Farm commerce in peril
NAFTA changes could imperil farm exports and thousands of jobs
Arizona’s $3.7 billion agriculture sector faces lower exports and big job losses if NAFTA is scrapped or if trade tensions escalate, analysts predict.
Arizona’s $3.7 billion agriculture sector faces lower exports and job losses if NAFTA is scuttled or if recent trade tensions worsen, industry experts say.
If a full-scale trade war breaks out, consumers here potentially could face higher costs at the grocery store for produce and other items.
Representatives of the U.S., Canada and Mexico have been meeting for months to renegotiate terms of the North American Free Trade Agreement. President Donald Trump elevated trade tensions to new levels this week, signing proclamations Thursday imposing tariffs on steel and aluminum imports.
Arizona is far from a top agricultural state but nevertheless sold $881 million worth of farm and ranch products to other nations last year, according to a conservative estimate of exports from the U.S. Commerce Department. Canada and Mexico, America’s two partners in the North American Free Trade Agreement, bought 39 percent and 22 percent of the total, respectively.
The Arizona Farm Bureau, which cites a broader measure of Arizona agricultural exports of about $1.5 billion from the U.S. Department of Agriculture, said it is especially concerned about any disruption of trade with Canada and Mexico.
In statements from the White House, Trump said his tariff plan exempts Canada and Mexico, pending the outcome of ongoing trade negotiations, and allows other countries to apply for relief from the new duties.
The Arizona Farm Bureau had hoped for those exemptions, saying agriculture is an “easy target” for retaliatory tariffs imposed by other nations.
“We need the White House to back off tariffs altogether,” Stefanie Smallhouse, the bureau’s president, said in a statement. “We already have instability in the renegotiation of NAFTA and our exit from (the Trans-Pacific Partnership)
negotiations. I’m not sure how many hits we can absorb.”
The value of direct Arizona agricultural exports have more than tripled from $268 million in 1999, the earliest year tracked by the International Trade Administration of the U.S. Commerce Department.
Canada and Mexico also were the two top export markets for Arizona agriculture back in the 1990s. NAFTA took effect in 1994.
President Trump’s trade policies have largely focused on industrial goods such as automobiles, with special criticism of China. But a trade war also could spread to other products.
For Arizona agricultural goods, Canada and Mexico are by far the biggest buyers, followed by Saudi Arabia, Italy and then China.
Arizona’s most valuable farm and ranch commodities, for export and domestic consumption, include vegetables/melons, milk and cattle, with all three categories each valued at $700 million or more, according to the U.S. Department of Agriculture.
Other high-value products include hay, nursery plants/flowers and cotton. Arizona ranks among the top 10 states in the value of vegetables/melons grown and cotton produced.
California is the top agriculture state, with $42.6 billion in production last year. Arizona ranked 32nd. Still, tens of thousands of Arizona jobs are tied to agriculture — not just those directly on farms and ranches.
Employment extends to industries ranging from transportation and packaging to retail, insurance and finance.
More than half of Arizona’s nearly 20,000 farms and ranches are owned by Native Americans.
In addition, Arizona consumers have benefited from global trade by paying lower prices for many agricultural products, while gaining year-round availability of once-seasonal items such as strawberries, grapes and flowers.
“Why does that happen? Because of good food trade relationships,” said Jaime Chamberlain, co-owner of J-C Distributing, a produce-import business in Nogales. “Virtually nothing is out of season anymore.”
American consumers pay some of the world’s lowest food costs, he added.
While the threat of a full-blown trade war still appears remote, retaliatory tariffs against Arizona and U.S. agricultural exports could make those items more costly and harder for farmers here to sell in other nations.
If the U.S. retaliated with its own tariffs, that could drive up the prices of foreign imports such as produce, boosting grocery-store inflation.
At any rate, many Americans don’t perceive the benefits of lower-cost agricultural importsor give them the same weight as high-visibility manufactured items — and the job losses associated with them.
“People are more concerned about TVs and cars and less concerned about toys, clothing and agriculture,” said Frank Luntz of Luntz Global Partners, a Las Vegas company that gauges public opinion on trade and other issues.
Even residents of Arizona and other states that lack much of an auto industry, for example, “still care what happens in Michigan, Indiana and Ohio,” said Luntz, who spoke recently at a NAFTA conference hosted by Arizona State University.
“There’s a romanticism about manufacturing that persists.”
But even Arizona could suffer from trade disruptions.
Two studies released in November, one from BMO Capital Markets and the other from the U.S. Chamber of Commerce, both ranked Arizona as ninthmost vulnerable among the states if NAFTA unraveled.
One study estimated that up to $5 billion of Arizona exports, equivalent to 1.6 percent of state gross domestic product, could be at risk, while the other suggested up to 236,000 jobs here are threatened.
Among the four states that share a border with Mexico, Arizona is secondmost vulnerable after Texas, both studies concluded. Along with agricultural products, other Arizona exports at risk if NAFTA were canceled include computer products, electronics, engines/ turbines and metals.
Canada, the largest trading partner of the U.S. and the top export market for Arizona, generally is viewed favorably by Americans, Luntz said.
The public’s perception of Mexico is lower, partly driven by immigration issues, with the real animosity directed against China, he said. That’s primarily because of that country’s huge trade surplus with the U.S.
“The concern about China has been getting angrier and more frightening,” Luntz said. “People see trade tied up with national destiny, and they wonder who will control our fate — China or the U.S.?”