WASHINGTON, Nov. 16, 2016 - Could Donald Trump as president actually pull the U.S. out of the North American Free Trade Agreement and reinstate tariffs on Mexican and Canadian goods that the deal did away with? The answer, according to Edward Farrell, a principal attorney with OFW Law, is “yes” and the cost to U.S. exports could be high.
During the campaign, Trump, in his Contract with the American Voter, vowed to announce on his first day in office his intention to “renegotiate NAFTA or withdraw from the deal under Article 2205.” It’s a very real threat, Farrell told Agri-Pulse and Trump could do either.
Article 2205 is a NAFTA provision that allows any of the three signatories to withdraw after giving six months’ notice, Farrell said. He also noted that Trump could reinstate the tariffs that were eliminated under NAFTA via proclamation.
“By proclamation, he could raise the duties on day one,” Farrell said. “He doesn’t need to withdraw from NAFTA in order to raise the duties. Under U.S. law, he’s got the proclamation authority to do so.”
Trump has repeatedly called NAFTA the worst trade deal ever signed by the U.S., but there is still a lot of uncertainty about what exactly he will do once in the White House. And that’s got the agriculture sector on edge, said David Salmonsen, senior director for congressional relations with the American Farm Bureau Federation.
“There’s a lot more questions than answers at this point,” Salmonsen said.
One thing is certain, though, he said. If Trump does try to renegotiate NAFTA, the agriculture sector wants to take part in the process. That’s because farmers have benefitted from the increased flow of U.S. farm exports since the trade pact was put in place.
NAFTA, which was ratified by Congress in 1993 and fully implemented by 2008, has resulted in massive increases in trade between the countries, sharply boosting U.S. exports of corn, beef, pork, rice, high fructose corn syrup, dairy and other commodities. Most trade tariffs and other barriers were either lifted immediately or phased out over time.
In 1994, at the start of NAFTA, the U.S. exported $4.6 billion worth of farm commodities just to Mexico, according to USDA data. That total had nearly quadrupled to $18 billion in 2015.
“Getting rid of tariffs was a big deal for the agriculture community,” Salmonsen said. “It certainly has led to big increases in trade by dollar value and volume.”
Renegotiating NAFTA can’t be good for farmers, said National Corn Growers Association Executive Vice President Jon Doggett.
The U.S. shipped roughly $341 million worth of corn to Mexico in 1994, but the figure had jumped to about $2.3 billion in 2015.
“Mexico is our number two-corn market,” he told Agri-Pulse. “If we renegotiate NAFTA, it isn’t going to become number one. What do you replace (NAFTA) with?” (Japan is the top destination for U.S. corn.)
Roger Johnson, president of the National Farmers Union, was finding it hard to believe the U.S. would try to re-open the 23-year-old trade pact. “I don’t know how you renegotiate NAFTA,” he said. “I mean NAFTA is NAFTA.”
As deep as the concern is over renegotiating the agreement, a complete withdrawal would be even more disruptive, possibly leading to a dangerous escalation, Farrell said. “Whenever you start a trade war, it’s not that the other guy doesn’t have guns too,” he said. “Clearly the U.S. is the biggest economic power, but these are major trading partners.”
Canadian Prime Minister Justin Trudeau has said he would agree to renegotiate NAFTA. Less than two days after Trump was elected, Trudeau told reporters, "I think it's important that we be open to talking about trade deals. If the Americans want to talk about NAFTA, I'm more than happy to talk about it."
Mexico, however, has not been so receptive to the idea of changing NAFTA. Economy Minister Ildefonso Guajardo, in a UPI report, said the country would not consider it. “We're ready to talk so we can explain the strategic importance of NAFTA for the region," Guajardo said. "Here we're not talking about ... renegotiating it, we're simply talking about dialogue."
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