North American Free Trade Agreement

1. North American Free Trade Agreement By: Tracy Brandenberger, Rahul Ramdas, & Kelsey Spillmann

2. What is NAFTA? • Trade pact that took into effect January 1, 1994 that was intended to gradually eliminate most tariffs and other trade barriers on products and services passing between the United States, Canada , and Mexico. • The pact has lead to much debate and protest from all sides, predominantly Mexican farmers and American factory workers. Current debates about NAFTA are focussed around the expansion of NAFTA • The pact has effectively created a free-trade bloc among the three largest countries of North America, covering a region of nearly 400 million people that produces over $8 trillion in goods and services. • The majority of industries in the United States, Canada, and Mexico have benefited from NAFTA.

3. EFFECTS ON THE UNITED STATES

4. United States and Mexico • Two-way agricultural trade between the United States and Mexico • Since NAFTA was iniated in 1994… • Types of Exports to Mexico • What is has done?

5. United States and Canada • Two-way agricultural trade between the United States and Canada • Since implementation of the U.S. Canada Free Trade Agreement… • Types of Exports

6. NAFTA: THE GOOD AND THE BAD FOR THE UNITED STATES • While NAFTA has increased gross U.S. exports, imports have increased as well • While U.S. markets such as electronics, clothing, and pharmaceuticals have increased, certain U.S. Horticultural markets have suffered due to open trade with Canada and Mexico

7. Effects of NAFTA on U.S. Markets • The “Bad” • Florida – Tomato • California – Avocado • The “Good” • Washington – Apple • California - Cherry

8. Florida and the Tomato • The Florida Horticultural industry exports commodities such as tomatoes, sugar cane, bell peppers, cucumbers, eggplant, snap beans, and squash • 80 Florida tomato growers produce about 1.6 billion pounds, $400 million worth, of tomatoes from 50,000 acres annually • The Florida Horticultural industry has been the most outspoken agricultural opponent of NAFTA thus far, with great deals of opposition coming from Floridian tomato growers

9. Tomato Trouble Since the development of NAFTA, imports have accounted for 32 percent of fresh tomato consumption in the U.S. in 1999 up from 19 percent in 1994 • Within the first few years of the implementation of NAFTA, Mexico, with an ideal soil and climate for producing tomatoes, began to sell increasing quantities to American consumers causing tomato prices to fall HOWEVER • People were buying more Mexican tomatoes and fewer Floridian tomatoes, resulting in the loss of 150 Floridian tomato growers.

10. Proponents for Mexico Americans get cheaper tomatoes under free trade, they get better ones. In the winter, Florida growers harvest tomatoes while they’re still green and ripen them artificially using ethylene gas. • “Mexican tomatoes taste better and last longer because they are vine ripened.“ - Consumers for World Trade, a pro-trade consumer advocacy group

11. Proponents for Florida NAFTA is on its way to destroying an entire industry. It has boosted Mexico’s economy at the expense of U.S. farmers. • “The development of exports of one country should not be aimed at harming to the productive capacity of another, while adhering to the commitments made in NAFTA." - Secretary of Agriculture, Dan Glickman

12. The Result • In 1996, Florida tomato growers fought for and won protection against Mexican tomato imports • In response to Florida grower protests, the US government took three steps to slow down the implementation of NAFTA's free trade provisions with Mexico • 1- Indefinitely postponed cross-border trucking • 2- Proposed to shift to a weekly measure of Mexican tomato imports. If Mexican shipments exceeded a weekly quota, a 2.5 percent tariff would be levied • 3- Supported efforts to define Florida winter vegetables as an "industry" so that growers there can more easily petition for relief from trade injury

13. The Result • The U.S. Commerce Department brokered a deal that set a floor price on Mexican tomatoes. • Along with a price floor the Commerce Department established two different tomato sales seasons each with a separate reference price. • 1st Season : California and Baja, Mexico spanning from July 1 to October 22 ($4.30 per 25-lb box) • 2nd Season : Florida and Sinaloa, Mexico spanning from October 23 to June 30 with a higher floor price ($5.27 per 25- lb box).

