Ag groups hope to keep NAFTA benefits

Trade pacts boost agricultural exports

Submitted Photo Lentils are a major U.S. export, and much of the crop originates in North Dakota. Photo courtesy AGT Food & Ingredients.

Agricultural groups are hoping their industry will continue to see trade benefits from a re-negotiated North American Free Trade Agreement.

The North Dakota Trade Office reports it hasn’t seen anything yet to get concerned about in the negotiations.

“So we are fairly confident that the re-negotiation will be positive. There seems to be agreement on all sides,” said Sharon May, director of global business development at the trade office.

The biggest concern in agriculture is that talks could cause NAFTA to fall apart or retaliatory actions could be taken against U.S. produce if talks get testy.

Tim McGreevy, CEO at the U.S. Dry Pea and Lentil Council, said NAFTA in its current form has been good for the pulse crop industry.

Submitted Photo An ag producer harvests beans in this photo from the U.S. Dry Pea & Lentil Council.

“Mexico is a great market for us,” he said, noting about 21,000 metric tons of dry peas and nearly 12 metric tons of lentils were shipped to that country last year. “Most of those exports are coming out of the Northern Plains.”

The N.D. Trade Officer reported North Dakota pulse crops generated $35 million in export activity with Mexico in 2016. Without NAFTA, a 10 percent duty would have been applied to those exports, which is significant, May said.

North Dakota also exported $9 million in barley to Mexico and $1.8 million in barley to Canada in 2016. The state exported $4.2 million in peas and $1.5 million in potatoes to Canada.

Data for 2017 data show the value of food-grade oil exports to Canada dropped from $48.6 million in 2016 to $22.8 million in 2017, while vegetables and pulse crops rose from $43.5 million in 2016 to $53.3 million in 2017.

May said duties can range from 6 to 11 percent on ag commodities, creating a significant impact on costs if a trade pact isn’t in place. Export of pasta products also would be affected if NAFTA were to go away.

NAFTA was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. NAFTA immediately lifted tariffs on the majority of goods produced and called for the gradual elimination of most remaining barriers to cross-border investment and to the movement of goods and services among the three countries.

Concerns from the current U.S. administration have led to re-negotiation of certain aspects of the agreement.

“NAFTA has been long-standing,” McGreevy said. “So we are cautious about re-opening this agreement and what it may mean for U.S. agriculture and our industry in particular.

“We are watching the negotiations closely, trying to make sure we can hang on to the benefits that NAFTA has provided. We know in talking to our buyers down in Mexico, they are certainly concerned about the position the U.S. has taken. That has to certainly encourage them to look at alternative suppliers,” he said.

The primary supplier competition in peas and lentils comes from Canada.

The United States exports 65 percent of its pea crop and 70 percent of its lentils.

“Our industry relies on strong export markets,” McGreevy said. “We have had increased production here in the U.S. over the last 10 years – about double our acreage. We have been very successful in our export promotion activities. We have tremendous quality that we bring to the market. It isn’t always the cheapest product but definitely the highest quality. It’s been well received.”

North Dakota Corn Growers doesn’t want to see export markets disrupted if NAFTA talks get rocky, either. For North Dakota growers, the biggest concern is distiller’s grain shipped to Canada for livestock feed as a byproduct of ethanol plants. Canada is the United States’ sixth largest market for distiller’s grain.

“It’s hard to get a better deal than we have today with NAFTA. We have zero tariff,” said Clark Price, Hensler, who serves on the North Dakota Corn Growers board and on the National Corn Growers’ Feed, Food and Industrial Action team.

Price said corn growers are concerned about maintaining Mexico trade because that country has been looking into sourcing corn from other parts of the world.

Price, also with the National Cattlemen’s Beef Association, said the livestock industry has much at stake, too. Forty percent of the nation’s pork and 30 percent of its beef were exported as meats in 2016 to Canada and Mexico without tariffs.

Again, there is concern about retaliatory actions if talks go sour. Mexico had imposed tariffs that affected pork hams several years ago over a trucking dispute. Being able to ship fresh, refrigerated meat across the border is advantageous to both the United States and Mexico, though, so there is motivation to maintain a favorable trade relationship rather than incur the cost and handling challenges of importing and exporting meat to and from farther away markets.

Mexico remained the second largest volume market for U.S. meat in 2017, although down 2 percent from 2016, according to the U.S. Meat Export Federation. It was the third largest market in value, up slightly to $979.7 million in 2017.

Joe Schuele, vice president of communications for the federation, said Mexico is number one in volume for U.S. pork exports and second for beef, while Canada typically is about the fifth largest market for both products.

“We have tariff-free access,” he said. “We are in a good position in the sense that the red meat industry isn’t really looking to achieve any gains through the NAFTA talks. All agriculture sectors are not that fortunate. Poultry and dairy have long-standing barriers they would like to overcome.”

Spring wheat and durum are a small portion of the wheat exported to Mexico, but North Dakota producers have significant interest in trade issues related to wheat and durum coming and going across the Canadian border.

Neal Fisher, administrator for the North Dakota Wheat Commission, said U.S. producers would like to see a change in Canada’s wheat grading system, which currently discourages the flow of product north. Fisher said U.S. wheat is discounted to keep it from co-mingling with Canada’s export stream, but those discounts also put a damper on U.S. producers taking advantage of favorable freight rates to Canadian markets when they occasionally occur.

Although that issue could be addressed without re-opening NAFTA, a good time to visit the topic is now that NAFTA is being discussed, Fisher said.

More significant to wheat farmers, though, is the Trans-Pacific Partnership, he said. The United States pulled away from negotiations and isn’t among the 11 countries signing that agreement.

“That was a disappointment,” Fisher said. Australia and Canada, as partners in the agreement, now will have better access to growing Asian markets. Although the United States is considering bilateral talks with other countries on trades, it will be a slow process to arrive at individual agreements with multiple countries, he said.