NAFTA and Fresh Produce – How International Trade Agreements Shape Your Shopping Cart

The North American Free Trade Agreement took affect in January 1994 and by 2008, it eliminated all duties and quantitative restrictions to trade between Canada, Mexico, and the US. Between 1992 and 2004, fruit and vegetable imports from Mexico tripled, increasing the availability of fresh fruit in the United States. It is a perfect example of how policy shapes what we eat.

US-Mexico Agricultural Trade

In 1990, the US imported just $1.4 billion worth of horticultural products. In 2012, US agricultural imports from Mexico totaled $16.4 billion, with fresh fruit and vegetables accounting for over 40% of this total. The US imports $18.9 billion worth of agricultural products to Mexico, especially grains, red meat, dairy, and soybeans. Agricultural trade between the two countries increased substantially after NAFTA came into effect.

The Mexican Produce Industry

Mexico is a major producer of tomatoes, cucumbers, bell peppers, eggplant, squash, citrus, grapes, melons, mangoes, avocados, strawberries, limes, and bananas. It has been a key supplier of produce for several decades, though it increased in importance after NAFTA. The Mexican fruit and vegetable export industry is shaped by foreign demands – variety and seasonal preferences, import restrictions relating to chemical residues, and other government restrictions. For example, some marketing order regulations, discussed in a previous post, apply to imports as well as domestic production, and restrict the amount of produce that can reach the market. The Mexican government does not directly subsidize fruit and vegetable production, but does provide subsidized and preferential water allocations, a serious constraint to production in some regions.

Mexico was able to take advantage of the opportunity NAFTA provided by expanding production and meeting standards as demanded by US markets. A USDA report explains that

“The vibrant Mexican produce industry has taken advantage of NAFTA and

improved production, investments, and marketing to increase fresh produce

exports to the United States. The strong export growth of Mexican produce

is also aided by successful phytosanitary negotiations.”

 NAFTA also encouraged US firms to invest in production in Mexico, since they were virtually guaranteed a market in the States. Many American companies are currently involved in fruit and vegetable production for export.

NAFTA Increases Produce Imports

Overall, Americans are eating more fruits and vegetables, and imports are playing a larger role. The United States is the world’s largest fresh fruit and vegetable importer, and much of this produce comes from Mexico, especially during the winter. Between 2004 and 2006, Mexico supplied three-quarters of tomato, pepper, and cucumber imports and one-quarter of grape and tropical fruit imports. Those three vegetables make up 60% of the US import market, and volume tripled between 1992 and 2004. The US is also Mexico's main customer: from 1991 to 2001, the US purchased 98% of Mexican vegetable exports. 

The American demand profile for fruit has changed a lot over the past 20 years. In 1990, bananas made up 60% of fresh fruit imports, coming primarily from Colombia, Costa Rica, Ecuador, Guatemala, Honduras, and Panama. These countries are still the largest providers of fresh fruit (their exports are ¾ bananas), but the percentage of bananas in US fruit imports has dropped to 28%. Tropical fruits, such as pineapple, mango, and papaya, are a faster-growing sector. Mexico is the leading supplier of both mangoes and papayas, with 56 and 76% of the market share respectively.

From 1992 to 2004, the value of fresh grape imports rose by 61%. Chile provides 71% of the total value of US grape imports, but Mexico is the second largest supplier, with 26%, and exports during a key period in the season when Chilean production drops and US grapes have yet to hit full production. Thus, changes in policy as well as rising demand for a wider variety of fruits and vegetables have increased US reliance on Mexican produce.

Criticism

Despite the benefits for American consumers, some American producers are unhappy with the effects of trade liberalization. In 1996, Florida tomato producers charged Mexico with dumping below market price tomatoes in the US, thus leading to lower prices and hurting the domestic industry. This lead to a series of suits and agreements, and the establishment of a minimum tomato price. Some also criticize this move towards year-round availability as keeping consumers out of touch with seasonality and the joys of fresh, local produce; others say greater availability of fruits and vegetables can only be good. 
While this post has focused on benefits that NAFTA has brought to American consumers and Mexican producers, it is important to consider other negative impacts of liberalizing agricultural trade between the two countries. It has been disastrous in many ways for Mexicans, especially the millions of Mexican farmers who were pushed off their land and outcompeted by subsidized US grain. The increased foreign investment that I mentioned has also done relatively little to benefit Mexico, as wages are low, and the jobs that were created in the manufacturing sector were not enough to compensate for the loss of livelihoods in agriculture.

Conclusion

            Overall, NAFTA has had positive impacts on the American diet. Americans are eating more fruits and vegetables, and many types of produce, even fragile, highly perishable berries, are available nearly year-round. For the most part, imports have grown to meet rising demand, rather than to replace domestic supply. Thus, according to the USDA Economic Research Service, “volume has increased while prices in general have remained stable, and consumers have gained access to significantly more produce without paying higher prices.” However, these gains came with losses for some American producers and many Mexican producers of other agricultural products.