favored nation (MFN) tariffs applied on imports from third countries.166 The CET goal should be reached by a NAFTA accord that all countries would implement—over the course of 10 years—the lowest rate applied by a NAFTA member for each tariff line and eliminate quota barriers. 167
A third area that needs to be addressed is the application of SPS restric- tions that hamper trade in farm products across NAFTA borders. SPS reg- ulations can act as a de facto nontariff barrier, especially on horticultural and meat products. We recommend, on a product-by-product basis, that the NAFTA partners create common SPS standards (or mutual recognition) and a common inspection service. Both the common standards and com- mon inspection service could start on a bilateral basis and eventually reach a trilateral basis.168 To illustrate, while cross-border US-Canada markets for live cattle are well integrated, the partners still do not have common beef grading standards nor do they recognize the equivalency of their individ- ual beef grades. The beef story was a key driving force for a common US- Canada SPS regime, which ultimately led to the NAFTA Security and Pros- perity Partnership pledge signed in March 2005.169 The broader goal, over a 10-year period, should be the establishment of common NAFTA stan- dards and joint inspection services, beginning with low-controversy prod- ucts (such as onions or mangoes) and ultimately reaching high-controversy products (such as genetically modified varieties and meats).
AAFC (Agriculture and Agri-Food Canada). 2001. The Canadian Cane and Beet Sugar In- dustry Profile (May). www.agr.gc.ca/index_e.phtml (accessed in April 2003).
166. The CET in agriculture and other sectors will eliminate a major rationale for protective rules of origin. Rules of origin are justified as a means of preventing “trade deflection,” namely the practice of routing imports through the lowest-tariff country in an FTA. Unstated is the intentional protective effect of rules of origin. Despite this intent, it is our hope that once the CET is established, rules of origin would be waived for tariff-free trade within NAFTA.
167. In 2001, the simple average MFN tariff rate for agricultural products was 4.7 percent in the United States, 3 percent in Canada, and 23.4 percent in Mexico. See WTO World Trade Re- port, 2003. These figures suggest that Mexico would have to cut its MFN tariffs much further than Canada or the United States in order to achieve a common external tariff by harmoniz- ing down.
168. As an example, the United States and Mexico recently resolved outstanding SPS issues in poultry, allowing most Mexican states to export poultry products into the US market. See “NAFTA: The Future of Poultry,” NAFTA Works 9, no. 2, February 2004.
169. In March 2005, US President Bush, Mexican President Fox, and Canadian Prime Minis- ter Martin announced the establishment of a “Security and Prosperity Partnership of North America,” which includes promoting a “safer and more reliable food supply while facilitat- ing agricultural trade.” Specifically, the NAFTA trilateral agreement addressed the need to “pursue common approaches to enhanced food safety and . . . recovery from foodborne and animal and plant disease hazards.” See White House press release, “Security and Prosperity Partnership of North America Prosperity Agenda,” March 23, 2005; and John D. McKinnon, “Canada, Mexico, US Reach Deal to Bolster Trade,” Wall Street Journal, March 24, 2005, A4.