In this file:
∑ Could NAFTA withdrawal push Iowa into another farm crisis? Ag leaders say it's possible.
∑ American agriculture canít afford to lose out on trade
∑ Update on NAFTA Renegotiations
∑ Ag Secretary Says Thereís No Contingency Plan For NAFTA
Could NAFTA withdrawal push Iowa into another farm crisis? Ag leaders say it's possible.
Donnelle Eller, Des Moines Register (IA)
Nov. 10, 2017
U.S. threats to pull out of longstanding trade agreements with Mexico and Canada could drag Iowa's ag industry into another depression, some state farm leaders say.
"We're not doing that well now, so any more bad news could push us over the edge," said Dermot Hayes, an Iowa State University economist.
U.S. Ag Secretary Sonny Perdue on Friday downplayed reports earlier this week that the Agriculture Department is working on contingency plans for U.S. withdrawal from the North American Free Trade Agreement.
Perdue said he was probably premature to publicly discuss possible contingency plans. "I think it's my responsibility to think about what-if scenarios," he said.
"I wanted to make the administration aware there could be some devastating price changes if NAFTA is not renegotiated," said the former Georgia governor, who has suggested farmers would need "safety nets" if they lost the NAFTA agreement.
He declined on Friday to elaborate what the safety nets would encompass.
"At the end of the day, it will be successfully negotiated," Perdue said.
Late last month, about 85 major farm and food groups sent the Trump administration a letter warning that withdrawing from NAFTA "would cause immediate, substantial harm" to U.S. food and farm industries and "to the U.S. economy as a whole."
Craig Hill, president of the Iowa Farm Bureau Federation, said withdrawing from the 23-year-old pact would "desecrate the trust" other countries have in the U.S. and "devastate the marketplace."
Hill said he's worried withdrawing from NAFTA could spark a farm crisis similar to former President Carter's 1980 U.S. grain embargo on Russia.
"Some believe it was the trigger to our going into a farm depression," Hill said.
"When the embargo happened, the land market declined, grain prices declined and we lost long-term opportunities," he said.
The 1980s farm crisis was one of Iowa's worst economic downturns in history, with the state's unemployment rate hitting 9.1 percent.
"When you're sitting on that much surplus, you can't do anything to interrupt demand ó whether it's ethanol, whether it's trade, whether it's livestock production," Hill said.
"You do anything to the demand-side, and it really has a devastating effect on markets," Hill said...
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American agriculture canít afford to lose out on trade
Hope Pjesky, The Fence Post
November 10, 2017
Pjesky is a member of AFBF's GO Team, blogs at hopepjesky.wordpress.com. She is a farmer/rancher in northern Oklahoma, where her family grows wheat and raises beef cattle.
As a farmer, it saddens me the way anti-trade rhetoric has escalated in the media and political climate over the last few years. Overlooking the benefits, people are too often quick to write off free trade agreements. They seem to forget the basic economic principle of comparative advantage, which allows people to do what they are best at and trade with others for the goods and services they lack. When this principle is followed, everyone benefits from access to the best and most affordable products and services.
International trade is incredibly important to hundreds of thousands of American farm and ranch families, including mine. Using knowledge and innovation, American farmers and ranchers have become very efficient at growing a diverse and abundant supply of food, fiber and fuel. Our productivity provides American consumers with more nutritious food choices, at lower prices than any other country in the world. But some of the products we take for granted in our grocery stores wouldn't be available without trade, due to the limits of our local climates and growing seasons. For example, tropical products such as coffee, cocoa and bananas cannot be produced in the continental U.S.
American farmers and ranchers are so efficient, in part, because we specialize in growing crops and raising livestock that are best suited to our land and climate. This efficiency allows us to grow an abundance of certain agricultural products to sell to markets around the world. And that's vital to keeping agriculture and the jobs it supports on American soil alive and well. With 95.6 percent of the world's consumers living outside the U.S., family farmers like me depend on international trade to make our businesses sustainable.
On our farm in Oklahoma, we produce wheat and beef for consumers in the U.S. and abroad. Our climate is challenging for growing most crops but the crop best suited to our region is hard red winter wheat, the type of wheat used in the bread that Americans eat every day. American family farmers depend on international markets to keep us in business, however, as demand is not high enough in the U.S. alone. Each year between 50 and 60 percent of the hard red winter wheat grown in the U.S. is exported to many countries around the world, including Mexico, Japan, the Philippines, China, Nigeria and South Korea.
