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.
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 year, 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 46 percent above the median price level for 2004.3 While this high price pushed the value of U.S. food exports 81 percent above the 2004 level, the volume of U.S. food exports were a mere 18 percent above the 2004 level. 4
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.5
In 2015, the volume of U.S. food exports was only 12 percent higher than in 1995, the year the WTO took effect. In contrast, U.S. food imports in 2015 were 128 percent higher than in 1995.6 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 198,000 small U.S. family farms have gone under since NAFTA and the WTO took effect, a 23 percent decrease in the total number.7 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 1967.8 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.
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 adjacent graph shows, small gains in U.S. beef and live cattle exports have been swamped by high imports throughout the NAFTA era.9
As another example while total U.S. vegetable imports from Canada and Mexico have nearly quadrupled (a 287 percent increase) under NAFTA, U.S. vegetable exports to NAFTA partners have remained relatively flat (a 72 percent increase). The U.S. vegetable deficit with Canada and Mexico has soared to $4.6 billion, nearly 10 times the pre-NAFTA level, as the graph below indicates.10
U.S. corn is, however, an exception – U.S. corn exports to Mexico in the three years after NAFTA soared 377 percent above the level in the three years before the deal. In 2015, the United States exported 33 times as much corn to Mexico as before NAFTA.11 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.12 In NAFTA’s first seven years, the annual number of people emigrating from Mexico to the United States more than doubled.13
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, in a factsheet used to promote the FTA, the White House claimed: “Tariff eliminations on Korea’s existing 40 percent tariff will further boost beef exports, saving an estimated $1,300 per ton of beef imported to Korea – savings that would total $90 million annually for U.S. beef producers at current sales levels.”14
Ironically, U.S. meat exports to Korea have plummeted faster than many other exports – export declines in some meat sectors were steeper than the overall 10 percent decrease in U.S. goods exports to Korea from the year before FTA implementation to the fourth year of the deal (meat imports have not been affected, since the United States does not import beef, pork or poultry from Korea). In contrast to the administration’s promise, U.S. pork producers saw their exports to Korea crash by $77 million – a 17 percent decline – in the first four years of FTA implementation, in comparison to the year before the FTA took effect.
Comparing 2011, the year before the FTA, to 2015 export levels, poultry producers have faced a 96 percent collapse of exports to Korea under the FTA – a $132 million reduction. U.S. beef exports only reached pre-FTA levels in the pact’s fourth year after declining an average of 11 percent during the first three years of the agreement. Notably, the growth of U.S. exports of beef to Korea since the FTA is much lower than the trend it was on from 2006 to 2011, as the graph below shows.
Even including the recovery in beef exports after a decline in the first two years of the Korea FTA, U.S. meat producers have lost a combined $57 million in beef, pork and poultry exports under four years of the Korea FTA (from the year before the deal to the recently completed fourth year of FTA implementation), as indicated in the graph above.15
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 2011.16 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).17
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 2015-2016 would be expected to surpass $840 million. Instead, they barely passed $370 million, 55 percent below the level that historical growth would predict.18 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.19 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 2011.20 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 2015, the Korean government enacted a nation-wide ban on nearly all imports of American poultry due to several isolated bird flu outbreaks in Minnesota and Iowa 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. This ban occurred as chicken consumption per capita in Korea has risen in each year since the Korea FTA entered into force.21 The ban on American poultry has meant that Koreans have been eating more chicken, just not U.S. chicken.
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.22 USDA has found 49 nations’ meat and/or poultry safety systems to be equivalent.23Equivalence 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.24
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.25 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.26
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.27 Imported seafood rates are even lower, with the FDA checking only 0.1 percent of imported seafood for drug residues.28 Only 6.7 percent of beef, pork, and chicken is physically inspected at the border by the USDA.29 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.30 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.31
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.
2These figures reflect food trade with the rest of the world, defined as the following HTS 2-digit codes: 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. Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed Jan. 12, 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.
3Food 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, 2014. Available at: http://www.fao.org/worldfoodsituation/foodpricesindex/en/. Analysis of all available years of food price index data (from 1990 through 2015) 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.
4Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed Jan. 12, 2017. Available at: http://www.fas.usda.gov/gats/default.aspx.
7Farming 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 2015 and 1996, 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 Nov. 27, 2016. Available at: http://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-produ….
8This reflects the inflation-adjusted dollar value between 1967 and 2015 of U.S. trade in food. Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed June 9, 2016. Available at: http://www.fas.usda.gov/gats/default.aspx.
9In the graph, beef is defined as SITC 011 and live cattle is defined as SITC 00111 and 00119. All data adjusted for inflation. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed Jan. 12, 2017. Available at: http://dataweb.usitc.gov.
10In this paragraph and the accompanying graph, vegetables are defined as SITC 054 and vegetable trade is presented in inflation-adjusted values. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed Jan. 12, 2017. Available at: http://dataweb.usitc.gov.
11Corn is defined as SITC 04490 in this inflation-adjusted comparison. U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed Jan. 12, 2017. Available at: http://dataweb.usitc.gov.
12John B. Judis, “Trade Secrets,” The New Republic, April 9, 2008.
13Jeffrey 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.
14The White House, “The U.S.-South Korea Free Trade Agreement: More American Jobs, Faster Economic Recovery through Exports.” Available at: http://www.whitehouse.gov/sites/default/files/09272011_wh_overview_fact_….
15For this report, beef is defined as SITC 011; pork is defined as SITC 0122, 0161, and 0175; and poultry is defined as SITC 0123 and 0174. 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. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed Jan. 18, 2017. Available at: http://dataweb.usitc.gov/.
16“U.S. Meat Exports to Korea Decline Year-On-Year, Due To One-Off Factors,” Inside U.S. Trade, Jan. 24, 2013.
17The 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.
18These 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. Pork is defined as SITC 0122, 0161, and 0175. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed Jan. 19, 2017. Available at: http://dataweb.usitc.gov/.
19Foreign 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….
21For 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….
22For more information, see Mary Bottari, “Trade Deficit in Food Safety,” Public Citizen report, July 2007. Available at: http://www.citizen.org/documents/FoodSafetyReportFINAL.pdf.
23USDA has deemed each of the 49 nations to have equivalent food safety systems for at least one of these products: meat from cows, swine, goats, sheep, or horses; poultry; or eggs. See Eligibility of foreign countries for importation of products into the United States, 9 C.F.R. § 327.2 (2014); Eligibility of foreign countries for importation of poultry products into the United States, 9 C.F.R. § 381.196 (2014); Eligibility of foreign countries for importation of egg products into the United States, 9 C.F.R. § 590.910 (2014).
24See 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.
25See Panel Report, United States — Certain Measures Affecting Imports of Poultry from China, WT/DS392/R, 29 Sept. 2010.
26Food 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….
27U.S. Government Accountability Office, “Imported Food Safety,” May 2016. Available at: http://www.gao.gov/assets/680/677538.pdf.
28U.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.
29Food 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….
30Centers 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.
31Lawrence 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