Trade agreements within North America have significantly lowered food prices for consumers, according to new research from Purdue University. The study, funded by the Corn Refiners Association, quantified the impact of the North American Free Trade Agreement (NAFTA) and the United States-Mexico-Canada Agreement (USMCA). Purdue professor of agricultural economics and study co-author Dr. Joseph Balagtas... Read More

North American trade deal lowers grocery costs, Purdue study finds

Podcasts &#8211; RealAgriculture

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**Podcast:** Podcasts &amp;#8211; RealAgriculture

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Right now everybody is really focused on what's going on from the aspects of North American trade. And there's this USMCA KUSMA review and the discussion about the July 1st date, but the reality is that free trade has existed in North America for quite some time. What we don't focus on enough or don't talk about enough is what has been the impact on the taxpayer or the consumer.

Joining us right now to discuss some new research that was funded by the Corn Refiners Association in the US. It is Dr. Joseph Blotkis. He is out of Purdue University. Joe, it's great to have you on the show here. Hi Sean, it's good to be with you. Yeah, okay, so I guess off the top, what did we find? Has NAFTA or USMCA, has it had a benefit for consumers?

Yeah, the bottom line is absolutely. US food prices are lower because of NAFTA. That's the bottom line effect. I think many of us knew that. We suspected that. What our study does, and I should say I do this work with my colleague here at Purdue, Bernard Dahlheimer, who's my co-author.

But our big result is that we measure the effect and try to quantify it, which is important for weighing costs and benefits as you say the US, Canada and Mexico are doing this joint review. Well, this fits right into what we heard from Canadian Prime Minister Carney talking about how Canada assists or helps in making America great again.

Something that stuck out to me in the report is that a 1% tariff cut yields a 2.8% consumer price drop. That seems to be a little bit of a multiplier. Explain that to us. Yeah, that's right. So what we do is we're estimating the effect of the tariff cuts on food price growth rates, right?

And so if you reduce the growth rate, food prices will be lower over time and slower growth rates accumulate over time, right? So 1% price cut causes over a decade prices to be lower by 2.8%. Is there certain types of food that have benefited more from free trade than others? So tariff rates vary across commodities, right?

So the highest tariff rates, the average tariff rate that US had on Canada and Mexico prior to NAFTA was I think 20% or Canada and Mexico, 20%. And that was cabbages, right? And it varies. Average rate was something like 7%. And so bigger tariff rate cuts would cause bigger price reductions.

Yeah. How did you take into account all of the – like obviously there is the tariff rates due to the trade agreement. There's a lot of other stuff happening out there in the world. There's weather. There's things like poultry has experienced, bird flu. There's all these different things that are happening in the Iran War. How do you remove some of those variables to really have a clear understanding of what's happening, the true impact of the tariff cuts?

Yeah, that's a good question, Sean. And it's important – it's an important empirical problem that economists wrestle with. We're observing a world that's not an experiment...

North American trade deal lowers grocery costs, Purdue study finds

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North American trade deal lowers grocery costs, Purdue study finds

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Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.