American Free Trade Agreement By: Tracy Brandenberger Rahul
American Free Trade Agreement By: Tracy Brandenberger Rahul Ramdas, & Kelsey Spillmann What is NAFTA? Trade pact that took into effect January 1, 1994 that was intended to gradually eliminate most tariffs and other trade barriers on
products and services passing between the United States, Canada , and Mexico. The pact has lead to much debate and protest from all sides, predominantly Mexican farmers and American factory workers. Current debates about NAFTA are focussed around the expansion of NAFTA The pact has effectively created a free-trade bloc among the three largest countries of North America, covering a region of nearly 400
million people that produces over $8 trillion in goods and services. The majority of industries in the United States, Canada, and Mexico have benefited from NAFTA. EFFECTS ON THE UNITED STATES United States and Mexico Two-way agricultural trade between the United States and Mexico
Since NAFTA was iniated in 1994 Types of Exports to Mexico What is has done? United States and Canada Two-way agricultural trade between the United States and Canada Since implementation of the U.S. Canada Free Trade Agreement Types of Exports
NAFTA: THE GOOD AND THE BAD FOR THE UNITED STATES While NAFTA has increased gross U.S. exports, imports have increased as well While U.S. markets such as electronics, clothing, and pharmaceuticals have increased, certain U.S. Horticultural markets have suffered due to open trade with Canada and Mexico
Effects of NAFTA on U.S. Markets The Bad Florida Tomato California Avocado The Good Washington Apple California - Cherry Florida and the Tomato The Florida Horticultural industry exports commodities such as
tomatoes, sugar cane, bell peppers, cucumbers, eggplant, snap beans, and squash 80 Florida tomato growers produce about 1.6 billion pounds, $400 million worth, of tomatoes from 50,000 acres annually The Florida Horticultural industry has been the most outspoken agricultural opponent of NAFTA thus far, with great deals of opposition coming from Floridian tomato growers
Tomato Trouble Since the development of NAFTA, imports have accounted for 32 percent of fresh tomato consumption in the U.S. in 1999 up from 19 percent in 1994 Within the first few years of the implementation of NAFTA, Mexico, with an ideal soil and climate for producing tomatoes, began to sell increasing quantities to American consumers causing tomato prices to fall HOWEVER
People were buying more Mexican tomatoes and fewer Floridian tomatoes, resulting in the loss of 150 Floridian tomato growers. Proponents for Mexico Americans get cheaper tomatoes under free trade, they get better ones. In the winter, Florida growers harvest tomatoes while theyre still green and ripen them artificially using ethylene gas.
Mexican tomatoes taste better and last longer because they are vine ripened. - Consumers for World Trade, a pro-trade consumer advocacy group Proponents for Florida NAFTA is on its way to destroying an entire industry. It has boosted Mexicos economy at the expense of U.S. farmers. The development of exports of one country
should not be aimed at harming to the productive capacity of another, while adhering to the commitments made in NAFTA." - Secretary of Agriculture, Dan Glickman The Result In 1996, Florida tomato growers fought for and won protection against Mexican tomato imports In response to Florida grower protests, the US government took three steps to slow down the implementation of NAFTA's free trade
provisions with Mexico 1- Indefinitely postponed cross-border trucking 2- Proposed to shift to a weekly measure of Mexican tomato imports. If Mexican shipments exceeded a weekly quota, a 2.5 percent tariff would be levied 3- Supported efforts to define Florida winter vegetables as an "industry" so that growers there can more easily petition for relief from trade injury
The Result The U.S. Commerce Department brokered a deal that set a floor price on Mexican tomatoes. Along with a price floor the Commerce Department established two different tomato sales seasons each with a separate reference price. 1st Season : California and Baja, Mexico spanning from July 1 to
October 22 ($4.30 per 25-lb box) 2nd Season : Florida and Sinaloa, Mexico spanning from October with a higher floor price ($5.27 per 25- 23 to June 30 lb box). California and the Avocado California is the worlds
second largest producer of avocados, accounting for about 15 percent of global production. Almost all U.S. production is the Hass variety. Mexico is the worlds largest producer of avocados, with an annual production varying between 700 and 900 thousand tons.
