GAO: NAFTA Yet to Reach Its Potential

Analysis shows that despite progress, some U.S. commodities still have problems accessing Mexican market. Compiled by staff

Published on: Apr 27, 2005

A new report from the congressional investigative arm reaffirms that the North American Free Trade Agreement has benefited U.S. agricultural producers, although problems still remain with increased market access.

The Government Accountability Office report titled "U.S. Agencies Need Greater Focus to Support Mexico’s Successful Transition to Liberalized Agricultural Trade under NAFTA," states that U.S. agricultural exports to Mexico increased under NAFTA from $4.1 billion in 1993 to $7.9 billion in 2003. That’s an annual increase in U.S. agricultural exports to Mexico of 17.4%. In contrast, the average annual rate of growth of U.S. agricultural exports to the world was only 2.3% over this same period.

Likewise, NAFTA has been good for Mexican farmers, with Mexican agricultural exports to the United States growing from $2.9 billion in 1993 to $6.3 billion in 2003. However, because of structural problems, such as lack of rural credit, full implementation of NAFTA has not occurred in Mexico. The report disputes arguments that NAFTA has hurt small farmers, backed by some Mexican studies.

"Despite overall gains from NAFTA, some problems remain," explains Sen. Chuck Grassley, Senate Finance Chairman who requested the report. "GAO’s report discusses significant market access problems for U.S. agricultural exports to Mexico. The report contains case studies of seven U.S. agricultural commodities that have confronted market access problems in Mexico, including high fructose corn syrup, a product that is currently blocked from entry into Mexico due to Mexico’s discriminatory tax on sweetened beverages not containing sugar."

Over the years, the United States has been met by Mexico's market access tactics including antidumping, plant and animal health requirements, safeguards and other nontariff trade barriers such as consumption taxes.

In farm trade relations with Mexico it seems many times issues are tit-for-tat. GAO points out that after the United States cited sanitary reasons for restricting avocado imports, Mexico imposed tougher inspection requirements for cherries.

The new report, full of cautions and optimism, will be important to Congress as the debate heats up over the Central American Free Trade Agreement. The new report also appears as Mexican and U.S. officials prepare for the next round of agricultural tariff reductions scheduled under NAFTA.

"The report also discusses steps that we can take to ensure better implementation of trade agreements. For example, technical assistance can be an important tool to ensure the effective implementation of trade agreements," Grassley says. "It is interesting to note that the United States has provided trade capacity building assistance to Central American countries and the Dominican Republic in anticipation of the United States-Central America-Dominican Republic Free Trade Agreement."