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Trade Creation and Trade Diversion in the North American Free Trade Agreement: The Case of the Agricultural Sector

Published online by Cambridge University Press:  28 April 2015

Dwi Susanto ,
C. Parr Rosson III  and
Flynn J. Adcock
Dwi Susanto
Affiliation:
Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, Texas
C. Parr Rosson III
Affiliation:
Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, Texas
Flynn J. Adcock
Affiliation:
Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, Texas
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Abstract

This paper examines the effect of the U.S.-Mexico trade agreement under the North American Free Trade Agreement (NAFTA). The results suggest that U.S. agricultural imports from Mexico have been responsive to tariff rate reductions applied to Mexican products. A one percentage point decrease in tariff rates is associated with an increase in U.S. agricultural imports from Mexico by 5.31% in the first 6 years of NAFTA and by 2.62% in the last 6 years of NAFTA. U.S. imports from Mexico have also been attributable to the pre-NAFTA tariff rates. Overall, the results indicate that the U.S-Mexico trade agreement under NAFTA has been trade creating rather than trade diverting.

Keywords

agricultural sectorNAFTApanel datatariffstrade creationtrade diversionF10F15Q17Q18C31C33
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 39 , Issue 1 , April 2007 , pp. 121 - 134
Copyright
Copyright © Southern Agricultural Economics Association 2007

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