Ban on Mexican Avocados The importation of fresh avocados was banned by the United States in 1914 after U.S. plant health officials identified avocado seeds in Mexican orchards as pests In the 1990s bilateral negotiations were conducted with the sanitary and phytosanitary provision of NAFTA for the importation of Mexican avocados
Indicators of Trouble for California With the approval of certain provisions of NAFTA in 1997, free trade between U.S. and Mexican avocados began to be permitted, causing a problem for California Avocado producers. Mexican Advantages Mexican yields vary from seven to nine metric tons per hectare. In Michoacan normal rainfall is sufficient for production and only about half of the groves are irrigated.
Californian Disadvantages Avocado production requires large amounts of water, which must be obtained from relatively expensive irrigation water in California. California yields are reported to be somewhat lower at about five metric tons per hectare. The Result In February, 1997, APHIS published the final rule that allowed the importation of Hass avocados from the Mexican state of Michoacn
into 19 Northeastern U.S. states and the District of Columbia from November to February. The Result Estimated Californian grower losses ranging from $1.4 to $6.4 million per producer. Consumer gains
ranging from $3.3 to $19 million California and the Cherry The United States is a net-exporter of sweet cherries. Nearly 37.7 percent of total U.S. cherry exports originated in California in 2001.
Total U.S. exports reached the value of $165.5 million in 2001, up 102 percent since the implementation of NAFTA. Washington and the Apple Since NAFTA, the Apple industry has become the biggest horticultural export from the U.S. to Canada
Effective January 1, 2003, the import tariff on U.S. and Canadian apples was eliminated as required under the North American Free Trade Agreement (NAFTA). Overall Imports From Canada and Mexico
Overall Imports From Canada and Mexico Effects on Canadian Horticulture History of Agriculture and Horticulture Agriculture 2nd largest natural resource industry Food sector is 2nd largest manufacturing
sector Farm population and area has decreased Top Sectors 1. 2. 3.
Livestock Grain Horticulture Provides jobs to 1 in 7 Canadians Regional Production Maritimes- Diversified farms Livestock and dairy oriented
Western Quebec and Eastern Ontario Primarily dairy Produces most of Canadas milk and cheese Southwestern Ontario Feedlots Specialty fruits and vegetables Northern Ontario
Sparsely scattered dairy and livestock Canadian Land 904 hectacres of land in country Half is tundra and rock 28% is forest cannot be used for ag. 13% is available for agriculture uses 18% is suitable for field crops Remainder is graze land 0.4% is occupied by cities, roads and other man made objects
Prairie Provinces Alberta Livestock Manitoba Diverse farms Saskatchewan Wheat
British Columbia Livestock in north Specialty crops Horticulture Represents $4.6 billion annually 14.4% of all Farm Cash Receipts (FCR) FCRs are up 16% from 2000 Ranked 3rd in ag sectors, behind livestock and grains Exports $2.9 billion worth of products Land area increased between 4 and
52% from 91 to 96 Growth in Horticulture Ornamental Industry experiencing the most growth. Other current increases Greenhouse Vegetables Berries, Grapes, Maples Food Processing Industry International and Domestic demand is increasing for Value Added Products demanded are frozen,
canned, dried or juiced Since 1988 Canning Operations have decreased Freeze Operations have increased Beyond the Farm Gate Horticulture has 9 categories with farm gate values of more than $100 million Floriculture tops the list Value of vegetables in 2000 $115 million Largest single crop in edible horticulture
was potato Growers experiencing unprecedented growth New state of the art processing facilities Large volumes of production are for foreign markets Canadian Agricultural Trade Canada & the U.S. Canada-U.S. Agri-Food Trade
Implemented in 1989 Increased trade 104% by 1994 53% of Canadian food exports went to the US in 94 60% of Canadian imports came from US Canada & the U.S. NAFTA
Increased trade by 82% since 1993 Trade reached $25.1 billion in 2000 U.S. is Canadas largest exporter Canada & the U.S. An example of crops that have benefited
Horticultural Tomatoes- increased 20-fold Peppers and Lettuce- increased 7-fold Cucumbers-increased 6-fold Oilseeds Soybean oils- increased 7-fold Sunflower oil- quadrupled Canada-Mexico Trade Trade increased by 164% since 1993 Increased to $1.1 billion in 2000 Exports to Mexico tripled to $692
Mexico purchases oats, canola, wheat, dried beans, frozen vegetables, beef and frozen French fries. Hot House Tomato Tomatoes grown in aluminum or steel structure covered in glass Every aspect of growth is controlled
Heat Light Nutrients No herbicides and minimal pesticides are used because plants are grown hydroponically Exports of tomatoes has grown from 2 billion in 1991 to 106 billion in 2001.
