WASHINGTON, May 17, 2017 - Renegotiating the North American Free Trade Agreement with Canada and Mexico is a scary proposition for many U.S. farm groups, but the National Potato Council (NPC) is excited about the proposition.
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Mexico’s outdated sanitary and phytosanitary restrictions and Canada’s complex and protectionist import policies are preventing hundreds of millions of dollars in U.S. exports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.”
And then there are Canadian anti-dumping duties. Canada’s International Trade Tribunal first ordered anti-dumping duties be placed on U.S. potatoes in 2010 and they are still in place. The Tribunal said there was sufficient evidence that farmers in British Columbia are being harmed by U.S. potatoes being sold into the province at below-market prices.
Keeling admitted that sometimes U.S. potatoes are sold at extremely low prices, but argued that it was simply the free market at work.
“The reality is that in any given year, unfortunately, potatoes are regularly sold at below the cost of production,” he said. “That’s what it takes to clean up the market and get all the potatoes sold. There’s no concerted effort to get potatoes to British Columbia more cheaply than they can be produced there. We’re just more proficient producers.”
Furthermore, Canada’s system for enacting anti-dumping duties and the ability to fight them need to be overhauled, the NPC stressed to Trump in its letter.
“Canada’s current system for challenging antidumping duties is flawed and weighted completely against those seeking to export potatoes to Canada,” according to the letter. “Antidumping duties must be based on solid economic analysis conducted by neutral third parties and not by those claiming to be affected. Such unfounded barriers should be eliminated within (NAFTA).”
With Mexico, the stakes are even higher. USDA, during the Obama administration, tried and failed to get the Mexicans to rescind an arcane phytosanitary barrier to U.S. potatoes. Now the NPC is hoping the Trump administration can tear it down in NAFTA renegotiations.
It was about 10 years ago that Mexico agreed to allow U.S. potatoes to cross the border – but not very far across the border. In what was meant to be a short-term, intermediary step to completely opening trade, Mexico let the U.S. potatoes in, but decreed they could only be delivered to destinations within 26 kilometers of the border.
The Mexican government, at the insistence of farmers there, never followed through by removing that restriction.
Mexican farmers, according to USDA officials, were successful in blocking the removal of the 26-kilometer restriction by arguing U.S. spuds could carry disease and end up as seed potatoes instead of in factories that produce French fries and potato chips.
But that makes no sense, Keeling argued. “If potatoes can be shipped safely to the 26-kilometer area, they can be shipped safely to other areas of Mexico,” he said.
Furthermore, there are no potato diseases in the U.S. that are not already in Mexico, so U.S. spuds don’t present an exotic threat that should scare farmers there.
“A strong phytosanitary chapter in a renegotiated NAFTA could provide opportunities for a resolution of the current application of non-science based requirements for fresh potato exports to Mexico,” NPC said in the letter to Trump.
Such a chapter – what the industry called an “SPS Plus” concept – was included in the Trans-Pacific Partnership (TPP) pact that was already agreed to by U.S. and Canadian negotiators, so it should not be too difficult to include it in a renegotiation of NAFTA, the potato group said.
The U.S., Mexico and Canada were all part of the 12-nation TPP pact, but one of Trump’s first actions after his inauguration in January was to pull the U.S. out of the trade deal.
Perhaps the most frustrating thing about the trade situation with Mexico, Keeling said, is that Mexico needs the imported potatoes.
“Mexico actually has (potato) chip plants that close down part of the year for lack of (raw potatoes),” he said. There are plenty of farmers in Idaho and other states that are eager to fix that problem.