Where is Trump going with NAFTA?

By Sara Wyant Special to the Farm Forum

Do you know what your net farm income (NFI) was in 2016? On average, USDA estimates that 20 percent of your NFI was due to exports. So take your income minus 20 percent and see how you feel about losing export markets.

And consider that the top export markets are reliably Mexico, Canada and China. Perhaps you will begin to understand why ag leaders are nervous about negotiations to overhaul the North American Free Trade Agreement (NAFTA) as renegotiations begin.

Representatives of the U.S. ag sector hope negotiators can reach a better deal, but President Donald Trump has again threatened to pull the U.S. out of the 23-year-old trade pact.

“Personally, I don’t think we can make a deal because we have been so badly taken advantage of,” Trump said during a recent rally in Arizona. “They have made such great deals – both of the countries, but particularly Mexico – that I don’t think we can make a deal.”

So it’s easy to see that our president is trying to be a master negotiator, and putting pressure on his neighbors to the north and south. Still, those are troubling words to Bob Young, chief economist for the American Farm Bureau Federation.

“We feel like there’s some significant advantages … for ag trade under NAFTA,” Young told Agri-Pulse. “We think the idea of renegotiation – bringing it up to date – makes a lot more sense than walking away from all those relationships that we’ve established and investments that have been made to help move our products.”

A withdrawal from NAFTA is the last thing that many farm groups want because the pact is generally credited for massively boosting U.S. exports of corn, soybeans, wheat, dairy, poultry, pork and beef.

“I don’t know how much clearer we can be with the White House – with President Trump – that we can’t afford to walk away from NAFTA,” Kent Bacus, international trade director for the National Cattlemen’s Beef Association, said in an interview. “We certainly can’t afford to walk away from NAFTA. And we certainly can’t afford to jeopardize the relationships we have with Canada and Mexico.”

The three-country trade pact, which virtually wiped out agricultural import duties, allowed U.S. U.S. farm product exports to more than quadruple from 1993 to 2016, Colorado Farm Bureau Federation President Don Shawcroft said in a recent recording published by the USDA. U.S. ag exports to Canada and Mexico totaled just $8.9 billion in 1993, the year before NAFTA was implemented, Shawcroft said. By 2016 they totaled $38.1 billion.

U.S. ag groups like the National Pork Producers Council, U.S. Wheat Associates, NCBA and many others have expressed support for renegotiation – the only other option under the Trump administration besides withdrawal – but they have all expressed strong desires that the trade gains under NAFTA not be harmed.

And as the first round of talks wrapped up, it looked like the U.S. was on the way to a successful start to renegotiation. U.S., Mexican and Canadian negotiators wrapped up the first round of negotiations for a new NAFTA Sunday on an upbeat note, promising that that they would move quickly through the rest of the process that’s likely to take months.

“While a great deal of effort and negotiation will be required in the coming months, Canada, Mexico and the United States are committed to an accelerated and comprehensive negotiation process that will upgrade our agreement and establish 21st century standards to the benefit of our citizens,” the three countries said in a joint statement after negotiators met last week in Washington for the first round of talks.

U.S. negotiators proposed sanitary and phytosanitary rules to protect U.S. agricultural trade, a key goal of many farm groups during the talks. The next round of NAFTA talks is scheduled for Sept. 1-5 in Mexico before moving to Canada later that month.

While Trump has previously threatened to pull the U.S. out of NAFTA, the move to renegotiate seemed to be on track, before Trump’s comments in Phoenix, where he said he still intends for the U.S. to exit the pact.

“So, I think we’ll end up probably terminating NAFTA at some point – probably,” Trump said in the Tuesday speech. “But I personally don’t think you can make a deal without a termination, but we’re going to see what happens.”

There is speculation that Trump’s remarks were actually a negotiating ploy, but still they are nerve-racking for the ag sector.

“Honestly, I don’t know if that was just playing to the crowd or if he’s sincere about that,” Bacus said. “But when you make a public statement and talk about withdrawal, it obviously alarmed a lot of people within our industry because we take it very seriously.”

Pulling out of NAFTA, Bacus said, would spur a reinstatement of import tariffs on U.S. beef as high as 25 percent and potentially cause a glut of beef, pork and chicken in the U.S.

“If we withdraw, where would the incentive be for Mexico and Canada to give us duty-free access if we’re not part of the trade agreement?” he asked rhetorically.

Young said he didn’t think making threats to withdraw as a negotiating tactic is a good idea.

“As long as you’re continuing to throw out these bluffs and things of that nature, the day could easily come when countries … decide to just say, ‘Fine, we’ll go negotiate with someone else,’” Young said and warned: “There’s an awful lot of gains that we’ve made over the past 20-plus years. Don’t screw this up.”