[CTC] Pieces on NAFTA, ag & ranching

Tue Dec 5 12:17:26 PST 2017

Op-eds from IATP’s Karen Hansen-Kuhn and R-CALF’s Bill Bullard below…

http://thehill.com/blogs/congress-blog/politics/363248-the-real-question-on-nafta-and-agriculture <http://thehill.com/blogs/congress-blog/politics/363248-the-real-question-on-nafta-and-agriculture>

The real question on NAFTA and agriculture
BY KAREN HANSEN-KUHN, OPINION CONTRIBUTOR — 12/05/17 10:50 AM EST 0 <http://thehill.com/blogs/congress-blog/politics/363248-the-real-question-on-nafta-and-agriculture#bottom-story-socials>
THE VIEWS EXPRESSED BY CONTRIBUTORS ARE THEIR OWN AND NOT THE VIEW OF THE HILL

Agribusinesses and commodity groups have been raising alarms lately about the potential impacts of withdrawal from NAFTA, at a time when farmers are already reeling from low prices and falling incomes. Unsurprisingly, the Trump administration has not yet conducted any analysis of what NAFTA withdrawal would mean for agriculture or other sectors. Instead, we are left to wonder if the threat of withdrawal is a bluff or a real possibility. The focus should be on the rules we need for fair and sustainable trade and food systems.

The companies are worried that Mexico would raise tariffs to levels that would make U.S. exports more expensive than similar goods from competitors in Brazil, Argentina or elsewhere. It is also possible that ending NAFTA would disrupt the highly integrated supply chains for meat and feed and generally lead to greater uncertainty over investment decisions.

These are real concerns, but the focus on increasing exports to solve the ongoing farm crisis is dangerously incomplete. NAFTA began just before the game-changing 1996 Farm Bill. U.S. farmers were promised that past policies that set floor prices and managed supply were no longer necessary: Instead, they were encouraged to expand production and export their way to prosperity. Crop prices plunged almost immediately following the ’96 Farm Bill, and since then prices have been volatile, but mostly low. The Institute for Agriculture and Trade Policy has calculated the extent of dumping of major commodity crops, i.e., exports at below the cost of production. As of 2015, U.S. corn was exported at 12 percent below the cost of production. Since NAFTA, more than 2 million Mexican farmers, unable to compete with these cheap imports, have been driven off their land. At the same time, more than 200,000 small and medium scale U.S. farmers have left agriculture since NAFTA, while corporate concentration in seeds, processing and other aspects of production increased dramatically.

The disruption of NAFTA withdrawal could affect family farmers on both sides of the border. Under WTO rules, Mexico has the right to raise tariffs substantially on many farm goods. The U.S. has mostly committed to lower tariff ceilings, but there are some exceptions, such as imports of red meat, for which the U.S. currently applies a 18 percent tariff on imports from non-NAFTA countries. However, both countries could decide to apply tariff rates (which would apply to all trading partners) that are much lower than the ceilings they have committed to under the global trade rules.

In any assessment of NAFTA, it’s important to recognize that family farmers’ interests aren’t the same thing as agribusiness interests, in the same way that an auto worker’s interests don’t necessarily mesh with the auto company. The worker, like the family farmer, wants decent compensation for their efforts (although the vagaries of climate change and price volatility make farming an even riskier business). The company may be interested more in maximizing profits, no matter where the workers or farmers are located. It’s telling that many of the companies producing fruits, vegetables and meat are indifferent about where that production is located — in fact nearly all of our major meat, grain and vegetable producers operate in multiple NAFTA countries. Among these companies’ priorities are “harmonizing” food safety rules, approvals of new genetically engineered foods and common organics standards among the three countries. 

The real question is not NAFTA or no NAFTA but what trade rules do we need to achieve fairer, more sustainable food and farm systems. Civil society organizations have raised consistent proposals for different economic relations among our countries for decades. In January, several U.S. family farm groups presented a NAFTA proposal that started with a better, more transparent negotiating process and the elimination of investor-state dispute settlement (which enables private investors to sue governments over public interest laws). In addition, the groups argued for new approaches to existing problems, such as restoring Country of Origin Labeling for meat and finding new ways to address dumping of farm goods. They also called for the exclusion of potentially dangerous elements of the Trans-Pacific Partnership that would limit farmers’ access to seeds and streamline agricultural biotechnology processes. Mexican and Canadian groups have presented similar proposals for a very different approach to trade.

NAFTA has failed family farmers on both sides of the border. It is important to achieve a better agreement that is coupled with a better Farm Bill. The agreement should not solely be assessed by how it affects agricultural exports by multinational agribusiness firms, but instead for its overall impacts on farmers, rural communities and our economies.

