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NAFTA Renegotiation Talks Extended– U.S. Dairy Proposal Rejected


Ana Swanson reported on Tuesday at The New York Times Online that, “Until Tuesday, the North American Free Trade Agreement looked like it might be headed for a quick demise. Now, it could be headed for a slow, painful one.

The United States, Canada and Mexico said on Tuesday that they would extend Nafta negotiations into next year, with the parties citing ‘significant conceptual gaps‘ in how to rewrite the 1994 trade pact.

“Negotiators, struggling to find agreement on some of the thorniest provisions of the trade deal, will take an extended break to consult with politicians and interest groups before convening again in Mexico City for the fifth round of talks in mid-November. The trade talks, which were supposed to wrap up by year-end, have now been extended into the first quarter of 2018, the parties said.”

And Jacob M. Schlesinger and William Mauldin reported on Tuesday at The Wall Street Journal Online that, “President Donald Trump’s top trade negotiator exchanged public barbs Tuesday with his Mexican and Canadian counterparts as well as U.S. businesses, magnifying large gaps over the North American Free Trade Agreement and highlighting the obstacles to keeping the pact alive.

“‘Frankly, I’m surprised and disappointed by the resistance to change from our negotiating partners,’ U.S. Trade Representative Robert Lighthizer told reporters after a week of talks on renegotiating Nafta, as Mexican and Canadian ministers stood beside him.”

The Journal writers noted that, “Despite the harsh disagreements among the government representatives, they all agreed to keep on talking to try to salvage and modernize Nafta, setting a new round for late November in Mexico, and agreeing to push the talks past their earlier year-end deadline into the first quarter of 2018, according to a joint statement from the three countries.”

Recall that at a House Agriculture Committee hearing on NAFTA in July, lawmakers emphasized the importance of a timely renegotiation process.  At that hearing, Committee Chairman Mike Conaway (R., Tex.) indicated that, “Time is of the essence. You’ve heard the comments over and over about the impact, the anxiety over this deal being renegotiated, which is an appropriate thing to do, how that anxiety is affecting our trading partners and potential trading partners.”

Meanwhile, in a “Q and A” Wall Street Journal article from earlier this week, Secretary of Agriculture Sonny Perdue was quoted as saying, “Most people in the agricultural sectors in all three nations believe that Nafta has been essentially positive for agricultural interests. There are little irritants that we must address in there. Overall, we began with a philosophy. First, do no harm with agricultural interests. But I believe we can increase opportunities for U.S. producers.”

Agricultural Issues- Potential Tariff Rates

Associated Press writer Paul Wiseman reported last week that, “The North American Free Trade Agreement is in its 23rd year. But there are growing doubts that it will survive through its 24th.

“President Donald Trump has threatened to withdraw from the agreement if he can’t get what he wants in a renegotiation.”

The article explained that, “Gary Hufbauer, senior fellow at the Peterson Institute for International Trade, says Trump ‘very likely’ has the legal authority to withdraw from NAFTA on his own if talks collapse. But Congress can fight back. Lawmakers could pass a resolution calling on the president to obtain congressional authority before invoking the NAFTA clause that lets countries pull out. They could also threaten to block the president’s agenda unless he secures congressional approval to withdraw.

“If the United States left NAFTA, trade barriers to Canada and Mexico would pop back up. Some of the tariffs wouldn’t be especially high.

But Mexican tariffs on many American farm products could soar — to as high as 37 percent on corn, for example, notes Caroline Freund, a senior fellow at Peterson.

Also, Ana Swanson pointed out in a New York Times article last week that, “If the deal does fall apart, the United States, Canada and Mexico would revert to average tariffs that are relatively low — just a few percent in most cases. But several agricultural products would face much higher duties. American farmers would see a 25 percent tariff on shipments of beef, 45 percent on turkey and some dairy products, and 75 percent on chicken, potatoes and high fructose corn syrup sent to Mexico.”

Value of U.S. Agricultural Exports, 1990-2016. USDA- Foreign Agricultural Service (May 1, 2017).

Likewise, The Wall Street Journal editorial board pointed out this week that, “Ending Nafta would be even more painful for U.S. agriculture, whose exports to Canada and Mexico have quadrupled under Nafta to $38 billion in 2016. Reverting to Mexico’s pre-Nafta tariff schedule, duties would rise to 75% on American chicken and high-fructose corn syrup; 45% on turkey, potatoes and various dairy products; and 15% on wheat.

