NAFTA IN REVIEW: THE BEFORE AND AFTER FOR CORN
It has been quite some time since the North American Free Trade Agreement (NAFTA), a multilateral free trade agreement between the United States, Canada, and Mexico, was signed by then-President Bill Clinton on December 8, 1993. On that day, the Dow-Jones hit a record 3734.53, Sister Act 2 and Schindler’s List were playing in theaters, and Janet Jackson’s “Again” was #1 on the Billboard chart. NAFTA, as President Clinton proclaimed at the signing, “means jobs,” and it also meant an opportunity for corn to trade freely between our three nations.
When NAFTA came into effect on January 1, 1994, it created the world’s largest free trade zone. It addition to the economic opportunity brought forth in the agreement, it was commonly believed that diplomatic relations would improve, as well.
But what did NAFTA mean for corn? For one thing, NAFTA eliminated all barriers to corn trade between Mexico, the U.S., and Canada. Prior to the implementation of NAFTA, Mexico and Canada both had trade barriers in place that made U.S. corn less competitive in the world market, with Mexico’s quota and tariff system amounting to a 215% tariff on corn imports over the allotted amount. NAFTA eliminated those import quotas and tariffs, with Canada by 1998 and with Mexico by 2008, allowing for the free movement of corn within North America, thereby finding efficiencies related to pricing and transportation.
In the spirit of freer trade, Mexico also ended a restriction on feeding corn to livestock. Although not directly tied to NAFTA, many believe the move was shaped by the ideals of free trade through NAFTA. Most domestic Mexican policies regarding corn were in place to protect the social value of corn in Mexico, as well as to protect the availability of corn as a human food source. That said, white corn is the primary source for Mexican food products.
For the 2015-16 marketing year (ending on August 31, 2016) Mexico was the #1 market for U.S. corn, with the total volume at 12,558,600 metric tons. Canada imported 355,200 metric tons.