By: Andrew Harig, Senior Director, Tax, Trade & Sustainability, Food Marketing Institute
While we are told that we live in an interconnected world in which the price of soybeans in Beijing or the weather in Mumbai ripples out and impacts us on a daily basis, understanding what the effects are and what they mean for the quality of our lives can be elusive.
Part of my work at FMI entails engaging with our members to help them understand the impact of trade agreements - like the North American Free Trade Agreement (NAFTA) - on their business model and what a renegotiation of the pact means for their consumers. But the rapid pace of events we see documented on TV every night and the sheer scope of the trade agreement can make those “ripples” very hard to see.
With Memorial Day just around the corner, grilling season is about to get underway. Oddly enough, this great American pastime can offer us a window into understanding exactly how an agreement that covers the trade relationship between the United States, Canada and Mexico impacts the lives of American consumers every day.
A recent study conducted by A.T. Kearney - and funded by the Food Marketing Institute, National Retail Federation and the Retail Industry Leaders Association – explores what NAFTA means for retailers and by extension our consumers. One of the ways it does this is by looking at the agreement’s impact on that most essential of grilling season staples – beef.
The United States, Canada and Mexico have a remarkably integrated supply chain that sees feed, cattle and fresh and frozen beef move frequently across the borders. Thanks to NAFTA, Americans are spared having to absorb more than $284 million in tariffs that would be imposed if the agreement were not in place. On a per hamburger basis, this may not amount to very much – likely a few fractions of a one cent. Multiply that by all the hamburgers you eat during the course of the summer and the cost increase becomes noticeable.
Beef is just one piece of the NAFTA puzzle – add in other products we now view as staples of a summer picnic, like avocados and bacon to top the burgers and cold beer to wash it down, and all of a sudden entertaining gets more expensive and grilling is a little less fun.
NAFTA has been a boon for American consumers – during grilling season and long after. Cars are less expensive, blue jeans no longer break the bank, and electronics that would have been out of reach a decade ago are cheap enough that many people have a TV in every room. For many of us, it is hard to appreciate the role this free trade agreement plays in making our lives better; after all, we don’t get a receipt that says “NAFTA saved you $3.09 on today’s purchases” in the way we do for membership in store clubs or the use of coupons. But the ripples are still there – and they make grilling season a little easier and more affordable for many Americans.
You can read the full A.T. Kearney report here.