Friday, March 31, 2017

NAFTA & Agriculture: Rhetoric, Posturing, Reality

Protesters in Mexico City hand out corn to workers and farmers in a march against spiraling food prices in 2007. Luis Acosta/Agence France-Presse — Getty Images

“Mexico’s bargaining chips with Trump: how about a corn boycott?” 

By Kate Linthicum for the Los Angeles Times, March 29, 2017

“First domesticated here 10,000 years ago, corn is not only a staple of the Mexican diet, but also a symbol of Mexico itself. Since the passage of the North American Free Trade Agreement in 1994, it has also become a symbol of Mexico’s growing economic dependence on the United States. Now, as President Trump threatens Mexico with drastic changes on trade, its leaders are wielding corn as a weapon. Mexico’s Senate is considering legislation calling for a boycott of U.S. corn, and the government has begun negotiating with Argentina and Brazil to import corn from those nations tax-free.

The threat of a boycott is Mexico’s latest and perhaps cleverest attempt to fight back against Trump, whose threats to pull out of free trade agreements and slap a 20% import tax on Mexican products have shaken confidence in Mexico’s economy.

Mexico, which exported surplus corn as recently as the early 1980s, now buys a third of the corn it consumes from the United States. Last year, it purchased $2.5 billion worth of corn from Iowa, Nebraska and other states, making Mexico the largest corn export market for U.S. farmers. Trump points to a roughly $60-billion trade deficit in Mexico’s favor as justification for a major overhaul of one of the United States’ most important and historically stable trading partnerships.

Organizers of the boycott say their goal is to highlight how much certain U.S. sectors depend on that relationship. ‘Trump says Mexico takes advantage of the U.S.,’ said Mexican Sen. Armando Rios Piter, who introduced the legislation last month after being inspired by a group of Mexican American immigrant rights activists calling for a boycott. ‘We need to make it clear how much many states win from trade with Mexico,’ said Rios, a member of the left-leaning Democratic Revolution Party. ‘It’s important that people in the Midwest know what Mexico means to them.’

Analysts say that although the proposed boycott is unlikely to pass, it is a deft political move because its biggest effects would be felt in Iowa, Nebraska, Wisconsin and other states that voted for Trump in last year’s presidential election.

For now, U.S. farmers have a clear advantage over South American sellers, thanks to proximity and a logistics system built up over decades, plus duty-free access that gives the U.S. an additional edge on prices. But elected leaders and agriculture advocacy groups in those states are now on high alert. Tom Sleight, chief executive of the U.S. Grains Council, said he was worried about a shift in Mexican corn purchases, noting that Mexican customers who met with him this month were upset with the tone of NAFTA renegotiations. ‘They want to keep it business as usual, but there’s consistent talk about a Plan B,’ he said.

In private meetings with Trump’s trade officials and in public settings, lawmakers have repeatedly warned about the potential harm to U.S. farmers should Mexico move to diversify grain imports by buying from suppliers in South America or other markets. ‘I can’t stress enough that there will be real and immediate economic consequences for farmers if we lose exports,’ Charles E. Grassley, the Republican senator from Iowa, said at a confirmation hearing this month on Robert Lighthizer, Trump’s nominee for the U.S. trade representative.” [….]

The rest of this article in the Los Angeles Times is here. 

Update: Two days later, the Times is reporting that there is presumptive evidence for the belief that the Trump administration is backing away from its earlier positions about trade with Mexico:

“Far from the sweeping trade overhaul that Donald Trump promised on the campaign trail, his administration is considering a surprisingly modest revamp of the North American Free Trade Agreement, according to a draft letter provided to Congress. The objectives outlined would bolster Trump’s emphasis on ‘Buy American,’ including giving greater preferences for U.S. companies in government procurement.

But the draft includes none of the harsh, punitive measures or steep tariffs he once threatened against Mexico. Neither does it crack down on currency manipulation or weak labor regulations, things critics of free trade in particular have long sought. The relatively minor changes to NAFTA would be a far cry from Trump’s campaign promise to dramatically reshape or withdraw from what he repeatedly called one of the worst deals ever negotiated by the U.S.

Ironically, the draft also incorporates many of the elements in the Trans-Pacific Partnership, the 12-nation trade deal negotiated by President Obama that Trump also trashed and formally withdrew from shortly after he took office. John Veroneau, a trade lawyer in Washington and former deputy U.S. trade representative in the George W. Bush administration, said the draft hardly qualifies as ‘protectionist and the first shots of a trade war. People may take issue with different items in the letter, but there’s nothing alarmist or unconventional about it.’

If the draft is adopted, its approach toward NAFTA would mark a political victory for a pro-free-trade faction that has been rising inside the Trump administration, led by former Goldman Sachs President Gary Cohn, now Trump’s top economic advisor. He and others have been seeking to temper the more protectionist policies articulated during the campaign.

White House Press Secretary Sean Spicer downplayed the significance of the draft, saying it was ‘not a statement of administration policy. That is not an accurate assessment of where we are at this time.’ Spicer suggested that there would be substantial changes in the letter after Trump’s nominee for U.S. trade representative, Robert Lighthizer, is confirmed by the Senate.” [….]

The rest of this article is here.

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