NAFTA is a multi-layer free trade agreement between the United States, Canada and Mexico that came into effect in 1994. It was designed to remove tariff barriers and facilitate the cross-border movement of goods and services among the three countries. There has been controversy over the effectiveness of the agreement in ongoing discussions of potential renegotiations.
|Donald Trump, U.S. president.
In a tweet on his verified Twitter account Trump stated he had talked with the president of Mexico and prime minister of Canada in which all are hoping for a renegotiation instead of a complete withdrawal.
“If we do not reach a fair deal for all, we will then terminate NAFTA,” he said in a second tweet. “Relationships are good — deal very possible.”
The comments made by Trump concerned many in the ag industry. Some U.S. grain associations spoke out against the possibility of leaving NAFTA and urged for renegotiations.
The U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) said in a joint statement that both were alarmed over media reports on April 26 that the Trump administration is considering a withdrawal from NAFTA.
“Mexico is our largest U.S. wheat buyer, importing more than 10% of all U.S. wheat exports this year,” the associations said. “NAFTA truly opened the door to the strong and growing market opportunity in Mexico. Closing that door would be a terrible blow to the U.S. wheat industry and its Mexican customers.”
USW and NAWG understand there are several elements of the trade agreement that could be re-examined and modernized.
“However, we believe withdrawing from NAFTA would be a serious mistake,” both the USW and NAWG said. “It could lead to new tariffs on U.S. wheat and threaten to undermine the long-standing, loyal relationship U.S. wheat farmers have built with Mexico’s wheat buyers and food industry. That would be devastating to U.S. wheat farmers already facing unprofitable prices and increasingly aggressive wheat exporting competitors.”
Ron Moore, president of the American Soybean Association, also urged for a strong working relationship between the three countries.
“If any actions to announce the intent to withdraw from NAFTA are under way, the administration should immediately abandon such plans and focus instead on ways to work with Canada and Mexico to modernize and optimize the agreement during a renegotiation,” Moore said. “ASA has been supportive of the administration’s efforts to improve NAFTA. That’s where the action should be; beginning withdrawal procedures before modernization negotiations even take place are counterproductive and send the wrong signal. Further, a U.S. Trade Representative is still waiting to be confirmed, and Agriculture Secretary Sonny Perdue just was sworn in yesterday (April 25). We need to give both time to have input on NAFTA modernization.”
Moore said the U.S. soybean farmers sent more than $2.5 billion in soybeans, meal and oil to Mexico last year, making it the No. 2 market overall and the leading purchaser of U.S. meal and oil. Canada is No. 3 in meal sales and No. 10 in oil. He also warned that such a move could have disastrous consequences for the nation’s leading agricultural export in light of the still-struggling U.S. agricultural economy.
Nothing but modernizing the agreement — not withdrawing — is a common yell of support among the industry.
“An executive order as reported will have an immediate effect on sales to Mexico, market prices and the profitability of U.S. farmers, who are already facing below cost of production prices,” said Tom Sleight, president and chief executive officer of the U.S. Grains Council (USGC). “Our top grain market is not a negotiating tactic. There is strong support and rationale to update and modernize NAFTA. Before today, we believed we were on track to have a reasonable discussion about how to update the agreement in ways that make sense for all parties.”
Wesley Spurlock, president of the National Corn Growers Association (NCGA), believes “NAFTA has been a huge win for American agriculture.”
“Corn and corn product exports today account for 31% of farmer income,” Spurlock said. “Mexico is the top export market for corn. Canada is also a top market for corn and ethanol. With a farm economy that is already weak, losing access to these markets will be a huge blow that will be felt throughout the ag value chain. Mr. President, agriculture and rural America are counting on you. We urge you not to withdraw from NAFTA."