As North American Free Trade Agreement (NAFTA) negotiations continue, the Washington wheat industry is sharing its concerns and hopes for a revamped contract. The sector is echoing the concerns from other agricultural stakeholders to allow NAFTA to continue without too many changes.
Also this month, the U.S. and South Korea entered into negotiations for the U.S. – Korea Free Trade Agreement to ensure the powerful partnership can continue, and to keep American-source wheat prices competitive.
The industry is an important one for Washington’s economy. According to the Washington Grain Commission (WGC) website, state wheat growers in 2016 harvested 2.2 million acres of wheat, that is, 157,290 million bushels. This ranks the state fifth in the nation for wheat production. The commodity also ranks fifth-highest in production value for Washington agricultural products, making close to $600 million.
The industry also provides a total of 6,860 jobs for Washingtonians for both direct and indirect employment, according to WGC data.
Washington wheat growers produce 80 percent soft white wheat used to make cookies, crackers, cakes and noodles, according to Glen Squires, WGC CEO. The remaining 20 percent is hard red wheat used in bread.
According to Squires, approximately 90 to 95 percent of Washington-sourced wheat is exported, with about 75 percent going to Asia and another large portion to Latin America.
Squires added the Korea Free Trade Agreement plays a large role in the success of Washington exports as it “puts everyone on a level playing field” so that wheat isn’t charged extra tariffs to ship to Korea compared to Canada or other competitors.
Squires added the agreement is beneficial because it encourages an “interchange of information,” where Washington farmers are trying to provide the highest quality products that South Korea buys.
“We compete on the quality of our wheat and its reliability and supply,” said Squires. “As soon as you disrupt that and say ‘we don’t have an agreement with you,’ your wheat may have a 3 percent or 5 percent tariff… then if you are the buyer, what are you going to do? You are going to buy the cheaper wheat and suddenly it becomes a price thing, and not based on quality competitiveness.”
When it comes to intercontinental trade, Mexico was the largest market for U.S. wheat last year, up from the 2nd largest one year prior. However, Washington primarily exports to Latin America, with small portions going to Canada and Mexico.
“Some improvements can be made but we know that since NAFTA, U.S. exports to Mexico were 400 percent higher 10 years after NAFTA than 10 years prior,” he added.
Although Washington’s wheat market in Mexico is not as large as other parts of the country, Ben Conner said the industry would be concerned should the U.S. pull out of NAFTA entirely. He is Director of Policy for the U.S. Wheat Associates.
“In Washington, it’s not as big as some of the Asian markets, but certainly if the U.S. loses its largest market, then the rest of the wheat industry will have ripple effects on the Washington wheat industry as well.”
One issue for American wheat growers on the northern border is the access into Canada because of the country’s laws about the what sold into Canada.
“You could have an identical shipment of wheat that is grown in North Dakota or Washington, and if you try to deliver it to the other side of the border you will get a huge discount compared to Canadian farmers that have the same specifications as you because of that grading issue.”
For the entire country, Conner said the wheat industry is urging negotiators to allow the agreement to continue with minor tweaks.
“Don’t withdraw, keep the benefits we have in place,” he said. “There’s a lot of issues that have changed since it was originally signed… the agreement should be modernized.”
Conner said it is too soon to tell how NAFTA discussions will play out, as negotiators have hinted at pushing back the timeline into 2018.
The fourth round of discussions concluded this month, however negotiators are expressing doubt that the talks can continue on the previous schedule to finish by the end of the year. The original plan was to finish talks before the Mexican presidential election campaigns begin, but sources indicate a February 2018 completion with the possibility of 12 day breaks in between talks.
“I hope to see the president and the secretary of agriculture fulfill their pledge to do no harm to agriculture and hope to see a good agreement and outstanding issues resolved, but there are some really tough negotiation dynamics now,” said Conner.