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NAFTA 2.0??

Trade has become a polarizing topic throughout the United States as political rhetoric during the last election cycle hammered free trade agreements on both sides of the aisle. Caught in the middle are our agricultural exports. We walked away from the Trans Pacific Partnership and left $5.3 billion in export value for U.S. farmers and ranchers on the table. While signing the Trans Pacific Partnership agreement would not have immediately increased the market price for many of our products it would have guaranteed we maintained or increased our market share into those markets. It allowed us to receive preferential market access, reduced (or eliminated) tariff rates or increased tariff rate quotas. We walked away from all of that and have allowed Australia to negotiate their way to increased market access in our wake. Now our attention has shifted from the failed Trans Pacific Partnership to the renegotiation of the North American Free Trade Agreement (NAFTA).

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Throughout the agriculture community trade groups, commodity groups and individual producers are holding their breath and hoping for the best as the Trump Administration begins renegotiating NAFTA this week. Many organizations have pushed the administration to “do no harm” to an agreement that has increased agricultural trade with Canada and Mexico substantially. The wheat and barley industry in particular has benefits from this agreement. Over half of the wheat produced in the United States is exported – which Mexico coming it at number one as they imported almost three million metric tons last year. For Montana specifically – nearly 80% of our wheat is exported. Most of the wheat exported from Montana is bound for the Pacific Rim and is not impacted significantly by the NAFTA – however Mexico is our number one importer of Montana malt barley.

Wheat Industry Letter on NAFTA negotiations

Canada and Mexico are two of the top five counties for U.S. agriculture exports. Together they combine to import more than a quarter of our total agriculture exports. Mexico is the top importer of both wheat and barley. Since NAFTA was signed over twenty years ago Mexico has imported 400% more wheat than it did before NAFTA. Canada and Mexico are also two of the top five export countries for beef.

It is an understatement to say that these two countries represent vital market access and export opportunities for our agricultural products. We also see room for improvement through these negotiations. It is impossible to have large multi-national trade deals and not see room for improvement and the need for modernization after two decades. Several of the key improvements many in the agricultural community want to see include:

  • Updating and improving the Sanitary and Phytosanitary (SPS) provisions.
  • Updating and improving rules on Technical Barriers to Trade (TBT).
  • Updating rules on biotechnology and plant breeding that are dictated by sound science.
  • Eliminating/reducing Canada’s tariff barriers for wheat, dairy, poultry eggs, and wine.

One of the key issues that the wheat industry had hoped to resolve before NAFTA 2.0 negotiations began was the wheat grading issue. We consider this issue to be an enforcement issue and a current technical barrier to trade. Technical barriers to trade have become a popular way to obstruct trade in the free trade agreement era. These technical barriers can range from the U.S.’s now defunct COOL policy, Canada’s wheat grading issue, or Vietnam’s current fumigation requirements – among many other examples. The wheat grading issue continues to move forward while at the same time standing still until Ottawa introduces and passes legislation amending the Canadian grading system. The list of individuals who have been pressuring Ottawa to correct this trade issue is long and distinguished however we gained a powerful advocate as a direct result of the Montana Ag Summit: Secretary Purdue. In the week following the Ag Summit the Secretary attended a previously scheduled event with Canadian officials and specifically brought up the grading issue. Ottawa has so far however been unwilling to support legislation correcting the issue despite pressure from some of their trade groups (other trade groups within the country remain opposed). We are now hopeful we can correct the issue through NAFTA 2.0 negotiations.

“U.S. farmers should be able to deliver their wheat to a Canadian elevator and not automatically receive the lowest grade because it was grown on our side of the border. This is a no-brainer, and it is already Canada’s legal obligation under existing trade agreements,”– Ben Conner, U.S. Wheat Associates

These trade deals are not universally beneficial for everyone throughout the United States. That is the difficult part about participating in a global economy and working in an industry that depends on global trade. Agriculture is and will always be one of the biggest supporters of trade. We depend on trade. We need strong bilateral, plurilateral, and multi-national trade agreements to survive as an industry. We know that all trade deals are a give and take, they are created through long term negotiations, and no one gets to walk away with everything they want. It would be great if that were possible, but it is not.

The Trump Administration has set a goal of finalizing NAFTA 2.0 by the end of the year – however that is likely an impossible goal given the glacial pace at which trade negotiations move. The agriculture community will continue to closely monitor negotiations and hold their breath. We depend on this agreement and we are hoping to see it become the “Gold Standard” for all future negotiations. Global trade, exports, and positive relationships with our export partners represent our livelihood. Agriculture depends on them. Montana depends on them. Our farm depends on them.

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