Agricultural Information Bulletin No. (AIB-784) 40 pp

September 2003

North American Agricultural Market Integration and Its Impact on the Food and Fiber System

Economic change and market dynamics have fundamentally altered the structure and performance of agricultural markets in the United States, Canada, and Mexico within the last 25 years. Many factors have helped shape the current North American food and fiber system, including technological change, domestic farm policies, international trade agreements, and the economic forces of supply and demand. Ratification of NAFTA, for example, helped spark a surge in trade and investment among the United States, Canada, and Mexico, deepening integration of North American agriculture. In recent years, efforts to further integrate the continental market seem to have slowed. Broadening the scope of NAFTA to include institutional reforms that lead to a more unified system of commercial law, the establishment of common antitrust and regulatory procedures, harmonization of product standards, and increased coordination of domestic farm, market, and macroeconomic policies would deepen market integration and enhance market efficiency and growth within North America.

Keywords: agriculture, market integration, market segmentation, law of one price, price transmission elasticities, exchange-rate pass-through, market efficiency, bilateral trade intensity, regional trade agreements, NAFTA, CUSTA, trade policy, WTO, GATT

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