Sources tell Reuters Canada is increasingly convinced the U.S. will pull out of NAFTA, and sources in Mexico say that country will likewise quit the deal if Trump announces plans to withdraw. Video provided by Reuters Newslook
President Donald Trump’s threat of withdrawing from NAFTA (the North American Free Trade Agreement), which went into effect in 1994, if the administration cannot get its demands met, presents a monumental threat to farmers, particularly in Wisconsin.
According to the U.S. Chamber of Commerce, Wisconsin is one of the 10 states most at risk if the agreement is terminated.
Agriculture products are the U.S.’s largest single industry export product, exceeding $161 billion in 2016. In 2017, the U.S. has a $21.3 billion agriculture trade surplus. Agricultural exports constitute 20 percent of U.S. farm income.
Although the U.S. has run a total trade deficit with Canada and Mexico since 2000, largely because of U.S. import of crude oil, it maintains a trade surplus with each country for manufactured goods and services.
Canada and Mexico are the two largest importers of U.S. agriculture product after China. In fiscal year 2017, these two countries imported 27 percent of U.S. agriculture exports ($20.4 billion and $18.6 billion for Canada and Mexico, respectively). Since 1993, U.S. agriculture exports to Canada and Mexico have grown 350 percent.
Mexico, which the administration bullies on a number of issues, is the largest export market for U.S. wheat, corn and dairy and is the second largest for soybeans.
Canada and Mexico are more important markets than China for the export of Wisconsin agriculture products; 46 percent of Wisconsin’s total exports (that support 463,000 jobs) are destined for Canada and Mexico, of which agriculture goods comprise 19 percent. In 2016, for example, Canada and Mexico imported $1.76 billion in agriculture products ($1.4 billion and $360 million for Canada and Mexico, respectively) of Wisconsin’s $9.5 billion in exports.
Despite the concern about Canada’s cancellation of purchasing ultra-filtered milk from Wisconsin’s Grassland Dairy in 2017, Canada is still Wisconsin’s second or third most important market for fluid milk ($942,000), second in importance for cheese ($27.4 million) after Mexico, and the primary market for general dairy and other products ($66.3 million).
Since 1996, general dairy produce, cheese and fluid milk exported from Wisconsin to Canada have increased in value terms seven-fold, four-fold and eight-fold, respectfully. These dairy products exported to Mexico multiplied nine-fold, more than a hundredfold and more than 120-fold, respectively.
Not only are these two NAFTA countries important for dairy exports, but other U.S. agriculture products such as soybeans, corn, wheat and cotton are exported more to Mexico than to Canada and face increasing competitor pressure from other producer countries.
Because the U.S. lost four times at the World Trade Organization to Canada and Mexico on a case regarding the implementation of the 2008 farm legislation requiring that Country-of-Origin Labeling (COOL) be attached to meat, nut and vegetable products, (not unlike labels on our clothes), U.S. consumers are kept ignorant whether these products are imported or domestically grown. This has resulted in more than a 50 percent reduction ($17.7 million) in Wisconsin meat shipments to our NAFTA partners.
Although China may be the U.S.’s biggest export market for soybeans and oil seeds, Mexico is second. Mexico is Wisconsin’s biggest export market for soybeans and oil seeds ($279.7 million in 2016). Wisconsin’s soybean exports to Mexico grew from nothing in 1996 to $176.3 million in 2017, while oil seed exports grew from $2.9 million to $103.4 million for the same period.
With four rounds of negotiations between the three NAFTA countries completed, virtually no progress has or is being made to revise an agreement that took years to formulate. The Trump administration repeatedly threatens to scrap the whole agreement. If such were to occur, Mexico, for example, is permitted under WTO rules to impose a 45 to 70 percent tariff on U.S. agriculture products, and probably would get its soybeans from Brazil, its dairy product from the EU, New Zealand and Argentina, its corn from Argentina and Brazil, and its wheat from Canada or Argentina. All these countries/blocks have a more favorable currency advantage vis-à-vis the U.S. Mexico has been increasing imports from these countries now.
It is downright foolish and imprudent to undermine this agreement and attempt to force change that endangers the revenue gains that U.S. agriculture, inclusive of Wisconsin, has received since 1996. This strategy is the result of inept and incompetent management by people who lack socially redeeming business experience.
Because the U.S., including farmers and major agribusiness, use the foreign export market as a release valve for the problem of oversupply and overproduction that farmers generate, neither NAFTA nor agreements like the Trans-Pacific Partnership address the fundamental problem we face — overproduction. Supply management of U.S. dairy, grains and meat would stabilize and improve farmers’ bottom line.
Before the 1996 “Farm Bill” was legislated, the USDA engaged in indirect supply management and set floor prices for farm produce. NAFTA and these “free” trade agreements intentionally encourage excess production that seeks to export the way to agricultural prosperity. This has resulted, except for years in which natural calamities occur, the plunging of crop prices, the dumping of major crops on foreign markets often below production cost, the squeezing out of the market of 200,000 small and mid-scale U.S. farmers, and the undermining of domestic farm markets in our trade partners, particularly Mexico where 2 million farmers were forced off their land.
NAFTA restructuring should address administrative workings related to the investor-state dispute resolution mechanism where corporate power exceeds that of the citizens in each of the member countries. Corporate wealth and power supersedes and exploits citizen rights! Other issues like COOL should be permitted and the restriction to farmers’ access to seed and the streamlining of biotechnology processes should be addressed.
Farmers, whose interests do not coincide with those of agribusiness, do not want NAFTA terminated, but only slightly tweaked.
Community columnist W. Michael Slattery is a Maribel resident.