WASHINGTON, D.C. — North American Free Trade Agreement (NAFTA) renegotiations have begun, and some agricultural industry parties are worried that changes could harm existing NAFTA trade practices.

 

NAFTA is the longest free trade deal the United States has in place. Representatives from farming organizations say the increase in export sales over the past few decades can be directly linked to the trade agreement with Canada and Mexico.

Free trade on a global scale has allowed the U.S. to sell billions of dollars worth of farm products and create millions of associated jobs involved with harvesting, packaging and transporting.

If changes are needed, representatives from most farming organizations ask that Congress “do no harm” to existing agricultural trade.

But specialty crop farmers, specifically in Florida, have indicated that trade with Mexico is hurting their industry in the United States.

It’s one of the few agriculture interests with concerns about the current agreement, though many other groups do see areas in which the deal can be strengthened. National Assoc. of Wheat Growers (NAWG) CEO Chandler Goule said the wheat industry can benefit from changes to enhance sanitary and phytosanitary rules.

The changes were part of Transpacific Partnership (TPP) negotiations before President Trump withdrew the United States from the agreement.

“With the global push to reduce tariffs, non-tariff barriers to trade are becoming increasingly common. It is critical that the sanitary and phytosanitary (SPS) measures in any agreement are transparent and based on scientific principles,” Goule said.

Another change would be to the grading system Canada uses for U.S. wheat, which is automatically downgraded to a feed grade while the U.S. grades Canadian wheat on quality.

“The new NAFTA can provide opportunities for both U.S. wheat buyers and wheat producers, if negotiated correctly. NAWG will continue to work with the administration to ensure wheat is present during the renegotiation discussions and that the new terms improve conditions for wheat farmers,” he said.

Richard Lugar, a former Republican senator for Indiana, recently joined forces with former Democratic Sen. Max Baucus of Montana to form Farmers for Free Trade, to educate farmers on international trade and encourage them to get in touch with Congressional representatives to try to protect agricultural trade.

The organization has five goals for modernization: increase market access for U.S. ag products and services; reduce risk by implementing consistent and transparent regulatory procedures; simplify packaging and labeling requirements; enhance intellectual property protections for ag innovation; and create new channels for small- and medium-sized ag producers serving customers through e-commerce channels.

Lugar said his small farm in Indianapolis sells to a grain elevator. What happens to his produce from there, he doesn’t know, but he knows trade agreements help keep demand high, which keeps prices high even for domestic sales. Even meat sales impact grain because more exported meat products mean more cattle, pigs and poultry need to be fed in the United States.

He acknowledges some sectors of the U.S. economy, including specialty crops, have not benefited from trade. Strengthening those areas would be ideal, but not at the expense of what is already working. Representatives for those sectors of the economy that have not benefited need to be involved in the renegotiations.

“I’ve seen data. At this point in our history, about 20 percent of income coming into American agriculture is coming in through trade,” Lugar explained. That money impacts not just farmers, but manufacturing jobs and transportation. The figure continues to grow, as does the percentage of produce exported.

He said the trade discussions are in their early days. He doesn’t know what the U.S. position has been on specific topics, but he does know it’s been a struggle to get Trump to reconsider his stance on trade.

Pork particularly vulnerable

Nick Giordano, vice president and counsel in global government affairs for the National Pork Producers Council, said that industry has benefited greatly as a result of trade with Mexico.

“Pork producers are the poster child of free trade agreements. Our exports have soared because of trade agreements,” he noted.

More pork products are sent to the 20 countries the United States has trade agreements with, than to all other countries combined – the U.S. exports pork to about 100 countries in all. For pork producers and many other agriculture groups, trade agreements work well. Disrupting the trade would be bad for American agriculture.

“It would be unthinkable to us if the United States withdrew from the agreements,” he said. “You can modernize this agreement. If you can make it better for the U.S., great, but we can’t go backwards in agriculture.  Giordano said he knows the U.S. has a trade deficit with Mexico and Canada, meaning we import more in dollar figures than Mexico or Canada imports from us. The trade deficit is something U.S. negotiators will focus on during the conversations.

He said using a dollar figure to determine the deficit isn’t reliable because that figure can change depending on the strength of the U.S. dollar. In 2008, when the recession hit, the trade deficit decreased.

The first round of NAFTA negotiations occurred in mid-August and lasted about five days. Negotiators from the three countries met in Washington, D.C. Much of what was discussed was confidential, Giordano said. A second round of talks will happen around Labor Day weekend in Mexico City, with a third round of negotiations in late September in Canada.

It’s an aggressive negotiation schedule, Giordano said. While all three countries are committed to moving negotiations along quickly, Mexico’s president is hoping to finish the negotiations before the July 2018 election.

He said Mexican and Canadian negotiators are also working with Asian countries involved in the TPP. They have stepped up to work out an agreement that does not include the United States. The Asian countries, particularly Japan, have been good markets for the U.S. and free trade would have benefited the pork industry, Giordano said.

In the pork industry, Canada is the only country Giordano knows that sells more to the United States than buys from it, and that deficit is closing.

About 75 percent of U.S. pork production is exported and while the domestic market is important, the future of the industry is in exports – with Canada filling gaps in domestic U.S. sales.

If NAFTA were dissolved, the loss of exports to Mexico would hit the pork industry hard, he said. With tariffs added to U.S. exports to Mexico and Canada, the purchases would decrease and other countries without the tax would have a chance to increase their market share.

Less would be produced in the U.S., which means fewer people would be employed. “If (the) U.S. were to withdraw, it would be terrible for our markets and rural economies,” Giordano said, adding it would be unlikely to have Canada and Mexico withdraw because they are more dependent on U.S. markets.