US President, Donald Trump, told the leaders of Canada and Mexico on Wednesday that he will not terminate the North American Free Trade Agreement (NAFTA) treaty at this stage, but will move quickly to begin renegotiating it with them, according to a White House statement.
US officials had disclosed earlier that Trump and his advisers had been considering issuing an executive order to withdraw the US from the trade pact, a move not well received by several feed and feed crop producer groups.
Organizations that spoke out against the withdrawal included the US Grains Council, US Food and Ag Dialogue for Trade, which includes the National Grain and Feed Association as a member, American Soybean Association (ASA), National Corn Growers Association (NCGA) along with US Wheat Associates and the National Association of Wheat Growers.
The organizations were quick to weigh in on the proposal and highlight risks to feed and agricultural trade the process could bring to the US and two of its largest trading partners.
“We are shocked and distressed to see news reports that the Trump Administration is considering an executive order to withdraw the United States from the North American Free Trade Agreement (NAFTA),” said Tom Sleight, US Grains Council president and CEO. “Mexico and Canada are among our largest and most loyal grain export markets, and our organization has worked closely with partners in both countries for more than 30 years.”
There would be support for efforts to modernize NAFTA, depending on how it was handled, he said. “Before today, we believed we were on track to have a reasonable discussion about how to update the agreement in ways that make sense for all parties – we hope we can get back to that position soon.”
“An executive order as reported will have an immediate effect on sales to Mexico, market prices and the profitability of US farmers, who are already facing below cost of production prices,” he said. “Our top grain market is not a negotiating tactic.”
Similarly, members of the ASA warned against a withdraw from the agreement because of the repercussions for groups including soybean growers and soy meal users.
“Without mincing words, initiating a process to withdraw from NAFTA is a terrible idea, and it will only mean a longer and more difficult struggle for farmers to recover in this economy,” said Ron Moore, ASA president. “With surplus production and domestic prices lagging, we need more opportunities and easier avenues to sell our products abroad, and signaling the U.S. intent to withdraw from NAFTA runs absolutely counter to that goal.”
US trade with Canada, Mexico
Mexico is the second largest overall market for US soybean, soy meal and oil, and sales amounted to more than $2.5bn last year, said Moore. And it is the largest market for soy meal.
Canada is the third largest market for soy meal, he said. “Add to that the sales of the meat, dairy and eggs that require soy meal as animal feed, our North American partners are unquestionably among the most vital and vibrant markets for American soybeans,” he added.
Additionally, Mexico is the top market for US corn and Canada also is a strong market for corn and ethanol, said Wesley Spurlock, president of NCGA. “With a farm economy that is already weak, losing access to these markets will be a huge blow that will be felt throughout the ag value chain,” he added.
“Withdrawing from NAFTA would be disastrous for American agriculture,” he said. “We cannot disrupt trade with two of our top trade partners and allies. This decision will cost America's farmers and ranchers markets that we will never recover.”
Before the announcement of a potential US exit from NAFTA, there already were some concerns about Mexico seeking to source some of its feed and feed grains from other countries potentially in South America – often referred to as “Plan B.”
However, many Mexican feed producers see an advantage to maintaining current trade relationships with the US, Sleight told us in an earlier interview. “They know they can get what they need, when they need it and they don’t have to have a lot of big storage facilities – the supply lines have been well developed,” he added.
“You hear a lot about Plan B, because the rhetoric is not pleasing to them,” he said. “They are looking for US farmers and agribusinesses to stand up for Mexico.”
The Council is working to stay engaged with trading partners in Mexico to show them that US producers are interested in maintaining that market and relationship, he said. It is important that no harm is done to agricultural trade.