Mexico doesn’t have to buy American, and last week it made its first wheat purchase from Argentina—30,000 tons for December delivery.

With this in mind, Sen. Heidi Heitkamp (D., N.D.) indicated in a news release on Tuesday that, “Since the beginning of the year, I’ve been talking with top administration officials about the importance of agriculture trade and exports. And during a dinner last night with Ivanka Trump, Jared Kushner, Secretary Mnuchin, and a bipartisan group of senators, I reinforced how any renegotiation of NAFTA must not leave agricultural states like North Dakota behind. When 95 percent of consumers live outside the U.S., if we aren’t exporting, we’re losing. As NAFTA talks progress, I remain focused on North Dakota’s farmers and ranchers and their need to export to survive.”

However, Thomas Phippen reported last week at The Daily Caller that, “Commerce Secretary Wilbur Ross dismissed concerns that withdrawing from NAFTA, the trade treaty between Mexico and Canada that President Donald Trump has repeatedly threatened, would cripple American agriculture businesses.

‘As far as I can tell there is not a world oversupply of agricultural products,’ Ross said during a panel discussion in Washington, D.C., [on October 11th], calling the potential dangers of a NAFTA withdrawal to food producers an ’empty threat.

“‘Unless countries are going to be prepared to have their people go hungry or change their diets. I think it’s more of a threat to try to frighten the agricultural community,’ he said.

U.S. Dairy Proposal Rejected by Canada

Bloomberg writer Josh Wingrove reported on Monday that, “The U.S. wrapped up the fourth round of Nafta trade talks with a bombshell proposal to dismantle Canada’s dairy sector, adding to a list of demands its trading partners say would be impossible to accept as negotiations grow more fraught.

The proposal delivered Sunday would effectively kill Canada’s so-called supply management system by fully eliminating tariffs on supply-managed products over 10 years, according to two officials familiar with the measures, speaking on condition of anonymity. The basics of the proposal were later confirmed by U.S. officials. Supply management is a system of quotas and tariffs for milk and other products that Canadian officials argue avoids oversupply and guarantees stable pricing and production. President Donald Trump has called the system ‘unfair’ to U.S. farmers as he threatens to back out of Nafta.”

The Bloomberg article explained that, “Canada’s government flatly dismissed the U.S. dairy proposal, while the Dairy Farmers of Canada called it ‘outrageous.'”

Mr. Wingrove added that, “John Melle, the lead U.S. Nafta negotiator, confirmed in an emailed statement Monday the U.S. requested greater access to Canada’s market for dairy, poultry and eggs, ‘with the goal of expanding export opportunities for U.S. farmers.’ The Canadians have long rejected changes to supply management — a stubborn trade irritant — with Agriculture Minister Lawrence MacAulay once again backing the status quo on Monday.

“‘It’s a model for the world, and that’s in fact where we are. To deal with anything else is simply a non-starter,’ he told reporters. ‘We need a ‘right’ deal, and we’re not going to sign any deal.’ Canadian Trade Minister Francois-Philippe Champagne called the proposal ‘obviously unacceptable’ to Canada. ‘I don’t know if they’re going to change their mind but I can tell you we won’t change our mind,’ he said.”

Florida Tomato Growers

Meanwhile, Caitlin Dewey reported on the front page of Tuesday’s Washington Post that, “As the United States, Canada and Mexico prepare to wrap up a fourth round of talks Tuesday about revisions to the North American Free Trade Agreement, there is growing fear that the talks could collapse around one of several ‘poison pill’ provisions.

Those include the demands of the Florida tomato growers, who say Mexico is selling tomatoes in the United States at artificially low prices. With the support of some berry, melon and pepper producers, the Florida producers are pushing for stronger anti-dumping measures — an idea that has been soundly rejected by the Mexicans.”

The Post article noted that, “‘The words we didn’t want to hear, in farm country, were ‘terminate NAFTA,’ ’ said Chad Hart, an economist at Iowa State University who focuses on grain markets. ‘Maybe ‘readjust,’ maybe ‘renegotiate.’ But you’re talking about two of our three largest agricultural trading partners — it’s never ‘terminate.’ ’

“But not all farmers have seen those gains — and some, including Florida tomato growers, argue that they have lost out because of competition from producers who enjoy lower labor costs and a better growing climate.”

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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