- Despite continuing attempts to renegotiate the North American Free Trade Agreement, there is a real threat the U.S. could formally withdraw from the trade deal under President Trump. Agriculture Secretary Sonny Perdue is working on a contingency plan to try to protect U.S. farmers and ranchers should NAFTA talks fall apart, reports Politico.
- “We’re talking with the administration and Congress about some mitigation efforts if that were to occur; about how we could protect our producers with that [farm] safety net based on prices that may respond negatively to any kind of NAFTA withdrawal,” Perdue told reporters earlier this week, according to Politico.
- Even though Politico reports Commerce Secretary Wilbur Ross doesn't think that scrapping NAFTA would cause a drop in agricultural exports, Perdue says that pulling out of the agreement could have “some tragic consequences” for U.S. producers.
The U.S. agriculture industry — including dairy farmers, pork producers, corn growers, ranchers and others — relies on exports to other countries to sell some of its surpluses. Currently, there are surpluses for grains, dairy, fruit and eggs that are pushing their prices down. Any policy that heavily favors domestic production may end up putting stiff tariffs on imports, which could result in other countries employing their own stiff tariffs on U.S. goods.
Consequently, if trade between the U.S. and other countries were to become more difficult — such as with a withdrawal from NAFTA — it would have a profound impact on the U.S. food economy as a whole, which President Trump may be overlooking. The U.S. could find itself dealing with larger surpluses, more wasted products and more severe price deflation. This in turn could impact farmers, food producers, grocery retailers and ultimately consumers.
One need only to look at the amount, especially agricultural products, that the food industry exports. According to the USDA, agricultural exports were worth $133 billion in 2015. In the same year, World Bank statistics showed food products made up about 10% of total U.S. exports.
The U.S. agriculture industry has made significant gains under NAFTA, bringing a windfall to farmers and food producers. Since the trade deal went into effect, U.S. food and agriculture exports to Canada and Mexico have more than quadrupled from $8.9 billion in 1993 to $38.6 billion in 2015.
Although three-quarters of Canadian exports flow to U.S. customers while just 18% of U.S. exports go to Canada, the northern neighbor remains the single largest customer for U.S. goods. Mexico is the largest exporter of fresh produce to the U.S. — which got about 70% of the total imported vegetables and approximately 31% of all imported fruits from south of the border last year, according to the USDA.
Early this year, a coalition of 133 companies and trade organizations representing more than 15 million jobs in the U.S. food and agricultural industry sent a letter to President Trump asking to modernize NAFTA, not scrap the deal altogether. Major signatories to the letter included Cargill, Smithfield, Tyson, and many trade groups representing dairy farmers, pork producers, corn growers — types of businesses that would be most affected if NAFTA falls by the wayside.
The letter to President Trump gave a clear indication that many food and agricultural companies want to maintain their prosperity through trade — and that means keeping NAFTA in some form. Should the worst happen, though, Perdue wants to provide a bit of solace that those operating in the agriculture sector would be protected.
Still, Perdue told Politico he doesn’t think a contingency plan would be put into action. He’s holding onto the belief that NAFTA 2.0 will be “successfully” renegotiated — as is the entire U.S. agriculture industry and its supporters.
“Despite [Trump] insisting he is a jobs person, [that] would almost assuredly lead to less and fewer jobs in the food industry,” Michael Cromwell, business litigation attorney with Womble Carlyle told Food Dive before Trump's inauguration. “I think repealing NAFTA, particularly with how things are set up now, would be disastrous.”