As Mexico Explores Options to Reduce Reliance on U.S. Ag Imports, NAFTA Ag Ministers Meet in Georgia

Background

Wall Street Journal writer Jacob Bunge reported late last week that, “Friction between the U.S. and Mexico over trade is starting to cut into sales for U.S. farmers and agricultural companies, adding uncertainty for an industry struggling with low commodity prices and excess supply.

“Over the first four months of 2017, Mexican imports of U.S. soybean meal—used to feed poultry and livestock—dropped 15%, the first decrease for the period in four years, according to data from the U.S. Department of Agriculture. Shipments of U.S. chicken meat fell 11%, the biggest decline for the period since 2003. U.S. corn exports to Mexico declined 6%. Mexico is the largest U.S. export market for those commodities.”

The Journal article explained that, “The numbers reflect how Mexican companies are now increasingly buying grain on a short-term basis and purchasing more chicken from Brazil, troubling some industry officials and analysts.

The trade data, which is the latest available, indicates that Mexico is starting to follow through on aspirations to buy food from a wider range of countries, and reduce reliance on the U.S.

The Journal article noted that, “‘We have to send a signal to policy makers in Washington, and emphasize that we are not sitting still,’ said Raúl Urteaga Trani, head of international affairs for Mexico’s Secretariat of Agriculture, who last month shepherded officials from 17 Mexican companies on a trade mission to South America, focused on corn, soybeans and wheat.”

Also, The Des Moines Register editorial board indicated in today’s paper that, “The friction created by Trump over trade with Mexico has cut into sales for U.S. farmers and agricultural companies. That means lost revenue for industries that pump more than $112 billion into Iowa’s economy annually and create 1 out of every 5 jobs here. The people of this state helped elect a president who seems intent on offending the global customers of agricultural operations already struggling with low commodity prices and excess supply.”

The Register editorial board added that, “U.S. Agriculture Secretary Sonny Perdue has been trying to build a better relationship with Mexico, initiating a call with his Mexican counterpart and inviting him to a two-day meeting this week where trade is expected to be discussed.”

With respect to the meeting with Sec. Perdue, which took place this week in Savannah, Georgia, Bloomberg writer Alan Bjerga reported on Monday that, “Agriculture Secretary Sonny Perdue meets Tuesday with his counterparts from Canada and Mexico for what he called candid talks on ‘irritants’ in the three-way trade relationship that will be a prelude to a renegotiation of Nafta set to begin later this summer.

“New rules on Canada’s dairy-supply system and how Mexico plans to enforce a recently concluded agreement limiting its sugar exports to the U.S. will be among the topics of discussion when Purdue plays host to Canadian Agriculture Minister Lawrence MacAulay and Mexican Agriculture Secretary Jose Calzada in Savannah, Georgia.”

The Bloomberg article explained that, “Farmers tend to support the North American Free Trade Agreement, but agricultural shifts since its 1990s implementation require a review of the accord, Perdue said in an interview. Frank discussions now may make farming issues less divisive during the formal negotiations on revamping Nafta that may begin as soon as August.”

Mr. Bjerga added that, “A withdrawal from Nafta would be ‘devastating‘ to rural America, a point Perdue said he’s impressed upon Trump, who won election to the White House in part due to wide victory margins in small towns and farming communities.

“‘By and large, the agriculture sector feels like it’s fared fairly well,’ under Nafta. But, he said, ‘There are things that need to be changed, because the world has changed quite a bit.'”

More specifically on potential issues that may need additional scrutiny, Jim Spencer and MaryJo Webster reported earlier this month in the Minneapolis Star Tribune that, “Most of Minnesota’s massive agricultural industry has benefited from NAFTA. Canada and Mexico ranked second and third behind China as the leading foreign purchasers of the state’s agricultural products, each market growing by nearly 200 percent from 2000-2014.

But not everyone has enjoyed the benefits of free trade. On his dairy farm in Goodhue, 60-year-old Dave Buck said Minnesota milk producers wish they could sell more to Canada, but they are blocked by trade restrictions despite NAFTA.

“‘We don’t export to Canada because it is too tightly controlled to get anything in there,’ Buck said.”

Meeting Results: “Relatively Few” Differences Noted

Reuters writer Harriet McLeod reported yesterday that, “The United States, Canada and Mexico have ‘relatively few’ differences on agricultural trade, the three countries’ agriculture ministers said after meeting on Tuesday to discuss the renegotiation of the North American Free Trade Agreement.

“There are some ‘irritants’ for each country, however, in the run-up to NAFTA renegotiations, U.S. Secretary of Agriculture Sonny Perdue told a joint news conference at the Port of Savannah, Georgia.

“‘Now is not the time to talk about them. These are family discussions that need to take place,’ Perdue said. He compared the 23-year-old trade relationship to a marriage.”

Also at the news conference yesterday, Sec. Perdue noted that, “We would like to have our producers have assurance that this is going forward in the best spirit of negotiation, in the best neighborhood, in the best familial conversation of not shouting and screaming, but let’s address those issues in a candid way of how we can resolve them.

“So we are not, as the—not the primary negotiators. You know that our United States trade representative will be at the table. Each of us have formal negotiators who will be the trade negotiators. But we’ll be consulting with them and giving them the benefits of what agriculture has enjoyed in all three of our countries in a consultive fashion to help them understand.

“So we’re not in charge of the timeline. I think each of us will go back and tell our people there that we’d love to see it done sooner rather than later. There will be some other issues probably outside agriculture that may be more difficult to address, and that will be done when it’s done.”

Mexico’s secretary of agriculture, Jose Calzada added that, “So in order to solve things, to make things better, we have established direct communication and trust. And I will, I can assure you, that this building of trust, I mean, through these two days, will bring good things to all [three parties].”

In a joint statement yesterday, the three ag ministers indicated that, “While even the best trading partnerships face challenges from time to time, our agricultural differences are relatively few in the context of the $85 billion in agricultural trade that flows between our three nations each year.”

Mary Carr Mayle reported yesterday at Business In Savanah Online that, “While none of the ministers were ready to identify what Perdue called ‘irritants’ at Tuesday’s gathering, they no doubt include such issues as Mexico’s recent agreement to limit its sugar exports to the U.S. and Canada’s trade barriers to dairy and wheat, a topic of discussion between Perdue and MacAulay in Toronto earlier this month.”

Also yesterday, Jonathan Easley reported at The Hill Online that, “The Trump administration is laying the groundwork to renegotiate the North American Free Trade Agreement (NAFTA).”

The Hill update noted that, “On a conference call with reporters on Tuesday, Ray Starling, a special assistant to the president, said Agriculture Secretary Sonny Perdue met in recent days with the ministers of agriculture from Mexico and Canada as part of a ‘relationship building exercise‘ before official negotiations begin.”

And the article added that, “The administration announced this week the nomination of Greg Doud to serve as Chief Agricultural Negotiator at the office of the U.S. Trade Representative.