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Secretary Perdue Intervenes on NAFTA- Trade Issues Persist

During last week’s tumultuous developments on trade, news reports indicated that Secretary of Agriculture Sonny Perdue was providing President Trump with data driven advice with respect to NAFTA and agriculture, and urged him not to trigger a U.S. withdrawal from the trade accord. Nonetheless, recent remarks from a Senator from Mexico regarding corn imports, and potential NAFTA renegotiation issues means trade policy will likely remain an ongoing concern for Illinois producers and farmers throughout the U.S.

Secretary Perdue on Trade- NAFTA

Ashley Parker, Philip Rucker, Damian Paletta and Karen DeYoung reported on the front page of Friday’s Washington Post that, “President Trump was set to announce Saturday, on the 100th day of his presidency, that he was withdrawing from the North American Free Trade Agreement — the sort of disruptive proclamation that would upend both global and domestic politics and signal to his base that he was keeping his campaign promise to terminate what he once called ‘a total disaster’ and ‘one of the worst deals ever.'”

“There was just one problem: Trump’s team — like on so many issues — was deeply divided.”

The Post writers explained that, “As news of the president’s plan reached Ottawa and Mexico City in the middle of the week and rattled the markets and Congress, Commerce Secretary Wilbur Ross, Agriculture Secretary Sonny Perdue and others huddled in meetings with Trump, urging him not to sign a document triggering a U.S. withdrawal from NAFTA.

Perdue even brought along a prop to the Oval Office: A map of the United States that illustrated the areas that would be hardest hit, particularly from agriculture and manufacturing losses, and highlighting that many of those states and counties were ‘Trump country’ communities that had voted for the president in November.

The Post article added that, “‘It shows that I do have a very big farmer base, which is good,’ Trump recalled. ‘They like Trump, but I like them, and I’m going to help them.’

“By Wednesday night, Trump — who spent nearly two years as a candidate railing against the trade agreement — had backed down, saying that conversations with advisers and phone calls with the leaders of Canada and Mexico had persuaded him to reconsider.”

Wall Street Journal writers Peter Nicholas, Paul Vieira and José de Córdoba reported on Thursday evening that, “Meanwhile, Sonny Perdue—the agriculture secretary who took office two days earlier—and Commerce Secretary Wilbur Ross met with Mr. Trump and showed him a map indicating the states where jobs would be lost if the pact collapsed, according to a person familiar with the matter. Many were farm and border states that voted heavily for Mr. Trump.

Those conversations, along with a flood of calls to the White House from business executives, helped steer Mr. Trump away from an idea that some of his own advisers feared was a rash and unnecessary threat to two trading partners who fully expected to renegotiate the agreement anyway.”

In a USDA radio update on Friday by Rod Bain (one minute audio file below), Sec. Perdue noted that, “I’m advising [Pres. Trump] on what the data is…[w]e are giving him the facts from USDA…”

Meanwhile, Bryan Lowry reported on Thursday at The Kansas City Star Online that, “[Sec. Perdue] called Trump a ‘trader’ and framed the president’s previous statements suggesting that the U.S. would withdraw from the agreement with Canada and Mexico as a negotiating tactic.

“‘Saying something was contemplated is not necessarily saying something was done or going to be done. I think the ultimate outcome is really what we’re interested in,’ said Perdue, who was confirmed by the U.S. Senate earlier this week.

‘He wrote ‘The Art of the Deal’ and he likes to do the deal and I’m persuaded that he has the leadership and the tenacity to make a good deal for Americans.’

“Perdue said that on balance NAFTA has been positive for U.S. agriculture, particularly grain producers, but that the Trump administration thinks it can be improved.”

Shawn Donnan, Jude Webber and Anna Nicolaou reported on Thursday at The Financial Times Online that, “Canada and Mexico have been ready to launch negotiations for some time, but the US has not engaged, partly because the nomination of Robert Lighthizer as US trade representative has been held up in Congress.

“Under existing US law Mr Trump needs to give Congress 90 days’ notice of any trade negotiation. But he can do so only after his USTR visits Congress.

“This week’s scramble in Washington — and recent moves against Canada on lumber and dairy products — have been read by some as an attempt to intimidate its two neighbours.”

(FarmPolicyNews Note: With respect to the dairy farms that had been impacted by the Canadian dairy dispute over ultra-filtered milkRick Barrett, reported on the front page of Saturday’s Milwaukee Journal Sentinel that, “Just days before they might have had to close, most of the Wisconsin dairy farms caught up in a trade dispute with Canada have found buyers for their milk, enabling them to stay in business.”  And an update from Rep. Tim Walz (D., Minn.) on Wednesday noted that, “…[R]eports that all Minnesota dairy producers whose contracts with Grassland Dairy Products, Inc. were terminated following the rollout of new Canadian dairy regulations have reached an agreement with the buyer.”)

