Because of NAFTA, I have an avocado in my fruit bowl and multi-colored tomatoes in my salad.
After the North American Free Trade Agreement (NAFTA) was implemented in 1994, Mexican and Canadian fruit growers began to have free access to U.S. markets. As a result, by 2012 the amount of fruit we were eating from Mexico and Canada had doubled while we consumed three times as many of their vegetables. Or, thinking of a pre-NAFTA world, please just imagine supermarkets with many fewer Mexican avocados, cantaloupes, grapes, mangoes, papayas, limes, strawberries and watermelon.
Where are we going? To the benefits of free trade,
Signed on February 4th, 2016, theTrans-Pacific Partnership (TPP) is now ready for ratification by each of its 12 member nations. More than 6,000 pages of individual rules and regulations that affect millions of buyers and sellers and countless goods and services, the TPP, like NAFTA, will impact the food we eat.
The following (very partial) tariff elimination schedule for selected goods and countries provides some facts. By noting who is cancelling tariffs, you can see where U.S. exporters and U.S. consumers will benefit.
Our Bottom Line: Comparative Advantage
The economist who first explained comparative advantage, David Ricardo (1772-1823) said each nation should make the goods and services for which it has the lower opportunity cost and import what it does not produce. Because of those imports, consumers would enjoy lower prices and more variety. Benefitting also, exporters have larger markets that supported the efficiencies of economies of scale.
While most economists hope the U.S. Congress will ratify the TPP because they agree with Ricardo, there is considerable opposition and some interesting projections supporting both sides. But we will save that for another day.
For now, if asked, just say that comparative advantage is the reason you have an avocado in your fruit bowl.