Michigan State University Extension
Extenstion International Trade Res. - 12179503
03/31/96
Geoff Benson Extension Economist
The United States exported $39 bil. of agricultural products in 1991 compared to $23 bil. of imports (Tables 1 and 2). Canada ranks second and Mexico ranks third as U.S. agricultural export markets, and Canada ranks first and Mexico second as sources of U.S. agricultural imports.
Currently tariffs, quotas and import licences restrict trade flows between the US and Mexico. Table 3 summarizes the level of protection for 29 major farm commodities, as measured by the tariff equivalent of all of the border measures currently in effect. The overall level of protection for Mexico is almost five times as great as that for the United States, with grains and oilseeds receiving the greatest protection. However, there is a wide variation in the types and levels of protection among individual products.
Lowering trade barriers would have a significant impact on U.S. and Mexican producers. In general, producers of the most protected commodities lose, and therefore U.S. exports of grains, oilseeds and meat are likely to expand, whereas some U.S.horticultural producers would experience increased competition from imports. However, dramatic changes are not likely because trade restrictions for the most sensitive commodities would be removed over periods of up to 15 years, giving producers time to adjust their enterprise mix and production and marketing practices.
Farm Commodity Impacts.
North Carolina agriculture will be affected by changes in national market conditions, but the overall impact will be small. A brief summary of the likely impact on individual commodities follows.
TOBACCO. There is little trade in tobacco between the United States and Mexico. Mexico has restrictive import licensing and tariffs of 15 to 20 percent.
Mexican exports to the United States face tariffs that vary according to the type of tobacco. U.S. exports are expected to grow significantly if trade barriers are eliminated, and could reach $100 mil./year according to USDA estimates.
POULTRY AND EGGS. Most U.S. poultry and eggs are consumed domestically, but exports are growing and accounted for approximately 6 percent of broiler, 2 percent of turkey and 3 percent of egg production in 1991. U.S. exports to Mexico have been growing rapidly, albeit from a small base, and NAFTA would provide an added boost. In the longer term, the Mexican poultry industry would receive a boost from cheaper U.S. feed grains and U.S. investment, and U.S. exports will depend on the relative growth in Mexican production.
HOGS. Most U.S. pork and pork products are consumed domestically and pork exports accounted for about 3 percent of production in 1991. U.S. exports to Mexico include live hogs, fresh and frozen pork, lard, and byproducts. The USDA estimates that NAFTA would increase U.S. exports and raise US hog prices by about 2 percent by the end of the transition period. U.S. imports are triple the value of imports. Canada is the major source of imports, which include both live hogs and pork products. Importation of live hogs and pork from Mexico is prohibited because of the prevalence of hog cholera in that country.
GRAINS AND OILSEEDS. Mexico imports several types of U.S. grain and oilseed products, with the US being the major source of corn and sorghum imports. United States exports are restricted by licencing and tariffs of 10 to 20 percent which, if removed, would result in increased U.S. exports. U.S. corn prices could increase by as much as five cents a bushel and soybean prices by two cents, according to USDA. Mexican exports of grain and oilseed products to the US are negligible.
BEEF. Both imports and exports are important to the US cattle industry. The United States exports high quality beef and hides, and imports live feeder cattle and low quality beef. Canada and Mexico both export live cattle to the United States, with Canada supplying the larger share. Canada also supplies some beef and hides to the United States. Imports of Mexican feeder cattle likely would increase under NAFTA. Increased exports of U.S. fed cattle and beef to Mexico would have a positive but small impact on U.S. cattle prices, with increases of $.50 to $1.00 per cwt.according to the USDA.
GREENHOUSE AND NURSERY. Trade flows between the United States and Mexico are small. U.S. import tariffs are small and the changes proposed under NAFTA would put Mexico on an even footing with major South American suppliers to the U.S.; the impact on U.S. imports, however, is likely to be small. Removal of Mexican tariffs of 10 to 20 percent is not likely to create significant U.S. export volume.
VEGETABLES. The United States is both a major exporter and a major importer of vegetables. Fresh tomatoes are the largest U.S. import item from Mexico, followed by cucumbers, peppers, onions, broccoli and cauliflower. U.S. vegetable imports are expected to grow under NAFTA, and Mexican production is likely to expand, in part because U.S. vegetable producers and processors would face few obstacles to building plants and facilities in Mexico. US producers of some winter, early spring and late fall crops will feel the greatest pressure, especially in Florida, Texas and California. These pressures will develop slowly, however, because tariffs will be phased out gradually for the most sensitive crops. U.S. exports of such items as sweet corn, green beans, tomato paste and frozen asparagus are expected to expand, mainly in the Canadian market.
FRUITS. Mexico exported $91 mil. of fruit and fruit preparations to the United States in 1991, including shipments of melons, pineapples and orange juice. Most U.S. tariffs on Mexican noncitrus imports are small and would end immediately under NAFTA,but imports still would be required to meet U.S. phytosanitary regulations. Frozen orange juice concentrate is is a protected U.S. import with a tariff of about 28 percent. This tariff will be phased out over 15 years. U.S. fruit exports to Mexico were $56 mil. in 1991 and included apples, pears and peaches. Export growth is expected under NAFTA.
COTTON. The United States exports about half its cotton crop and Mexico imported 236,400 bales in 1991-92. Mexico fluctuated between being a major exporter and a small net importer of cotton in the 1980s. U.S. cotton exports to Mexico are expected to increase significantly because Mexican apparel production is likely to expand. Also, the raw cotton for products exported under NAFTA rules to other NAFTA countries must be of U.S. or Mexican origin.
PEANUTS. Mexico is a small producer of peanuts, with production of 110,000 tons in the 1991-92 season. This compares to U.S. production of 2.5 million tons. Mexico normally is a net importer of U.S. peanuts and has no trade barriers on imports from the United States. The United States imposes quotas and tariffs on peanut imports. Only Mexican-grown peanuts would qualify for preferential treatment under NAFTA rules and, if these rules are enforced effectively, Mexico would remain a net importer of U.S. peanuts, only exporting limited amounts to the United States.