Feb 23, 2015 - 11:00am

The Open Door of Trade: Agreements and American Agriculture


Senior Vice President for International Policy

Fifth in an occasional series

Previously: Trade Agreements and American Manufacturing

What are the benefits of America’s free trade agreement (FTAs)? With debate over the renewal of Trade Promotion Authority (TPA) now underway in Washington, the Chamber is publishing this series of blog posts examining the benefits of the trade agreements that TPA makes possible. Here is the full report on the benefits of America’s free trade agreements.

For U.S. farmers and ranchers, America’s FTAs have been a bonanza. According to the U.S. Department of Agriculture (USDA), exports of U.S. farm and food products to FTA partner countries increased by more than 130% between 2003 and 2013, increasing from $24 billion to $56 billion.

In particular, America’s most recent FTAs are front-loaded to eliminate foreign tariffs rapidly, especially in the case of key exports, and this is evident in the following results reported by USDA:

  • Under the U.S.‐Chile FTA, U.S. agricultural exports to Chile have grown by more than 525%, increasing from less than $145 million in 2003 to more than $900 million in 2013.
     
  • Under the U.S.‐Peru FTA, U.S. agricultural exports to Peru have grown by 230%, rising from less than $215 million in 2005 to more than $700 million in 2013.
     
  • Under the U.S.-Central America-Dominican Republic FTA (CAFTA‐DR), U.S. agricultural exports to Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua doubled from $1.9 billion in 2005 to $3.8 billion in 2013.
     
  • Under the U.S.‐Australia FTA, U.S. agricultural exports to Australia have risen by nearly 240%, increasing from $410 million in 2004 to $1.4 billion in 2013.
     
  • Under the North American Free Trade Agreement (NAFTA) — which maintained significant agricultural tariffs for some products until 2008 — U.S. exports to Canada and Mexico rose by nearly 50% between 2007 and 2013, increasing from less than $27 billion to nearly $40 billion.

The North American success story deserves special attention. The share of U.S. agricultural exports destined for Canada and Mexico grew from 21% in 1993 to 27% in 2011, according to USDA. The American Farm Bureau Federation makes the point that 1 in 3 acres on American farms is planted for export, so roughly 1 in 10 acres is planted to feed hungry Canadians and Mexicans.

Canada was the largest agricultural export market of the United States in 2012, and U.S. farms and ranches supplied 59% of Canadian imports. (In 2013, China, with its population of 1.3 billion, overtook Canada, population 35 million, as the top market for U.S. agricultural exports.) Meat, grains, fruit, vegetables, and related products make up about 60% of U.S. agricultural exports to Canada in 2012.

As in manufacturing, however, Canadian and U.S. farmers and ranchers work in an integrated and interdependent marketplace. According to USDA, “Much of Canada-U.S. agricultural trade consists of intra-industry trade, meaning that each country exports products to the other within certain sectors.” This includes co-production of processed foods such as pet foods, bakery products, breakfast cereal and pastas. There is significant intra-industry trade in wheat products and beef, for example.

NAFTA did even more to open the Mexican market for U.S. farmers and ranchers. According to USDA, “Mexico does not produce enough grains and oilseeds to meet internal demand, so the country’s food and livestock producers import sizable volumes of these commodities to make value-added products, primarily for the domestic market.”

U.S. agricultural exports to Mexico have quintupled since NAFTA entered into force even as Mexican agriculture has enjoyed steady growth. According to USDA, grains, oilseeds, meat, and related products make up about three-quarters of U.S. agricultural exports to Mexico.

The integration of North America’s agricultural markets exemplifies the value of America’s FTAs, as USDA explains: “In general, it enables agricultural producers and consumers in the region to benefit more fully from their relative strengths and to respond more efficiently to changing economic conditions. For producers, it opens new territories for the sale of their output. … For consumers, market integration gives them access to new varieties of food products and off-season supplies of fresh produce. Greater competition along the food supply chain is also likely to make food more affordable, thereby expanding consumer purchasing power.”

The principal rationale for FTAs is to unleash new flows of mutually beneficial trade between Americans and the citizens of these 20 countries — and do so in a way that is fundamentally fair. For America’s farmers and ranchers, and for many other Americans, these FTAs have been a big success.

Next time: Trade Agreements and Services

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.