Let Them Eat Imports: Food Under NAFTA and WTO

Food Imports to United States Soar During NAFTA-WTO Trade Agreement Era, Threatening American Farmers and Food Safety

June 2017
(View PDF here)

In the mid-1990s, supporters of the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) sold the deals to U.S. farmers and ranchers as the new path to economic success – hyping the agreements’ prospects for increasing exports.1 U.S. farmers would export their way to wealth, the NAFTA and WTO proponents promised. Unfortunately, while U.S. food exports have increased since these deals, much of these gains have been swamped by surges in food imports under the deals. In 2016, the total volume of U.S. food2 exports stood just 27 percent higher than in 1995, the year that the WTO took effect and one year into NAFTA. In contrast, imports of food into the United States in 2016 towered 135 percent above the 1995 level.3

If these figures are surprising, that is because typically agricultural trade data is reported on the basis of value (the dollar figure) not volume. When agricultural trade data is based on value, spikes in international prices can look like, and often get reported as, a jump in agriculture exports. But what looks like a “surge” in exports really reflects increased world market prices, not major increases in the volume of U.S. exports.

The value of U.S. food exports has closely tracked international food prices, which became highly volatile after implementation of the WTO. (The WTO required countries worldwide to eliminate many policies that controlled supply and set price floors and ceilings.)

Starting in 2007 and peaking in 2011, world agricultural commodity prices were at historically high levels. Although prices have dropped in the past few years, they remain considerably higher than in the previous two decades. As a result, agricultural trade data based on value appear to show significant export gains when compared to values before NAFTA and the WTO. But, in fact, U.S. agricultural export volumes have remained comparably flat, as shown in the graph above. In 2015, for example, the Food and Agriculture Organization’s international food price index was 43 percent above the median price level for 2004.4 While this high price pushed the value of U.S. food exports 84 percent above the 2004 level, the volume of U.S. food exports were only half that, a mere 33 percent above the 2004 level.5

Gauging the track record of U.S. food trade without the distortion of short-term price spikes requires an analysis of the volume, not just the value, of U.S. exports and imports. Measured by volume, imports of food into the United States have risen more steadily and to a greater degree than U.S. food exports under NAFTA and the WTO, as shown in the graph below.6

In 2016, the volume of U.S. food exports was only 27 percent higher than in 1995, the year the WTO took effect. In contrast, U.S. food imports in 2016 were 135 percent higher than in 1995.7 As a result, the share of Americans’ food that is imported, versus produced here, has increased. The much greater rise in imports over exports is more notable given historically high international food prices since 2007, which would be expected to dampen the volume of U.S. food imports. Absent this price effect, the volume of U.S. food imports would likely be even higher today.

Family Farmers Hit Hardest

Smaller-scale U.S. family farms have been hardest hit by the import influx caused by deals like NAFTA and the WTO. About 231,000 small U.S. family farms have gone under since NAFTA and the WTO took effect, an 11 percent decrease in the total number.8 After the WTO required elimination of various U.S. price support and supply management policies, small farmers were also hard-pressed to survive the increasing year-to-year volatility in prices paid for commodities, making investment and planning more difficult than before the WTO.

Food and Agricultural Trade Becomes Chaotic Under NAFTA/WTO, Yielding Historic Deficits

The United States has experienced wide swings in food and agricultural trade under the WTO. In 2005, the United States became a net food importer for the first time since the U.S. Department of Agriculture started reporting data in 19679. Trade deficits have become the norm for U.S. agriculture under NAFTA, as indicated in the adjacent graph. High imports and lackluster exports have continued to wrack U.S. family farmers with deficit surges.

