Border fFnce
A border wall and related issues may be a factor in NAFTA renegoitiations--if the agreement is not scrapped altogether by the Trump Administration.

USDA preparing for NAFTA renegotiation

Any changes in NAFTA must carry with it benefits for all trading partners, and negotiations must move forward in a spirit of cooperation. In the end, the real winners and losers of such negotiations won't be the trade negotiators, but the industries that so desperately depend on good trade agreements that promote imports and exports across international borders, and this includes U.S. farmers and ranchers.

Regardless of all the talk about how renegotiating U.S. trade deals can improve producer's profits, there is still a lot of concern being tossed around about how changing terms of international trade agreements—like the North American Free Trade Agreement (NAFTA)—will play out for U.S. agricultural producers.

Canceling or renegotiating terms of NAFTA was a major campaign promise for Donald Trump, but even the most loyal of Trump supporters have quietly admitted they were not sure how much candidate Trump understood about the importance of NAFTA to U.S. farmers and livestock producers, and how upsetting the apple cart could have a long term negative impact on domestic agriculture production and the ag economy.

But as with so many other issues, President Trump has been well advised by scores of farm groups and key advisers since the election, including newly appointed agriculture secretary Sonny Perdue, and rumor has it that the White House has been reevaluating many ideas, such as a border tax, as they gear up to tackle renegotiating efforts with trade officials of both Mexico and Canada.

SENSE OF URGENCY

The first priority in the preparation for those trade meetings is becoming more obvious as both the White House and the Republican-controlled House and Senate have begun expressing a sense of urgency and an acceleration of the renegotiation process. Secretary Perdue said last week he is hopeful Congress can clear the way by the end of this week (May 26) to post notice of intent, as required by rules of NAFTA, to call for meetings between member states for the purpose of discussing desired changes and amendments to the NAFTA agreement.    

Both Trump and his staff, who have been working on NAFTA plans, have been asking U.S. lawmakers to move more quickly, but up until last week, Congress seemed to be dragging their feet. In recent days, however, some lawmakers have joined Trump in expressing the need to hurry up the process and clear the way to get renegotiation efforts moving forward as quickly as possible.

To be specific, according to terms of the agreement between the three trading nations, a legal notice of intent must be published 90 days before any trade discussion or negotiations can begin.

Commerce Secretary Wilbur Ross has staged a half-dozen meetings with relevant congressional committees so far and expressed confidence Congress will be able to clear the path for that notice to be posted soon, but he also said he wants Congress to move even faster if possible.

For some, the urgency being expressed in Washington comes as a surprise, especially after Trump said earlier this month he was considering canceling NAFTA altogether. He promptly changed his mind the following day when he amended that statement to say he would agree to amending terms of the agreement, warning if those terms did not meet his standards or expectations, he would then move to withdraw from the agreement.

UNCERTAINTY

Such back and forth uncertainty about whether the administration is for the agreement or against it has spawned a lack of confidence among many ag producers and farm support groups, some of which say NAFTA represents as much as 20 percent of total gross revenues to farmers and ranchers.

But those close to Trump say his casual, if not care-free attitude, about keeping or canceling the NAFTA agreement was nothing more than a ploy designed to strengthen his bargaining position once all three nations reach the negotiation table. If that's true, some trade officials say the attempt has fallen on deaf ears in both Mexico and Canada.

While both nations have agreed that renegotiating NAFTA may have some merit for all parties involved, both have failed to express any real urgency in setting a date to begin meetings between the trading partners.

The urgency of the White House and many members in Congress to move a possible trade meeting forward and the apparent contrasting opinions of both Mexican and Canadian trade officials that there is no particular rush required to meet on the issue raises the question of why U.S. officials are suddenly anxious to get the process moving forward so quickly. Perhaps it could be that it is related to Mexico's apparent confidence headed into renegotiation meetings. It seems that regardless of Trump's rhetoric concerning NAFTA during the campaign and since becoming President, Mexico considers it will be renegotiating from a position of strength rather than weakness. Over the past 90 days, for example, Mexico appointed economy minister Ildefonso Guajardo as its lead trade negotiator, who has since said his timeline for renegotiating NAFTA is about eight months.

COMPETITORS

In the meantime, Guajardo has been busy meeting with trade officials from a number of South American nations and with countries as far away as New Zealand in an effort to prepare for a potential trade collapse with the United States. He talked to at least two other nations about corn imports and has been negotiating possible deals for trade of livestock including beef and poultry imports.

Guajardo also recently said if talks do not resume before the end of the year, they may not happen until after Mexico's Presidential election next year, a development that should further worry U.S. officials.

Mexican Presidential candidate Andres Manuel Lopez Obrador, a populist who has been gaining points with Mexican voters, partly because of his strong opposition to Trump's rhetoric about border walls and unfair trade practices, is gaining strength in the polls. If Obrador should win the national election, trade renegotiation may no longer be an option, or worse, he could withdraw his country from NAFTA over potential threats of a border tax, implementation of potential trade tariffs and threats of the U.S. finding other ways to make Mexico pay for a border wall. Such sentiments have been rising in Mexico among voters who have been angered by Washington's view on immigration issues.

Another issue hanging over Washington is midterm elections in the U.S. next year. The last thing Republican candidates want is a serious trade issue that could adversely affect the U.S. economy. Voter and lawmaker support could swiftly disappear if economic concerns grow by November.

While much remains uncertain concerning the future of NAFTA talks and what affect that might have on U.S. agriculture, it is only fair to note that since the last time NAFTA terms were discussed and agreed upon by the trading partners of the agreement, much has changed. It is entirely possible that while renegotiating terms of the agreement could cost U.S. agriculture to lose ground with two of its largest trading partners, it is also possible that renegotiated terms of NAFTA could provide a modernization to the agreement that could improve trade conditions, not only for U.S. producers but for all parties involved.

While the primary concern of U.S. farmers and ranchers concerns how renegotiated terms of the trade agreement might help or hurt them, the same is true for producers in both Mexico and Canada. For one, when NAFTA was drafted back in 1994, there was virtually no electronic commerce, a common practice today. Renegotiating NAFTA should include measures to bring terms of the agreement into the 21st century business world.

Other areas of the agreement should be addressed, areas that would be welcomed by all three trading partners.

RESPECT IS THE BOTTOM LINE

Economists say the bottom line is that renegotiating NAFTA between member partners could provide some positive changes for all parties involved provided the renegotiating process were to be conducted from a position of mutual respect from all three countries. The concern, however, is that President Trump's harsh statements about forcing Mexico to pay for a border wall and his increasingly rash comments over U.S. dairy trade and commerce, and tariffs on soft wood from Canada fuels the fire of uncertainty. Those skilled in international negotiations say cooler heads are required if the partners involved in such meetings are hopeful of accomplishing their objectives.

Any changes in NAFTA must carry with it benefits for all trading partners, and negotiations must move forward in a spirit of cooperation. In the end, the real winners and losers of such negotiations won't be the trade negotiators, but the industries that so desperately depend on good trade agreements that promote imports and exports across international borders, and this includes U.S. farmers and ranchers.

In the words of USDA: “Agricultural trade is critical for the U.S. farm sector and the American economy as a whole.  U.S. agricultural and food exports account for 20 percent of the value of production, and every dollar of these exports creates another $1.27 in business activity.  Additionally, every $1 billion in U.S. agricultural exports supports approximately 8,000 American jobs across the entire American economy. As the global marketplace becomes even more competitive every day, the United States must position itself in the best way possible to retain its standing as a world leader.”

 

 

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