NAFTA's impact on trade volume and agricultural commerce between the United States and Canada

NAFTA is economic and trade agreement between United States, Canada and Mexico. The agreement has provided sufficient incentives to the member countries particularly those with stable economy and large market i.e. United States and Canada. The Canadian department claims that NAFTA has established a strong foundation for future growth and set a valuable example of the benefits of trade liberalization. According to Canadian government, the trade agreement has been responsible for the launch of "strong foundation for future growth and set a valuable example of the benefits of trade liberalization" (Stephanie, 2002).

NAFTA: Trade Volume and Level of Economic Activities

The United States and Canada have developed strong trade relationship; the trade volume of both the countries was reported to be more than USD 411 billion in 2004. The merchandise trade volume between Canada and United States was USD 370 billion. According to reports more than ninety percent of the Canadian trade through merchandise ships is diverted towards United States, the country receive more than sixty percent of the imported goods from United States. According to reports, more than twenty percent of the merchant ships from United States voyage to Canada for trade products delivery, and slightly less than twenty percent of the imported goods are purchased from Canada. The government of Canada and United States signed agricultural provisions of the U.S. & Canada Free Trade Agreement, which was effective since 1989; the provisions of the agreement were then incorporated in NAFTA, "all tariffs affecting agricultural trade between the United States and Canada, except for a few items covered by tariff-rate quotas, were removed by Jan. 1, 1998" (Thomas, 2003). The Agricultural trade between Canada and United States gained momentum after the implementation of NAFTA. The Canadian market is considered to be the priority market for the agricultural products produced in United States, the Canadian government purchases more than USD 9 billion of agricultural product on annual basis, "since 1994, U.S. agricultural products to Canada have accounted for almost half of total growth in U.S. agricultural exports worldwide, and the growth rate has significantly outpaced that of sales to the test of the world" (Public Policy Forum, 2002).

After the implementation of NAFTA annual growth rate of U.S. agricultural product exports to Canada has amplified, the annual growth rate of the U.S. agricultural product to the European and Asian countries is 1%, whereas the annual growth rate of the agricultural product to Canada has been phenomenal, the annual growth rate has been estimated to be five percent. A significant increase of imports of Canadian agricultural products to United States have been observed after the implementation of NAFTA, which includes mostly red meats, live animals and frozen potato fries. The Canadian imports from United States has also registered significant growth, the imported products include "wide range of bulk, intermediate and consumer-oriented agricultural products" (Clarkson, 2002). The analysts have expressed their concern that, in the absence of NAFTA agreement, the United States "would have lost these expanded export opportunities." The United States has registered massive increase in exports of the bulk commodity to Canada, the annual growth rate of ten percent has been observed, the growth rate is responsible for the creation of USD 1 billion market. The intermediate exports of United States "rose more than $500 million, the country has high value food exports grew at an annual average rate of 4.5% and has created a stable $6.0 billion market for U.S. manufactured consumer food products." In 2002, the sales of the fresh vegetables from United States to Canada was approximately USD 1 billion, the figure expressed an annual growth rate of five percent soon after the implementation of NAFTA. The sales of the vegetable products was expected to cross over the previous amount, which was responsible for the declaration of the Canadian market as major market for exports from United States in food and agricultural product category. The trade was facilitated through the incorporation of "NAFTA border facilitation measures and modern transportation and wholesale dealer networks, the network offered Canadian fresh vegetable buyers with prompt delivery" (Thomas, 2003).

