President Trump has made re-evaluating our approach to international trade a centerpiece of his economic agenda. In addition to putting what appears to be the final nail in the coffin of the Trans-Pacific Partnership (TPP), Trump has signaled his intention to re-negotiate the North American Free Trade Agreement (NAFTA); if the U.S. does not receive satisfactory terms, he has vowed to scrap the agreement in its entirety. As was noted in an earlier OFW blog, the President has substantial authority under NAFTA to call for new negotiations, withdraw from the agreement, or levy tariffs on goods imported from Canada and Mexico.
Mexico and Canada have indicated that they are open to negotiations to improve the 23-year old trade deal. Certainly, all three countries believe that NAFTA can be updated to further enhance trade between them. Many of these improvements were included in the now-scrapped TPP. But, as these negotiations move forward, it is critical that the Trump Administration keep front of mind the importance of international trade for U.S. agriculture.
Canada and Mexico are our second and third largest customers for agricultural exports. Under NAFTA, agricultural products are allowed to move freely between the countries, with a few exceptions. This has allowed for the development of an integrated North American market. For example, the imported Mexican and Canadian cattle and Canadian hogs that American slaughterhouses depend on create jobs in the meat processing industry, balance out seasonal supply fluctuations, and produce meat for export, including to Canada and Mexico. Bottom line — American companies have greater access to our neighbor’s markets and U.S. consumers benefit from having access to fresh fruits and vegetables on a year-round basis.
Disrupting this arrangement by employing punitive tariffs would devastate many parts of the U.S. farm and food sector to the tune of billions of dollars. Even if the motive is to ensure that more consumer products are manufactured domestically, the food and agriculture sector would suffer collateral damage. Consumers would also lose out by having fewer choices and paying higher prices at restaurants and in the checkout line.
Dr. Joe Glauber, former USDA Chief Economist, and now a Senior Research Fellow with the International Food Policy Research Institute, has put together an excellent two-pager on the importance of international trade for American agriculture. Dr. Glauber’s thoughtful analysis doesn’t mince words when assessing the potential effects of the President’s trade agenda on American agriculture. We recommend that you give it a read at the link below.