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Ag Industry: NAFTA Uncertainty Hurting U.S. Farmers Before Negotiations Start

Farmworker Florentino Reyes picks tomatoes Aug. 30, 2016, at a field near Mendota, Calif. (AP Photo/Scott Smith)

WASHINGTON – Agriculture representatives before a House panel on Wednesday lamented the negative impacts from uncertainty surrounding NAFTA re-negotiations, while a GOP lawmaker said he doesn’t doubt that President Trump can deliver a better trade deal for the U.S.

“I have tremendous confidence in our negotiator in chief to get a better deal for American producers and manufacturers,” Rep. Jodey Arrington (R-Texas) said Wednesday before the House Agriculture Committee, noting that U.S. leaders need to hustle. “I think that’s his heart. I think that’s his intent.”

Arrington’s comments came after panelists from the dairy, beef, poultry, grains, fruit and vegetable industries lauded the positive impacts of the 23-year-old trade deal with Canada and Mexico, though there was some sharp criticism for Canada’s “manipulation” of dairy prices.

Several panelists agreed that just the possibility of a re-negotiation has had negative impacts on certain industries. Trump’s tough rhetoric, calling NAFTA the single worst trade deal in history during his campaign and threatening to pull the U.S. out of the deal, has sent Mexico searching for trade partners in South America and Europe, experts have said.

Floyd D. Gaibler, director of Trade Policy and Biotechnology for the U.S. Grains Council, said that Mexico has been buying from Brazil and Argentina. Rep. David Scott (D-Ga.) noted that Mexico bought five times more corn from Brazil than it sold to its southern neighbor in 2016. This shift has resulted in a 4 percent decline in U.S. corn exports to Mexico (7 percent in terms of value) since the start of the year, when compared to 2016.

“If we’re not getting this negotiation done by the end of the year, we anticipate that this erosion will continue, and all of us who are in the international export business know that once you lose market share, even with your best customers, it’s very difficult to recover it,” Gaibler said.

Thomas Hammer, president of the National Oilseed Processors Association, noted that since the deal was implemented in 1993, U.S. food and agricultural exports to Canada and Mexico have more than quadrupled, expanding from $8.9 billion in 1993 to more than $38 billion in 2016. But the uncertainty surrounding a NAFTA renegotiation has had a chilling effect on the soybean industry, as Mexican companies are shooting for shorter-term deals. Sale of soybean meal in the first six months of the year dropped by 21 percent from same period in 2016, Hammer said, noting that represents a 13 percent drop in volume.

“We need to send this signal that we want to continue this supply chain relationship that we have with both Canada and Mexico,” Hammer said.

The panel agreed that the winners of the U.S. walking away from the Trans-Pacific Partnership were China and the EU, as both are occupying markets that the U.S. vacated. Trump announced America’s exit from the deal – which included Vietnam, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru and Singapore – during his first month in office.

Former Agriculture Secretary and Iowa Gov. Tom Vilsack, who now serves as president and CEO of the U.S. Dairy Export Council, said that Mexico is negotiating on free trade deals with the EU. He said that Mexicans are skilled negotiators and are playing the U.S. and EU against each other for competitive services.

Arrington said that he wants Americans to be “fierce” at the negotiating table, as well, saying, “We’ve got to get it right. It’s a great opportunity.”

Vilsack accused Canada of manipulating dairy prices, which he said has created serious advantages for Canadian producers over Americans. He said that fixing the issue should be a priority at the negotiating table.

Kendal Frazier, CEO for the National Cattlemen’s Beef Association in Centennial, Colo., said that NAFTA has been a good deal for the beef industry. Prior to NAFTA, according to Frazier’s testimony, U.S. beef exports to Mexico was recorded at about 39,000 tons valued at $116 million per year. After NAFTA, Mexico removed a 15 percent tariff on live slaughter cattle, a 20 percent tariff on chilled beef and a 25 percent tariff on frozen beef. Mexican consumers bought nearly 2250,000 metric tons of U.S. beef valued at $975 million in 2016, while Canada bought about $760 million worth of U.S. beef products.

“We feel like NAFTA is working for our industry. It’s providing a lot of value-added products that we’re able to utilize around the world,” Frazier said. “We would like to see more of the focus on bilateral negotiations with Japan, in the absence of TPP, and bilateral negotiations with other countries around the world and replicate some of the things that are beneficial in NAFTA.”