Bloomberg's Clarice Couto reported this past Friday that "a surprising tax change in agriculture powerhouse Brazil has the potential to make soy grown in the world’s largest bean exporter less…
NAFTA Renegotiation: Round One Complete, President Trump Reiterates Threat to Pull Out of the Agreement
Background
Sara Schaefer-Munoz and Bob Davis reported in Monday’s Wall Street Journal that, “[In the opening-round of talks to remake the North American Free Trade Agreement] which concluded Sunday, the [U.S., Mexico, and Canada] said in a trilateral statement they had made ‘detailed conceptual presentations‘ of their positions and were working toward ‘an ambitious outcome’ through a fast-paced schedule of negotiations.
“Early tensions over areas such as the so-called rules of origin—a major issue for the automotive industry—signaled the tough bargaining that lies ahead as the three nations try to wrap up a deal by early next year.”
The Journal writers noted that, “At this early stage of the talks, it is difficult to measure the depth of the disagreement. Opening rounds generally set the tone and schedule for negotiations. The U.S. has yet to release specifics on some of its most controversial positions, including measures to reduce the U.S. trade deficit, prevent currency manipulation, favor U.S. companies in government contracts, known colloquially as Buy America, and rework rules governing arbitration panels.”
Munoz and Davis also explained that:
The U.S. feels that its most significant leverage in the talks is Mr. Trump’s threat to withdraw from Nafta if the U.S. doesn’t get the changes it wants. North American trade is far more significant to the Canadian and Mexican economies than it is for the U.S.
“Mexican negotiators say they are prepared to scrap Nafta rather than accede to demands they consider harmful to their economy.”
Don Lee reported this week at the Los Angeles Times Online that, “After the opening round of talks to revamp the North American Free Trade Agreement, at least this much is known: The U.S. is pushing for comprehensive changes and racing to meet a tight political calendar.
“In a joint statement issued Sunday upon conclusion of the first session, trade officials from the U.S., Canada and Mexico outlined an aggressive schedule for future meetings. They will reconvene Sept. 1-5 in Mexico and then later that month in Canada, to be followed by another round in Washington in October.”
Mr. Lee indicated that, “But it is far from clear how realistic that timetable is, given the ambitious plans outlined by the Trump administration to rewrite major sections of the 23-year-old pact, including the United States’ much-opposed focus on reducing the country’s trade deficit and strengthening its hand in enforcement.
“‘They’re the ones who said they want more than just tweaking [of NAFTA] — and they want it very fast,’ said John Masswohl, director of government and international relations for the Canadian Cattlemen’s Assn., who, along with other business groups from all three countries, was at hand monitoring the talks. ‘You can have it quick or have it meaningful. You can’t have both.'”
The L.A. Times article added that, “The [join-trilateral] statement did not characterize the tenor of the talks, nor did it address any specific subject of negotiations. There was no news conference afterward, and trade negotiators left quietly or declined to comment. Representatives of [U.S. Trade Representative Robert Lighthizer’s] office did not return messages.”
As the inaugural round continues, renegotiating a free & fair #NAFTA means helping to create more U.S. jobs. pic.twitter.com/ODr5fwq2e0
— USTR (@USTradeRep) August 18, 2017
And Reuters writers David Lawder and Anthony Esposito reported earlier this week that, “One person directly involved in the talks described the schedule as exceedingly fast, given that past trade deals took years to negotiate.”
The article pointed out that, “A second person participating directly in the talks but not authorized to speak about them said negotiating teams were instructed to ‘work and work fast,’ but added that the substance of the agreement would not be sacrificed for speed.
Trade experts have consistently said that the schedule is far too ambitious, given the amount of work and differences on key issues.
Meanwhile, Financial Times writer Shawn Donnan reported on Wednesday that, “Donald Trump has revived a threat to pull the US out of the North American Free Trade Agreement with Canada and Mexico just days after officials from the three countries began the laborious process of renegotiating the deal. ‘
“‘Personally, I don’t think we can make a deal . . . I think we’ll end up probably terminating Nafta at some point,’ he told supporters in Arizona on Tuesday night at a rambling rally that saw the president return to some of his favourite campaign tropes.”
