BURGERS HANG IN THE BALANCE
Fries from the north, tomatoes from the south — future costs of your favorite combo meals could be affected by current trade negotiations
Few meals are more American than a burger and fries, the combo McDonald’s made globally famous. But few Americans probably realize howmuch the affordability of that classic meal depends on a free-trade agreement.
French fries from Canada. Tomatoes from Mexico. Beef sourced froma supply chain that crosses all three countries. When it comes to dinner, there’s plenty at stake in the North American Free Trade Agreement, whose future was being negotiated at a sixth round of talks in Montreal on Monday.
Negotiators from Mexico, Canada and the United States expect to spend several more months working to revise the treaty after President Trump repeatedly threatened to withdraw. NAFTA has allowed billions of dollars of agricultural commodities to travel each year among the three countries.
Without NAFTA, many economists say, the price of some consumer goods would probably go up. Those include a handful of foods that could face tariff increases, supply chain disruptions and new protectionist trade barriers. While no one can predict exactly how these mechanisms would play out, they underscore the enormous complexity of the North American food system.
To understand the range of factors at play, consider the hamburger.
There’s a reason Canadian poli--
ticians have hyped the burger as an example of NAFTA’s universal benefits: Ground beef is the end product of a highly- efficient, integrated international system.
U. S. farmers ship corn for cattle feed to Mexico and Canada. Mexico and Canada ship cattle - 1.7 million in 2016 - to the United States for slaughter. And the United States ships finished steaks and burgers back to its neighbors.
While the United States both produces and processes most of the beef in this system, the supply chain is highly specialized by country and attuned to changes across the market. That’s why economists fear that if NAFTA ends, the system that gives us ground beef could be disrupted by tariffs.
Karen Hansen- Kuhn, the director for trade and global governance at the Institute for Agriculture and Trade Policy, points to one figure: Under its commitments to the World Trade Organization, Mexico can tax imported corn at rates of up to 37 percent - an increase that could echo throughout the system.
You can’t have a burger without fries, and Canada produces tons of them. While the United States grows and processes most of the potatoes it consumes, the country has
“We believe NAFTA is an exemplary example of the benefits of trade to everyone.” — Ramón Paz-Vega, chairman of Mexican trade association Avocados from Mexico
grown increasingly dependent on its northern neighbor to back-fill the growing domestic market. U. S. demand for fries is increasing, said Kevin MacIsaac, the head of the United Potato Growers of Canada. At the same time, domestic potato production is down 2 percent, and processors have been hampered by the delayed opening of several new processing plants.
But Canadian fries may grow more expensive should NAFTA end and the United States fall back on the tariff rates it charges othermembers of theWTO. That rate is set at 8 percent for frozen potatoes.
Condiments could also face tariff increases. The United States does not import many finished cucumber pickles from Mexico - but in 2016, it did buy $176million in vinegar-preserved veggies, including jalapeños, pimentos and cactus pads, or nopalitos.
U.S. farms also grow jalapeño peppers, of course. But the bulk of their production typically goes to the fresh market, according to the Vegetable Research and Information Center at the University of California Davis.
When it comes to tomatoes, avocados and other freshMexican produce, the issues under NAFTA grow more complex.
While imported fruits and vegetables don’t face particularly high tariffs in the United States, there’s some anxiety among U. S. importers and Mexican farming groups that the country could impose new anti-dumping and countervailing duties on them.
These tariffs are meant to raise the price of imported foods that U. S. officials believe are being sold below their fair-market value. NAFTA includes special mechanisms for resolving anti- dumping conflicts and avoiding duties, said Cullen Hendrix, who heads the Project on Environment, Food and Conflict at the University of Denver - but without the agreement, Hendrix said, U. S. growers could push for measures that protect their crops against Mexican competition.
Ultimately, this could affect the price and availability of Mexican produce, especially during certain seasons.
“We are concerned and worried about any disruption to the supply chain,” said Ramón Paz-Vega, the chairman of Avocados from Mexico, a Mexican trade association. “We believe NAFTA is an exemplary example of the benefits of trade to everyone.”
Last but not least, think about the mushroom. The United States grows most of the mushrooms its consumes, but Canada is also a major supplier of commodity mushrooms, such as buttons, creminis and portobellos. Should the United States withdraw from NAFTA, those mushrooms could become subject to a tariff of more than 20 percent.
“Nearly 15 percent of the United States’ fresh mushrooms come from Canada today,” said Aaron Hamer, the chief executive of Ontario-based Highline Mushrooms, the largest exporter to the United States. “With the addition of a tariff, we expect consumers would face higher prices and lower supply,” particularly for organic mushrooms, he said.
Like many in agriculture, Hamer is watching the NAFTA renegotiations closely; they could have a major impact on his business. But he also believes that the outcome of the talks will have effects for consumers, and he is hopeful that U.S. voters are beginning to realize the potential fallout of a withdrawal.
It’s not merely mushrooms, Hamer pointed out. Without NAFTA, the future ofmany supply chains could be uncertain.
“I can only hope,” he said, “that now that [consumers] see there are consequences that will negatively impact their everyday life, they are advocating for moderation.”