Both the United States and its partners benefit from free trade agreements (FTAs), judging by the increased volumes of food and agricultural commerce between the nations, according to a USDA analysis of 14 pacts covering a total of 20 countries. “Trends suggest that agricultural trade increased for many of these countries,” said the study. “Another change was a trend toward specialization in certain products.”
The results are a rebuttal to doubts about whether other nations can compete with high-volume U.S. farm production, said the authors of the Economic Research Service report. Critics say the FTAs are a bludgeon in the hands of agribusiness. The nonprofit Public Citizen, a skeptic of corporations, said in a 20th anniversary critique of NAFTA that it drove down the price of corn, and pointed to an estimate that more than 1.1 million small farmers went broke in the first decade of the agreement.
“There is often a phase-in period where countries adjust to lower trade barriers and often turn to specialization in certain products,” said the USDA report. “This adjustment leads to specialization of labor and can cause unemployment for certain products — but the general consensus is that trade agreements are beneficial.” As examples, it said Colombia became the leading source of coffee imports and Peru became the third-largest supplier of fresh fruit.
Overall, U.S. agricultural imports from FTA partners grew more than sixfold, to $101.9 billion, from 1989 through 2020, while U.S. sales to FTA nations grew nearly six times larger, to $67.5 billion, during the same period. And the share of the market increased for both sides, said the USDA. Developing nations with FTAs accounted for 31 percent of U.S. ag imports in 2020, compared to 22 percent in 1989.
“While most countries were already experiencing declines in agricultural employment — but with a general increase in productivity — the move to specialization seemed to accelerate the impacts to that kind of employment,” said the ERS report. “But the data show that overall employment was not affected by the move out of agriculture, and overall GDP per capita increased.
“Thus, it seems the FTAs with the United States (and other countries) are correlated with an acceleration in the move to more productive agriculture in developing countries, which ultimately leads to overall economy-wide benefits, as pointed out in the literature.”
Mexico is the No. 1 ag exporter to the U.S. market, with sales forecast at $46.9 billion this trade year, said the USDA in its latest trade forecast. Canada is the No. 2 supplier. Together, the U.S. neighbors generate $4 of every $10 in U.S. ag imports.
Agriculture is a small share of global trade but it is highly prized, said the report, pointing to “the heavy protection it is given and the difficulty with reforming it in trade negotiations.”
The ERS report, “Do free trade agreements benefit developing countries?” is available here.