In early October 2015, negotiators for the Trans-Pacific Partnership (TPP) reached an agreement that they submitted to their respective governments for approval. The countries involved in addition to the U.S. are Canada, Mexico, Japan, Australia, Brunei, Chile, New Zealand, Singapore, Malaysia, Peru, and Vietnam. The Office of the United States Trade Representative explains that the “TPP will make it easier for American entrepreneurs, farmers, and small business owners to sell Made-In-America products abroad by eliminating more than 18,000 taxes and other trade barriers on American products across the 11 other countries in the TPP—barriers that put American products at an unfair disadvantage today.”
In any trade agreement there are always winners and losers among countries and economic sectors. While it is difficult to say with any degree of certainty how the TPP will play out, we can gain some insight by looking at the impact of past trade agreements. By far, the most important trade agreement of the last couple of decades was the North America Free Trade Agreement (NAFTA).
NAFTA, negotiated by the George H.W. Bush administration and ratified during the presidency of Bill Clinton, came into effect on January 1, 1994. The agricultural export boom that began in the early 1970s peaked in 1981. Over the next decade, U.S. crop exports remained below earlier levels as production increased and prices languished. With the ratification of NAFTA, farmers had high expectations that they would benefit from increased agricultural trade with Canada and Mexico.
With that in mind, we looked at U.S. International Trade Commission (USITC) data for U.S. domestic exports and U.S. imports for consumption for both Canada and Mexico. (We chose to use data beginning in 1997 because USITC data before 1997 are not available using NAICS (North American Industry Classification System) codes that allow us to look at individual economic sectors. The latest full-year data available is 2014 allowing us to compare the change in trade between 1997 and 2014, just short of the full period NAFTA was in force.)
Here are the findings for trade with Canada:
Turning to Mexico, here is what we found:
As the NAFTA results suggest, high expectations that trade deals will accelerate growth in the value of total U.S. agricultural exports don’t always materialize.
Harwood D. Schaffer is a research assistant professor in the Agricultural Policy Analysis Center, Institute of Agriculture, University of Tennessee. Daryll E. Ray is emeritus professor at the institute and former director of the center.