Significance for Canadian and American Markets: Scope of Opportunities

In addition to the market opportunities which have generated through zero tariffs, NAFTA has provided Canadian consumers better choice to establish their requirement "for high-value agricultural products in a more competitive marketplace" (Public Policy Forum, 2002). The market conditions have been evaluated by the Canada's wholesale, retail and food service industries "with acute interest developments in U.S. packaged and processed foods and service trends." The trade agreement has been responsible for the creation of medium for exchange of information sources, which has been responsible for the "immediate demand that helps ensure the success of United States high-value food products" (Jackson, 1999). The demand of food-product has accelerated and has been responsible for the expansion of two-way trade; the Canadian community associated with food policy has distinguished the significance of functioning with the NAFTA partners in the direction of "harmonization in food packaging and nutrition labeling regulations" (Stephanie, 2002). The progress assures additional force for "accelerated trade for the NAFTA partners in the coming years" (Clarkson, 2002). The NAFTA agreement has listed tariff phase-out provisions. As per the approved and documented regulations, the fresh vegetables exported from United States to Canada "enter duty-free; seasonal duties are no longer applicable, although tariff snapback provision remains in effect until 2008, it has been used sparingly by Canada, and not at all in recent years." The trade agreement has offered an opportunity to the fresh vegetable exporters from United States to avail and access the opportunities in the neighboring Canadian market, "stemming from increased demand in the food service sector and higher fresh market sales to Canada's growing number of Asian immigrants, whose traditional diet includes large amounts of fresh vegetables" (Public Policy Forum, 2002). According to surveys, the world highest consumption rates of fresh vegetables has been reported in Canada, "in Canadian retail grocery stores, more space is devoted to fresh produce than to any other food sector" (Clarkson, 2002).

The NAFTA has been responsible for the creation of employment opportunities. According to employment statistics, nine years after the implementation of NAFTA, the employment opportunities in Canada grew by twenty percent, equivalent to 2.7 million new jobs; most of the jobs were full-time. The comparison between NAFTA and Canadian-U.S. Free Trade Agreement reflected "rosy period of Canadian job gains under NAFTA, between 1988 and 1994 Canada lost 334,000 manufacturing jobs, equivalent to 17% of total manufacturing employment in the year before CUFTA took effect." During Free Trade period the reduction in the tariff was responsible for "one-third of the job losses during the Canadian-U.S. Free Trade Agreement period." The trend was common in textile industry, where most of the employees were immigrant. The remaining two-third of the job losses "were the result of the severe recession provoked by the Bank of Canada's high interest-rate policy" (Public Policy Forum, 2002), the high interest rate policy was responsible for the "overvaluation of the Canadian dollar relative to its U.S. counterpart." The revival of Canadian economy took place soon after the interest rates were reduced, and the provisions in NAFTA were incorporated, "the bilateral current account balance of Canada with the United States turned from deficits to surpluses" (Thomas, 2003).

Conclusion: Light on Concerns

The Canada-U.S. Free Trade Agreement and NAFTA represented "the era of a supra-constitution, a limiting framework which not only binds Canada with its southern neighbors, but limits democracy at home by prioritizing and protecting market dominance and the rights of property holders and investors." The trade agreements in particular NAFTA has been key to the economic integration, "without proposing significant modifying structures of political governance, have argued that FTAs lead inevitably to customs unions, common markets and ultimately effective political unions" (Anne, 2003). Prior to the approval and promulgation of NAFTA, the analysts criticized the sluggish and dull approach of the Canadian government towards formation of economic and trade association with United States in a manner that both the country are able to facilitate and secure their national objective through mutual economic gain and easy trade transit. The analysts viewed that, "the Canadians don't understand what they signed; in twenty years, they will be sucked into the U.S. economy" (Teresa, 2002). The critics have warned that that implementation of NAFTA has able responsible for the creation of North American Common Market. The market research has transpired that the positive impact has been generated through the imposition of NAFTA, the agreement has undoubtedly offered American government with better opportunities, but has offered convenient trade to the Canadian government. The NAFTA is expected to result into the formation of single North American economy, "free trade tends towards a full customs union and economic union as a matter of internal logic" (Anne, 2003). The agreement is expected to place Canada under obligation to develop political and military coherence with United States. The NAFTA has developed great concerns at parallel irrespective of the gains and access to the particular goods, "the logic of the integration process unleashed by the agreement and its predecessor, the Canadian-U.S. Free Trade Agreement, poses new challenges for the citizens of Canada and a warning for other peoples contemplating whether to join a Free Trade Area of the Americas." The external political factors have resulted in complication of the bilateral relationship between U.S. And Canada, unfortunately NAFTA has failed to deliver and resolve the issues and concerns related to the political ideology and foreign policies of the respective countries. According to reports, "a multi-lateralist and pluralistic Canada is confronted with unilateralist, interventionist and aggressive neighbor, the super power is extremely sensitive and reactive towards real and alleged threats to its security and interests." The concerns related to the NAFTA are based upon the derived relation between the political differences and economic consequences, and the resolution of such concerns is possible through eradication of the "political autonomy and divergence" (Teresa, 2002).