Senior Vice President for International Policy
November 04, 2022
What are the benefits of trade and trade agreements for the United States? As noted earlier in this series, the world is charging ahead in pursuit of new market-opening trade agreements, while Washington policymakers have been sitting on the sidelines.
In that context, it’s worth taking a moment to assess the benefits of trade — and trade agreements — for American agriculture.
American farmers and ranchers benefit tremendously from international trade. About 25% of U.S. farm products by value are exported each year, according to the American Farm Bureau Federation. Agricultural exports are expected to reach nearly $200 billion in fiscal year 2023, according to the U.S. Department of Agriculture (USDA).
For many crops, such as wheat or almonds, more than half the U.S. harvest is sold abroad. U.S. farmers and ranchers are so productive there’s no way Americans could consume this bounty alone: The Farm Bureau estimates that one American farm produces enough food to feed 166 people annually — making exports essential to the prosperity of the U.S. farm and ranch economy.
For U.S. farmers and ranchers, America’s free-trade agreements (FTAs) have been a bonanza. According to a report by USDA looking at the 2003-2013 period — during which the United States entered into new FTAs with a dozen nations — exports of U.S. farm and food products to FTA partner countries increased by more than 130%.
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 grew 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 grew 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 rose 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, when they were phased out — U.S. exports to Canada and Mexico rose by nearly 50% between 2007 and 2013 as the benefits of this more complete market opening took hold. By 2013, U.S. agricultural exports to Mexico had quintupled since the NAFTA entered into force even as Mexican agriculture also enjoyed steady growth.
The North American success story deserves special attention. Mexico and Canada are, respectively, the second and third largest export markets for U.S. agriculture (after China, with its population of 1.4 billion). Together they purchased 29% of all U.S. agricultural exports in 2021. The United States is the source for 70% of Mexico’s agricultural imports and 58% of Canada’s.
This boom in North American exports for U.S. farmers and ranchers is due in large part to the NAFTA’s elimination of all Mexican tariffs and nearly all Canadian tariffs on agricultural products. The USMCA, which entered into force in 2020, maintained this invaluable market access.
The USMCA also introduced some improvements on the NAFTA with important provisions upholding agricultural biotechnology. It also provides new access to Canada’s market for U.S. dairy, poultry, and eggs while eliminating non-tariff barriers relating to wheat and wine.
Indeed, it’s often the case in trade policy that the “devil’s in the details,” and little publicized rules and regulations can become significant barriers to the export of “made-in-the-USA” products. For agricultural exports, these barriers often involve sanitary and phytosanitary standards (SPS) — having to do with animal and plant products, respectively — and are addressed in U.S. trade agreements’ SPS chapters.
These chapters require transparent, non-discriminatory rules to ensure that SPS measures don’t become disguised protectionism or stealth barriers to trade. SPS chapters like the one in the USMCA “encourage the development and adoption of science-based international standards, guidelines, and recommendations” and aim to “advance science-based decision making.”
In sum, American farmers and ranchers depend on trade. Their incredible productivity produces an impressive harvest that’s simply too large not to share — and to sell around the globe. Entering into new trade agreements to help them do so should be a top priority.
Read more in our Lead On Trade Series:
- Why Americas Must Lead on Trade
- The Benefits of Trade for America
- The Benefits of Trade Agreements in America
- How America’s Small Businesses Benefit from Trade
- Why Manufacturers Need a Bold Trade Agenda