Overview

The North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994, establishing a free trade area as part of a comprehensive economic and trade agreement among the United States, Canada, and Mexico. President Trump has repeatedly stated that he intends to either renegotiate or withdraw from NAFTA. In May 2017, the U.S. Trade Representative (USTR) formally notified Congress of the Administration's intent to renegotiate NAFTA. Reactions to the announcement have been mixed, with some industries supporting NAFTA modernization as a way to address a range of trade concerns, while others are urging the need to proceed more cautiously so as to not destabilize current U.S. export markets. Canada and Mexico are key U.S. agricultural trading partners. Since NAFTA was implemented, the value of U.S. agricultural trade with its NAFTA partners has increased sharply. Agricultural exports rose from $8.7 billion in 1992 to $38.1 billion in 2016, while imports rose from $6.5 billion to $44.5 billion. As a share of U.S. agricultural trade, Canada and Mexico rank second and third (after China) as leading U.S. export markets. Leading NAFTA-traded agricultural products were meat and dairy products; grains; fruits, tree nuts, and vegetables; oilseeds; and sweeteners. In general, NAFTA is considered to have benefitted the United States both economically and strategically in terms of North American relations. Many U.S. food and agricultural industry groups claim that NAFTA has been positive for their industries. As part of its 2015 retrospective analysis of the impacts of NAFTA, the U.S. Department of Agriculture (USDA) concluded in a 2015 report that NAFTA has had a profound effect on many aspects of North American agriculture over the past two decades, contributing to increased market integration and cross-border investment and resulting in important changes in consumption and production. Although NAFTA resulted in tariff elimination for most agricultural products and redefined import quotas for some commodities as tariff-rate quotas (TRQs), some products-such as U.S. exports to Canada of dairy and poultry products-are still subject to high above-quota tariffs. In addition to tariffs and quotas, NAFTA addressed sanitary and phytosanitary (SPS) measures and other types of non-tariff barriers that may limit agricultural trade. SPS regulations are often regarded by agricultural exporters as one of the greatest challenges in trade, often resulting in increased costs and product loss and disrupting integrated supply chains. Renegotiating NAFTA could provide an opportunity to modernize certain issues affecting U.S. agricultural exporters. Potential options could include the following: Improving agricultural market access. Liberalize remaining dutiable agricultural products that are still subject to TRQs and high out-of-quota tariff rates. Updating NAFTA's SPS provisions. Address SPS concerns in agricultural trade by going beyond existing World Trade Organization (WTO) rights and obligations by addressing certain requirements including risk assessment, transparency, and notification, as well as building in additional rapid response mechanism and enforcement. Addressing other trade concerns. Address concerns raised in outstanding disputes between the United States and its NAFTA partners, as well as geographical indications (GIs) or place names that identify products based on their reputation or origin. A number of these types of trade concerns were addressed in recent U.S. trade negotiations under the Trans-Pacific Partnership (TPP) agreement, and some farm interest groups claim that the TPP could provide a blueprint for NAFTA renegotiations involving U.S. agricultural trade concerns.

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9781973755036

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