Enhancing Trade Through Work in the Trenches


The meeting in late March of President Bush, President Fox of Mexico and Prime Minister Martin of Canada to launch the Security and Prosperity Partnership of North America was another step toward what is becoming known as the “NAFTA plus” agenda. The 11 years of experience with NAFTA have shown that trade agreements need huge amounts of work away from the political limelight to produce economic benefits for producers and consumers.

The U.S. commitment to the prosperity side of the partnership is led by Secretary of Commerce Gutierrez. Eight working groups were formed, including one on energy, food and agriculture, and are to focus on improving productivity, reducing the costs of trade and enhancing the joint stewardship of the environment. The working groups are to consult with stakeholders in the U.S., set goals and implementation dates, identify concrete steps government can take and report back to President Bush within 90 days and semiannually after that. Similar groups were created in Mexico and Canada.

Veterans of governmental processes may want to smile and simply dismiss this effort as another set of meetings that take time away from other work and result in reports that no one reads. It has happened thousands of times before; why would this time be any different?

It may be different because there appears to be a growing awareness that trade agreements need constant follow-up if serious policy problems are to be resolved before they become political footballs. The easy policy issues get resolved quickly because the parties involved have an interest in resolving difference so trade can occur. The hard ones usually fester until all sides have staked out political positions that can only be abandoned at great political costs. U.S. agriculture needs to look no further than disputes with Canada on wheat and BSE and Mexico on sugar and high fructose corn syrup for good examples of festering problems.

The leaders of three countries have made a commitment at the top to push resolution through cooperation at the administrative level. While Prime Minister Martin is relatively new in the job, Presidents Bush and Fox have been in office long enough to have seen far too many issues become intractable because they were not dealt with on a technical level.

This approach takes as given that trade policy differences will develop among the three countries in NAFTA. Stuff happens! It is not a question of if, but when. Addressing issues in a proactive, cooperative manner is more likely to result in a positive outcome. A problem not aggressively addressed is a potential political football.

As trade expands around the world solving problems is becoming easier because governments and industry groups continuously need to establish standards so trade can flow. Regulatory burdens that once survived in closed economies cannot face the reality of changing markets. Also, the leaders of the three countries noted that market competition from countries like China and India make it even more important that differences in North America be resolved.

Independent research groups and think tanks have begun addressing the NAFTA-plus agenda. In December of 2004 the Institute for International Economics released an analysis “North America Agriculture Under NAFTA” by Hufbauer, Schott and Wong. They suggested that the NAFTA partners use the current period to “chart a course towards ‘approximate free trade’ over the decade 2007 to 2017.” Three goals were suggested.

First, they concluded that domestic agricultural subsidies cannot be addressed within NAFTA because they are part of the broader trade policy debate. Their alternative is “compensatory border taxes” for coupled subsidies that would replace existing border barriers.

Second, they call for common external tariffs to eliminate differences in tariffs on imports from third countries. Third, they recommend sanitary and phyto-sanitary regulations be removed as non-tariff barriers on a product-by-product basis by creating common standards and inspection.

As this effort in the trenches moves forward there will be no shortage of ideas on how to make the process work better. The key is to recognize that work in the trade policy trenches is essential for a more open trading system to produce economic benefits for people in all three countries.

While the leaders of the three countries made strong commitments to the partnership, they also made clear that further economic integration through trade does not mean an EU type of continental integration. Each country will make changes within its own legal and political structures. Two countries can move forward on an issue if all three do not agree.

Progress on agricultural trade policy issues will be determined by the level of involvement of private stakeholders in the U.S. working groups. All parts of the industry will have to understand the issues and effectively communicate solutions to the working groups. The policy output will only be as good as the industry input.

A new fundamental mindset has been established that increased communication and cooperation is critical for dealing with trade policy problems. Now the hard work in the trenches must begin.

Ross Korves

Ross Korves

Ross Korves served Truth about Trade & Technology, before it became Global Farmer Network, from 2004 – 2015 as the Economic and Trade Policy Analyst.

Researching and analyzing economic issues important to agricultural producers, Ross provided an intimate understanding regarding the interface of economic policy analysis and the political process.

Mr. Korves served the American Farm Bureau Federation as an Economist from 1980-2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004.

Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1985 and Germany in 1987.

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