The average annual U.S. trade deficit in agricultural goods with Canada and Mexico in the five years before NAFTA nearly tripled (a 174 percent increase) in the five years after the deal took effect.10 

Key Exports Remain Stagnant under NAFTA while Imports Soar

Some U.S. farming sectors have suffered not only a flood of imports under NAFTA, but have also seen very little gains on the export side, even with the post-2007 spikes in international prices, despite promises to the contrary. As the graph below shows, small gains in U.S. beef and live cattle exports have been swamped by high imports throughout the NAFTA era.11

As another example while total U.S. vegetable imports from Canada and Mexico have nearly quadrupled (a 332 percent increase) under NAFTA, U.S. vegetable exports to NAFTA partners have remained relatively flat (a 71 percent increase). The U.S. vegetable deficit with Canada and Mexico has soared to $5.4 billion, nearly 12 times the pre-NAFTA level, as the graph below indicates.12

U.S. corn is, however, an exception – U.S. corn exports to Mexico in the three years after NAFTA soared 378 percent above the level in the three years before the deal. In 2016, the United States exported 37 times as much corn to Mexico as before NAFTA.13 But when the flood of U.S. corn in Mexico caused corn prices to plummet 66 percent for Mexican farmers, 2.5 million farmers and agricultural workers in Mexico lost their livelihoods, many of whom resorted to migration.14 In NAFTA’s first seven years, the annual number of people emigrating from Mexico to the United States more than doubled.15

U.S. Meat Exports Go Bad Under the Korea FTA

Despite the record of failed promises under NAFTA and the WTO, the same claims about booming exports were made to push the U.S. “free trade” agreement (FTA) with Korea in 2011. The Obama administration promised that U.S. exports of meat would rise particularly swiftly under the Korea FTA, thanks to the deal’s tariff reductions on beef, pork and poultry. For example, the official government study claimed “The U.S.-Korea FTA would likely result in increased U.S. exports of meat to Korea” as a result of “the removal of high tariffs upon implementation of the FTA.”16

Ironically, export declines in some meat sectors were steeper than the overall 8 percent decrease in U.S. goods exports to Korea from the year before FTA implementation to the fifth year of the deal.17 (meat imports of beef and pork have not been affected, since the United States does not import beef or pork from Korea. More on poultry imports below).

In contrast to the administration’s promise, U.S. pork producers saw their exports to Korea crash by $70 million – a 15 percent decline – in the first five years of FTA implementation, in comparison to the year before the FTA took effect. Comparing U.S. export levels in 2011, the year before the FTA, to export levels in 2016, poultry producers have faced an 85 percent collapse of exports to Korea under the FTA – a $118 million reduction. U.S. beef exports dropped after the U.S.-Korea agreement took effect, and has only recently moved back to the  trend it was on from 2006 to 2011, as the graph below shows.18

The government estimated that U.S. exports of pork and poultry would more than double under the agreement.19 In reality, U.S. exports of pork and poultry have lost a combined $188 million in five years under the Korea FTA (from the year before the deal to the recently completed fifth year of FTA implementation), as indicated in the graph above.

The U.S. pork industry blames the post-FTA downfall of U.S. pork exports to Korea on a foot-and-mouth disease-related surge in U.S. pork exports in 2011.20 But this narrow focus on foot-and-mouth disease ignores the broader growth trajectory of U.S. pork exports, a trajectory that should have continued under the FTA but did not, as shown in the graph below. In the 10 years before the financial crisis-spurred global downfall in exports in 2009, U.S. pork exports grew at an annual rate of 22 percent (using the FTA-relevant 12-month period).21

Starting from the 2010 level (the first post-crisis year) and applying this pre-crisis growth rate, U.S. pork exports under the FTA in 2016 would be expected to surpass $1 billion. Instead, they barely passed $383 million, 62.7 percent below the level that historical growth would predict.22 Had the foot-and-mouth disease outbreak not occurred, it is indeed possible that U.S. pork exports to Korea would not have been as high in 2011. But even if this is the case, it cannot explain why U.S. pork exports under the FTA have fallen significantly below the long-term growth trend.

Regarding U.S. poultry exports to Korea, USDA notes that Korean consumption of chicken hit record highs in 2011 as Koreans substituted beef and pork consumption (given the foot-and-mouth disease outbreak) with increased chicken consumption, driving a surge in poultry imports from the United States.23 Some industry groups may try to use this data to explain away the downfall in U.S. poultry exports to Korea under the FTA, framing the 2011 increase as an anomalous spike and the subsequent reduction since the FTA as an expected result of the end of the foot-and-mouth disease outbreak.

