Source: Gary BrockDr. Ian Sheldon talks NAFTA and its impact on farmers.
By Gary Brock
CIRCLEVILLE — The hot topic of international trade and agriculture was front and center at a recent meeting held in Circleville.
As negotiators continue in February to renegotiate the North American Free Trade Agreement (NAFTA) with Mexico and Canada, Ohio State University agriculture economist, Ian Sheldon, cautions against the U.S. withdrawing from the accord, saying this will not help out trade deficit and will likely hurt farmers in Ohio and throughout the nation.
Speaking on the topic, “Free Trade Agreements: Why they matter to U.S. agriculture” in late January at the 2018 Agriculture Outlook meeting in Circleville sponsored by Ohio State University Extension, Sheldon talked about the impact NAFTA has had on Ohio farmers and what might happen if the U.S. pulls out.
Sheldon, Andersons Professor of International Trade at Ohio State, pointed out that Canada and Mexico were the number two and number three trading partners with the United States. Our number one partner is The Peoples Republic of China.
“We can never overestimate the importance of our trade with China,” he cautioned, especially in terms of agriculture. “Almost 20 percent of ag exports is to just China – our largest exporter.” But he added that the impact of NAFTA on Ohio farmers is significant.
He listed the top Ohio annual agriculture exports in millions to Canada and Mexico, but Sheldon cautioned he was not sure of how reliable these figures from the Congressional Research Service are:
Meat products – $191.1
Fruits and vegetable preserves – $124.3
Grain/Oilseed milling – $96.9
Animal foods – $83.5
Bakery products – $82.1
Other foods – $77.2
Beverages – $60.6
Oilseeds and grain – $251.1 (mostly corn)
Meat products/packing – $17.5 (feeder pigs mostly)
Bakery products – $15.9
Animal foods – $6.9
Sugar and confectionery – $4.8
Cattle – $4.4
Grain/oilseed milling – $4.1
Sheldon said that if the U.S. pulls out of NAFTA, it will place the U.S. at a disadvantage because usually countries with free trade agreements discriminate against non-members.
The U.S. is a member of 14 free trade agreements, including 20 trading partners; NAFTA, approved in 1994; and the recently approved Korean-American free trade agreement, which includes Australia, Canada, Mexico, Chile and S. Korea.
The Trans-Pacific Partnership (TPP), which President Trump put on hold the day he took office last year, would have included 11 countries, was “NAFTA plus Japan,” Sheldon said. He said this access to the Japanese market would have been the biggest plus to the TPP agreement.
He said the U.S. free trade partners account for 10 percent of global GDP and 6 percent of world population. By 2015, these partners accounted for 43 percent of U.S. ag exports, compared to 29 percent in 1990.
Exports to our partners by products:
Grains, feeds – 54%
Dairy – 64%
Poultry – 64%
Beef – 58%
Pork – 66%
Fruits/vegetables – 75%
Sheldon said that of all the ag commodities, U.S corn exports to partners, have shown the biggest growth; this is mainly caused by lifting of trade barriers with Mexico. Corn exports have been the single biggest export jump to partners, by more than 60 percent.
He said that since NAFTA, U.S. ag exports to Canada and Mexico have quadrupled, from $8.9 billion in 1993 to $38.4 billion in 2016. Canada and Mexico’s U.S. agriculture exports in 2016 were $20.5 billion and $17.9 billion in 2016, respectively.
Regarding the NAFTA negotiations, Sheldon said, “Renegotiating NAFTA will not solve the U.S. trade deficit. The U.S. trade deficit is a structural imbalance between consumption, savings and investment. We save too little and we consume too much. If we shut down NAFTA what do you think someone like Wal-Mart will do? It will simply find suppliers elsewhere in the international markets and it won’t impact the trade deficit.”
However, he said it will hurt us in markets such as Japan, “Where we are already being out-imported in beef to Japan by Australia, which has a free trade agreement with them.”
What about prices of goods if NAFTA ends?
Sheldon said if NAFTA ends, price changes would be more significant in Mexico than in the U.S. and Canada, primarily because of the price of corn. “It is really going to hurt their consumers. In the U.S., it will not not have a significant price impact except possibly in the fruit and vegetable area.”
UPDATE: Since Sheldon’s presentation, negotiations over NAFTA have intensified.
Bloomburg News reported in mid-February that the Trump administration was signaling progress on NAFTA talks, particularly with Mexico, as Republican lawmakers voiced support for a trade deal President Donald Trump has threatened repeatedly to abandon.
The U.S. is making “headway” in its efforts to renegotiate the North American Free Trade Agreement, Trade Representative Robert Lighthizer said on Feb. 12 at a meeting with the president and a bipartisan group of lawmakers at the White House. He also downplayed the likelihood of a U.S. withdrawal. Talks are going well, “particularly with the Mexicans,” he said, according to Bloomburg.
Kelly Craft, the U.S. ambassador to Canada appointed by Trump, said in Ottawa Feb. 12 that Trump has a clear mandate for change but that the administration didn’t want to leave Canada behind. “We want an updated NAFTA to stimulate North America to be more competitive in the global economy,” Craft said.
Lighthizer’s warming tone on Mexico has been a surprising turn of events given that Washington initiated the NAFTA revamp last year by saying it wanted to address its gaping trade deficit with Mexico, while only seeking tweaks to the trading terms with Canada. Relations between the U.S. and Mexico were frosty when the talks started last August as Trump kept insisting Mexican President Enrique Pena Nieto’s government would pay for a southern border wall.