The Impact of NAFTA on Agricultural Commodity Trade: A Partial Equilibrium Analysis

This paper examines the effects of the North American Free Trade Agreement on agricultural commodity trade using extensive data. The data cover agricultural exports and imports between the U.S. and NAFTA partners over the extended period of 1989-2010. The commodities covered in our analyses include; corn, soy bean, cotton, wheat, fresh vegetables, poultry, dairy products, and red meats. Since the signing of the agreement, U.S. total agricultural commodity trade with NAFTA members has increased three-fold from $18 billion in 1994 to $61 billion in 2010. A partial equilibrium model, in which we derive each trading partner's excess demand and excess supply, is used to study the impact of NAFTA on trade, controlling for other trade-inducing variables such as exchange rates, tariffs, per capita incomes, and relative prices. Regression results show mixed effects of NAFTA on different commodities while graphical and counterfactual analyses indicate strictly positive effects.