By Dudley Althaus and Santiago Pérez in Mexico City and William Mauldin in Washington
U.S. agricultural producers are lobbying hard on both sides of
the Mexico border to try to ensure that a renegotiation of the
North American Free Trade Agreement doesn't turn U.S. farm exports
into collateral damage.
Farm groups are making their case in Washington in the hopes
that changes to the 23-year-old trade deal don't hurt what has
become the No. 1 market for many U.S. grain, meat and dairy
products, often from states that supported President Donald Trump
in the election.
Agriculture groups have also been flocking to Mexico in recent
weeks to strengthen ties with clients and the government amid
rising concerns that Mexico could slap retaliatory tariffs on goods
if the U.S. pulls out of Nafta.
Mexico Foreign Minister Luis Videgaray raised that threat last
month, saying that retaliatory duties could be used as a response
to unilateral trade barriers. In 2009, Mexico did just that:
following a dispute over allowing Mexican trucks to cross the
border, Mexico put import tariffs on up to 99 products, affecting
some $2 billion in U.S. farm exports.
"We've got to have export markets, it's that simple. We can't
survive without them," said Phillip Councell, chairman of the U.S.
Grains Council, a Washington-based organization which promotes
grains exports. Mr. Councell, who farms nearly 2,000 acres of grain
and vegetables in eastern Maryland, was part of a delegation that
visited Mexican officials and clients in mid-March.
Mr. Trump has called Nafta -- which also includes Canada -- "the
worst trade pact" the U.S. has ever made, saying it is responsible
for millions of factory jobs being lost to Mexico. He has said that
he expected talks to begin this year, and that they would either
revamp the pact in favor of American workers or he would scrap it
altogether.
Mr. Trump has also asserted his support for U.S. farmers. "As my
Administration fights for better trade deals, agriculture will be
an important consideration so that its significant contributions
will only increase in the years ahead," he wrote on Tuesday.
Nafta has greatly aided the industrialization of Mexico as U.S.
firms built factories to supply American consumers. But Mexico also
made significant concessions in the pact by opening its markets to
more efficient U.S. and Canadian farmers -- at the expense of many
poor, small Mexican farms.
U.S. farm imports are now critical for Mexico's food supply,
providing all of the country's corn and sorghum imports, for
example.
Mexico has about a $60 billion trade surplus with the U.S.,
mostly due to manufactured products such as cars. In turn, Mexico
enjoys a surplus of $7 billion in agricultural products, providing
U.S. consumers with winter vegetables such as tomatoes and
fruits.
U.S. farmers have expressed concerns about Mr. Trump's trade
agenda and its focus on manufacturing. This month, 11 major farm
groups met with Gary Cohn, director of the National Economic
Council, a White House office that advises the president.
"Our big concern is touching Nafta at all: It's hard for us to
improve on our access to Canada and Mexico," said Kent Bacus,
director of international trade and market access at the National
Cattlemen's Beef Association.
The White House and the U.S. Trade Representative declined to
comment on the farmers' message about Nafta.
Commerce Secretary Wilbur Ross, during his confirmation hearing
earlier this year, suggested the U.S. has the upper hand. Since
many trading partners depend on food imports, the U.S. can use its
competitive edge in agriculture in trade talks, he said.
But the U.S. farm lobby wants the administration to remember
that Mexico has leverage, too. With the productivity of U.S.
agriculture growing faster than domestic demand, the sector relies
heavily on exports to sustain prices and revenue.
U.S. farm exports to Mexico totaled close to $18 billion last
year, according to U.S. trade figures, compared with $4.2 billion
in 1994, the year Nafta was signed.
Mexico is also seeking to lessen its dependence on U.S. farm
products as Nafta talks loom. "We have increased and accelerated
our visits to countries for the purpose of quickly further
diversifying Mexican imports," Secretary of Agriculture José
Calzada Rovirosa said recently in announcing trade missions to Asia
and Europe.
U.S. lobbyists said their meetings with Mexican officials were
constructive and that local clients seemed reassured. Mexico's
Economy Ministry, which leads Nafta's renegotiation, declined to
comment on the talks with these groups.
Should talks on Nafta break down, Mexico's retaliatory tariffs
in 2009 are an example of what could happen. Mexico imposed the
tariffs after it won a Nafta dispute resolution that the U.S. had
unfairly blocked Mexican trucks from U.S. roads.
Though the $2 billion of targeted goods -- including Oregon
Christmas trees, certain California fruits and frozen ham --
represented a fraction of total bilateral trade, they were
carefully chosen to have an impact on certain congressional
districts, to put pressure on the U.S. to comply with the
ruling.
"The products were chosen in a political way," said Luis de la
Calle, a former Mexican official who participated in the
negotiations to create Nafta. The retaliatory measures forced the
U.S. government to change its policy. "The lesson is very clear:
retaliatory measures work."
Tom Vilsack, president of the U.S. Dairy Export Council and the
Obama administration's agricultural secretary, said producers are
working to convince U.S. legislators and policy makers that the
possibility of a punitive reaction on agriculture exports is
real.
"If we do our jobs, we should hopefully avoid ever putting the
Mexican government in a position where they feel compelled to take
a look at a reaction," he said after a day of meetings with clients
and authorities in Mexico City.
--Jesse Newman contributed to this article.
Write to Dudley Althaus at Dudley.Althaus@wsj.com and William
Mauldin at william.mauldin@wsj.com
(END) Dow Jones Newswires
March 25, 2017 08:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.