But while Korea’s poultry consumption and importation levels indeed increased in 2011, they increased to an even greater degree in 2010, when foot-and-mouth disease was not a significant factor in the poultry market. According to USDA’s own data, Korean poultry consumption rose 11 percent in 2010 compared to 8 percent in 2011, while Korea’s poultry imports from the United States climbed 86 percent in 2010 compared to 58 percent in 2011.24 As such, the 2011 increase in U.S. poultry exports to Korea, far from being an anomalous disease-related spike, seems to fit a larger growth trend.

Also in each of the last three years, the Korean government has enacted a nation-wide ban on nearly all imports of American poultry due to several isolated bird flu outbreaks in the United States despite the promises made by U.S. officials that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade.25 This ban occurred as chicken consumption per capita in Korea has risen in each year since the Korea FTA entered into force.26 The ban on American poultry has meant that Koreans have been eating more chicken, just not U.S. chicken.

In addition to declining exports, the United States has begun to import poultry from Korea despite not importing any meat from Korea before the “trade pact.” Over the past 12 months, the United States imported $2.4 million of poultry from Korea.27

Food Safety Jeopardized

Current U.S. food trade trends also pose serious risks to food safety, as our current trade agreements both increase imports and set limits on the safety standards and inspection rates for imported foods. WTO and NAFTA required the United States to replace its long-standing requirement that only meat and poultry meeting U.S. safety standards could be imported. Under this standard, only meat from plants specifically approved by USDA inspectors could be imported. But WTO and NAFTA – and the FTAs that followed – required the United States to accept meat and poultry from all facilities in a trade partner country if that country’s system was found to be “equivalent,” even if core aspects of U.S. food safety requirements, such as continuous inspection or the use of government (not company-paid) inspectors, were not met.28 USDA has found 44 nations’ meat and/or poultry safety systems to be equivalent.29 Equivalence determinations have allowed U.S. meat imports to persist even after infrequent USDA spot checks of a sample of a country’s processing plants have found major health threats.30

The threat that WTO and FTA rules pose to domestic food safety standards is not hypothetical.  For instance, China used the WTO to challenge a U.S. prohibition on imports of chicken from China. As required by the WTO and requested by China, USDA had initiated an equivalence determination on cooked chicken from China and was moving toward allowing its importation. Alarmed by the recent avian flu epidemic in China and the concerning findings of USDA’s on-site inspections of sanitary conditions at Chinese chicken processing facilities, Congress intervened and cut off funding for the equivalence determination. A 2010 WTO ruling declared that the U.S. ban violated China’s WTO rights.31 The Obama administration launched a successful campaign to pressure Congress to lift the funding ban, warning that failure to do so would result in WTO-authorized trade sanctions against the United States. In August 2013, USDA declared China’s system for processed poultry to be “equivalent,” opening the door to more U.S. imports and less U.S. vetting of processed chicken from China.32 In fact, the Trump administration recently promised China that it would realize “China poultry exports as soon as possible.”33

Even without the safety-eroding meat equivalence rule, the WTO and NAFTA-enabled flood of imports has jeopardized public health by overwhelming the ability of limited U.S. inspectors to ensure the safety of the food supply. The Food and Drug Administration (FDA) only physically inspects about 1 percent of the food imports that it regulates (vegetables, fruit, seafood, grains, dairy, and animal feed) at the border.34 Imported seafood rates are even lower, with the FDA checking only 0.1 percent of imported seafood for drug residues.35 Only 6.7 percent of beef, pork, and chicken is physically inspected at the border by the USDA.36 Incidence of food borne illnesses such as salmonella and vibrio in the United States have increased since the WTO and NAFTA went into effect, despite repeated reforms to improve domestic safety standards.37 Among the most notorious NAFTA-related food borne illness outbreaks was the illness of Michigan schoolchildren and teachers in 1997. A severe hepatitis A outbreak related to strawberries imported from Mexico resulted in 163 children and teachers becoming ill, several seriously.38


