U.S. Not Pulling Out of NAFTA

28 Apr 2017

By Jerry Hagstrom
DTN Political Correspondent
And Chris Clayton
DTN Ag Policy Editor

WASHINGTON (DTN) -- Major farm groups responded with shock and dismay Wednesday after reports that President Donald Trump is considering an executive order to withdraw the United States from the North American Free Trade Agreement.

Politico first reported Wednesday that the White House had a draft executive order ready on NAFTA that "could be unveiled late this week or early next week." Politico reported those details came from two White House officials.

Late Wednesday evening, the White House issued a statement summarizing phone calls President Trump had sometime in the afternoon with President Enrique Pena Nieto of Mexico and Prime Minister Justin Trudeau of Canada. The White House stated, "President Trump agreed not to terminate NAFTA at this time and the leaders agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three countries."

President Trump said, "It is my privilege to bring NAFTA up to date through renegotiation. It is an honor to deal with both President Pena Nieto and Prime Minister Trudeau, and I believe that the end result will make all three countries stronger and better."

The White House statement came hours after leaders of some of the country's largest farm organizations stressed their support for President Trump while also leveling some of agriculture's harshest criticism of the White House since the president took office. Leaders of farm groups said pulling out of NAFTA would be devastating financially for farmers and they urged the White House not to pull the trigger on any plan to withdraw from the 23-year-old trade agreement.

President Trump is constantly challenging major trading partners over U.S. trade deficits and has demanded to take tough actions to get better trade terms out of them. Trump has called NAFTA "a disaster" for the U.S. economy.

NAFTA accounts for about $1.225 trillion yearly in direct trade across North America. In 2015, the U.S. exported $24 billion in ag products to Canada, making the Great White North the top market for U.S. ag commodities. The U.S. exported $18 billion in farm products to Mexico in 2015 as well.

Agricultural leaders sought to stress the importance of trade to the industry when farmers and new Agriculture Secretary Sonny Perdue met with Trump on Tuesday. After learning about the possible NAFTA executive order, leaders from major grain, oilseed and protein farm organizations quickly denounced the idea.

DENOUNCING IDEA TO LEAVE NAFTA

Tom Sleight, president of the U.S. Grains Council, said the group was "shocked and distressed" that the Trump administration was considering a withdrawal from NAFTA. The Grains Council is the major group promoting corn, barley, sorghum and distillers grains to U.S. trading partners. Mexico and Canada are large, loyal customers of U.S. grains, Sleight noted. The executive order would disrupt both of those markets, negatively affecting farm income at a tenuous time for farmers already.

"An executive order as reported will have an immediate effect on sales to Mexico, market prices and the profitability of U.S. farmers, who are already facing below-cost-of-production prices," Sleight said. "Our top grain market is not a negotiating tactic."

Sleight agreed with the Trump administration that there was a need to update and modernize NAFTA, but a notice of withdrawal was not the path to take.

"Before today, we believed we were on track to have a reasonable discussion about how to update the agreement in ways that make sense for all parties," Sleight said. "We hope we can get back to that position soon."

The U.S. Wheat Associates and National Association of Wheat Growers responded in similar fashion. The groups jointly stated they "are alarmed" over the reports of the executive order. The groups stated Mexico is the largest buyer of U.S. wheat, importing more than 10% of all U.S. wheat exports, or roughly 100 million bushels of wheat sent to Mexico.

"NAFTA truly opened the door to the strong and growing market opportunity in Mexico," U.S. Wheat Associates and NAWG stated. "Closing that door would be a terrible blow to the U.S. wheat industry and its Mexican customers."

Putting U.S. pork exports back on the pre-NAFTA tariff scale would be "financially devastating to U.S. pork producers," said Ken Maschhoff, president of the National Pork Producers Council, and a producer from Carlyle, Ill. Maschhoff said tens of thousands of jobs that rely on those exports would also be lost.

"The bottom line is U.S. pork trade with Canada and Mexico has been very robust, and we need to maintain and even improve that trade. We're all for modernizing NAFTA, but we cannot support efforts that would undermine the livelihoods of America's 60,000 pork producers."

Texas farmer Wesley Spurlock, president of the National Association of Corn Growers, reminded President Trump that America's corn farmers helped get him elected. Spurlock said corn farmers are strong supporters and want to work with president on a strong trade policy. That said, Spurlock said, "Withdrawing from NAFTA would be disastrous for American agriculture. We cannot disrupt trade with two of our top trade partners and allies. This decision will cost America's farmers and ranchers markets that we will never recover."

MEXICO: VALUABLE MARKET FOR U.S. CORN, SOY

Mexico is the top market for U.S. corn. Canada also is major buyer of both corn and ethanol, Spurlock said.

Ron Moore, president of the American Soybean Association and a farmer from Roseville, Ill., reiterated much of the same theme. "Without mincing words, initiating a process to withdraw from NAFTA is a terrible idea, and it will only mean a longer and more difficult struggle for farmers to recover in this economy," Moore said.

Mexico bought roughly $2.5 billion in soybeans, meal and oil last year, making it the No. 2 market overall for soybean products. Canada is a top buyer of both meal and oil as well. Moore called the Trump administration to "immediately abandon" any plans to announce intentions to withdraw from NAFTA and instead focus on modernizing the trade deal, Moore said.

"That's where the action should be; beginning withdrawal procedures before modernization negotiations even take place are counterproductive and send the wrong signal," Moore said.

Moore pointed out Agriculture Secretary Perdue was just sworn in on Tuesday and the Senate has yet to even confirm Robert Lighthizer as the U.S. Trade Representative.

"We need to give both time to have input on NAFTA modernization," Moore said.

Wednesday's news about the possible NAFTA withdraw came just hours after a Farm Foundation forum on the future of NAFTA. At that forum, Bob Stallman, former American Farm Bureau president, urged farmers to be more vocal about the importance of free trade. Stallman said statements that NAFTA has been a disaster amount to "fake news." Stallman did not mention Trump directly, but it was clear he had Trump in mind when he said at the event that "the statements in the news that NAFTA is the worst thing that has happened -- that is fake news."

DTN staff reporter Todd Neeley contributed to this report.
Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(ES)