The FT article noted that, “Mr Trump’s remarks also come after he decided at the last minute in April to abandon a plan to withdraw from the pact that had been pushed by Steve Bannon, the chief strategist forced to leave the White House last week. However, at the time, he insisted that he would still withdraw from Nafta if a fair deal could not be reached in a renegotiation.”
Mr. Donnan added that, “A Nafta withdrawal would also cause a revolt in farm states, many of which supported Mr Trump last year.
“In an interview with the Financial Times last week the chief executive of Cargill, the world’s largest agricultural commodities supplier, warned that a withdrawal from Nafta would be ‘destructive‘ for the US economy.”
However, Reuters writers Gabriel Stargardter and David Ljunggren reported this week that, “Mexico and Canada on Wednesday dismissed U.S. President Donald Trump’s latest threat to scrap NAFTA, describing it as a negotiating tactic aimed at winning the upper hand in talks to update one of the world’s biggest trading blocs.”
NAFTA- Ag Focus: Backlash and Congressional Research Service Report
Jeff Daniels reported on Wednesday at CNBC Online that, “Ditching NAFTA without a replacement could be devastating to U.S. agriculture and end up costing Americans more for groceries, according to experts.
“Mexico and Canada represent nearly one-third of total U.S. agricultural exports. Corn, soybeans, fresh fruits and vegetables as well as livestock and dairy are major U.S. exports to those countries.”
The CNBC update noted that, “‘Scrapping NAFTA would have a huge impact on U.S. agriculture,’ said Joseph Glauber, a senior research fellow in the markets, trade and institutions division of the International Food Policy Research Institute in Washington. ‘I would hope this is just a trade ploy.'”
The CNBC article also indicated that, “‘In general there’s a disconnect between Trump on the campaign trail, which is the Trump we see at these rallies, and Trump in the Oval Office,’ said Cullen Hendrix, a nonresident senior fellow at the Peterson Institute for International Economics, a Washington-based think tank. ‘He tends to make pretty bold claims and then we see little in the way of follow-through on the policy side.’
“Hendrix added:
‘My guess is once he gets back to Washington, Agriculture Secretary Sonny Perdue or [Commerce Secretary] Wilbur Ross will reacquaint him with the electoral map, which shows that leaving NAFTA would put the hammer to many of his supporters and GOP strongholds in the Great Plains. He’s going to need those senators to support any renegotiated NAFTA.’
And, Perry Aasness, the executive director of the Minnesota AgriGrowth Council, stated in an opinion column this week in the Minneapolis Star-Tribune that, “With many Minnesota farmers struggling because of several years of low commodity prices, it is more important than ever for Congress and the Trump administration to support efforts that will expand market opportunities for agricultural and food products. We encourage federal leaders to look past the fiery rhetoric and avoid the lure of reverting to protectionist trade policies that will hurt our state and its citizens.”
Also, the Congressional Research Service (CRS) issued a recent report titled, “The North American Free Trade Agreement (NAFTA) and U.S. Agriculture,” which stated that, “As a share of U.S. agricultural trade, Canada and Mexico rank second and third (after China) as leading U.S. export markets.”
In 2016, Canada and Mexico accounted for 28% the total value of U.S. agricultural exports, CRS pic.twitter.com/Em7dCUCtZ8
— Farm Policy (@FarmPolicy) August 23, 2017
The CRS report noted that, “In 2016, U.S. agricultural exports to Mexico were valued at $17.8 billion…Leading U.S. agricultural exports to Mexico were (ranked in descending order based on value): animal products; grains and feed; oilseeds; sugar/tropical products; other horticultural products; fruits, nuts, and vegetables, and related products; cotton; seeds and nursery products.”
The CRS report added that, “Adjusted for inflation, growth in the value of total U.S. agricultural exports and imports with its NAFTA partners have increased roughly threefold, growing at an average rate of about 5-6% annually.”
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