A sense of collective unease has prevailed across the grain sector with the impending start of negotiations over the North American Free Trade Agreement. How the talks will turn out is difficult to predict, but agricultural interests have much to lose and not nearly as much to gain.

Numerous groups representing wheat, feed grain and oilseeds producers responded with strongly worded opposition to Trump administration threats in April to completely withdraw from the 1994 trade pact. Since the administration’s subsequent May 8 decision to open NAFTA to new negotiations, the industry’s tack has been to advocate that the negotiations first and foremost “do no harm.” (Secretary of Agriculture Perdue himself used the expression last week.)

The notification letter to Congress from the U.S. Trade Representative included words perceived in the industry as encouraging, noting that the administration is seeking “substantive results for U.S. consumers, businesses, farmers, ranchers and workers.” Still, in the presidential campaign and the letter, it is pursuit of “higher-paying jobs in the United States” that is emphasized. Perhaps that is why Senator Pat Roberts of Kansas has voiced concern that the Trump administration may put the interests of industrial states ahead of those of farm states. Negotiating objectives announced by the USTR widely have been characterized as “vague” but are grounded in the belief that the U.S. trade deficit with Mexico should be narrowed.

What’s at stake for agriculture in the talks was laid out neatly in a statement before the House Agriculture Committee by Floyd D. Gaibler of the U.S. Grain Council, a group representing feed grain and related interests. He said that in 2015-16, U.S. exports of feed grains in all forms to Canada and Mexico totaled 29.3 million tonnes, valued at $9.9 billion. The figure in 1993-94 was below 5 million. Globally, Mexico is the largest customer of U.S. corn. This robust activity has been made possible by NAFTA agreements generally eliminating tariff and quota restrictions on agricultural trade between the NAFTA signatories. Exports of wheat to Mexico have more than tripled since the agreement was originally signed.

Numerous groups representing wheat, feed grain and oilseeds producers responded with strongly worded opposition to Trump administration threats to withdraw from NAFTA.
To explain what’s at risk, Gaibler shared with the House Committee findings of a study the U.S. Grains Council commissioned. Conducted by World Perspectives, Inc. in consultation with Purdue University, the researchers explored what could be gained if enhancements to agricultural trade were achieved during the talks. Positive steps include the elimination of protectionist sanitary and phytosanitary measures that are not grounded in sound science and better language on bioengineered crops (NAFTA became law two years before bioengineered crops were first commercialized in the United States). The researchers estimated increased market access that could result from successful negotiations of such issues would generate $80 million of increased value for U.S. corn producers. At the other end of the spectrum, failed negotiations and an exit from NAFTA could cost $1.2 billion in U.S. grain production if each country were to revert to most favored nation duties (which range up to 40% in Mexico).

“Negotiating objectives or independent trade policy actions that could result in retaliation should be avoided at all costs,” Gaibler said.

Such fears are not unfounded. In a recently resolved dispute, demands that Mexico stop dumping refined sugar in the United States were countered for a time by threats Mexico would ban imports of corn sweeteners.

Responding to these concerns, Representative Mike Conaway of Texas, chairman of the House Agriculture Committee, acknowledged “angst” over the negotiations but adopted an optimistic tone.

“We have no interest in reversing any of production agriculture’s hard-fought gains, and the administration has made clear that it doesn’t either,” Conaway said.

The remarks are unlikely to settle the industry’s jitters. The grains sector has benefited extraordinarily from the trade liberalization made possible by NAFTA. Further trade liberalization would provide additional economic benefits across through the grain sector and the overall economy. Sadly, averting catastrophic reversals is the most important objective in the upcoming round of talks.