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NAFTA Revisited-Moving Forward

Paper Session

Friday, Jan. 4, 2019 10:15 AM - 12:15 PM

Hilton Atlanta, 401
Hosted By: Agricultural and Applied Economics Association
  • Chair: Andrew Schmitz, University of Florida

USMCA, Supply Management, Suspension Agreements, and Retaliatory Tariffs

Troy Schmitz
,
Arizona State University
James Seale Jr.
,
University of Florida

Abstract

The United States-Mexico-Canada Agreement (USMCA) was signed on November 30, 2018, but still needs to be ratified by all three governments. We analyze the implications of the proposed USMCA for trade involving agricultural goods. The major concession in agriculture will be the increased access of U.S. dairy and poultry to Canadian markets. We also review the major barriers involving agricultural trade in the United States, Canada, and Mexico that would still exist even if the USMCA were to be signed into force. These include the core system of Canadian supply management for dairy and poultry and U.S.-Mexico suspension agreements for sugar and tomatoes. We also discuss the implications of the retaliatory tariffs placed on U.S. agriculture in 2018 and the resulting assistance programs, such as the Market Facilitation Program (MFP), aimed at compensating U.S. farmers for losses incurred from retaliatory tariffs.

Role of Enabling Trade Indexes & Agreements on Production and Trade Efficiency: A Spatial Stochastic Frontier Analysis

Saleem Shaik
,
North Dakota University

Abstract

Due to the increased globalization and free market economy, the last
decade of the twentieth century and first decade of the twenty first century saw an
increase in trade among countries. However, one of the most debated issues in
trade is whether regionalism or multilateralism and enabling trade indexes have
a differential spatial effect on world trade. The 1960s saw the first wave of
regionalism, the 1980s saw regional trade agreements – EU, NAFTA,
MERCOSUR. Recently, the world economic forum (WEF) created an enabling
trade index. The enabling trade index measures countries on their success in
building an environment for trade, covering both tariff and non-tariff
considerations such as border administration, quality of transport services,
infrastructure, technological sophistication, and operating environments. In this
paper, simulated maximum likelihood functions are used to evaluate the
importance of the enabling trade index and agreements on production and trade
efficiency using spatial stochastic frontier analysis in the form of two
propositions. Proposition 1: Quantifying the importance of enabling trade indexes
and trade agreements on production risk efficiency using simulated maximum
likelihood estimation of spatial stochastic frontier function, and Proposition 2:
Quantifying the importance of enabling trade indexes and trade agreements on
trade risk efficiency using simulated maximum likelihood estimation of spatial
stochastic frontier functions.

Strategic Agricultural Trade Policy Interdependence and NAFTA: Does the Exchange Rate Matter?

Lynn Kennedy
,
Louisiana State University

Abstract

This paper seeks to determine the effect of the exchange rate on the willingness of the United States to participate in a trade agreement with Mexico and Canada. To accomplish this, we model various degrees of agricultural trade liberalization among these three countries using a partial equilibrium trade simulation model. The policy strategies of each country and their corresponding social welfare functions are employed in a game theoretic framework to determine the optimal strategy for each country given alternative levels of Mexican peso devaluation. This analysis shows that the United States moves away from free trade as the value of the peso decreases. These results demonstrate the sensitivity of U.S. agricultural trade liberalization to the value of the currency of its trading partners.

NAFTA: Trade and Water Needs in the South Texas-Mexico Border

Luis Ribera
,
Texas A&M University

Abstract

Produce imports from Mexico have increased rapidly since NAFTA was signed in 1994. The U.S. imported US$12.9 billion of produce and products from Mexico during 2017. About 49.5 percent of U.S. fresh fruit and vegetable imports from Mexico entered through Texas land ports, with the Pharr port of entry being the largest one accounting for over 66 percent. In order to keep up with produce demand from the U.S., Mexico has switched production areas from traditional row crops to fruits and vegetables. However, this increased production of fruits and vegetables increased the demand for irrigation water, which has caused problems, such as shortages, for agricultural producers in the U.S. as the main source of water for both U.S. and Mexican farmers in this region is the Rio Grande. This paper will consider produce trade flows between the U.S. and Mexico as well as the economic impact of increased water needs between the two countries. Additionally, this paper will consider how the renegotiation of NAFTA could impact future trade flows and water use treaties.
JEL Classifications
  • F1 - Trade