14. California and the Avocado • California is the world’s second largest producer of avocados, accounting for about 15 percent of global production. Almost all U.S. production is the Hass variety. • Mexico is the world’s largest producer of avocados, with an annual production varying between 700 and 900 thousand tons.

15. Ban on Mexican Avocados • The importation of fresh avocados was banned by the United States in 1914 after U.S. plant health officials identified avocado seeds in Mexican orchards as pests • In the 1990’s bilateral negotiations were conducted with the sanitary and phytosanitary provision of NAFTA for the importation of Mexican avocados

16. Indicators of Trouble for California • With the approval of certain provisions of NAFTA in 1997, free trade between U.S. and Mexican avocados began to be permitted, causing a problem for California Avocado producers. Mexican Advantages • Mexican yields vary from seven to nine metric tons per hectare. • In Michoacan normal rainfall is sufficient for production and only about half of the groves are irrigated. Californian Disadvantages • Avocado production requires large amounts of water, which must be obtained from relatively expensive irrigation water in California. • California yields are reported to be somewhat lower at about five metric tons per hectare.

17. The Result In February, 1997, APHIS published the final rule that allowed the importation of Hass avocados from the Mexican state of Michoacán into 19 Northeastern U.S. states and the District of Columbia from November to February.

18. The Result • Estimated Californian grower losses ranging from $1.4 to $6.4 million per producer. • Consumer gains ranging from $3.3 to $19 million

19. California and the Cherry • The United States is a net-exporter of sweet cherries. • Nearly 37.7 percent of total U.S. cherry exports originated in California in 2001. • Total U.S. exports reached the value of $165.5 million in 2001, up 102 percent since the implementation of NAFTA.

20. Washington and the Apple • Since NAFTA, the Apple industry has become the biggest horticultural export from the U.S. to Canada • Effective January 1, 2003, the import tariff on U.S. and Canadian apples was eliminated as required under the North American Free Trade Agreement (NAFTA).

21. Overall Imports From Canada and Mexico

22. Overall Imports From Canada and Mexico

23. Effects on Canadian Horticulture

24. History of Agriculture and Horticulture

26. Agriculture 2nd largest natural resource industry Food sector is 2nd largest manufacturing sector Farm population and area has decreased Top Sectors Livestock Grain Horticulture Provides jobs to 1 in 7 Canadians

27. Regional Production • Maritimes- • Diversified farms • Livestock and dairy oriented • Western Quebec and Eastern Ontario • Primarily dairy • Produces most of Canada’s milk and cheese • Southwestern Ontario • Feedlots • Specialty fruits and vegetables • Northern Ontario • Sparsely scattered dairy and livestock

28. Canadian Land • 904 hectacres of land in country • Half is tundra and rock • 28% is forest –cannot be used for ag. • 13% is available for agriculture uses • 18% is suitable for field crops • Remainder is graze land • 0.4% is occupied by cities, roads and other man made objects

29. Prairie Provinces • Alberta • Livestock • Manitoba • Diverse farms • Saskatchewan • Wheat • British Columbia • Livestock in north • Specialty crops

31. Horticulture • Represents $4.6 billion annually • 14.4% of all Farm Cash Receipts (FCR) • FCR’s are up 16% from 2000 • Ranked 3rd in ag sectors, behind livestock and grains • Exports $2.9 billion worth of products • Land area increased between 4 and 52% from ’91 to ’96

32. Growth in Horticulture • Ornamental Industry experiencing the most growth. • Other current increases- • Greenhouse Vegetables • Berries, Grapes, Maples

33. Food Processing Industry • International and Domestic demand is increasing for Value Added • Products demanded are frozen, canned, dried or juiced • Since 1988 • Canning Operations have decreased • Freeze Operations have increased

34. Beyond the Farm Gate • Horticulture has 9 categories with farm gate values of more than $100 million • Floriculture tops the list • Value of vegetables in 2000 $115 million • Largest single crop in edible horticulture was potato • Growers experiencing unprecedented growth • New state of the art processing facilities • Large volumes of production are for foreign markets

