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U.S. NAFTA objectives begin to focus the trade picture

Free Market Reflections with Steve Dittmer

Ever since President Donald Trump’s election, cattlemen on both sides of the border have worried about the NAFTA agreement that has governed trade among the U.S., Canada and Mexico since 1994.

Trump has called NAFTA the worst agreement the U.S. ever signed. In early conversations, Trump told Prime Minister Trudeau that very little of the negotiations would affect Canada. Since then, the Trump administration has initiated kerfuffles with Canada over softwood lumber and dairy imports. And while some Trump advisers have maintained free trade stances, protectionist advisers like Peter Navarro are still on the team and the U.S. Trade Representative appointed by Trump comes from a tradition of supporting steel tariffs.

One issue common to the Trump trade team, as befits an administration of businessmen, has been the goal to “improve procedures to resolve trade disputes,” regarding NAFTA or any future trade negotiations with China. They are interested in “very specific, very tangible achievements,” rather than big, ceremonial meetings and proclamations that have no teeth. They have also expressed an interest in speeding up WTO procedures: or “internal reform,” as Commerce Secretary Wilbur Ross termed it, not to “blow up the whole system.” Both U.S. and Canada officials have expressed frustration in the past by the glacial pace of WTO resolution procedures. The resolution of the mCOOL issue is a prime example. By the time it was decided, some folks couldn’t remember what the fight was about.

Speaking of mCOOL, R-CALF is taking another legal run at USDA, plus a political plea to the Trump administration, to have COOL regulations included in the next NAFTA. Our political sources in Washington indicate neither the Trump administration nor congressional committee chairmen have shown any interest. The concern can’t be totally dismissed given R-CALF’s past successes in Washington, so we will keep an eye on that effort.

We’ve also seen that the Trump team likes to resolve smaller issues that might get in the way of a larger agreement ahead of time. That has been their pattern with sugar and Mexico and softwood lumber and Canada. Ross noted the sugar issue was resolved without rancor. The tactic doesn’t appear to have been as successful with softwood lumber.

Before the U.S. posted its objectives of the NAFTA negotiations, we had hoped meat and livestock would hardly make the list. After all, there are no real restrictions left to fix. Ross mentioned a need to deal with industries “barely talked about” in the original such as digital economy, natural resources and financial services. Some NAFTA manufacturing provisions were “totally obsolete.” The “rules of origin” provisions of the automotive section, for example, are conceptually good but with new technology, “half of those parts aren’t even used in cars anymore.” (“Wilbur Ross Talks Trade,” Wall Street Journal, June 19, 2017).

Ross still talks about trade deficits, an issue we wish the administration would just forget. Trade between two countries is never going to be perfectly split. One country will end up with more “stuff” and the other will have more cash. So? The split will be a reflection of the resources, capabilities and wants of the citizens of each of the two countries at any point in time. That is the people of both countries expressing their purchasing desires through the markets and trade. Those desires should not be overridden by government edicts or by some government balancing mechanism.

The chief balancing force for agricultural producers in both Canada and the U.S. is the fact they must have export markets to survive. Canada’s need will be at a higher percentage of production than the U.S. and, therefore, even more pressing. U.S. corn farmers will feel pressure on that market more intensely. Beef industries on both sides of the border are seeing expanded demand for grainfed beef in the world and certainly don’t want to slow the momentum.

In mid-July the speculation was over as the U.S. Trade Representative Robert Lighthizer released 15 pages of negotiating objectives for renegotiating NAFTA. Fortunately for cattlemen on both sides of the border, the section on “Agricultural Goods” took up less than half a page. Perhaps reflecting the voluminous communications from U.S. farmers and ranchers, the first bullet read “maintain existing reciprocal duty-free market access for agricultural goods.” After three bullet points not relevant to livestock and meat, the last point described a process often quoted by Canadian trade officials, “promote greater regulatory compatibility to reduce burdens associated with unnecessary differences in regulation” or in Canadian-speak — harmonization.

That was it for the specific objectives for agricultural negotiations, although another half-page dealt with sanitary and phytosanitary measures, which often affect livestock trade. In general, the section calling for new mechanisms and rules based on science, good regulatory practice, import checks, equivalence and regionalization, while being transparent and non-discriminatory, improving communication, consultation and co-operation between governments. Discussing and dealing with new issues, including new technology, should be done expeditiously and barriers that block trade removed.

One never knows how games or wars will go after the puck drops but at least it appears the Trump administration has listened to the advice of U.S. agriculture that they “do no harm” to a trade agreement that has worked so well for agriculture in both the U.S. and Canada.

About the author

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Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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