The effects on intraregional agricultural trade of ending NAFTA's market access provisions

Abstract

AbstractThis paper explores the possible effects on agriculture of ending the market access provisions of the North American Free Trade Agreement (NAFTA). This paper considers two hypothetical scenarios: one revolving around a fallback to most‐favored‐nation (MFN) tariff rates and the other considering the additional effect of increased transaction costs in intraregional trade. Results from a computable general equilibrium model indicate that applying MFN tariff rates to U.S.–Canada and U.S.–Mexico agricultural trade would lead to a 14.43% reduction in these trade flows, while a scenario also featuring higher transaction costs would bring an even larger reduction (21.25%). In both scenarios, almost every agricultural product experiences a reduction in bilateral trade, with U.S. agricultural exports to Mexico undergoing some of the largest proportionate decreases. Many sectors within North American agriculture would have lower output, including fruit and nuts, vegetables, oilseeds and vegetable oils, and processed foods in Canada; fruit, vegetables, and beef in Mexico; and poultry meat, pork, beef, and dairy products in the United States.