Changing Agricultural Trade Patterns in North America

Changing Agricultural Trade Patterns in North America

AAEA-CAES WorkshopNorth American Free Trade Agreements:

Policy Challenges for 2002 Farm Bill and Beyond

Session I, August 8, 2001

The Impacts of NAFTA and CUSTA on Agricultural Trade Flows

Thomas L. Vollrath

Economic Research Service

USDA

Chart 1: Intra-NAFTA agricultural trade grew faster than NAFTA trade with the rest of the world

0

5

10

15

20

25

1974

1978

1982

1986

1990

1994

1998

Per

cen

t

0

5

10

15

20

25

Bil

lio

ns

of

real

U.S

. d

oll

ars

(198

9-91

ter

ms)

NAFTA to NAFTA trade

Intra-NAFTA exportshare

NAFTA

CUSTA

Total agriculture(USDA-defined) and the

4 subsectors• Bulk commodities

– unmilled grain, oilseeds, raw fiber

• Processed intermediates– flour, feed, vegetable oils, spun fiber, live animals

• Fresh produce & horticultural products– fruits, vegetables, nuts, flower, horticultural products

• High-value-processed products– fresh & frozen meats, pasta, breakfast cereals, wine,

beer, food preparations

Chart 2:The dominance of bulk exports has declined

considerably since 1974-76

United States, 1974-76

Bulk71%

Intermediates17%

Produce5%

HVPP7%

United States, 1996-98

Bulk37%

Intermediates27%

Produce8%

HVPP28%

Chart 3: Mexico now exports more fresh produce and horticultural products than bulk commodities

Mexico, 1974-76

Bulk54%

Intermediates17%

Produce17%

HVPP12%

Mexico, 1996-98

Bulk16%

Intermediates12%

Produce37%

HVPP35%

Chart 4: U.S. processed food exports to Canada and Mexico & U.S. FDI in food manufacturing move in tandem

U.S. SIC-20 exports and FDI

0

1,000

2,000

3,000

4,000

5,000

6,000

1973

1978

1983

1988

1993

1998

Mil

lio

ns

of

U.S

. d

oll

ars

FDI in Mexico

FDI in Canada

Exports to Canada

Exports to Mexico

CUSTA

NAFTA

Chart 5: The U.S. is a more important market to Canada and Mexico than either of these countries are to the United States

Destination shares

0

10

20

30

40

50

60

70

80

90

1974

1978

1982

1986

1990

1994

1998

Pe

rce

nt Canada to U.S.

U.S. to Canada

Mexico to U.S.

U.S. to Mexico

NAFTA

CUSTA

Chart 6: The U.S. captures a much larger share of the Mexican market than exporters in Mexico secure in the U.S.

U.S.-Mexican agricultural trade shares

0

20

40

60

80

100

1974

1978

1982

1986

1990

1994

1998

Des

tinat

ion

shar

e

0

20

40

60

80

100

Mar

ket s

hare

DS: Mexico to U.S.

DS: U.S. to Mexico

MS: U.S. to Mexico

MS: Mexico to U.S.

NAFTA

Chart 7: The U.S. also captures a much larger share of the Canadian market than exporters in Canada achieve in the U.S.

U.S.-Canadian agricultural trade shares

0

10

20

30

40

50

60

1974

1978

1982

1986

1990

1994

1998

Des

tin

atio

n s

har

e

0

20

40

60

80

Mar

ket

shar

e DS: Canada to U.S.

DS: U.S. to Canada

MS: U.S. to Canada

MS: Canada to U.S.

CUSTA

Chart 8: U.S. agricultural exports to Canada (Mexico) were 3.6 (6.3) times greater than would have been predicted in the

absence of special inducements and impediments

Bilateral trade intensity

0

2

4

6

8

10

12

1974

1978

1982

1986

1990

1994

1998

IT in

de

x

Canada toU.S.

U.S. toCanada

Mexico toU.S.

U.S. toMexico

NAFTA

CUSTA

Chart 9: The farm economies in all three NAFTA have undergone substantial structural change

Revealed comparative advantages in selected primary commodities

01234567

1974

1977

1980

1983

1986

1989

1992

1995

1998

Bala

ssa's

in

dex

U.S. corn

Mex fruit

Cdn potatoes

threshold

NAFTA

CUSTA

Chart 10: NAFTA countries have developed or strengthened comparative advantages in HVPP post-CUSTA/NAFTA

Revealed comparative advantages in selected high-value processed products

0

0.5

1

1.5

2

1974

1977

1980

1983

1986

1989

1992

1995

1998

Bala

ssa's

in

dex

Cdn bakery products

Mex n-alchc bevrdgs

U.S. food preps

threshold

NAFTACUSTA

Chart 11: The United States is a big winner exporting meats across the board

U.S. revealed comparative advantages in meats

0

0.5

1

1.5

2

2.5

1974

1977

1980

1983

1986

1989

1992

1995

1998

Bala

ssa's

in

dex

U.S. beef

U.S. pork

U.S. poultry

U.S. other meat

threshold

NAFTA

CUSTA

Field crops and high-value products

• Field crops– rice, wheat, corn, and other cereals– soybeans, rapeseed, and other oilseeds– cotton and other plant fiber– fresh fruits, vegetables, and nuts– legumes and tubers– other crops

• High-value products (HVP)– pasta, bakery products, and breakfast cereals– meat and meat products– processed fruits and vegetables– beer, wine, soft drinks, distilled alcoholic beverages– other food preparations

Chart 12: Pre-NAFTA downward trends in U.S.-to-Mexico complementarities reversed themselves during 1994-98

Commodity complementarity, United States to Mexico

0

0.5

1

1.5

2

2.5

1974

1977

1980

1983

1986

1989

1992

1995

1998

CC

inde

x

field crops

HVP

Commodity complementarity, Mexico to United States

0

0.5

1

1.5

2

2.5

1974

1977

1980

1983

1986

1989

1992

1995

1998

CC

inde

x

field crops

HVP

NAFTA

NAFTA

Chart 13: Increased complementarities characterize U.S.-Canadian trade post-CUSTA

Commodity complementarity, United States to Canada

0

0.20.4

0.60.8

11.2

1.4

1974

1977

1980

1983

1986

1989

1992

1995

1998

CC

inde

x field crops

HVP

Commodity complementarity, Canada to United States

0

0.20.4

0.6

0.8

11.2

1.4

1974

1977

1980

1983

1986

1989

1992

1995

1998

CC

inde

x field crops

HVPCUSTA CUSTA

Summary of key findings

• Explosive growth in intra-NAFTA trade

• Changes in the composition of ag trade

• Changes in the geographical distribution of member-country trade

• Increased competitiveness within NAFTA

• “Neighborly” trade more important most everywhere, except for Mexican exporters

• Some evidence that structural changes are beneficial