The NAFTA agreement on agricultural trade consists of three bilateral agreements—between the United States and Mexico, the United States and Canada, and Canada and Mexico. The US-Canada agreement largely car- ried into NAFTA the tariff and nontariff barrier rules that had been adopted in the Canada-US Free Trade Agreement (CUSFTA). Under the CUSFTA, most agricultural tariffs between the United States and Canada were to be phased out by January 1998, and NAFTA adopted this schedule. However, Canada was allowed to maintain permanent tariff rate quotas (TRQs) on imports of dairy products, poultry, and eggs from the United States,1 and the United States was allowed to maintain TRQs on imports of sugar, dairy products, and peanuts from Canada (appendix table 5A.1).2 Although a tar- iff snapback provision remains in effect until 2008, Canada has rarely used
1. Under NAFTA, the overquota tariffs for products subject to a TRQ regime are the lower of either the existing tariff rate when NAFTA took effect or the current most-favored nation (MFN) rate. In-quota imports are charged the more favorable NAFTA tariff. Under NAFTA’s TRQ arrangement, the members must gradually expand each quota while gradually elimi- nating the associated overquota tariff during the transition period. See USDA (2002a).
The TRQ system does not cover agricultural products subject to special safeguards (Article
. Special safeguards apply only to Canada-Mexico and US-Mexico trade but not to Canada-
US trade. When a special safeguard is applied, tariffs on goods listed in Annex 703.3 may be raised to higher levels if imports reach the quota levels specified in the tariff schedules. A NAFTA country, however, cannot simultaneously apply a safeguard against a good listed in Article 703 and invoke Chapter 8 emergency action on that good. Mexico, for example, uses special safeguards on imports of live swine, pork, potato products, fresh apples, and coffee ex- tract. The United States applies special safeguards on selected horticultural crops. Sensitive agricultural commodities subject to Canadian special safeguards include fresh cut flowers, tomatoes, onions, cucumbers, broccoli, cauliflower, and frozen strawberries. See USDA (2002a).