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on May 26, 2017

NPPC affirms value of NAFTA to US pork producers

The Trump administration announced plans to renegotiate the North American Free Trade Agreement.

Following a notification by the Trump administration that it will renegotiate the North American Free Trade Agreement (NAFTA), the National Pork Producers Council released a white paper on the benefits of the trade deal among the United States, Canada and Mexico.

The paper, which focuses primarily on trade with Mexico, makes the case for not abandoning the 23-year-old pact and for not disrupting trade in sectors for which NAFTA has worked well, including U.S. pork. Mexico is the No. 2 export market for U.S. pork, and Canada is No. 4.

For all U.S. goods and services, Canada and Mexico are the top two destinations, accounting for more than one-third of total U.S. exports, adding US$80 billion to the U.S. economy and supporting more than 14 million American jobs, according to U.S. government data.

Two key points of NAFTA for pork producers

While considerable attention has been given to the US$63 billion trade deficit the United States has with Mexico, NPPC’s paper highlights two key facts: When NAFTA took effect January 1, 1994, trade between the United States and Mexico was only US$50 billion each way. Last year, U.S. exports to Mexico were nearly quintuple that amount at $231 billion, and those exports supported five million U.S. jobs. While imports to the United States from Mexico were US$294 billion, those, too, supported millions of U.S. jobs. (Nearly 40 percent of Mexican imports include U.S. content.)

For U.S. agriculture, Canada and Mexico are the second and third largest foreign markets. They imported more than US$38 billion of U.S. products in 2016, or 28 percent of all U.S. agricultural exports. Those exports generated more than US$48 billion in additional business activity throughout the economy and supported nearly 287,000 jobs.

Disrupting U.S. agricultural exports to Mexico and Canada, the NPPC paper argues, would have devastating consequences for America’s farmers and for the U.S. processing and transportation industries. U.S. pork producers would be particularly hard hit.

Economic repercussions of U.S. leaving NAFTA

Iowa State University economist Dermot Hayes calculated that if Mexico placed a 20 percent duty on U.S. pork – a likely response to a U.S. withdraw from NAFTA – and allowed other countries duty-free access, the U.S. pork industry eventually would lose the entire Mexican market. That equates to a loss of 5 percent of U.S. pork production, which would reduce the U.S. live hog market by 10 percent at a cost of US$14 per hog, or a nearly US$1.7 billion aggregate loss to the industry.

“A loss in exports to Mexico of that magnitude would be cataclysmic for the U.S. pork industry,” said Nick Giordano, NPPC’s vice president for global government affairs, in a press release. “Pork producers will support updating and improving NAFTA but only if duties on U.S. pork remain at zero and pork exports are not disrupted.”

The NPPC paper also notes that NAFTA has provided benefits beyond trade, including improved relations with Canada and Mexico, better regional investment and supply chains, increased cooperation with Mexico in fighting drug trafficking and terrorism and greater political stability in that country.

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