California agriculture and an emerging Mexico

Abstract

Agriculture is an important part of global trade, constituting one-tenth of all international trade flows. This is true despite the fact that historically, agriculture has been the most heavily distorted industry in the industrial countries. Pervasive and significant barriers to trade have been, and continue to be, exceedingly difficult to remove in agriculture, which remains the industry least susceptible to freer trade. The recently completed Uruguay round of GATT negotiations almost foundered in December 1990 on the issue of agricultural subsidies. To quote an even more relevant example for the case of the North American Free Trade Area (NAFTA), the U.S.-Canadian free trade agreement did not fully liberalize agricultural trade, instead leaving many temporary restrictions. With Mexico’s proposed entry into NAFTA, we can anticipate that agriculture will continue to be a key sector in the negotiations and final agreement. This article examines the effect of Mexico’s entry into NAFTA on agricultural trade with California. Along with Arizona and Florida, this state has substantial flows of agricultural goods with Mexico. The next section provides an overview of total U.S. agricultural trade with Mexico, followed by a discussion of the California crops that face potential import competition or export opportunities under Mexico’s entry into NAFTA. These crops were identified from government publications and telephone interviews with commodity groups throughout California. A summary of responses from these interviews is provided. We then describe the results from a statistical analysis of potential import competition from Mexico in selected crops. The longer-run changes in Mexican supply are discussed at the end of the article.