U.S. could be big loser if NAFTA dies

OTTAWA — Late January isn’t the best time for a trip to Canada, but a group of U.S. farmers, including one from southern Texas, travelled to Montreal Jan. 26 to defend the North American Free Trade Agreement.

The farmers and most U.S. agricultural groups are terrified that President Donald Trump will rip up the trade deal.

They have good reasons for feeling scared.

Eliminating NAFTA may hurt American farmers more than Canadian producers because agricultural trade in North America could return to World Trade Organization rules, which means import tariffs on goods, including ag commodities and food.

“Mexico had a very high level of tariff protection in the WTO,” said Mike Gifford, who was Canada’s chief agricultural trade negotiator for the Canada-U.S. free trade agreement and for NAFTA.

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“If the United States is faced with the so-called most favoured nation (status), they’re going to get hit with some very high tariffs (into Mexico).”

Gifford, who spoke at the Canadian Agri-Food Policy Conference held late January in Ottawa, said U.S. tariffs on Canadian products would be around four percent.

In comparison, Mexican tariffs on U.S goods would be around 10 percent. For some commodities, the tariffs could be much higher.

“Twenty, 30 or 40 percent tariffs could come into play,” he said.

“(That’s why) most U.S. agriculture is saying, ‘whatever you do, don’t upset the apple cart.’ ”

The U.S. farmers were in Canada because the sixth round of re-negotiations for NAFTA were held in Montreal Jan. 23-29.

The mood through the week was a sense of hopefulness, but wrap-up comments by U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland dampened that optimism.

Lighthizer said Canada has an $88 billion trade surplus in goods with the U.S. and made his familiar point that trade must be balanced.

Freeland shot back, saying
NAFTA is mutually beneficial for Canada, the U.S. and Mexico and suggested the U.S. isn’t interested in sharing the benefits of trade.

“Canadians do not view trade as a zero sum game in which one side must lose in order for the other to win,” she said.

One of the U.S. farmers in Montreal for the NAFTA talks was Scott Frazier, who grows corn, sorghum and raises cattle near Corpus Christi, Texas.

Frazier worries he will lose out If NAFTA implodes because Mexico will start buying grain from countries other than the U.S.

“If you lose a third of your demand, almost overnight, that’s really detrimental,” Frazier said from his farm at Chapman Ranch.

Frazier said about 40 percent of grain exported from Texas goes to Mexico. Overall, American agri-food exports to Mexico were worth US$17.8 billion in 2016.

Mexico is the No. 1 market for U.S. corn, dairy, poultry and soybean meal and the No. 2 market for soybeans, pork, wheat and barley.

Gifford said Canadian farmers face less risk without NAFTA because of the lower tariffs into the U.S. and the fact that Canada’s ag industry is in a good position to sell to the world.

Compared to 25 years ago, Canada now has world scale meat packing and oilseed crushing and a more efficient grain-handling system.

However, Gifford said food processing in Canada could suffer in a post-NAFTA era because investors might shift their money to the big market — the U.S.

Contact robert.arnason@producer.com

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