Potential NAFTA Negotiation Issues- Additional Trade Concerns

Wall Street Journal writer William Mauldin reported on Thursday that, “The Trump administration is hoping to start talks on renegotiating the North American Free Trade Agreement, or Nafta, as soon as this summer.”

Mr. Mauldin noted that, “Mexican officials are looking to diversify the country’s source of food during the Nafta fight, looking to import more from other Latin American countries. But Mexican consumers are vital for U.S. farm exports.”

Schnitkey, G., K. Baylis, and J. Coppess. “A Reminder on NAFTA and Agriculture.” farmdoc daily (7):78, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 28, 2017.

The Journal article added that, “Canada wants to defend as much as possible its system for protecting its domestic dairy industry, but U.S. lawmakers want Canada to open up to more American dairy.”

However, The Wall Street Journal editorial board indicated on Friday that, “Mr. Trump may think this is all part of a negotiation to get a better ‘deal,’ but it isn’t clear there’s much better to get. Mexican tariffs on imports of U.S. agricultural products, and most other goods, are nearly zero. U.S. agriculture’s three biggest export markets are China, Canada and Mexico.”

Also this week, an update at WBUR (Public Radio, Boston) indicated that, “Mexican Sen. Armando Ríos Piter, who plans to run for president in the next election, has called for a Mexican boycott of American corn to retaliate against President Trump’s trade policies.”

An interview highlight from the WBUR program quoted Sen. Armando Ríos Piter as saying, “Those who support Donald Trump’s speech are the ones in the Midwest, the ones who support the most his speech. And when I sent this bill into the Senate saying we won’t buy any more corn from Iowa to Nebraska to Wisconsin to North Dakota, South Dakota. Then they said, ‘What’s going on, why is this senator saying this?’ We are spending [nearly $2.6 billion] a year regarding corn. This means a lot of money for the pocket of farmers in the Midwest, for producers in the Midwest.”

And, “on buying corn from alternative providers in South America,” the Senator stated that, “Surprisingly it is even cheaper. We buy it from Brazil. Especially if the United States is having a hostile position against us it’s a good way to tell them we won’t continue collaborating.

Probably we won’t collaborate buying corn, and we won’t probably collaborate in terms of anti-terrorism. Why should we be doing it with a hostile administration and the one that Donald Trump is leading?

And DTN Ag Policy Editor Chris Clayton reported on Saturday that, “[I]n a press call Friday about scrutinizing trade agreements,” Commerce Secretary Wilbur Ross stated that: “If I were a farmer, I would plant as much as I can logically plant under today’s environment. And I would — certainly wouldn’t shrink my production just because there’s going to be some renegotiation.  I think that would be silly.”

The DTN article stated that, “Ross added that American farmers would find another market for their commodities because of the overall global demand for food even if the current agricultural trade were displaced because of trade negotiations.

“‘The fact is that most of the rest of the world is incapable of feeding itself.’ Ross said. ‘So it isn’t as though this is a discretionary purchase by people, nor, in most areas of farming, is there gross overcapacity in the world.

‘So if some country would cut back on what they purchase from us by going to someone else as a competing vendor, then whoever else had been the customer of that competing vendor is going to have to buy our stuff anyway.’

“Ross added, ‘I think it’s highly unlikely that worldwide food consumption will go down just because we renegotiate trade agreements.'”

However, Tim Puko and Julie Wernau reported on Friday at The Wall Street Journal Online (“Nafta Posturing Takes Bite Out of Agriculture Markets“) that, “Agriculture markets, already in a fallow period, could have even rockier times ahead.

“U.S. agricultural commodities with important trade relationships with Canada and Mexico – including corn, wheat, soybeans and lean hogs – are facing renewed concern about President Donald Trump‘s intentions for the North American Free Trade Agreement.”

The Journal writers noted that, “Such a move could prove risky for U.S. farmers by opening the door to new tariffs. Canada and Mexico are the second and third biggest destinations, respectively, for goods from U.S. farms, taking in a combined $38 billion worth last year.

The jawboning on Nafta comes at a vulnerable time for the group. Vast technological improvements have allowed competitors with cheaper land, friendly trade policies and currency advantages to overtake the U.S. in key crops. A string of bumper crops also have overwhelmed buyers and steadily brought down prices for years.

Losing free access to international buyers now would bottle up even more supply in the U.S. at a time when stockpiles have grown to historic highs.”

More specifically to Illinois, Tim Landis reported on Saturday at The State Journal-Register (Springfield, Il) Online that, “NAFTA was a major concern, though, as Mexico and Canada are top markets for Illinois pork.

“‘We know that even the shortest interruption would have significant impact, not only on Illinois, but also the United States,’ [Jennifer Tirey, executive director of the Illinois Pork Producers Association] said.

Keith Good Photo

Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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