U.S. playing with NAFTA fire: ag economist

Al Mussell says ag trade through agreement has created 300,000 jobs, some of which could be lost if NAFTA reopened

Reopening the North American Free Trade Agreement could backfire on the United States from an agricultural perspective, says an agricultural economist.

“The U.S. should be very careful what it wishes for here,” said Al Mussell, research lead for Agri-Food Economic Systems.

Agricultural trade with its NAFTA partners has resulted in US$88 billion in U.S. economic activity and almost 300,000 jobs.

Some of those jobs could be lost if the agreement was altered as per the wishes of U.S. President Donald Trump.

“The U.S. could do a great deal of self-injury,” said Mussell.

Canada is the top provider of bulk and intermediate agricultural products to the U.S. Bulk is largely raw grain and intermediate products include livestock and processed grain, such as flour.

Canada sold $1.67 billion of bulk goods and $6.5 billion of intermediate goods to the U.S. in 2016.

Food companies process the raw goods into consumer food products used in the U.S. and exported around the world.

Canada is the top buyer of U.S. consumer agri-food products, purchasing $16.16 billion worth of goods in 2016. That is twice as much as the next biggest buyer, Mexico.

Mussell said the U.S. food processing industry has greatly benefited from unfettered access to Canadian ingredients and Canadian consumers through the NAFTA agreement.

That makes the food processing sector vulnerable to NAFTA changes that would limit access to the Canadian market.

U.S. farm groups are also wary of reopening NAFTA. Mexico is the number one export market for U.S. corn and number two for U.S. soybeans.

A Mexican senator has threatened to introduce legislation to source all of its corn from South America instead of the U.S. in retaliation for Trump threatening to renegotiate NAFTA and impose an import tax on Mexican goods.

John Heisdorffer, vice-president of the American Soybean Association, said the Trump administration needs to be careful how it proceeds with NAFTA because it has been a good deal for U.S. farmers.

“While we think there are some places that we can improve NAFTA, we have to make sure that we don’t take a step backwards,” he said during the recent 2017 Commodity Classic conference.

Mussell does not believe the food processing business would flow back to Canada if NAFTA was renegotiated in a way that would restrict U.S. access to Canadian bulk and intermediate products.

“Markets work. This is happening for a reason and if you artificially come in and try to somehow or other impose things being processed in Canada that probably will backfire,” he said.

Mussell said the U.S. has a great advantage in terms of the scale of its processing plants because of the size of the U.S. market. And most major food companies are based in the U.S., so it would be hard for Canada to compete.

He believes the best solution for both countries is to leave the existing deal intact.

“The evidence does not support U.S. agri-food as victim of NAFTA,” he said.

Contact sean.pratt@producer.com

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