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MAJOR BENEFITS OF NAFTA 



Opening up Trade in Agriculture. I am sure that Secretary Espy will elaborate 

 in more detail on the benefits NAFTA includes for American agriculture. But let me 

 touch on some of these. 



As this committee knows, exports are the life blood of American agriculture. As 

 much as one-quarter of our total agricultural production is exported and for some 

 key commodities, the share shipped overseas is even higher. The economic well- 

 being of our agricultural sector is directly linked to our ability to sell our products 

 in international commerce. To ensure growth in our agricultural economy and pros- 

 perity in our rural communities, we must secure and expand our agricultural export 

 markets. NAFTA does that. 



After Japan, Canada and Mexico are the second and third largest markets for 

 U.S. agricultural exports. Since 1987, shipments of American farm products to Mex- 

 ico have nearly tripled, climbing from $1.2 billion to $3.8 billion in 1992 and estab- 

 lishing Mexico as our fastest growing market for farm-produced goods. In fact, our 

 two neighbors accounted for more than 20 percent ($8 billion) of U.S. agricultural 

 exports in 1992. NAFTA secures our access to these markets and establishes a 

 sound basis for further growth. 



NAFTA contains separate bilateral undertakings on cross-border trade in agricul- 

 tural products, one between Canada and Mexico, and the other between Mexico and 

 the United States. As a general matter, the rules of the U.S. -Canada Free Trade 

 Agreement on tariff and nontariff barriers will continue to apply to agricultural 

 trade between Canada and the United States. 



The U.S.-Mexico agreement on market access for agricultural goods represents a 

 significant change from the status quo and is one of the highlights of NAFTA. Upon 

 implementation of NAFTA, tariffs and tariff-rate quotas will replace current non- 

 tariff barriers in U.S. -Mexican agricultural trade. Roughly one-half of U.S. -Mexican 

 trade will be duty free when the agreement goes into effect. Nine years later, all 

 agricultural tariffs between the United States and Mexico will be eliminated except 

 duties on certain highly sensitive products. 



Barriers on U.S. imports of sugar, peanuts, orange juice and a few fruits and 

 vegetables will not be eliminated until the 14th year after the agreement takes ef- 

 fect. Also at the beginning of the 14th year, Mexico will fully eliminate its barriers 

 on corn, dry beans, powdered milk, sugar, and orange juice. 



Mexican import licensing requirements for covered U.S. agricultural products will 

 be eliminated as soon as the NAFTA takes effect. This will secure access to the 

 Mexican market for U.S. producers of products such as corn, dried beans, nonfat dry 

 milk, poultry, barley/malt, animal fats, potatoes, eggs, tobacco, grapes, and other 

 products. While we have shipped significant quantities of many of these commod- 

 ities to Mexico, the cessation of licenses has been a constant threat. Exporters who 

 have been regularly supplying the market suddenly find that their Mexican im- 

 porter cannot obtain a license. Under present circumstances, there is little or no re- 

 course. 



Another threat to our access has been the fact that most of Mexico's tariffs are 

 bound in the GATT at 50 percent. However, Mexico typically applies a lower rate — 

 usually from zero to 20 percent. Without a NAFTA, we have no basis for challenging 

 an increase in Mexican tariffs, unless the GATT -bound rate of 50 percent is ex- 

 ceeded. 



A decision by the Mexican Government to increase duties on live cattle and beef 

 last fall is instructive in considering the value of NAFTA. Although bound at 50 per- 

 cent, Mexico had been applying no duty on cattle and beef. However, last November 

 tariffs were increased up to 15 to 25 percent on live cattle and various categories 

 of beef. Since we had no NAFTA rights and could not exercise our GATT rights be- 

 cause the increase did not exceed the GATT-bound rate, we could not effectively re- 

 spond. 



The NAFTA requires that Mexico eliminate all duties on U.S. and Canadian live 

 cattle and beef. It may maintain the higher duties on all other countries. 



Mexican demand for food is likely to grow significantly over the next few decades. 

 The NAFTA, our proximity to the market, and our unparalleled ability to produce 

 large quantities of competitively priced farm products ideally positions U.S. farmers 

 to satisfy much of that expected growth. As evidence of the potential for growth in 

 Mexican demand for food: 



• Mexico's population is about 90 million. With a median age of 19, compared 

 with 33 years of age for the United States and Canada, Mexico's population growth 

 rate is, and will continue to be, significantly higher that ours. 



