Wheat growers encourage continued support for NAFTA

Posted November 9, 2017

The Kansas Association of Wheat Growers is joining other agricultural organizations in encouraging President Trump to support a modernized North American Free Trade Agreement (NAFTA) that maintains and enhances food and agricultural trade between the U.S., Mexico and Canada.

The organizations represent a diverse U.S. food and agricultural industry which supports more than 21 million jobs—including more manufacturing jobs than any other U.S. manufacturing sector—and accounts for 20 percent of the U.S. economy. Our industry is the economic backbone of rural America—stimulating employment all along the value chain.

Under NAFTA, American food and agriculture exports to Canada and Mexico grew by 450 percent. In 2015, the United States held a 65 percent market share for agriculture products in the NAFTA region, and in 2016, we exported nearly $43 billion worth of food and agriculture goods to Canada and Mexico, making our NAFTA partners the largest export consumers of U.S. agriculture. NAFTA also lowered the price of various inputs throughout the supply chain—benefitting U.S. consumers— and helped eliminate non-tariff barriers, making U.S. agriculture more competitive. Of course, NAFTA also has provided U.S. consumers year-round, reliable access to many forms of produce previously available only on a seasonal basis.

Prior to NAFTA, state intervention and import tariffs kept U.S. wheat exports out of the Mexican market. Now, most U.S. wheat farmers – especially Kansas farmers – rely on Mexico as their number one market. Without NAFTA, wheat from other sources will increasingly displace U.S. wheat from the Mexican and Canadian markets. In fact, there is an upcoming shipment of wheat from Argentina to Mexico — a first in modern history — as Mexico looks to diversify suppliers amidst the uncertainty over NAFTA’s future.

Notice of withdrawal from NAFTA would result in substantial harm to the U.S. economy generally and U.S. food and agriculture producers, in particular. While it has been asserted that negotiations could be completed and a new agreement approved subsequent to issuance of notice of withdrawal, but prior to actual withdrawal, that observation underestimates the business complexity, integrated supply chains and contracting periods involved.

Such a notice of withdrawal would fuel additional uncertainty among our North American trading partners, creating a sense of urgency to explore non-U.S.-origin sources of supply. It also would trigger a substantial, immediate response in commodity markets, as market-specific focus would turn to a scheduled return to trade-prohibitive tariff rates. Contracts would be renegotiated or cancelled, sales would be delayed or lost altogether, able foreign competitors would rush to seize our export markets, and litigation would abound even before withdrawal took effect.

The negative impact on the United States would include a net loss of 256,000 U.S. jobs, a net loss of at least 50,000 jobs in the U.S. food and agriculture industry, and a drop in GDP of $13 billion from the farm sector alone. NAFTA withdrawal would also disrupt critical industry supply chains, close markets, eliminate jobs, and increase prices for the basic needs of American consumers.

The adverse effects of issuance of a notice of NAFTA withdrawal would be abrupt and particularly severe for America’s farmers, food manufacturers and agribusinesses. For instance, the world grain market currently is experiencing the greatest oversupply of production since the 1980s – with the U.S. facing increasing competition from foreign competitors – and net U.S. farm income has declined to half what it was just five years ago.  2018 would be an especially damaging time to lose America’s two largest food and agriculture product markets.

Therefore, Kansas wheat growers urge support for continued positive U.S. engagement in NAFTA negotiations to advance America’s economic interests by opening new export opportunities and by tackling non-tariff concerns our industries have identified. By building on the Administration’s “do no harm” pledge toward food and agriculture trade within NAFTA renegotiation, modernization of trade relations with two of our largest export markets can and should be effectively advanced.