Inside D.C.

NAFTA Nerves

So why the consternation, nay frustration among aggies over the impending renegotiating, modernizing and/or “tweaking” of the North American Free Trade Agreement (NAFTA)?  Put simply, no one’s quite sure who’s on first from a policy and U.S. position standpoint.

Conventional wisdom leads us to believe that a largely successful 23-year-old tripartite trade deal is a tough thing to walk away from, particularly when the agreement is with U.S. agriculture’s number one and number two export customers.  And while Agriculture Secretary Sonny Perdue, U.S. Special Trade Representative (USTR) Robert LIghthizer, and to a lesser extent, Commerce Secretary Wilbur Ross, continue to assure U.S. global market players that the Trump administration is approaching the NAFTA talks with a “do-no-harm” philosopy, still President Trump keeps everyone off balance with his less-than-enthusiastic public statements about NAFTA’s future.

In any event, process is proceeding apace, with the White House having given formal notice to Congress and the rest of the world it intends to begin formal negotiations with Mexico and Canada.  No formal talks can begin until the 90-day consultative process mandated by the president’s trade promotion authority (TPA) is over – around mid-August — and those consultations include the folks in Congress, business and industry broadly and the general public.

The consultation process is turning out to be somewhat of a confidence builder for nervous aggies.  Not only is USTR actively soliciting positions/priorities from one and all, due to USTR by June 12, it’s also holding a June 27 meeting – and it may be extended a second day – in Washington, DC, to collect public and industry input.  It’s also holding separate ag sector meetings, with the grain industry and crop processing organizations set to meet with USTR June 16, while livestock and poultry producer groups, feed and pet food interests are sitting down with USTR on June 19.

Many in agriculture are watching U.S.-Mexico negotiations over bilateral sugar trade as kind of a dress rehearsal for how NAFTA negotiations may go.  The whys and wherefores of the sugar dispute are complex, but the White House announced this week a preliminary agreement between the two countries on how much, what kind and when Mexican sugar enters the U.S.  Depending on which side of the border you reside, the preliminary deal either stinks or it’s the best that can be achieved under the circumstances.  The U.S. sugar industry – both growers and users – isn’t happy and wants changes; the Mexican industry says the deal agreed to is as far as it will go. “No more concessions,” say Mexican sugar folks.

What makes folks nervous is a sort of “sure, it will hurt, but not that much” response when concerns are raised.  In testimony this week before a Senate Appropriations subcommittee, Ross reported he and his Mexican counterpart have initialed a preliminary agreement – the product of more than a year of negotiations – and talks are continuing on a final deal.  When pressed about U.S. sugar producer/user disappointment with the deal claiming it will push up sugar prices – Ross said any anti-dumping resolution usually leads to a price increase, but added “I don’t think it will be a gigantic one.”

U.S. agriculture is concerned the sugar deal is a signal of how much Ross may be willing to cede to get a deal done.  While the resolution of the sugar issue will avoid a trade war between the two countries which likely would have poisoned the broader NAFTA renegotiations, industry nonetheless fears other contentious NAFTA issues could be resolved in the same manner, with industry dissatisfied and the administration apologizing that the end product is the best it can deliver under the circumstances.

Perdue was in Toronto this week talking about the NAFTA negotiations framework, pushing for possible resolution of ugly U.S.-Canada dairy and wheat issues outside the confines of formal NAFTA deliberations.  Even Perdue acknowledges that’s an unlikely scenario; why would Canada and/or Mexico give up issue leverage going into negotiations?

Completion of a NAFTA update would best occur in early January, said Ross, putting the final treaty in hand prior to Mexico’s general and presidential elections and congressional elections in the U.S.  Ross said he wants to get the deal done as early in January as possible so Mexican election issues don’t complicate that country’s legislative approval of the final trade agreement.

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