Impacts of NAFTA and CUSTA on Agricultural Trade Flows: A Northern Great Plains Perspective

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Impacts of NAFTA and CUSTA on Agricultural Trade
Flows A Northern Great Plains Perspective

• Won W. Koo
• Professor and Director
• Center for Agricultural Policy and Trade Studies
• North Dakota State University

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Purpose

• To evaluate changes in agricultural trade flows
  between the United States and Canada under CUSTA
  and impacts on Northern Plains agriculture

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Changes in trade flows of agricultural
commodities and products under CUSTA

• HRS wheat
• durum wheat
• malting barley
• feed barley
• Live cattle and hog
• beef and pork
• processed products

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Table 1. U.S. Trade Flows to and from
Canada, Grain
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Table 2. U.S. Trade Flows to and from
Canada, Livestock
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Factors affecting trade flows

• Lower transportation costs relative to other
  major markets
• Continuous appreciation of the U.S. dollar
  against the Canadian dollar
• Quality of wheat and malting barely
• Export enhancement program
• Elimination of Canadian Rail subsidies under WGTA

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Empirical Model

• CX f(USDP, CDP, EXR, OTHX)
• USDPg(CX, DCS, OTHP)

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Effect of Canadian Exports on Price
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Conclusion (1)

• CUSTA has had a significant influence on trade
  flow of agricultural goods, mainly Canadian
  exports to the United States.

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Conclusion (2)

• Trade flows of livestock and livestock products
  are influenced by exchange rate between the two
  countries and price differences, while those of
  wheat and barley are influenced by not only
  exchange rate and price differences, but also
  quality of U.S. grain, the EEP, and Canadian rail
  subsidies.

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Conclusion (3)

• Canadian exports of grain and livestock to the
  U.S. have negatively affected U.S. price of grain
  and livestock, but the price effects are not
  significant for all agricultural goods except
  wheat and pork.