35. Canadian Agricultural Trade

36. Canada & the U.S. • Canada-U.S. Agri-Food Trade • Implemented in 1989 • Increased trade 104% by 1994 • 53% of Canadian food exports went to the US in ’94 • 60% of Canadian imports came from US

37. Canada & the U.S. • NAFTA • Increased trade by 82% since 1993 • Trade reached $25.1 billion in 2000 • U.S. is Canada’s largest exporter

38. Canada & the U.S. • An example of crops that have benefited • Horticultural • Tomatoes- increased 20-fold • Peppers and Lettuce- increased 7-fold • Cucumbers-increased 6-fold • Oilseeds • Soybean oils- increased 7-fold • Sunflower oil- quadrupled

39. Canada-Mexico Trade • Trade increased by 164% since 1993 • Increased to $1.1 billion in 2000 • Exports to Mexico tripled to $692 • Mexico purchases oats, canola, wheat, dried beans, frozen vegetables, beef and frozen French fries.

40. Hot House Tomato • Tomatoes grown in aluminum or steel structure covered in glass • Every aspect of growth is controlled • Heat • Light • Nutrients • No herbicides and minimal pesticides are used because plants are grown hydroponically • Exports of tomatoes has grown from 2 billion in 1991 to 106 billion in 2001. • Majority of the tomatoes are still field grown because of labor intensity of Hot House Tomatoes.

42. US tomato growers have complained that Canadian growers are selling their tomatoes too cheaply in US markets 1% of the 16 lbs /yr./person tomato consumption now comes from Canada Last year, the US increased the duty on tomatoes to 30% Canadians have also filed a trade complaint of their own against US tomatoes coming into Canada. Americans and Canadians are going back and forth in a biased battle of who thinks who is wrong The Canadian Tomato

43. Floriculture, Nursery, & Christmas Trees • Account for 13% of cash receipts on crop sales • In 2000… • exported $409 million worth of floriculture and nursery products • Exported 2.5 million Christmas trees • Main floriculture exports include roses, tulips, chrysanthemums, gerberas, lilies, alstromeria, and snapdragons.

44. The Canadian Spud • Accounts for 33% of vegetable FCR’s • 158,900 hectares of potatoes planted • New fry plants opening, expected to increase exports • Over 50% of Canadian grown potatoes are processed into French fries • Canada exports continue to increase due to a favorable exchange rate, good product quality, proximity to Eastern & Midwestern markets and an increasing manufacturing capacity.

45. Effects on Mexico’s Agricultural Industries

46. 1995 Recession in Mexico • Devalued the Peso by 50% • Exports became more competitive • Exports to the US rose by $12 billion • # of Imports decreased significantly • Larger percentage decrease from countries other than the US • Imports from US decreased by only $4 billion • NAFTA agreements • Co-production agreements • NAFTA’s role • Increased speed of recovery from the recession • Provides confidence to investors • Acted as a stabilizer

47. Effects on Mexico’s Economy • Two way trade between the United States and Mexico rose 113 percent between 1993 and 1998 • Mexico has bypassed South Korea to become 7th largest exporter • Mexico has become the second largest trading partner with the U.S.

49. WHEAT • Mexico has become the third largest wheat importer from the U.S after Egypt and Japan • Mexico’s wheat imports grew 48% over the past 5 years • Mexico imports more in years with poor weather/production • Mexico lifted price controls and subsidies on wheat products but not corn products in 1995 • Tariffs on wheat entering Mexico should be eliminated this year • According to the U.S. Wheat Association, sales to Mexico have increased 35% over the same period last year

50. Mexico’s Sugar Trade • At a minimum, Mexico was allowed to ship 7,258 metric tons of raw cane sugar duty-free. • Limited to 250,000 tons of duty free imports per year • Raw sugar tariff was 9.07 cents a pound in 2002 and the refined sugar tariff was 9.61 cents a pound • Decreases by about 1.5 cents per year • Both will reach 0 in 2008