WASHINGTON, Feb. 1, 2017 - The tumultuous relationship between President Donald Trump and Mexican President Enrique Peña Nieto has farmers worried about the future of the North American Free Trade Agreement, a trade pact that is regarded highly by much of the agriculture sector.
Trump made repeated promises on the campaign trail to either renegotiate the agreement with Mexico and Canada or pull the U.S. out altogether. NAFTA, Trump charged, was responsible for luring factory jobs south of the border as U.S. companies sought cheaper labor while allowing them to ship products cheaply back into the U.S.
One of the first calls Trump made after being sworn in as the 45th president was to Peña Nieto, and the two leaders agreed to talk in person about NAFTA renegotiation. Peña Nieto agreed to visit the White House on Jan. 31. U.S. farm groups, wary about changes to NAFTA but eager to participate in any negotiations, fired off an upbeat letter to Trump.
“We are focused on improving the U.S. position in the North American market and look forward to working with the Trump administration on ways to modernize (NAFTA) in ways that preserve and expand upon the gains achieved,” more than 130 farm groups wrote in the letter dated Jan. 23. “In the 20 years since NAFTA was implemented, the U.S. food and agriculture industry has become increasingly efficient and innovative — growing to support millions of jobs.”
But the relationship between Trump and Peña Nieto quickly soured. Trump, following up on another campaign promise, signed executive orders on Jan. 25 to start construction on a border wall, build detention facilities for illegal immigrants and hire thousands of new border guards. With mounting political pressures at home, Peña Nieto canceled his visit the next day, leaving the prospects for NAFTA talks in the dark.
On that same day, Trump spokesman Sean Spicer told reporters that the administration was considering a 20 percent tariff on imports from countries like Mexico to pay for the border wall. That proposal would essentially add on to the so-called “border adjustable” corporate tax that is a part of the House GOP tax plan. It would apply the tax to the value of imported products, but not to U.S. exports.
Further complicating things and casting an even bleaker prospect for friendly trade talks, Trump reacted in a Tweet that if Mexico was unwilling to pay for the wall, canceling the meeting was probably for the better, and that because of Mexico’s $60 billion trade deficit with the U.S., he viewed NAFTA as a “one-sided deal from the beginning.”
Largely unmentioned, however, was the boon NAFTA created for U.S. farmers and ranchers by lifting virtually all of the tariffs on agricultural trade with Mexico.
“There’s been a lot of talk about the renegotiation of NAFTA, but I don’t think this is what ag had in mind,” said Barbara Patterson, government relations director for the National Farmers Union. “On the dairy side, they thought it was about how do we open up access to markets in Canada, not potentially shutting off our southern border.”
The U.S. exported a little over $5 billion worth of farm products to Mexico in 1994, the year NAFTA was implemented. This year, 23 years later, USDA is predicting that the U.S. will sell about $18.3 billion worth of pork, corn, wheat, rice, dairy, beef, sorghum and other farm commodities to Mexico.
Mexican exports to the U.S. have similarly increased, but USDA Chief Economist Robert Johansson said that is a big plus to consumers here. The U.S. imports a lot of fruit and vegetables, mostly when they’re not available in the U.S., giving shoppers access to the fresh produce even in the winter months.
Farmers like Jay Armstrong, owner of Armstrong Farms in Muscotah, Kansas, say they are concerned about the way relations with Mexico are developing.
“I would hate to see anything related to agriculture undone because we’ve invested years to get an even playing field,” the wheat farmer told Agri-Pulse. “I’d hate to lose that.”
Doug Keesling, a former chairman of Kansas Wheat, said that far too often it’s the negative side of trade deals that are accentuated while the positive side is overlooked. The positive side of NAFTA, he said, is the massive amount of agricultural trade that helps keep farmers in business and helps prop up the U.S. gross domestic product.
The U.S. exports about $1 billion worth of wheat to Mexico in most years, according to USDA data. In 1998, the year NAFTA was signed into law, the U.S. exported just $214 million of wheat to Mexico.
USDA’s Johansson, in an interview with Agri-Pulse, said that while the fate of NAFTA is impossible to predict, the effects of a potential U.S. withdrawal would likely be dramatic. The cost of imports from Mexico would go up and prices for U.S. crops would likely drop without the Mexican market.
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For a taste of what a breakdown in trade between the U.S. and Mexico might look like, he pointed to what happened as the result of a border trucking dispute that broke out almost a decade ago. Mexico imposed retaliatory tariffs on some U.S. farm goods from March 2009 through October 2011, and U.S. agricultural exports to the country dropped by 21.4 percent, costing U.S. producers about $1.1 billion, according to a USDA analysis.
The uncertainty over NAFTA’s fate is a reasonable concern for farmers, Senate Agriculture Committee Chairman Pat Roberts told Agri-Pulse.
“Every farmer out there wants to know what the heck our trade policy is going to be,” Roberts said. “If you dismantle NAFTA, what goes in its place?”
Roberts said he was particularly concerned about the border adjustable tax plan. “What worries me is the effect of all of this,” he said. “We’re in a rough patch right now in agriculture and we don’t need anything to push us off the edge. I don’t want to go back to the ‘80s and something wrong in regards to the tax code could really result in that. A lot of farmers understand that.”
Meanwhile, farmers will have to wait and see what the next developments are between Trump and the Mexican president and how that affects trade negotiations.
“We’re watching with great interest,” John Bode, president of the U.S. Corn Refiners Association, told Agri-Pulse. “We’re going to stay focused on working with our government leaders to improve trade relations and opportunities. We’re concerned about every aspect of developments with the relationship (to Mexico), but my organization is focused on staying positive and finding ways to really improve ag trade.”
The Farmers Rice Mill in Lake Charles, Louisiana, depends on its ability to access foreign markets, and Mexico is one of the biggest for the company, said CEO Ann Stone. The company is constantly fighting off competition from Asian exporters, she said, and stressed that she fears any changes to NAFTA.
“We wish they would leave everything as status quo – don’t do anything with it,” Stone said in an interview. “We have enough challenges as it is.”