U.S. Beer Flows & the Impact of NAFTA

After World War II and up until the 1980’s, the liberalization of trade was realized on a multilateral basis. World trade grew at twice the pace of GDP growth (Krueger, 1999). However, starting in the mid 1980’s, preferential trading arrangements (PTAs) increased in numbers. Perhaps the most influential PTA ever to be signed could be the North America Free Trade Agreement, or simply NAFTA, which came into effect January 1, 1994. The agreement established a free-trade area between its member countries- US, Canada and Mexico- in which all tariffs would be phased out between them, but each country would maintain its separate national barriers against the rest of the world. A lot of attention has been paid to the impact of NAFTA on the welfare of its member countries and on the rest of the world. This paper will focus on the impact of the agreement on the US’s beer trade flows by analyzing annual import and export data using several methods. To our knowledge there is no precedent for such research. Section II provides a brief review of the conclusions and methodology of existing works on NAFTA trade issues, as well as some important aspects of the agreement. Section III provides an overview of the world beer industry, and the NAFTA member countries beer markets. Section IV provides in great detail the methodology that we will employ. The focus of Section V is to explain the results obtained. Section VI provides conclusions and implications for further research on this subject. References and other sources can be found in Section VII.