Hansen-Kuhn is director of trade and global governance at the Institute for Agriculture and Trade Policy.

http://thehill.com/blogs/congress-blog/politics/363247-to-help-ranchers-us-should-change-naftas-rule-of-origin <http://thehill.com/blogs/congress-blog/politics/363247-to-help-ranchers-us-should-change-naftas-rule-of-origin>

To help ranchers, US should change NAFTA’s rule of origin
BY BILL BULLARD, OPINION CONTRIBUTOR — 12/05/17 08:45 AM EST 6 <http://thehill.com/blogs/congress-blog/politics/363247-to-help-ranchers-us-should-change-naftas-rule-of-origin#bottom-story-socials>
THE VIEWS EXPRESSED BY CONTRIBUTORS ARE THEIR OWN AND NOT THE VIEW OF THE HILL

The renegotiation of the North American Free Trade Agreement (NAFTA) has quieted the mantra that all free trade agreements are good for America. Consequently, we now can analyze NAFTA’s impact on the largest segment of American agricultural, the U.S. cattle industry. A focus on the U.S.-Mexico portion of that agreement reveals President Trump should expand his NAFTA negotiating objectives.

American agriculture is divided into two distinct segments. The first consists of actual farmers and ranchers who grow and sell livestock and raw commodities, such as cattle and wheat. The second consists of industrial processors and meatpackers who buy those raw commodities and livestock and manufacture them into food products, such as a bag of flour or a beef roast.

America’s farmers and ranchers are, therefore, the domestic supply chains for America’s industrialized food processors and meatpackers. Unsurprisingly, there is often an inverse relationship between profits at the supply chain level and profits at the manufacturing level.

Consistent with the World Trade Organization’s objective to create global supply chains so multinational manufacturers can declare their goods “Made in the World,” rather than assigned a country of origin, NAFTA, too, was designed to expand cattle supply chains beyond domestic borders, albeit regionally, and make them indistinguishable components of the final food product.    

Four giant meatpackers control market access for 85 percent of the nation’s fed cattle sold by American ranchers. This level of concentration is among the highest of any industry in the U.S. and exceeds levels known to elicit noncompetitive conduct and poor economic performance.

This is the hand dealt to America’s 729,000 widely dispersed and mostly family-owned cattle ranchers who market about 24 million fed cattle annually, about 20 million of which are sold to meatpacking giants Tyson, JBS, Cargill and National Beef.

The interplay between these meatpackers’ market dominance replete with their NAFTA-expanded supply chains and America’s family-owned ranches is often hidden by the meatpacking lobby’s glib talking points in support of making no substantive changes to NAFTA.

Those talking points include:  the cattle and beef industries in North America are highly integrated and must be considered as one; Canada and Mexico are among the United States’ four largest beef export customers; and, “beef is beef, whether the cattle were born in Montana, Manitoba or Mazatlán.”

However, in the trade of cattle and beef (including beef variety meats and processed beef), the U.S. has performed poorly under NAFTA, generating a cumulative deficit of nearly $30 billion. The average annual trade deficit is about $1.3 billion, though in recent years it has been north of $2 billion.

Until 2012, the U.S. generally maintained a surplus in cattle and beef trade with Mexico, which buffered the persistent deficit generated between the U.S. and Canada. Since 2012, however, the U.S.-Mexico deficit has burgeoned, reaching over $900 million in 2015.

Because NAFTA’s rule of origin essentially states the origin of beef is the country where the animal was slaughtered, meatpackers use their access to Mexico’s cattle supply chain to leverage down prices paid to American ranchers, even during years when the U.S.-Mexico trade balance was favorable. 

Mexican cattle imports average over 1 million head annually under NAFTA. Prices paid to American ranchers are highly sensitive to changes in supplies, so these imports reduce domestic cattle prices. These imports are also cheaper; in 2016 they sold for about $70 per head less than domestic cattle. This further depresses domestic prices. The first negative impact on American ranchers is that this influx of cheaper-priced Mexican cattle effectively lowers the value of domestic cattle.

The second negative impact occurs when meatpackers slaughter those cheaper Mexican cattle in the U.S. and declare the resulting beef a product of the USA. This USA-labeled Mexican beef remains undifferentiated from genuine USA beef when sold to consumers. Yes, NAFTA allows meatpackers to buy cheaper Mexican cattle and then exploit the good name and reputation of the American rancher by selling the resulting beef to consumers as if it were produced exclusively in America.

The third negative impact occurs when the meatpackers export that USA-labeled Mexican beef. Because the Mexican supply chain is undifferentiated from the U.S. supply chain, the meatpacker does not have to share the increased export profits with American ranchers.

America has lost 177,000 ranches and 82,000 small cattle feeders since NAFTA. This is largely the result of the increased market power that NAFTA accords giant meatpackers by authorizing them to seamlessly access foreign supply chains and deceptively label foreign beef as an American product. 

To reverse the harm NAFTA has wrought upon America’s cattle ranchers, President Trump should change NAFTA’s rule of origin to require the origin of beef to be the country(s) where the animal was born, raised and slaughtered and to require all beef to be labeled accordingly when sold to consumers both here and abroad. 

Bill Bullard is CEO of R-CALF USA.

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.citizenstrade.org/pipermail/ctcfield-citizenstrade.org/attachments/20171205/3fa0d277/attachment.html>