data illustrate that U.S. corn, cotton, rice, and soybean exports to Mexico have skyrocketed between 1993 and 2000. Corn exports jumped from $34 million to $511 million, cotton from $188 million to $476 million, rice from $56 million to $102 million, while soybean exports increased from $416 million to $678 million between 1993 and 2000, respectively. Canadian imports of these agricultural commodities also grew over this period, but not as drastically. NAFTA will continue to be important to Mississippi and its farmers because almost 20 percent of all the agricultural products produced in the state are exported to markets outside of the United States and, most notably, to Mexico and Canada. DBJ

(C.W. “Bill” Herndon, Jr., is Professor of Agricultural Economics, Mississippi State University)