New NAFTA deal feeds farmers’ Trump support
This week’s last-minute NAFTA rewrite may have solidified President Donald Trump’s support from the farmers and ranchers who made up a large part of his voting base.
Even before the announcement of the new United States-Mexico-Canada Agreement, or USMCA, the agricultural industry was feeling optimistic.
In early August — before Trump announced a deal with Mexico that squeaked by a deadline for Congress to take it up before incoming leftist President Andrés Manuel López Obrador takes office — farmers polled by one of the nation’s leading agricultural news services expressed the highest levels of optimism about their current situation since surveying began in 2010.
“I think this agreement is what we’ve been hearing from readers and from farmers out there, which is the opinion or the feeling that things are going to work out, that we will get agreements,” said Greg Horstmeier, The Omaha, Neb.based editor of DTN/The Progressive Farmer, which has more than 2 million news and data customers and polls farmers and agribusinesses three times yearly.
Sixty-two percent of rural voters turned out at the polls for Trump in 2016. Even before winning election, the Manhattan billionaire appointed a team of advis-
ers to help shape agricultural policy.
The value of U.S. agricultural trade with Canada and Mexico exploded under the North American Free Trade Agreement, with U.S. exports jumping from $8.7 billion in 1992 to $38.1 billion in 2016. So preservation of a three-way pact was a top concern.
A big piece of news had dropped just before the pre-harvest poll. As predicted in the agricultural press months earlier, U.S. Department of Agriculture Secretary Sonny Perdue was without need for congressional approval able to secure billions of dollars to subsidize losses to farmers from retaliatory tariffs.
It was widely criticized as a bailout to make up for markets cut off by Trump’s own move to slap heavy duties on aluminum and steel. Commodity groups cried for markets and not payments. But the July 24 announcement gave small and medium-sized producers in particular peace of mind.
Soybeans are a prime example. With a bumper crop and dim hopes of buyers to replace their share of the $34 billion Chinese market, Horstmeier said farmers at least “know they’ve got cash coming in.”
The fate of USMCA is far from certain. It still has to be ratified by the governments of all three countries, and the makeup of one or both houses could tip Democrat after the midterm elections.
“It’s so hard to tell,” said Belinda Román, adjunct professor of economics at St. Mary’s University. “I mean, it’s such a contentious political environment at the moment and with these elections and post-elections it seems like there’s a lot of maneuvering. Certainly I think in San Antonio that we want them to support, it but I guess we just don’t know.”
The San Antonio Chamber of Commerce was among trade organizations and politicians issuing a flurry of news releases praising the survival of a pact that President Donald Trump once campaigned against. NAFTA was ceremonially signed in San Antonio and is seen as key to the economic development in the city as well as the rest of Texas.
“In fact, Texas sells $27 billion in goods and service to Canada, with top exports being oil and machinery, both of which closely affect our local economy,” said Chamber CEO Richard Perez. “This Chamber has been advocating for an updated NAFTA for more than two years, and it looks like a trilateral agreement will finally become a reality.”
While the Chamber also supported the bilateral agreement with Mexico announced on Aug. 27, there was doubt a pact without Canada would pass muster with northern state Democrats.
Trump on Monday said a key win for U.S. negotiators was increased access to Canadian dairy markets under the USMCA, something sorely wanted by northern dairy states amid a glut of production. The National Milk Producers Federation estimated the cost of tariff conflicts could cost the industry more than $1.5 billion by the end of this year.
“In the dairy industry we’ve enjoyed bipartisan support to address the Canadian dairy policy and make modifications to it to create more of a level playing field,” said Michael Dykes, CEO of the International Dairy Foods Association. “New York Gov. (Andrew) Cuomo, Minority Leader Chuck Schumer, Wisconsin Gov. Scott Walker and Speaker Paul Ryan from Wisconsin have all been in support in and urging the administration to address the Canadian policy issues whenever they renegotiate the NAFTA agreement.”
The dairy deal provides additional market access to up to 3.59 percent of the Canada’s dairy market and phases out milk classifications seen as underselling foreign producers.
Pierre Lampron, president of the Ottawa-based Dairy Farmers of Canada, bemoaned it, saying “We fail to see how this deal can be good for the 220,000 Canadian families that depend on dairy for their livelihood.”
A Bank of America Merill Lynch Global Research report said this will increase exports to Canada by $70 million, a small amount considering U.S. dairy exports were $5.5 billion in 2017.
Dykes said maintaining exports to Mexico, the top buyer of American dairy exports, was crucial.
“Twenty-five percent of our exports go to Mexico,” he said. “So we need to get our agreements solidified and remove any of the uncertainty in the marketplace.”
Texas is the nation’s sixth leading producer of dairy, most in Central and Northern regions less subject to summer heat and humidity.
But its main agricultural exports to Mexico and Canada include cotton, corn, grain and feed, rice and beef.
“It just brings a lot of certainty on the main markets and the main trading partners for the U.S.,” said Luis Ribera, an agricultural economist with Texas A&M University . “We produce cotton that we send to Mexico, we send corn, we send rice for sure, sorghum.”
It’s not just what’s produced in Texas, Ribera said, but what comes through it. Grains come through Texas by rail and truck, and a huge complex of cold storage and trucking infrastructure for Mexican produce has been a boon for cities on the Texas side of the border.
A closer look at the hundreds of pages of text and side notes in the newly minted USMCA showed provisions that could be key to the border region and San Antonio, such as smoothing glitches at border crossings and opening service sector opportunities in all three countries.
“One of the chapters in this big story is about customs and trade facilitation, in other words moving the goods through those border areas more quickly,” Román said. “That has implications for us in San Antonio because we’re such a logistics hub.”
The United States’ vast trade in services — as of 2016 the U.S. had a $24 billion services trade surplus with Canada and a $7.5 billion services such as banking, legal, customs brokerage and information technology — also could see a boost, Roman said.
“So I think in that respect we’re seeing kind of a dynamic change,” she said. “They’re trying to open up into other areas besides our traditional agriculture.”
As for the nation’s farmers, a DTN/The Progressive Farmer Zogby Analytics poll in August had similar results to one taken weeks before the election in 2016, when Trump led candidae Hillary Clinton by nearly 2-to-1.
In the new poll, rural residents remained satisfied with Trump’s win by a margin of 54.4 percent to 35.2 percent, with more than 70 percent saying they wouldn’t have cast their votes differently. With the Midterm elections closing in, more than 72 percent of respondents said policies affecting their farms are more important than party.
“Definitely more (supportive) than the last president, because he is visiting and talking about rural America,” respondent Jeff Wuebker, a Versailles, Ohio, farmer who is past chairman of the Ohio Soybean Association said of Trump. “The world is run by those who show up.”