A major topic in the market recently has been U.S. trade relations – with the North American Free Trade Agreement being the primary one.

 

The North American Free Trade Agreement, or NAFTA, was enacted on Jan. 1, 1994 as a way to increase and protect trade between Canada, the United States and Mexico. This replaced an agreement that covered just the United States and Canada. The greatest benefit for the members is that it eliminated many import tariffs that were making trade difficult.

 

One of the industries that benefitted the most from NAFTA was agriculture. This gave U.S. farmers the ability to reach new markets, some of which they struggled to get into before. The biggest jump was with corn sales to Mexico. Mexico now sources 99 percent of its corn from the United States and had become a leading importer of our corn. Mexico has also been a primary buyer of products such as ethanol.

 

There are now concerns that the NAFTA agreement will be dissolved. Claims are this trade deal treats the United States unfairly, which is not necessarily true. There are many products the United States imports that it cannot produce on its own, and some are better being made in other regions.

 

The greatest concern is that the United States will lose much of its export business, mainly with Mexico. Mexico is already rumored to be booking corn from South America, making the possibility of shifting even more likely.

 

Some other criticisms of NAFTA are that it favors manufacturing in other countries rather than the United States. This is done to take advantage of cheap labor, which lowers production costs.

 

While this does happen, some economists claim there are losses for other countries, as well, the main one being the revenue from import tariffs. Again, this was most reported with Mexico. Mexican officials claim the country losses more revenue from these tariffs being lost than the manufacturing jobs bring in. The fact that NAFTA closes some marketing options is also a concern for members. Rather than just being eliminated, the NAFTA agreement is more likely going to be modified for today’s needs. This is not uncommon, and has taken place several times since being enacted. The difficulty with such an agreement is finding one that benefits all parties without giving up too much revenue in the process.

 

With the evolvement into more of a global market, this and other such trade pacts will become more common. The views and opinions expressed in this column are those of the author and not necessarily those of Farm World.