NAFTA Negotiations Continue With Increased Discord in Trump’s Base

USDA Secretary Sonny Perdue meets with United States Trade Representative Robert Lighthizer in May 2017. (Public domain USDA photo by Preston Keres.)

In the 2016 presidential election, farmers across the heartland states—among many other factors—helped put Donald Trump in the White House. Although Trump’s anti-trade platform would have normally turned off those in the agricultural sector, the agricultural lobby believed that Trump’s promised renegotiation of NAFTA would leave agricultural trade untouched.

Now, Trump’s threats to pull out of NAFTA are shaking this confidence. Gordon Stoner, a Montana wheat farmer in charge of the National Associate of Wheat Growers told Politico he believes “this administration is determined to end NAFTA.”

The Trump administration has played down the threat of a NAFTA withdrawal to the agricultural sector. Commerce Secretary Wilbur Ross, whose department along with the Office of the United States Trade Representative, or USTR, is responsible for trade negotiations said, “Unless countries are going to be prepared to have their people go hungry or change their diets, I think it’s more of a threat to try to frighten the agricultural community.”

The first round of NAFTA negotiations took place in August. The Trump administration’s demands were focused on manufacturing issues, particularly the requirement that 62% of the parts in a car sold in the United States, Canada, or Mexico must come from one of the three countries. The Trump administration would like to see an increase in this “rules of origin” requirement, and even rules per country to increase American manufacturing.

The fifth round of negotiations began on November 15 and will continue through November 21. Rather than ending in December as originally planned, negotiations will continue into March. However, it would appear that the Trump administration and Mexico have very wide differences to bridge; according to Mexico’s top trade official, Ildefonso Guajardo, “There isn’t one trade agreement in the world that has country-specific content.”

The way Ross and the Trump administration see it, the United States has all the leverage in the negotiations. Ross argued that if the United States wanted concessions on issues such as auto-part imports, Mexico would give in rather than risk losing access to the United States’ cheap farm products.

Farmers are skeptical and Mexico’s actions reflect this. Mexico is preparing to accelerate trade deals and establish commercial relationships with other agricultural powerhouses in Latin America, namely Argentina and Brazil.

Already, Mexican buyers are signing fewer long-term commodity contracts with American farmers and South American sellers are beginning to make a greater presence.

Historically, U.S. farmers have been the favorite of Mexican buyers due to their geographic proximity, low tariffs under NAFTA, and decades of relationships. However, rapid development in South America has made Brazilian and Argentinian farmers competitive with the U.S. in terms of scale and price.

Even more worrying to farmers, the United States Department of Agriculture is actively preparing contingency plans for a NAFTA withdrawal. All of this points to a sad reality for the agricultural sector: to the Trump administration, the benefits agriculture has enjoyed under NAFTA are only a bargaining chip, not an economically important arrangement that must be defended at any cost.

Groups representing the agricultural sector met with the House Agriculture Committee on November 7, where they made clear their expectation that Congress aggressively oppose the Trump administration’s disregard for NAFTA’s benefits towards farmers.

According to Chairman Mike Conaway, R-Texas, “they were very candid in their comments to the members about… how they’d like to see the administration move forward.”

Politics within the Trump administration are also playing a role. At the beginning of the year, Secretary of Agriculture Sonny Perdue was able to convince Trump to not withdraw from NAFTA immediately. Perdue made the case by showing Trump how a large portion of his base depends on agricultural export revenue.

With the appointment and nomination of Trump’s USTR head, free trade skeptic Robert Lighthizer, there is now equal pushback to Perdue’s stance. Additionally, Perdue will be under increased pressure in 2018 with the reauthorization of the farm bill, the law that authorizes the vast range of federal agricultural subsidy and insurance programs.

With vital political capital stretched thin, a divided base and two other countries with their own intentions, the future of the 23-year-old agreement has never been so unclear.

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