ENDNOTES

1Charles Conner, “Agribusiness Food Producers Back NAFTA,” Memphis Commercial Appeal, Aug. 15, 1993; Jennifer Lin, “In Texas, High Noon over NAFTA,” Knight-Ridder Newspapers, Oct. 31, 1993.
2Food is defined as the following HTS 2-digit codes in this report: meat/poultry, fish/seafood, dairy, vegetables, fruits/nuts, coffee/tea/spices, milling products, meat/fish preparations, animal/vegetable fats, sugars/confectionary, cocoa products, cereal/flour preparations, vegetable/fruit/nut preparations, miscellaneous edible preparations and beverages.
3These figures reflect food trade with the rest of the world. Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed March 29, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx. Even in the recessionary year of 2009, when import levels crashed, food imports comprised 17 percent of food consumed by Americans by volume, compared to 11 percent before NAFTA and the WTO. Economic Research Service, “Import Shares of US Food Consumption Using the Volume Method,” U.S. Department of Agriculture, 2009. Available at: http://www.ers.usda.gov/media/563776/import_1.xls.
4Food price information in this paragraph and the accompanying graph comes from Food and Agriculture Organization of the United Nations, “FAO Food Price Index,” May 6, 2017. Available at: http://www.fao.org/worldfoodsituation/foodpricesindex/en/. Analysis of all available years of food price index data (from 1990 through 2016) shows that the median food price index occurred in 2004. In the graph, the food price index, export volumes and export values have been indexed to the 2004 level (which is equated to zero) such that the level in any given year can be read as the percentage above or below the 2004 level.
5These figures and the accompanying graph reflect the volume and inflation-adjusted value of U.S. food exports. Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed March 29, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx.
6Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed March 29, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx.
7All data in this paragraph and in the accompanying graph reflect the volume of U.S. food trade with the world. Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed March 29, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx.
8Farming typologies and numbers come from the USDA. Small family farms consist of “farming occupation” farms grossing less than $250,000 per year (“lower sales” and “higher sales”), while large farms include family farms grossing more than $250,000 per year (“large” and “very large”) and nonfamily farms. Comparisons are between 2016 and 1998, the latest and earliest data available for those typologies. Economic Research Service, “Agricultural Resource Management Survey: Farm Financial and Crop Production Practices,” U.S. Department of Agriculture, updated May 30, 2017. Available at: http://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-produ....
9Figures in this report are adjusted to 2016 dollars using the CPI-U-RS from the Congressional Budget Office. Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed May 24, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx.
10Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed March 29, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx.
11In the graph, beef is defined as SITC 011 and live cattle is defined as SITC 00111 and 00119. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed May 22, 2017. Available at: http://dataweb.usitc.gov.
12In this paragraph and the accompanying graph, vegetables are defined as SITC 054. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed May 22, 2017. Available at: http://dataweb.usitc.gov.
13Corn is defined as SITC 04490. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed May 22, 2017. Available at: http://dataweb.usitc.gov.
14John B. Judis, “Trade Secrets,” The New Republic, April 9, 2008.
15Jeffrey Passel, D’Vera Cohn, and Ana Gonzalez-Barrera, "Net Migration from Mexico Falls to Zero—and Perhaps Less," Pew Hispanic Center, April 23, 2012, at 45. Available at: http://www.pewhispanic.org/files/2012/04/Mexican-migrants-report_final.pdf.
16U.S. International Trade Commission, “U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects,” Sept. 2007. Available at: https://www.usitc.gov/publications/pub3949.pdf.
17The annual data used for the U.S.-Korea FTA section includes only FTA-relevant years unless otherwise specified. The U.S.-Korea FTA entered into force on April 2012, so FTA-relevant years represents April of the stated year to March of the following year.
18For this section, beef is defined as SITC 011; pork is defined as SITC 0122, 0161, and 0175; and poultry is defined as SITC 0123 and 0174. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed May 24, 2017. Available at: http://dataweb.usitc.gov/.
19U.S. International Trade Commission, “U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects,” Sept. 2007. Available at: https://www.usitc.gov/publications/pub3949.pdf.
