NAFTA
 
WASHINGTON, D.C., U.S. — U.S. President Donald Trump intends to initiate negotiations with Canada and Mexico regarding modernization of the North American Free Trade Agreement (NAFTA), according to a May 18 letter submitted to the U.S. Senate by U.S. Trade Representative Robert E. Lighthizer.

“We will consult closely with Congress in developing our negotiating positions to ensure that they are consistent with congressional priorities and objectives outlined in section 102 of the Trade Priorities and Accountability Act,” Lighthizer wrote in the letter. “We intend to initiate negotiations with Canada and Mexico as soon as practicable, but no earlier than 90 days from the date of this notice.”

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.

corn harvest
U.S. ag secretary expects 'a better deal' for farmers, ranchers, foresters and producers.
 
In his letter to the U.S. Senate, Lighthizer said the United States is looking to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities under NAFTA. He said NAFTA was negotiated 25 years ago, and while little with the agreement has changed, the economy and businesses have changed considerably over that time.

“Many chapters are outdated and do not reflect modern standards,” he said. “For example, digital trade was in its infancy when NAFTA was enacted. In addition, and consistent with the negotiating objectives in the Trade Priorities and Accountability Act, our aim is that NAFTA be modernized to include new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment and small and medium enterprises. Moreover, establishing effective implementation and aggressive enforcement of the commitments made by our trading partners under our trade agreements is vital to the success of those agreements and should be improved in the context of NAFTA.”

Following the release of Lighthizer’s letter to the Senate, U.S. Secretary of Agriculture George (Sonny) Perdue issued a statement expressing his confidence that renegotiation of NAFTA will result in a better deal for many parties.

Sonny Perdue
Sonny Perdue, U.S. Secretary of Agriculture.

“While NAFTA has been an overall positive for American agriculture, any trade deal can always be improved,” Perdue said. “As President Trump moves forward with renegotiating with Canada and Mexico, I am confident this will result in a better deal for our farmers, ranchers, foresters and producers. When the rules are fair and the playing field is level, U.S. agriculture will succeed and lead the world. It’s why we recently announced the creation of an undersecretary for trade at USDA, because as world markets expand, we will be an unapologetic advocate for American agriculture. As I have often said, if our people continue to grow it, USDA will be there to sell it.”

Many U.S. ag groups welcome the idea or opportunity to renegotiate NAFTA but urge a tremendous amount of caution on changes that could limit the current benefits that grain growers utilize in the industry.

Chips Councell chairman of USGC
Chip Councell, chairman of USGC.

“NAFTA is the most critical free trade agreement on the books for U.S. grain farmers, providing open access to countries that are among our top corn, sorghum and barley export markets as well as significant and growing markets for distiller’s dried grains with solubles (DDGS) and meat products made using grain,” said Chip Councell, chairman of the U.S. Grains Council (USGC). “This agreement has served our industry extremely well over the past 20 years, allowing us and our customers there to integrate operations and build deep relationships that both sides value. Our top priority in the modernization of NAFTA is to maintain this market access and keep in place what we and our customers have built.”

Councell explained that currently all corn products that go into Mexico and Canada are duty-free which creates about $2.7 billion in commodity corn alone.

“That demand is an essential part of ensuring farmers can continue to farm in this economy,” he said.

David Schemm President of NAWG
David Schemm, NAWG president.

Some groups suggested focusing on updating certain areas of the agreement instead of re-creating it. U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) said a good place to start are the sanitary and phytosanitary (SPS) rules that the three countries already agreed to as part of the Trans-Pacific Partnership (TPP) negotiations.

“Despite the risks, there’s an opportunity here to get better trade rules in place that will set the gold standard for trade agreements going forward, without hurting wheat farmers and their importing customers,” said David Schemm, NAWG president.