Majority of the tomatoes are still field grown because of labor intensity of Hot House Tomatoes. The Canadian Tomato US tomato growers have complained that Canadian growers are selling their tomatoes too cheaply in US markets
1% of the 16 lbs /yr./person tomato consumption now comes from Canada Last year, the US increased the duty on tomatoes to 30% Canadians have also filed a trade complaint of their own against US tomatoes coming into Canada. Americans and Canadians are going back and forth in a biased battle of who thinks who is wrong Floriculture, Nursery, & Christmas Trees Account for 13% of cash receipts on crop
sales In 2000 exported $409 million worth of floriculture and nursery products Exported 2.5 million Christmas trees Main floriculture exports include roses, tulips, chrysanthemums, gerberas, lilies, alstromeria, and snapdragons.
The Canadian Spud Accounts for 33% of vegetable FCRs 158,900 hectares of potatoes planted New fry plants opening, expected to increase exports Over 50% of Canadian grown potatoes are processed into French fries Canada exports continue to increase due to a favorable exchange rate, good product quality, proximity to Eastern & Midwestern markets and an increasing manufacturing capacity.
Effects on Mexicos Agricultural Industries 1995 Recession in Mexico Devalued the Peso by 50% Exports became more competitive Exports to the US rose by $12 billion # of Imports decreased significantly
Larger percentage decrease from countries other than the US Imports from US decreased by only $4 billion NAFTA agreements Co-production agreements NAFTAs role
Increased speed of recovery from the recession Provides confidence to investors Acted as a stabilizer Effects on Mexicos Economy Two way trade between the United States and Mexico rose 113 percent between 1993 and 1998 Mexico has bypassed South Korea to become 7th largest exporter
Mexico has become the second largest trading partner with the U.S. WHEAT Mexico has become the third largest wheat importer from the U.S after Egypt and Japan Mexicos wheat imports grew 48% over the past 5 years Mexico imports more in years with poor weather/production Mexico lifted price controls and subsidies on wheat products but
not corn products in 1995 Tariffs on wheat entering Mexico should be eliminated this year According to the U.S. Wheat Association, sales to Mexico have increased 35% over the same period last year Mexicos Sugar Trade At a minimum, Mexico was allowed to ship 7,258 metric tons of raw cane sugar duty-free. Limited to 250,000 tons of duty free imports per year Raw sugar tariff was 9.07 cents a pound in 2002 and
the refined sugar tariff was 9.61 cents a pound Decreases by about 1.5 cents per year Both will reach 0 in 2008 Whole Tomatoes From 1993 to 1998 there was an 83% inc. in Mexicos exports Tariffs were already low, but are being phased out Minimum price/reference price restriction
July 1 to October 22 ($4.30 per 25-lb box) October 23 to June 30 ($5.27 per 25-lb box) Whole Tomatoes Continued New variety of tomatoes Vine-ripe, ESL (extended shelf life) tomatoes Last one week longer in storage than a mature green tomatoes Dont grow well in Florida due to wet weather
Tomato market is becoming more segmented ESL varieties preferred by consumers Food Service industry prefers ripe green tomatoes for slicing U.S Import of Tomatoes Cucumbers About 38% cucumbers for U.S.
consumption are imported In 1998 94% (143 million according to the USDA) of imports came from Mexico Tariffs Pre-NAFTA tariffs were near 20% on Mexican imports to the U.S. These tariffs are being phased out over a 15 year period Citrus Fruits
Most citrus fruits can enter Mexico and the U.S. duty free Limes are the main citrus export to U.S. from Mexico U.S. imported $43million of limes in 1998 Tariff changes estimated to have increased lime imports from Mexico by 2% Benefits from NAFTA Increased trade
Increased the number of jobs Lowers poverty in Mexico Assisted Mexico in importing environmentally friendly technology Regulated working conditions Pitfalls of NAFTA
Will harm Mexican Farmers Need tariffs to support farmers Mexico must implement subsidies for farmers Lack of diversity in Mexicos trading partners Bilateral trade btw Mexico and European Union (EU) was 10-11% before NAFTA Currently accounts for 5-6% of trade Mexico relies on U.S. for 80-90% of trade References www.agr.gc.ca
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