Farmers move to defy Trump on NAFTA
After spending nine months indulging President Donald Trump’s desire to renegotiate NAFTA, agricultural groups representing farmers in Trump-supporting states across the heartland are now moving aggressively to save an agreement they consider crucial to their industry.
The once-powerful agricultural lobby was somewhat muted in its warnings about losing a significant portion of the $17.9 billion worth of agricultural products exported last year to Mexico, the U.S.’ third-largest trading partner, believing that the Trump administration would reach a settlement on other aspects of NAFTA while leaving agricultural trade alone.
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Now, with Trump threatening to issue a formal intent to withdraw from the deal, farming groups say it’s clearer than ever that their pleas to save the pact are barely registering with a president intent on its destruction.
“I’ve come to believe this administration is determined to end NAFTA,” said Gordon Stoner, a fourth-generation Montana wheat farmer who leads the National Association of Wheat Growers.
The fearful tone now coming from many of the nation’s farm groups has only amplified as America’s agriculture sector confronts the loss of its main profit driver — foreign exports. Many are now mobilizing behind the scenes to stave off what most believe would be a disaster for American farmers.
A reversal on NAFTA would be a clear measure of the industry’s lack of influence over Trump and his administration. There’s also a growing recognition that the agriculture industry, while united on the importance of NAFTA, may have failed to coordinate an effective strategy to counter the threat that Trump posed to the trade pact since his first day in office.
“The importance of trade to economic growth in the food and ag sector is so fundamental that there tends to be an assumption that everyone understands that,” one association leader told POLITICO. “We can get lazy about our meeting our educational challenge in explaining that part of our industry to others.”
But the newly energized, growing frustration of the agriculture industry has hit what some are calling a milestone after it recently released a letter directly challenging Commerce Secretary Wilbur Ross after he publicly disputed the idea that a NAFTA withdrawal would lead to a serious drop in exports.
“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,” Ross said during an public event on Oct. 11.
The letter also responded to a threat Trump has been amplifying both publicly and privately to lawmakers in recent weeks: He would send notice that the United States would withdraw from the pact in order to pressure Canada and Mexico to agree to U.S. demands.
But agriculture groups say even that action would be cataclysmic and render meaningless the administration’s continuing promise to “do no harm” to agriculture through the NAFTA talks. Mexico has also said with no uncertainty that it would walk away from the talks if Trump resorted to that tactic.
“Contracts would be canceled, sales would be lost, able competitors would rush to seize our export markets, and litigation would abound even before withdrawal would take effect,” more than 80 associations wrote in their letter to Ross, which they made public soon afterward.
The six-page missive was meant to be an unequivocal recognition there was little expectation that the Trump administration would be helpful in trying to preserve NAFTA’s benefits for U.S. agricultural producers, according to sources who helped organize the effort.
“It was a huge departure,” said one strategist involved in the effort. “I see this as a major sea change of people saying the administration is not going to be helpful on this.”
The letter was in fact a culmination of what many agriculture groups had sensed for months: The Trump administration viewed agriculture’s benefits from the deal more as a bargaining chip rather than something that needed to be defended at all costs.
Ross “told aggies straight up that they’ve just got to get used to the fact that they’re a minor part of the economy and that trade policy isn’t going to be constructed around their interests,” said one industry consultant.
In numerous meetings between Ross and industry groups starting last spring, he said he believed the United States held all the leverage based on the volume of food and agriculture products it sold to Mexico. He argued that if the United States wanted to press Mexico into making concessions on issues such as auto-part imports, Mexico would agree rather than risk losing inexpensive access to U.S. farm products, according to people briefed on those meetings.
“All the ag groups looked at him and their mouths dropped open and said, ‘Don’t you get it? The leverage is in their hands. We are completely dependent on them as this major export market,’” said one person who received the briefing.
“If you try to twist Mexico’s arm to give in on rules of origin [on autos], they’ll just stop buying,” the person added. “That’s just an inconvenience to them because there are so many other places they can go. Sure, consumers might pay a little more, but it’s not as if they can’t get it.”
Trump’s threats to withdraw from NAFTA and the U.S.-Korea Free Trade Agreement have “generated a response that I don’t think that he fully expected,” said Kent Bacus, the international trade director at the National Cattlemen’s Beef Association.
“It’s been difficult, to be honest with you, because even though we have a lot of support from people within the Trump administration, President Trump has made statements that obviously have caused us a lot of concern,” he said.
Bacus said his group’s lobbying effort had “evolved” from simply reminding the administration of the positive benefits of trade to strongly opposing the administration’s positions.
“People are just shocked and kind of angry that the [ag] sector is not being taken very seriously or that these administration officials who prided themselves on understanding business and being business-friendly are dismissing the massive costs [of NAFTA withdrawal] at a time of low commodity prices and a really hurting ag sector,” said another agriculture industry consultant.
Agriculture Secretary Sonny Perdue — one of the industry’s few allies in the administration — recently acknowledged Trump’s “bombastic” statements on trade during a meeting with farmers in California, but he still predicts a positive outcome from the NAFTA talks.
“The president is determined to get a better deal for American agricultural producers. At the end of the day I think he will achieve that,” Perdue said in a statement to POLITICO.
Still, the Agriculture Department is actively engaged in developing contingency plans if a NAFTA withdrawal actually happened.
“We’re talking with the administration and Congress about some mitigation efforts if that were to occur; about how we could protect our producers with that [farm] safety net based on prices that may respond negatively to any kind of NAFTA withdrawal,” Perdue told reporters this week.
Perdue acknowledged that pulling out of NAFTA could have “some tragic consequences” for U.S. producers, but added that he believed that farmers could adapt to changes in the market.
Mexico’s ‘Plan B’
Mexico, meanwhile, is moving forward with its “Plan B,” which involves accelerating trade deals with other countries and establishing new buyer-seller relationships with commodity powerhouses in Latin America like Argentina and Brazil — a specter that both shocks and haunts U.S. farmers.
The Mexican government announced last month that it would import 30,000 metric tons of Argentine wheat in December. That’s a drop in the bucket compared to the 3.3 million metric tons of wheat U.S. farmers exported to Mexico last year, but many farmers saw it as a testing of the market in anticipation of a U.S. withdrawal from NAFTA.
Stoner, the Montana wheat farmer, said his own bottom line has yet to be affected, but it would only be a matter of time once NAFTA’s benefits are gone.
“We all know the story of the little Dutch boy that had his thumb in the dike, trying to plug the leak,” he said. “This Argentine wheat is just the first trickle of water in the dike, and the dike may break loose.”
U.S. grain producers are heading to Jalisco, Mexico, to tend to their seller-buyer relationships during a conference this week, where there is sure to be talk of alternative sourcing, said Tom Sleight, head of the U.S. Grains Council.