20U.S. Meat Exports to Korea Decline Year-On-Year, Due To One-Off Factors,” Inside U.S. Trade, Jan. 24, 2013.
21The growth rate is determined using the compound annual growth rate method. “FTA-relevant period” refers to the 12-month period that is comparable to the first year of FTA implementation: April of one year through March of the following year.
22These numbers reflect a comparison of U.S. pork exports in the second year of FTA implementation compared to the export level that would be predicted at the pre-crisis growth rate.  U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed Jan. 19, 2017. Available at: http://dataweb.usitc.gov/.
23Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 4, 2012, at 4. Available at:  http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20Pr....
24Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 1, 2010, at 4. Available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20Pr.... Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 8, 2011, at 6. Available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20Pr.... Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 4, 2012, at 6. Available at:  http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20Pr....
25Jim Wiesemeyer, “USDA Now Signaling South Korea Has Reopened Market to U.S. Poultry,” Pro Farmer, Nov. 24, 2015. Available at: http://www.profarmer.com/article/usda-now-signaling-south-korea-has-reop.... USDA, “South korea: Poultry and Products Annual,” Sept. 16, 2016. Available at: https://www.fas.usda.gov/data/south-korea-poultry-and-products-annual-1. Jane Chung and Tom Polansek, “Asian Nations Restrict U.S. Poultry Imports over Bird Flu,” March 7, 2017. Available at: http://www.reuters.com/article/us-health-birdflu-southkorea-idUSKBN16D2HE.
26For years 2012-2013, Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 5, 2013. Available at:  http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20Pr.... For years 2013-2016, Foreign Agricultural Service, “Korea: Republic of, Poultry and Products Annual,” Global Agricultural Information Network report, U.S. Department of Agriculture, Sept. 9, 2016. Available at:  https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Poultry%20and%20P....
27U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed Jan. 18, 2017. Available at: http://dataweb.usitc.gov/.
28For more information, see Mary Bottari, “Trade Deficit in Food Safety,” Public Citizen report, July 2007. Available at: http://www.citizen.org/documents/FoodSafetyReportFINAL.pdf.
29USDA, “Eligible Foreign Establishments,” last modified May 22, 2017. Accessed at: https://www.fsis.usda.gov/wps/portal/fsis/topics/international-affairs/i....
30See Mary Bottari and Winifred DePalma, “The WTO Comes to Dinner: U.S. Implementation of Trade Rules Bypasses Food Safety Requirements,” Public Citizen report, July 2003. Available at: http://www.citizen.org/documents/EQUIVALENCYFINALREPORT.PDF. See also “NAFTA's Broken Promises: Fast Track to Unsafe Food,” Public Citizen memo, Fall 1997. Available at: http://www.citizen.org/trade/article_redirect.cfm?ID=1894.
31See Panel Report, United States — Certain Measures Affecting Imports of Poultry from China, WT/DS392/R, 29 Sept. 2010.
32Food Safety and Inspection Service, “Frequently Asked Questions - Equivalence of China’s Poultry Processing System,” U.S. Department of Agriculture, Sept. 26, 2013. Available at: http://www.fsis.usda.gov/wps/portal/fsis/newsroom/news-releases-statemen....
33U.S. Department of Commerce, “Initial Results of the 100-Day Action Plan of the U.S. - China Comprehensive Economic Dialogue,” May 11, 2017. Available at: https://www.commerce.gov/news/press-releases/2017/05/joint-release-initi....
34U.S. Government Accountability Office, “Imported Food Safety,” May 2016. Available at: http://www.gao.gov/assets/680/677538.pdf.
35U.S. Government Accountability Office, “Seafood Safety: FDA Needs to Improve Oversight of Imported Seafood and Better Leverage Limited Resources,” April 2011, at 21. Available at: http://www.gao.gov/assets/320/317734.pdf.
36Food Safety and Inspection Service, "Quarterly Enforcement Report for Quarter 4, Fiscal Year 2013," U.S. Department of Agriculture, 2013, at Table 3a. Available at: http://www.fsis.usda.gov/wps/portal/fsis/topics/regulatory-compliance/re....
37Centers for Disease Control and Prevention, “Table 2b FoodNet–Incidence of Laboratory–Confirmed Infections by Year 2013,” accessed June 9, 2014. Available at: http://www.cdc.gov/foodnet/data/trends/tables/2013/table2a-b.html.
38Lawrence K. Altman, “Tainted Strawberries' Danger Has Eased, U.S. Officials Say,” The New York Times, April 4, 1997. Available at: http://www.nytimes.com/1997/04/04/us/tainted-strawberries-danger-has-eas.... “HAV-Tainted Frozen Strawberries,” Hepatitis Control Report, Spring 1997, Vol. 2, No. 1. Available at: http://www.hepatitiscontrolreport.com/State3.html.