World Grain - February 2018 - 6

FROM THE EDITOR

U.S.'s troubling trade policy

hese are uncertain times for farmers
and agribusiness companies in the
three countries governed by the North
American Free Trade Agreement (NAFTA).
Not only are they dealing with four straight
years of depressed grain prices, but the
trade deal that has been good for U.S. and
Canadian farmers - while perhaps not as
positive for Mexican producers - could unravel in the coming months. Signed in 1994,
NAFTA fundamentally reshaped North
American economic relations, driving an
unprecedented integration between Canada
and the United States' developed economies
and Mexico, a developing country.
Donald Trump, the surprising winner of
the 2016 U.S. presidential election, contends
that the deal has shifted U.S. manufacturing
production and jobs to Mexico, and therefore in August of last year his administration reopened negotiations with Canada and
Mexico with the aim of reforming the pact
and possibly even withdrawing from it if
changes aren't agreed upon.
And while there may be some truth to
Trump's claim regarding manufacturing,
there's also clear evidence that NAFTA has
been a big winner for U.S. agriculture. Since
NAFTA was implemented 24 years ago,
U.S. farmers have quadrupled their exports
to Canada and Mexico and the two nations
rank second and third, after China, as markets for U.S. farm goods.
&DQDGDDOVRKDVEHQH¿WHGDVLWVWRWDODJricultural exports to Mexico and the United
States have tripled.
Meanwhile, Mexico's results have been
mixed, as some economists have blamed
NAFTA for exposing Mexican farmers,
especially corn producers, to competition
from heavily subsidized U.S. agriculture. A
study from the Center for Economic Policy
and Research found that NAFTA put nearly
2 million small-scale Mexican farmers out
of work.
While the Trump administration appears
¿[DWHG RQ PDQXIDFWXULQJ WKH 86 DJULFXOtural community, particularly corn producers, stands to lose the most if the deal falls
apart. Mexico, which currently purchases
98% of its corn from the United States, has

said it is considering offering duty-free access to Brazilian and Argentine corn as an
alternative to U.S. imports.
If the United States withdraws from NAFTA, which removed high tariffs on Mexicanbound corn from the United States, Mexico
could reinstate tariffs as high as 37% on U.S.
corn without breaching any international
rules. This would, in effect, halt U.S. corn
imports, which in recent years have been
worth more than $2 billion annually.
From a U.S. perspective, the question is
can Trump negotiate a deal that addresses
the loss of U.S. jobs to Mexico while protecting all the advantages that the agreement
brings to U.S. agriculture? It seems doubtful.
Renegotiations also have begun on another less publicized free trade agreement
between the United States and South Korea,
called KORUS. Signed in 2012, it has resulted in reduced tariffs on U.S. products bound
for South Korea and gained market share for
U.S. agricultural products in the Asian PaFL¿FUHJLRQ
7UXPS¶V¿UVWVKRWDFURVVWKHERZRIJORbalization occurred a year ago when he withdrew the United States from the Trans PaFL¿F3DUWQHUVKLS7337KH733ZKLFKZDV
never approved by the U.S. Congress, was a
12-nation trade pact the Obama administration framed as a way for the United States to
establish economic leadership in the region.
It's strange to see the United States, which
for many years had bipartisan support for
forging free trade agreements, taking a protectionist position. But with or without the
U.S.'s leadership, the pursuit of free trade
agreements is vital for the health of global
agriculture.
For 36 years, World Grain's stance on this
issue has been crystal
clear: free trade is good
for the global grain and
grain-based foods industry, and more trade agreements between nations
- not fewer - should
be sought.
Arvin Donley
Editor

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WORLD GRAIN (ISSN 0745-8991) Volume 36, issue 2,

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World Grain - February 2018

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