The U.S. Grains Council (USGC) released this week the first installment of a video showing the impacts of the North American Free Trade Agreement (NAFTA) on U.S. agricultural exports to Mexico.
More than 20 years after its implementation, NAFTA has helped boost agricultural trade between United States and its southern neighbor, with Mexico now the second largest market for U.S. corn, a consistent market for U.S. sorghum, the top market for U.S. barley and second largest market for U.S. distiller’s dried grains with solubles (DDGS).
“That agreement created the world’s largest free trade zone,� said David Wolfe, USDA’s office of agricultural affairs senior attaché, in a video interview from Mexico City.
“NAFTA has successful linked about 461 million people producing more than $17 trillion worth of goods and services annually. When the effects of inflation are taken into account, overall trade between the United States and Mexico has increased more than 552 percent.�
Before NAFTA was implemented, Mexico had protectionist regulations in place that inhibited trade, causing that market to become known as one of the world’s most protected economies.
“Before NAFTA, the government was setting prices so they could protect domestic production,� said Fernando Lorano for ANFACA, Mexico’s association of feed manufacturers.
“This was hurting the Mexican feed industry since they were paying more for subsidized grain. After NAFTA was implemented, the price of grain started to follow the Chicago Board of Trade, so the feed industry was able to pay a fair price for the corn that they need.�
The Council opened an office in Mexico City in 1982. After NAFTA was ratified, the Council’s programs in the country became focused on educating the entire grains value chain from feed importer to livestock producer on topics ranging from feed formulation to forward contracting to livestock genetics.
As the livestock sector matured in Mexico, the Council’s strategic plan for the Mexican market evolved accordingly, and USGC’s staff and consultants working in Mexico began incorporating programs that were focused on maximizing the U.S. marketing advantage there and expanding sales of U.S. coarse grains and co-products to that country. Now, USGC programs touch all pieces of potential feed grain demand and even future ethanol demand.
Through the NAFTA agreement, Mexico has become and will remain an important market for U.S. coarse grains and grains in all forms, including co-products, meats and fuel.
Future installments in this video series will cover the Mexican perspective an this trade agreement and how it could help shape Mexico’s demand for U.S. grain products in future years.
Click here to read past Global Update articles about NAFTA.