Printer Friendly Version
final provisions of the North American Free Trade Agreement (NAFTA) were fully
implemented on January 1, 2008. Launched on January 1, 1994, NAFTA is one of the
most successful trade agreements in history and has contributed to significant
increases in agricultural trade and investment between the United States, Canada
and Mexico and has benefited farmers, ranchers and consumers throughout North
With full implementation, the last remaining trade restriction on a handful
of agricultural commodities such as U.S. exports to Mexico of corn, dry edible
beans, nonfat dry milk and high fructose corn syrup and Mexican exports to the
United States of sugar and certain horticultural products are now removed. The
United States will continue to work with Mexico to build on the successes
achieved to date. Since 2005, the United States has invested nearly $20 million
in programs and technical exchanges to assist Mexico in addressing production,
distribution and marketing-related challenges associated with the transition to
free and open trade.
The agricultural provisions of the U.S.-Canada Free Trade Agreement (CFTA),
in effect since 1989, were incorporated into the NAFTA. Under these provisions,
all tariffs affecting agricultural trade between the United States and Canada,
with a few exceptions for items covered by tariff-rate quotas (TRQ's), were
removed before January 1, 1998.
Mexico and Canada reached a separate bilateral NAFTA agreement on market
access for agricultural products. The Mexican-Canadian agreement eliminated most
tariffs either immediately or over 5, 10, or 15 years.
Benefits to U.S. Agriculture
In 2007, Canada and Mexico were, respectively, the first and second largest
export markets for U.S. agricultural products. Exports to the two markets
combined were greater than exports to the next six largest markets combined.
From 1992-2007, the value of U.S. agricultural exports worldwide climbed 65
percent. Over that same period, U.S. farm and food exports to our two NAFTA
partners grew by 156 percent.
Trade with Mexico
: It estimated that U.S. farm and food exports to
Mexico exceeded $11.5 billion in 2007 -- the highest level ever under NAFTA.
From 2001 to 2006, U.S. farm and food exports to Mexico climbed by $3.6 billion
to $10.8 billion. U.S. exports of soybean meal, red meats, and poultry meat all
set new records in 2006.
In the years immediately prior to NAFTA, U.S. agricultural products lost
market share in Mexico as competition for the Mexican market increased. NAFTA
reversed this trend. The United States supplied more than 72 percent of Mexico's
total agricultural imports in 2007, due in part to the price advantage and
preferential access that U.S. products now enjoy. For example, Mexico's imports
of U.S. red meat and poultry have grown rapidly, exceeding pre-NAFTA levels and
reaching the highest level ever in 2006.
NAFTA kept Mexican markets open to U.S. farm and food products in 1995 during
the worst economic crisis in Mexico's modern history. In the wake of the peso
devaluation and its aftermath, U.S. agricultural exports dropped by 23 percent
that year, but have since surged back setting new annual records. NAFTA
cushioned the downturn and helped speed the recovery because of preferential
access for U.S. products. In fact, rather than raising import barriers in
response to its economic problems, Mexico adhered to NAFTA commitments and
continued to reduce tariffs.
Agricultural trade has increased in both directions under NAFTA from $7.3
billion in 1994 to $20.1 billion in 2006.
Trade with Canada
: Canada had been a steadily growing market for U.S.
agriculture under the U.S.-Canada Free Trade Agreement (CFTA), with U.S. farm
and food exports reaching a record $11.9 billion in 2006, up from $4.2 billion
in 1990. Fresh and processed fruits and vegetables, snack foods, and other
consumer foods account for close to three-fourths of U.S. sales.
U.S. exports of consumer-oriented products to Canada continued to set records
in 2007 in virtually every category. Additionally, new value highs were recorded
for vegetable oils, planting seeds, and sugars, sweeteners, and beverage bases.
With a few exceptions, tariffs not already eliminated dropped to zero on January
In 1996, the first NAFTA dispute settlement panel reviewed the higher tariffs
Canada is applying to its dairy, poultry, egg, barley, and margarine products,
which were previously subject to non-tariff barriers before implementation of
the Uruguay Round. The panel ruled that Canada's tariff-rate quotas are
consistent with NAFTA, and thus do not have to be eliminated.
NAFTA Eliminates Trade Barriers
NAFTA helped to eliminate a number of non-tariff measures affecting
agricultural trade between the United States and Mexico. Prior to January 1,
1994, the single largest barrier to U.S. agricultural sales was Mexico’s import
licensing system. However, this system was largely replaced by tariff-rate
quotas or ordinary tariffs.
All agricultural tariffs between Mexico and the United States were eliminated
as of January 1, 2008. Many were immediately eliminated and others were phased
out over transition periods of 5, 10, or 15 years. The immediate tariff
eliminations applied to a broad range of agricultural products. In fact, more
than half the value of agricultural trade became duty free when the agreement
went into effect. Tariff reductions between the United States and Canada had
already been implemented under the CFTA.
Both Mexico and the United States protected their import-sensitive sectors
with longer transition periods, tariff-rate quotas, and, for certain products,
special safeguard provisions. However, now that the 15-year transition period
has passed, free trade with Mexico prevails for all agricultural products. NAFTA
also provides for strict rules of origin to ensure that maximum benefits accrue
only to those items produced in North America.
