THE IMPORTANCE OF NAFTA TO FARM SECTOR

Tricia Braid

Nov, 03, 2017  |  Today's News |  Exports |  Legislation & Regulation

U.S. Department of Commerce Secretary Wilbur Ross has been dropping hints lately that the likelihood of the U.S. dropping out of NAFTA (the 23-year old North American Free Trade Agreement) is all too real. Secretary Ross recently made the observation that there is “not a world oversupply of agricultural products” and that harm to American food and agriculture interests from a potential NAFTA withdrawal is an “empty threat.” We couldn’t disagree more, Secretary Ross. We recognize that NAFTA has not benefited some sectors as it has American food and agriculture. Accordingly, we appreciate President Trump’s initiative to modernize NAFTA with a “do no harm” pledge to American food and agriculture. IL Corn joins others in the endeavor to be helpful to Trump Administration efforts in that regard and agree with the Administration’s objective of an improved and modernized NAFTA.

 

Here’s what we know about NAFTA. Under NAFTA, American food and agriculture exports to Canada and Mexico grew by 450 percent. In 2015, the United States held a 65 percent market share for agriculture products in the NAFTA region, and in 2016, we exported nearly $43 billion worth of food and agriculture goods to Canada and Mexico, making our NAFTA partners the largest export consumers of U.S. agriculture. NAFTA also lowered the price of various inputs throughout the supply chain—benefitting U.S. consumers— and helped eliminate non-tariff barriers, making U.S. agriculture more competitive. Of course, NAFTA also has provided U.S. consumers year-round, reliable access to many forms of produce previously available only on a seasonal basis.

 

The notice of intent to withdraw from NAFTA would have immediate consequences. According to a recent study, a withdrawal from NAFTA would mean for:

 

Corn: The U.S. exported $3.2 billion worth of corn to Mexico and Canada last year, supporting 25,000 sector jobs. Withdrawal would erase $800 million in value and increase the need for farm program payments by $1.2 billion;

 

Pork: Mexico and Canada account for nearly 40 percent of U.S. pork export volume. An economic analysis by Iowa State University found that withdrawal would decrease total U.S. pork production by 5 percent, resulting in an aggregate industry loss of around $1.5 billion, jeopardizing more than 16,200 U.S. jobs;

 

Beef: In 2016, U.S. beef exports to Mexico and Canada exceeded $1.7 billion and accounted for 27 percent of total U.S. beef exports. Since NAFTA was implemented, exports to Mexico, an irreplaceable market for large volumes of certain beef cuts, have risen nearly 250 percent. NAFTA withdrawal would raise tariffs above 20 percent, causing a reduction in beef exports, a contraction in U.S. beef production, fewer jobs in the U.S. beef industry, and lower returns for U.S. cattlemen, ranchers, and meat packers;

 

Poultry: U.S. chicken and turkey products have greatly benefited from NAFTA. In 2016, U.S. poultry exports were 7.95 billion pounds, over 16 percent of total production. Canada was second largest market for the chicken industry and in the top five for turkey. Mexico proved the largest single customer for U.S. poultry exports in 2016. Almost 70 percent of U.S. turkey exports go to Mexico. Disruption of this vital link in trade would be devastating. Mexico imported 23.5 percent of all U.S. poultry exports, while Canada received more than 5 percent of U.S. poultry exports;

 

High-Fructose Corn Syrup (“HFCS”): U.S. exports to Mexico would decrease by $500 million per year, as Mexico would replace U.S. HFCS with sugar and there is no alternative market for that production;

 

and Dairy: Over $1 billion a year in U.S. dairy products are shipped to Mexico. If Mexico reverts to MFN status, applied tariffs would range from 20 to 60 percent on cheese and up to 45 percent for skim milk powder, undermining the largest market by far for U.S. dairy exports at a time when Mexico is preparing to finalize negotiations with the EU, the world’s largest dairy exporter and a region keen to act as a substitute for U.S. dairy.