NAFTA nervousness: Farm groups anxious about renegotiating trade pact
It’s official: After months of bashing the North American Free Trade Agreement (NAFTA) on the campaign trail last year, the Trump administration informed Congress in mid-May that it intends to begin renegotiating the decades-old trade pact with our neighbors in Mexico and Canada.
The much-anticipated notification gives Congress a 90-day window to work with the Office of the U.S. Trade Representative, the Commerce Department and other agencies to help develop priorities in overhauling the pact with two of our largest trading partners.
Needless to say, there is a lot at risk for any one making their living off of a farm or ranch. In general, U.S. leaders have negotiated trade agreements over the last few decades that have expanded farm exports. Many farm organization leaders understand that, when it comes to trade, Mexico and Canada are some of their number one and two markets for selling agricultural goods.
But for some, Trump’s decision to renegotiate could have been worse. Just one month earlier, farm groups were worried that the president would withdraw from NAFTA completely.
“When you’re talking about $3 billion in soybean exports a year, any threats to withdraw from agreements and walk away from markets makes farmers extremely nervous. We remain supportive of efforts to modernize NAFTA and further expand access for U.S. soy in Mexico and Canada, and we look forward to working with the administration to realize these goals,” said ASA President Ron Moore, a soybean farmer from Roseville, Ill.
Corn growers were also relatively relived by the Trump’s administration’s recent announcement.
“Exports are one pillar of a strong farm economy, accounting for 31 percent of farmer income. Nowhere is the importance of trade stronger than right here in North America,” National Corn Growers Association President Wesley Spurlock said in a statement. “Since NAFTA was implemented, U.S. agricultural exports to Canada and Mexico have tripled and quintupled, respectively. We export billions of dollars of corn and corn products to these countries each year.”
Much of that success is because under NAFTA, most tariffs on U.S. agricultural exports have dropped to zero, a situation that farm groups like NCGA want to maintain.
The U.S. exported about $35 million worth of corn to Mexico in 1993, the year before NAFTA went into force, according to USDA data. Last year the U.S. sold $2.6 billion worth of corn to Mexico.
But now that NAFTA discussions are heating up, Mexican leaders there are talking to producers in other parts of the world, including Argentina and Brazil, about corn supplies.
Cattlemen are concerned, too. Exports of American-produced beef to Mexico have grown by more than 750% since the inception of NAFTA, according to the U.S. Meat Export Federation.
“Exports now account for as much as 13% of overall U.S. beef production — and it’s more likely to be higher-quality cuts that bring in higher revenues for the hundreds of thousands of American families in the beef community,” said National Cattlemen’s Beef Association President Craig Uden.
NCBA joined forces with the Canadian Cattlemen’s Association and Mexico’s Confederación Nacional de Organizaciones Ganaderas to defend their gains under NAFTA.
“We urge you not to jeopardize the success of the men, women and families engaged in the cattle and beef industries of each of our countries, who depend on the success that market access provides under NAFTA,” leaders of major cattle-ranching groups in the U.S., Mexico and Canada said in a joint letter to Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto.
NAFTA blamed for rural losses
But the trade pact also has its critics, including the National Farmers Union (NFU).
“For far too long, our nation has stuck to a free trade agenda that has led to a massive $500 billion annual trade deficit, lost jobs, and lowered wages in rural communities across the U.S.,” said NFU President Roger Johnson.
“With this renegotiation of NAFTA, the Trump Administration has the opportunity to reset that agenda by instituting a new, fair trade framework that works for family farmers, ranchers, and rural residents. NFU urges them to do so in a fashion that does not upset the positive trade relations the U.S. agriculture community relies upon.”
Commerce Secretary Wilbur Ross plans to seek a “better” NAFTA deal.
“I look forward working with the President, Ambassador Lighthizer, and our counterparts from Mexico and Canada, to find a solution that is both fair and beneficial for all parties,” Ross said
USTR Robert Lighthizer said in a letter to Senate Finance Committee Chairman Orrin Hatch that the primary goal is to improve the 23-year old trade pact to include things like protections for digital trade and intellectual property rights. But during his March 15 confirmation hearing, Lighthizer also said he would do his best to protect what farmers have gained under NAFTA under any renegotiation.
“We have to be careful not to lose what we gained … I do believe it can be done,” he told lawmakers at the hearing. “I’m not suggesting that it will be easy, but I do believe it can be done.”
Potato growers optimistic
One group that will be delighted to see improvements in NAFTA is the National Potato Council.
Canada and Mexico are already two of the largest export markets for U.S. potato farmers and processors, but the sector sees the possibility for massive expansion with a few key changes to NAFTA.
Mexico’s outdated sanitary and phytosanitary restrictions and Canada’s complex and protectionist import policies are preventing hundreds of millions of dollars in U.S. exports every year, Council CEO John Keeling told Agri-Pulse in an interview, and the Trump administration will be in a good position to rectify the situation.
“Despite the current size of these two valuable markets, exports could be substantially larger if improvements were made,” the NPC told President Donald Trump in a recent letter. “The potato industry believes that potato exports to Mexico could grow to $500 million annually with full unrestricted access for all U.S. fresh and processed potatoes. Those same conditions would produce exports to Canada of $300 million annually.”
That represents a massive growth in sales to Mexico – the U.S. now exports only about $30 million worth of spuds south of the border – and a smaller but still significant increase of about $50 million per year to Canada.
When it comes to Canada, the NPC’s main goal is for U.S. negotiators to do away with a Canadian trade rule called “Ministerial Exemption.” The rule essentially requires proof that there aren’t enough domestic potatoes on the Canadian market before imports from the U.S. can be allowed in.
It’s an absurd situation that makes trade far more complicated that it needs to be, Keeling said.
“There’s no reason that willing buyers and willing sellers can’t trade potatoes across the Canadian border as they see fit without seeking permission.”
Bill Tomson contributed to this report.