Protection for Import-Sensitive Products
Under the General Agreement on Tariffs and Trade (Article XIX), and the
U.S.-Canada Free Trade Agreement (Chapter 11), countries may take emergency
action if increased imports cause injury to domestic producers. This concept was
carried over into the NAFTA. Chapter 8 of the NAFTA permits, under specified
conditions, the parties to impose a temporary, emergency safeguard measure –
that is, an increase in the tariff to the prevailing MFN level - in the event
imports cause, or threaten to cause, serious injury to domestic producers. In
2008, a NAFTA partner could, assuming the associated conditions are satisfied,
invoke a Chapter 8 safeguard provision until 1 year following full
implementation of the NAFTA commitments, i.e., until January 1, 2009. Beyond
January 1, 2009, the NAFTA Partner could maintain a safeguard arrangement only
with the consent of the Party against whose good the action would be taken.
Other Key NAFTA Provisions
Sanitary and Phytosanitary Measures
: The NAFTA imposes disciplines on
the development, adoption, and enforcement of sanitary and phytosanitary (SPS)
measures. These are measures taken to protect human, animal, or plant life or
health from risks that may arise from animal or plant pests or diseases, or from
food additives or contaminants. Disciplines contained in NAFTA are designed to
prevent the use of SPS measures as disguised restrictions on trade, while still
safeguarding each country's right to protect consumers from unsafe products, or
to protect domestic crops and livestock from the introduction of imported pests
Although NAFTA encourages trading partners to adopt international and
regional standards, the agreement explicitly recognizes each country's right to
determine the necessary level of protection. Such flexibility permits each
country to set more stringent standards, as long as they are scientifically
based. NAFTA also allows state and local governments to enact standards more
stringent than those adopted at the national level, so long as these standards
are scientifically defensible and are administered in a forthright, expeditious
: The three NAFTA countries work toward the elimination
of export subsidies worldwide. The United States and Canada are allowed under
the NAFTA to provide export subsidies into the Mexican market, under certain
conditions, to counter subsidized exports from other countries. Neither Canada
nor the United States is allowed to use direct export subsidies for agricultural
products being sold to the other, and both countries are required to consider
the export interests of the other whenever subsidizing agricultural exports to
: Under NAFTA, the parties should endeavor to move
toward domestic support policies that have minimal trade or production
distorting effects, or toward policies exempt from domestic support reduction
commitments under the World Trade Organization.
Grade and Quality Standards
: The United States and Mexico agreed that
when either country applies a measure regarding the classification, grading, or
marketing of a domestic product destined for processing, it will provide no less
favorable treatment for like products imported for processing.
Rules of Origin
NAFTA improves incentives for buying within the North American region and
ensures that North American producers receive the primary benefits of all newly
established tariff preferences. Goods not originating from the United States,
Mexico, or Canada must be significantly transformed or processed in one of those
countries before they receive NAFTA's lower duties for shipment to one of the
two other countries.
The NAFTA rules of origin for agricultural products were constructed to
prevent Mexico from becoming an export platform for processed products made from
subsidized raw materials originating in non-NAFTA countries. There are also
strong rules of origin for U.S. import-sensitive commodities, such as citrus and
: All bulk agricultural commodities, and certain
processed products such as orange juice and cheese, are exempt from the de
provision, which otherwise allows up to 7 percent of
non-NAFTA-origin product to be included in final NAFTA goods.
: All single-fruit juices (fresh, frozen, concentrated,
reconstituted, fortified) must be made from 100-percent NAFTA-origin fresh
citrus fruit. The de minimis
provision does not apply to any citrus
: Only U.S. or Mexican milk or milk products can be used
to make cream, butter, cheese, yogurt, ice cream, or milk-based drinks traded
under NAFTA preferential rates.
: With the exception of certain industrial fatty acids and
acid oils, refining of crude oils within a NAFTA country does not confer NAFTA
origin. Making margarine and hydrogenated oils from imported crude oils does not
: Refining does not confer origin. In order for sugar to be
considered of North American origin, all processing of sugarcane or sugar beets
must take place in NAFTA territory.
: Mexico must produce the peanuts to qualify for NAFTA
preferential rates on peanuts and peanut products exported to the United States.
U.S. exports of peanut products to Mexico are subject to this same rule.
Committees Help Implementation
The NAFTA Committee on Agricultural Trade monitors and promotes cooperation
on the implementation and administration of the agricultural provisions. The
committee provides a forum for the three countries to consult on trade issues
and other matters related to the implementation of the agreement.
The NAFTA Committee on Sanitary and Phytosanitary (SPS) Measures promotes the
harmonization and equivalence of SPS measures, and facilitates technical
cooperation, including consultations regarding disputes involving SPS measures.
This committee meets periodically to review and resolve issues in the SPS area.
The NAFTA Advisory Committee on Private Commercial Disputes Regarding
Agricultural Goods provides recommendations to the three governments for
resolving private commercial disputes that arise in connection with transactions
in agricultural products. The intent is to achieve prompt and effective
resolution of commercial disputes, with special attention to perishable items.
The committee is composed primarily of private sector representatives but also
has government participants. Lastly, bilaterally, the United States maintains
annual meetings with both countries called the Consultative Committee on
Agriculture (CCA). The CCA meeting is used by both countries to ensure the full
and proper implementation of the NAFTA.
Return to the NAFTA page