In spite of our nation's love affair with red meat, valuable beef would be tossed out if our farm sold only to domestic customers...
Update on NAFTA Renegotiations
Steve Burak, Kathy Baylis, and Jonathan Coppess, Department of Agricultural and Consumer Economics
University of Illinois - farmdoc daily - Gardner Policy Series - November 10, 2017
The North American Free Trade Agreement (NAFTA) has been in the news for the last year-and-a-half; in the summer of 2016, Presidential candidate Trump vowed from the campaign trail, to renegotiate the "worst trade deal ever." Candidate Trump also announced at an October 2016 campaign rally in Michigan that he would use his power as President to exercise Article 2205 of NAFTA to pull out of the agreement if a renegotiation failed. It was no accident this announcement happened in Michigan--several of the U.S. NAFTA renegotiations revolve around the U.S. auto industry. The fourth round of negotiations concluded last month and the three nations are reportedly far from reaching an agreement; distance based on what all three countries are seeking in these negotiations. To help better understand the negotiations, the following is a brief historical background on NAFTA.
NAFTA is trilateral trade agreement among the United States, Canada, and Mexico and the deal has been in place for 23 years (Global Training Center). The path to NAFTA began in 1980 with the intent to reduce trade costs, increase business investments, and make North America more competitive in a global market. President Ronald Reagan proposed a North American common market during his campaign. In 1984, the U.S. Congress passed a key ingredient for negotiating trade agreements called the Trade and Tariff Act. This gave the President what is referred to as "fast-track authority" because it authorizes the President to negotiate trade agreements without direct involvement from Congress. Congress still retains the ultimate authority to ratify trade agreements or reject them. Fast track authority limits the ability for Congress to propose amendments to change elements of the agreement and it limits the use of procedural rules, such as the filibuster, to delay it.
The precursor to NAFTA was a bilateral agreement with Canada signed in 1988, called the Canada-U.S. Free Trade Agreement. This agreement went into effect January 1, 1989. President George H.W. Bush then began negotiations with Mexico for a liberalized trade agreement between the two countries. In 1991, Canada requested a trilateral agreement which became NAFTA; leaders of the three countries signed the deal in 1992. In 1993, concerns about the liberalization of labor and environmental regulation led to two addendums that were adopted and attached to the agreement. With those added, Congress ratified the agreement and President Bill Clinton signed the final, Congressionally-approved agreement into law. NAFTA entered into force on January 1, 1994 (Villarreal and Fergusson, 2014).
The decade-long process of arriving at NAFTA granted "most favored nation" status to all co-signers, which means countries must give all parties equal treatment, including over foreign investment. A nation cannot provide better treatment to domestic investors, nor can they offer a better deal to non-NAFTA investors. NAFTA also eliminated tariffs on most imports and exports between the member nations by 2008. Certain sensitive agricultural products -- dairy, poultry and eggs in Canada and sugar in the United States -- received special treatment, however, with tariffs phased out over the course of 15 years (Villareal and Fergusson, 2014). For the preferential tariff treatment under NAFTA, exporters must certify that the goods qualify using certificates of origin; only exports that originate in a NAFTA country qualify (U.S. Customs and Border Patrol). Countries must also respect and ensure that intellectual property rights (patents, trademarks, and copyrights) don't interfere with trade.
As was expected, the removal of tariffs resulted in rapid growth of the trade between member nations, especially between the U.S. and Mexico. Canada is the U.S.'s number one destination for exported goods, followed by Mexico which is also the second largest supplier of goods to the U.S. (U.S. Trade Representative, Canada and Mexico). In fact, the U.S. accounts for 80% of Mexico's exported goods (Trading Economics).
Rapid trade growth between the U.S. and Mexico is at the center of most opposition to NAFTA; the U.S. went from having a small trade surplus pre-NAFTA to an increasing deficit (Villarreal and Fergusson). The current U.S. administration has stated a goal of improving the U.S. trade balance and reduce deficits with both members. To meet this objective, the U.S. is arguing for stronger rules of origin to ensure these regulations incentivize the sourcing of goods and materials from the U.S. and North America.
