Most ag leaders apprehensive about NAFTA renegotiation

At a House Agriculture Committee hearing Wednesday about the Trump administration's renegotiation of the North American Free Trade Agreement, grain, oilseed, beef and poultry leaders expressed growing apprehension that the atmosphere is leading to reduced farm exports while dairy and Florida tomato industry leaders said they hope the negotiation can help them deal with problems with Canada and Mexico, respectively.

House Agriculture Committee Chairman Michael Conaway, R-Texas, said in an opening statement that he believes that farmers and ranchers can benefit from updating the 23-year old agreement.

Conaway said he considers President Donald Trump "a master negotiator. I trust his negotiating instincts to make this happen."

But the grain, oilseed, beef and poultry leaders all said that the top goal of the renegotiation should be to "do no harm" to agriculture exports.

Under NAFTA, Mexico has become the No. 1 market for U.S. corn exports, but U.S. corn exports to Mexico this year have declined 4 percent by volume and 7 percent by value, said Floyd Gaibler, the director of trade policy and biotechnology for the U.S. Grains Council, which promotes U.S. feed grains exports.

Mexico is expected to import between seven and eight cargoes of corn from South America beginning in August and September and if those shipments materialize the Grains Council expects further "erosion" of its Mexican market, Gaibler added.

"If we are not getting the negotiation done by the end of the year, we anticipate this erosion will continue," he said.

The renegotiation could benefit U.S. farmers if it contains a mutual recognition agreement with Canada and Mexico on the safety determination of biotech crops and a consistent approach to managing low-level presence of products that have undergone a safety assessment, Gaibler added.

Mexico has also increased its imports of soybeans and soy products and meat from animals that eat soybeans since the implementation of NAFTA 23 years ago, Thomas Hammer, president of the National Oilseed Processors Association, said.

U.S. exports of soybeans and soy products totaled $415 million to Canada and $2.5 billion to Mexico in 2016, while exports of meat and poultry products totalled $2.07 billion to Canada and $3.25 billion to Mexico, Hammer added.

In recent months, he said, Mexican buyers have been asking for shorter contract terms, which is "not good for us."

While a survey of NOPA members did not uncover any "trade irritants or non-tariff barriers" with Mexico or Canada that could be addressed in the renegotiation, NOPA members could benefit from increased market access for U.S. exports of dairy poultry and eggs to Canada and the same biotech provisions that the U.S. Grains Council favors, Hammer said.

Kevin Brosch, a trade consultant representing the National Chicken Council, the National Turkey Federation and the USA Poultry & Egg Export Council, said that Mexico is "by far our largest market for U.S. poultry products" and that, while access to the Canadian market has been limited, Canada is still the second largest market for poultry exports.

Brosch said Mexican food processors used to regard the United States as a "pushy big brother," but now "they're looking at Brazil, they're looking at other sources of supplies."

"NAFTA has been a godsend for U.S. poultry," he said, adding that a six-pound chicken amounts to the export of 12 pounds of soybeans that the animal has eaten over the course of its life.

Brosch said that the Trans-Pacific Partnership agreement from which the Trump administration has withdrawn contained a "preliminary agreement" that would have increased the Canadian quota for U.S. chicken and improved sanitary and phytosanitary rules.

"The poultry industry considers the progress on poultry trade that had been envisioned in those preliminary TPP negotiations as potentially important components in modernizing the NAFTA in several ways," Brosch said.

Kendal Frazier, CEO of the National Cattlemen's Beef Association said that NAFTA "has developed all of North America into a premium market for U.S. beef sales," although Mexico and Canada rank only third and fourth in dollar value, behind Japan and Korea.

Frazier said the biggest danger in the NAFTA negotiations would come if the United States tried to re-establish country-of-origin labeling for red meat, a program the United States stopped after Canada and Mexico won a World Trade Organization case on the grounds that the labeling scheme led U.S. meat processors to discriminate against Canadian and Mexican animals.

The National Farmers Union and other groups have called on the Trump administration to propose re-establishing COOL, but NCBA opposes that idea.

In contrast, former Agriculture Secretary Tom Vilsack, the president and CEO of the U.S. Dairy Export Council, said the NAFTA dairy provisions in relationship to Canada are "in urgent need of improvement."

"Whenever the U.S. begins to create a small foothold in Canada's dairy market, the Canadian government creates new classifications, categories or standards to make U.S. dairy exports non-competitive with domestic product," Vilsack said.

"The most recent manifestation of this practice was witnessed earlier this year with Canada's new pricing scheme that essentially wiped out an export market for ultrafiltered milk that U.S. processors had developed and for which many U.S. dairy farmers had come to rely upon as a market for their milk."

Vilsack also said it is vital to finish the NAFTA renegotiation as quickly as possible to try to stop the European Union's attempt to include Canada and Mexico in its global attempt to win further acceptance of geographic indicators, the system of labeling that says certain products can use the names of places where the product originated only if the product is produced in that place.

"Canada already recognizes GIs. The EU is talking to Mexico about GIs. And, just recently, Japan struck an agreement with the EU that recognizes geographic indicators," Vilsack said.

Canada "intentially tries to shirk its dairy commitments" international agreements, Vilsack said, citing its decision in its free trade agreement with the European Union to provide GI protection to asiago, feta, fontina, gorgonzola and muenster cheeses, which the U.S. industry considers to be common names.

"NAFTA would offer a prime chance to press Canada to hold U.S. companies harmless from this unwarranted nontariff barrier on U.S. cheese," Vilsack said. The TPP text on GIs could be a starting point in that negotiation, he said.

House Agriculture Committee ranking member Collin Peterson, D-Minn., said he is particularly interested in the dairy negotiations because Canadian dairy firms have made so much money under Canada's supply management system that they have been buying up U.S. dairy processing facilities.