Lessons Learned from Other Blocs: The NAFTA Experience Rene F. Ochoa Dirección General de Estudios Agropecuarios y Pesqueros Subsecretaría de Fomento a los Agronegocios First CAMIC Workshop San José, Costa Rica November 5-7, 2007

Agenda Characteristics of NAFTA North America: a strong market The experiences under NAFTA What to focus on Conclusions

NAFTA: What is and what is not Free trade agreement –Tariff removal Policy agreement Migratory agreement Customs Union

The North American market is one of the most important around the world. Each of these economies rank among the top in the world Together, these three countries produce more than 15 trillion dollars annually There are more than 430 million consumers GDP per capita (US dollars): Mexico $ 8,000 Canada $39,135 United States $44,300

NAFTA boosted agricultural trade Agricultural trade under NAFTA has grown 7% annual rate Today, agricultural trade surpasses 40 billion dollars a year SOURCE: USDA

Trade evolution within NAFTA Since NAFTA: Trade between US and Canada has more than double Mexico´s trade with the US increased more than 150% Mexico and Canada agricultural trade is small, but it is growing at an increasing rate

Mexico’s trade agreements NAFTA: USA Canada EUROPEAN UNION: EUROPEAN ASSOCIATION OF FREE TRADE Million dollars Mexican Exports by Trade Agreement NAFTA EU Mexico has signed 12 Trade Agreements around the world NAFTA is by far the most important, followed by the EU trade agreement

Mexican agrifood trade increment Since 1994, Mexican agrifood exports to the world increased more than 120% and 150% to North America However, under more integration we would expect higher trade SOURCE: World Trade Atlas Mexican Agrifood Exports (million dollars)

NAFTA overall growth in US Agricultural Exports Overall Growth in US Agricultural Exports Share of Exports (%) SOURCE: Presentation of Suzane Heinnen at FIRA-IAMA Seminar The US exports would be greatly benefited under a higher level of integration

NAFTA needs to move forward to the next level of integration Improving agricultural policy harmonization among the three countries Developing compatible sanitary, phytosanitary and food security policies to achieve a common sanitary region A North America wide agreement is needed to address biosecurity and supply chain issues Promoting agribusiness within the region Fostering research and innovation of “North American” products

NAFTA: Challenges for the next stage Technical trade barriers –Fostered by tariff removal –Inspection, certification, and labeling issues –Sanitary and phytosanitary issues Agricultural policies –In order to stimulate competitiveness, coordination and harmonization of agricultural policies must be promoted

NAFTA needs to compete as a region The traditional vision of trade, based on the competing advantages by country is changing. Now, the new global competition comes in economic regional blocks A condition to insert NAFTA in the new global market forces us to further integrate our markets

Sanitary frontier: Eradication programs Swine Fever Newcastle Avian Influenza Aujesky Disease

We need to face structural changes and challenges as a region Sanitary and phytosanitary –Mad cow disease (EEB) –Avian influenza (H5N1) Biofuels –Food vs. fuel Agricultural policy –Farm bill 2007/2008

Positioning North American Agriculture for Global Competition needs efficient policy Policy: the key

Strategies and policies Product standardization Policy harmonization Scientific cooperation vs. politics Trilateral working groups

Conclusions For CAFTA to work: Win-Win situation –Signing an agreement is the first step of a journey Trade in the same terms and conditions –Within/across countries –Comparative advantages Value added Production and processing costs

Conclusions Do not wait on structural change –Proactive vs. reactive Safety net for those “left behind” Sanitary and phytosanitary –Easy to stop trade, difficult to re-establish –Joint laboratories –Joint training –Supranatural authority Think/Work as a bloc –Multilateral vs. bilateral Época de cambios vs. Cambio de Época

The North American market as one bloc Integration Trade Economic Policy Policy coordination Equivalence agreements Harmonization