The U.S. wants to eliminate non-tariff barriers to U.S. agriculture and provide reasonable adjustment periods for import-sensitive agriculture products. The U.S. seeks to codify the previously mentioned labor and environmental addendums into the main agreement and increasing labor standards. The latter is specifically intended to better align Mexican standards with U.S. and Canadian standards. Other objectives include: reducing/eliminating barriers to U.S. investment in all sectors in NAFTA countries; creating a mechanism to ensure NAFTA countries avoid manipulating exchange rates to gain an unfair competitive advantage; and eliminating the existing dispute-settlement mechanism for anti-dumping. The full 17-page list of U.S. demands and objectives is available from the U.S. Trade Representative (Summary of Objectives).
The primary objective in the NAFTA renegotiations for both Canada and Mexico is to ensure the U.S. doesn't impose tariffs on their products or make doing so easier in the future. Canada also opposes eliminating the anti-dumping dispute mechanism as this allows them to bypass U.S. judicial review--a long and slow process--when the U.S. imposes anti-dumping tariffs on Canadian products. In addition, Canada also wants to ensure no country can weaken its environmental standards to attract investment, and support efforts against climate change. They also wish to see language on gender rights, freer movement of professionals and expanded procurement rules. NAFTA also lists professions where people can easily get a visa to work across the border, however, the list is old and doesn't include tech jobs. Canada has also been trying to eliminate "Buy American" rules for construction jobs at the state and local level; a policy President Trump championed in his campaign.
Canada also wants reforms to the provisions for suing sovereign governments. A Canadian study indicated that it was the country sued the most under NAFTA (Sinclair). The NAFTA provisions allow investors to sue foreign governments without first going through that country's court system. They were included to protect Canada and the U.S. from potential corruption in Mexico's judicial system. Intended to protect foreign investors from discrimination, most claims filed against Canada stem from their stronger environmental laws and standards. Such laws make it harder for foreign investors who operate under more lax standards in their home country from entering the Canadian market. Canada's response to these claims has been that they should be allowed to regulate in the public's best interest.
Mexico's primary sticking point involves labor regulations and the differences in pay for Mexican workers compared to the U.S. and Canada (Graham and Angulo, 2017). Other issues, however, like immigration and the border wall loom large in discussions (Rampton, 2017). Mexico seeks to strengthen North American competitiveness by maintaining preferential access for Mexican goods/services in NAFTA countries, especially agricultural products. Mexico wants to prevent rules and regulations that create unjustified barriers to free trade and to expand the categories for temporary entry of business people to encourage the freer movement of professionals. They also seek a more inclusive economy in which more regions, sectors, and firms can partake in globalization. Currently, six northern Mexican states are responsible for over 50% of Mexican exports and two sectors--automotive & electronics--represent 60% of exports (Soergel, 2017).
With the removal of trade restrictions, the North American economy has grown as a whole and all three nations have received some benefits under NAFTA. Since its implementation, trade has skyrocketed between member nations, nearly quadrupling from $293 billion in 1993 to $1.1 trillion in 2016, and not just in final goods (McBride and Sergie, 2017)). NAFTA has seen substantial integration of supply chains among members, with materials from Canada being sent to Mexico for production, and then sent to the U.S. for final assembly (for example in the auto industry). There has also been substantial growth in U.S. service exports and foreign investments.
With so much money exchanging hands between the three countries there is a lot at stake with these NAFTA negotiations. As previously discussed, U.S. agriculture is particularly dependent upon; Canada and Mexico are two of our biggest agricultural export markets (farmdoc daily, December 22, 2016 and April 28, 2017). Of particular concern, the agricultural sector is often the target of any retaliatory trade disputes (farmdoc daily, October 4, 2017). As such, American agriculture continues to monitor the NAFTA renegotiation process closely.
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Ag Secretary Says Thereís No Contingency Plan For NAFTA
Radio 570 WNAX (SD)
Nov 10, 2017
Ag Secretary Sonny Perdue says he doesnít have a contingency plan in case the renegotiation of the North American Free Trade Agreement fails. He told farm broadcasters thatís because heís optimistic in a successful conclusion to the talks.
Perdue says the NAFTA agreement is too important to United States agriculture for it to fail.
Perdue says the world is closely watching the NAFTA discussions and the conclusion will set a precedent for further bi-lateral trade agreements going forward. And he says the President continues to believe bi-laterals will be most favorable to the U.S...
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