In this file:
· NAFTA Uncertainty Looms over Ag
· Mexico Loads Up on U.S. Farm Products
· Iowa could lose thousands of jobs with NAFTA pullout. But is the hit 4,900 or 138,000 jobs?
NAFTA Uncertainty Looms over Ag
by Russell Hillberry, The Farmers Exchange Online (IN)
February 9, 2018
The following is from Russell Hillberry, associate professor of agricultural economics at Purdue University.
USDA is expecting the value of agricultural exports to remain stable at $140 billion in 2018. Relatively small adjustments are expected in most Ag products. On a volume basis, wheat and corn exports are expected to be down, but higher volumes are expected for soybeans (record exports), soybean meal, beef, pork and chicken.
U.S. Ag exports are expected to be supported by somewhat faster world economic growth in 2018. The value of the U.S. dollar declined during much of 2017 and is expected to be stable to down slightly in 2018. Any weakness in the dollar would be a potential supportive factor for U.S. exports.
The biggest trade issue for 2018, however, is the on-going renegotiation of the North American Free Trade Agreement (NAFTA). Most agricultural producers will have something at stake in these talks, but corn growers and poultry producers should be especially interested in seeing a successful conclusion of the negotiations. U.S. exports in corn and poultry products have seen sizable shifts towards NAFTA markets, especially Mexico. These shifts could be reversed if NAFTA collapses.
How many dollars of exports are at stake? Among the top four product groups (corn, soybeans, pork and poultry), U.S. exports approached $8 billion in export value. Corn is the most significant U.S. export item under NAFTA rules, followed by pork products, soybeans and poultry. Total exports of agriculture and related products to our two NAFTA partners totaled $43 billion in 2016.
A USDA report offers a comprehensive review of "NAFTA at 20." The report highlights a number of developments in the Ag and food sectors that have occurred because of the agreement. In broad terms, the agreement led to increased U.S. exports of grains, oilseeds and meat products, as well as increased U.S. imports of horticultural products and sugar. Horticultural imports led to greater variety and seasonal availability of fresh produce, though they also displaced U.S. production. Cross-border Ag and food supply chains have developed under NAFTA rules, and there have been significant cross-border investments in all NAFTA member countries. Efforts by the NAFTA member countries to coordinate sanitary and phytosanitary (SPS) policies has facilitated cross-border trade in live animals and in meat products.
The USDA report notes that agricultural trade between the three countries tripled over the first 20 years of the treaty. The report also showed that growth in exports of key commodities to these markets has slowed in recent years. This may mean that most of the adjustment to the provisions of the agreement have already occurred.
The agreement contains provisions for renegotiation and for withdrawal. President Trump considered a complete withdrawal of the United States from NAFTA, but was persuaded to follow the path of renegotiation instead. It seems likely that unsuccessful negotiations would trigger the president to push for complete withdrawal. U.S. law is not clear on the question of whether the president has the legal authority to withdraw without the consent of Congress. A unilateral effort by the president to trigger withdrawal would likely result in legal action in U.S. courts. Another open question is whether U.S. withdrawal would also mean effective withdrawal from the Canada-U.S. Free Trade agreement, which pre-dated NAFTA.
Trade negotiations occur in secret, so it is not possible to know whether agreement is likely. However, the public statements of the negotiators make it seem that consensus will be difficult. U.S. chief negotiator Robert Lighthizer expressed frustration with his counterparts, who were unwilling to concede issues that had been negotiated as part of the Trans-Pacific Partnership prior to U.S. withdrawal. Canada's top negotiator has called several U.S. proposals in the NAFTA negotiations "unconventional," and argued that some were inconsistent with WTO disciplines. Most of the U.S. demands that Canadian and Mexican negotiators see as beyond-the-pale are oriented towards trade in manufactured goods. One proposal that could turn into a deal killer is the U.S. desire to include a "sunset clause," which would trigger reconsideration of NAFTA commitments at 5-year intervals.
Whether the president's aggressive stance in the negotiations will bear fruit is an open question. As the largest economy in the group, the U.S. may have leverage that it has not fully exploited in the past. However, Canada and Mexico have other good options. They remain members of the recently concluded Trans-Pacific Partnership agreement, for which our president withdrew the U.S. This gives them preferential access to sizable Asian Ag and food markets, most notably Japan's. On the import side, Mexico is negotiating with Brazil and Argentina to replace imports of U.S. corn if the NAFTA talks collapse. The disruption that U.S. withdrawal would generate for all the member countries should give the negotiators an incentive to keep talking.
In a review of the specific agricultural issues at play in the negotiations, Hendrix asks the rhetorical question, "What would a productive renegotiation of NAFTA look like?" His answer includes four issues:
Mexico Loads Up on U.S. Farm Products
Even amid trade talks, the Latin American nation is importing record agricultural goods
By Jeff Wilson, Bloomberg
Feb 8, 2018
Even amid U.S.-initiated talks to revamp the North American Free Trade Agreement, Mexico bought a record amount of wheat, corn, soybeans, pork, dairy products and fresh vegetables from its northern neighbor in 2017.
Overall, Mexico imported 8 percent more than in 2016, and it was the largest market for U.S. corn and wheat.
The seventh round of Nafta talks are scheduled to begin Feb. 26. Should the negotiations fail, the Latin American nation has said it will seek food shipments from other suppliers.
document, plus chart
Iowa could lose thousands of jobs with NAFTA pullout. But is the hit 4,900 or 138,000 jobs?
Donnelle Eller, Des Moines Register (IA)
Feb. 8, 2018
How big of a hit will Iowa take if the United States terminates its trade agreement with Canada and Mexico, the state's top export markets?
A new report says Iowa could lose 19,300 jobs. That's about 70 percent of the jobs Iowa added in 2017.
President Trump has repeatedly threatened to leave NAFTA, the North American Free Trade Agreement, as negotiators try to hammer out a new deal.
The hit to Iowa's economy could reach $1.2 billion, according to the study completed for Business Roundtable, a group of corporate CEOs that include Walmart, Boeing, JPMorgan Chase and GM.
Iowa exports would drop 28 percent, hammering the state's grain, meat, construction and equipment industries the hardest, the report says.
Iowa is the national leader in corn, pork and egg production. It ranks second for soybean and seventh in beef production.
It's also home to large farm machinery manufacturers, including Deere & Co., Vermeer Co. and Kinze Manufacturing.
"Folks in Iowa are making it clear to the administration and stakeholders in Washington just how dependent their economies are on trade with Mexico and Canada," said Neil Herrington, a senior vice president at the U.S. Chamber of Commerce.
Iowa and other states that were key to President Trump's election are "extraordinarily dependent on NAFTA," said Herrington, whose group released its own analysis...