Arkansas officials hopeful for an agri-friendly NAFTA renegotiation

Gov. Asa Hutchinson has submitted letters to the president encouraging favorable positioning of agriculture during efforts to rewrite trade deals, Arkansas Farm Bureau President Randy Veach said.

Trade has been a hot-button issue as President Donald Trump’s administration renegotiates the North American Free Trade Agreement. One-third of Arkansas’s nearly $16 billion agriculture economy is generated through exports. Arkansas enjoys a net-plus trade deficit with Canada and Mexico, one of the few states to do so.

“Canada and Mexico are our largest trading partners,” Veach said. “These neighbors are vital to farmers and ranchers. We agree that some changes need to be made with NAFTA, but we are hesitant to disrupt the flow of U.S. farm products to our neighbors to the north and south.”

More than $1.8 billion in Arkansas agriculture exports went to Canada and Mexico in 2016. The countries are the Natural State’s two top trading partners. Arkansas exports $1.4 billion in goods to Canada annually, and trade with Canada supports nearly 67,000 Arkansas jobs. About $400 million worth of goods is exported to Mexico, and trade between the state and that country is growing 3.6 times faster than with any other country.

Since NAFTA began, trade between the two has grown by 700%. Arkansas’ NAFTA exports include $167 million in poultry and eggs, about $127 million in meat products, and $82 million in grain exports. Estimates show that more than 100,000 Arkansas jobs are supported by trade with NAFTA partners.

Arkansas exports more than $3.3 billion in agricultural products each year. Soybeans and soybean products ($1 billion), rice and processed foods ($768 million), broilers ($344 million) and forest and paper products ($312 million) are the primary agriculture-related exports. About 50,000 jobs in the timber, paper, and processed foods sectors in the state are reliant on foreign investment from those two countries.

Other free-trade agreements need to be sought in addition to NAFTA, Veach said.

“Arkansas agriculture’s trade needs extend beyond successful steps with regard to NAFTA,” Veach said. “There are meaningful discussions surrounding the South Korea-U.S. Free Trade Agreement (KORUS) that was first enacted in 2012, which made South Korea our fifth-largest agricultural export market. And, the U.S. government needs to be more active in pursing bi- lateral trade agreements, those agreements between the U.S. and one other country. Those tend to be a bit easier to negotiate. We believe that Arkansas farmers and ranchers are among the most efficient and effective in the world, and we simply want the opportunity to sell our products in a manner that benefits our farmers and other countries.”

According to a study by ImpactECON, if Canada, Mexico, and the United States return to “most favored nation” (MFN) tariff rates upon any withdrawal from NAFTA, the negative impact on the United States will outweigh any benefits from higher U.S. tariffs, including a net loss of 256,000 U.S. jobs, a net loss of at least 50,000 jobs in the U.S. food and agriculture industry, and a drop in GDP of $13 billion from the farm sector alone. NAFTA withdrawal would also disrupt critical industry supply chains, close markets, eliminate jobs, and increase prices for the basic needs of American consumers.

A coalition of 85 agriculture-related organizations recently sent a letter warning U.S. Secretary of Commerce Wilbur Ross about the negative impacts of withdrawing from North American Free Trade Agreement (NAFTA). Coalition members represent 21 million jobs nationwide or 20% of the U.S. economy. In 2015, the U.S. held a 65% market share of the agricultural products exchanged under the agreement, and in 2016 more than $43 billion worth of food was exported to those countries. American food exports to Canada and Mexico have increased by 450% since the deal was adopted in 1994. Input costs have been reduced as a result of the agreement, and traditional trade barriers were eliminated.

NAFTA may have been beneficial to agricultural commerce, but others argue it has caused wage stagnation and significant job losses in other sectors. Since the agreement’s inception, the U.S. auto industry has lost 350,000 jobs, while the number of auto workers in Mexico ballooned from 120,000 to 550,000 workers, according to the Council on Foreign Relations. Econometric research shows expanded trade has stifled wages for non-college educated workers. Those workers directly compete for jobs with workers in Mexico who are often paid much lower wages, according to CFR.

At least 5 million U.S. manufacturing jobs have been lost since NAFTA was signed, according to the Economic Policy Institute. Not all those jobs can be directly linked to NAFTA, but a significant number can. Those displaced workers earned on average $40,154, according to a study conducted by the Brookings Institution. Those wage rates plummeted to $32,123 when those workers found new jobs. Wage levels in the U.S. have risen less than 1% during the first 19 years of the agreement, median wage is essentially the same as it was in 1979.

Negotiations have been ongoing, with a series of meetings this year. A timetable for a decision on changes to NAFTA, or the United States’ potential exit, has not been released by the Trump administration.