One of President Trump’s main campaign promises was that he would renegotiate the North American Free Trade Agreement (NAFTA), which he referred to as the “worst trade deal ever.” Now, as Trump pushes forward with his plan, the food industry is starting to push back.
Last month, 133 food and agriculture organizations and companies sent a letter to Trump urging him to modernize the agreement, rather than ditch it entirely.
While the United States currently imports more than it exports from Canada and Mexico, free trade on the whole has been lucrative for the U.S. food and agriculture sectors. According to the USDA, the United States has had a worldwide trade surplus on agricultural products since 1960. The letter states that trade resulted in more than $130 billion worth of exports and $423 billion in U.S. economic activity in 2015 alone.
California in particular has a lot to lose from any move to restrict trade. The state produces a huge percentage of the country’s exports, including more than 90% of exported almonds, wine, broccoli, and a long list of other crops. Ken Barbic of the Western Growers Association, told the Los Angeles Times: “The U.S.-Mexico trade relationship is very important. We would be concerned to see that relationship negatively affected.”
The cattle industry has also benefited significantly from NAFTA, with exports increasing nearly 80% in the last 25 years. If trade markets contract, domestic beef producers could find themselves with an oversupply. In an interview with Bloomberg, Kent Bacus, director of international trade and market access at the National Cattlemen’s Beef Association, said: “Americans are not going to eat more beef at the same price. If there’s a surplus, we have to move that product to other countries, and to sustain the expansion, we need to expand export markets.”
In addition to ending NAFTA, Trump has suggested instituting a 20% tax on imports from Mexico as a way of paying for his border wall. Many believe this would trigger retaliation. Malcolm DeKryger, the president of pork producer Belstra Milling, told Reuters he was concerned that Mexico might retaliate by imposing tariffs on U.S. ham.
This wouldn’t be the first time something like this has happened.
Between March 2009 and October 2011, Mexico instituted retaliatory import tariffs on many agricultural products following a trucking dispute. An analysis in the journal Applied Economic Perspectives and Policy found that the tariffs cost U.S. agricultural producers almost $1 billion in lost revenue. The authors conclude: “The large impact of the tariffs underscores the importance of the duty-free provisions of the North American Free Trade Agreement, as well as the potentially high costs of retaliatory trade measures.”
So far, the reaction of the food industry and analysts to Trump’s administration has been one of uncertainty. For now, it looks like that uncertainty will last at least until May, as that’s when President Enrique Peña Nieto has agreed to start NAFTA renegotiations following a 90-day consultation period with Mexican businesses.