Discussions to revamp the North American Free Trade Agreement (NAFTA) begin in one week, and Washington’s agricultural stakeholders are voicing concerns and offering suggestions to preserve keep that sector of the state’s economy.
On July 17, the Office of the United States Trade Representative (USTR) released a summary of U.S. objectives for a NAFTA rework. The document outlines changes in the current agreement and suggestions for improving relations with agricultural workers as they export their commodities among the U.S., Canada and Mexico.
Key goals while considering the U.S. agricultural sector include:
-Continuing NAFTA’s duty-free market for agricultural goods, without tariffs;
-Eliminating any remaining tariffs; and
-Reducing other limitations on U.S. agricultural exports.
In February, President Donald Trump indicated his administration would go into NAFTA negotiations with the intention of making the agreement more fair for American workers and businesses. Last month, U.S. Trade Representative Robert Lighthizer voiced the importance of a “do no harm” approach to NAFTA discussions while discussing U.S. agriculture.
“NAFTA has been very beneficial for our growers, packers and shippers, so the ‘do no harm’ approach is very positive at this point,” said Mark Powers, president of the Northwest Horticultural Council (NHC).
According to Powers, Washington exports approximately 15 percent of its apple crop and 20 percent of the state’s pear crop to NAFTA countries each year, totaling $345 million and $97 million, respectively. Also, Washington cherries sent to Canada and Mexico bring in $105 million annually.
Powers told Lens that the state’s agricultural sector is most concerned with the possibility of new taxes that could be added as a result of an updated trade deal.
“Right now, tariffs are at zero and have been for many years; we want to keep them at zero,” he said.
Any added tariffs would only increase prices for consumers and disrupt the healthy relationship between NAFTA countries and their growers across the border.
“Any time you have (taxes), it affects the volume of fruit that a consumer can buy in the aggregate. In Mexico, for instance, the pre-NAFTA tariff was 20 percent, which is a significant tax on a load of fruit.”
The tax may not be substantial on one apple, he added, but it is considerable when looking at a semi-truck full of apples crossing the border into Mexico.
Keeping tariffs out of NAFTA is important for Washington especially, as the U.S. has a long-standing position of no tariffs on apples, pears or cherries, added Powers.
“However, that isn’t the case in many other countries, and it’s the reason why agreements are important – it gives our growers, packers and shippers the ability to sell into other countries under the same type of duty-free access we already provide their growers and shippers.”
Another area of concern is a provision in the document’s “Trade Remedies” section which encourages the creation of a separate NAFTA clause related to anti-dumping and countervailing duties. Those “fair trade” provisions aim to protect domestic producers from foreign producers who are able to sell their product for less due to government subsidies. Anti-dumping is the process of placing tariffs on foreign goods that are sold below the “fair market price” of the originating country.
Agricultural stakeholders are citing concern that the change would allow producers of perishable and seasonal products to claim Canadian and Mexican imports are harming the success of their products.
“I think it could well be used to restrict our ability to ship to Mexico and Canada,” said Powers.
That objective was suggested from U.S. fruit and vegetable producers who worry about the vitality of their products under NAFTA, “but we need the USTR to be very careful about this type of language,” he added.
If implemented, the provision could make the U.S. agricultural sector vulnerable to Canada and Mexico following suit and implementing similar provisions against U.S. producers.
The same fear is shared by Frank Lyall, president of the Yakima County Farm Bureau, who told the Yakima Herald the change could allow disagreements over the trading of Mexican-sourced car parts to prompt Mexico to reduce the amount of Washington apples it imports.
“I would say, in general, there’s a bit of trepidation with any renegotiation of NAFTA,” he said. “There is some concern it could impact some agricultural trade. There’s a significant amount of uncertainty.
“Our industry is a strong industry,” said Powers. “It benefits from our location geographically and our climate. We have to be careful that whatever is in place in a trade agreement doesn’t affect our competitive advantage.”
Powers also noted that Washington’s agricultural sector is in a unique position, in that the fallout from a poorly modified agreement greatly overshadows the potential for growth in the market.
“The upside is not as strong as the downside is dangerous,” he added.
Powers added Washington growers have an important stake in the ongoing discussions, and they hope that NAFTA negotiators will not make any changes that might hurt the state’s economy or the success of agricultural producers.
The first round of NAFTA discussions will take place in Washington, D.C. from August 16-20.