November 07, 2017
Editors' note: Randy Spronk is a pork producer from Edgerton, MN. He was a panelist at an October 31, 2017 U.S. Chamber event,"The Future of NAFTA: The Stakes for American Agriculture and Business."
As a hog farmer from Edgerton, Minnesota, I’ve learned over the years that prosperity depends on things I can control, like hard work, and other things no one can. But today, pork producers across rural America are profoundly concerned about a potential man-made disaster: The prospect of losing access to the Mexican and Canadian markets for our products. That’s exactly what would happen if the United States withdraws from the North American Free Trade Agreement (NAFTA).
These concerns about the ravages my operations would face are shared by the overwhelming majority of farmers and ranchers across the United States. While most agree that NAFTA can and should be modernized, the administration has stated that its core objective in the negotiations is to achieve more balanced trade between the United States and Mexico. (Canada appears to be of secondary importance since our trade deficit with our northern neighbor is relatively small.)
However, neither the Mexican nor the Canadian government has said it would be willing to accept the elimination of trade deficits as an objective of the renegotiation. What if they refuse? If they refuse, and the administration carries through with its threat to terminate the entire agreement, it will be a financial catastrophe for all of U.S. agriculture.
We know that Agriculture Secretary Sonny Perdue understands the risks to agriculture, but it is not clear that every member of the administration’s trade team understand that termination would be economically devastating for farmers, ranchers and food and agriculture workers.
For our part, the U.S. pork industry has given these risks a great deal of consideration, and here are our views:
- Terminating NAFTA would do serious harm to U.S. agriculture and rural America. There’s no way to sugarcoat it.
- Exports are critically important to our sector, and terminating NAFTA would send a shockwave around the globe. We are already falling behind our competitors in negotiating trade agreements, and withdrawing from NAFTA would doom U.S. prospects to negotiate new deals to keep us competitive.
- Food and agricultural exports in 2016 totaled $135 billion, which generated $440 billion in U.S. economic activity, based on information from the USDA’s Economic Research Service. Every $1 billion of U.S. agricultural exports supports approximately 7,550 American jobs throughout the economy. Agricultural exports in 2016, therefore, required more than 1 million full-time civilian jobs, which included about 752,000 jobs in the nonfarm sector.
These facts explain why U.S. agriculture has been such a strong supporter of free trade agreements (FTAs). We now export as much to the 20 countries with which we have FTAs as we do to the rest of the world, excluding China.
NAFTA itself has delivered enormous benefits to virtually all of American agriculture. Canada is the second largest market for U.S. agricultural products; Mexico is the third. Last year, U.S. farmers exported more than $38 billion of products to the two nations, or 28% of all U.S. agricultural exports. Those exports generated more than $48 billion in additional economic activity and supported nearly 287,000 U.S. agricultural jobs.
Exports of U.S. pork to Canada and Mexico in 2016 were almost $2.2 billion, representing more than one-third of U.S. pork exports. Those exports added significantly to the bottom line of every hog farmer, contributing more than $18 to the price of each hog marketed last year. That’s a lot, considering the average hog farmer just broke even in 2016. These exports also supported more than 16,000 U.S. jobs, many in rural towns and cities.
Dr. Dermot Hayes, Charles F. Curtiss Distinguished Professor in Agriculture and Life Sciences and Chair in Agribusiness at Iowa State University, has calculated that if the United States lost the zero-tariff access to the Mexican market that NAFTA guarantees and had to pay a 20% tax like other nations that don’t have a free trade agreement with Mexico, the U.S. pork industry eventually would lose the entire Mexican market. That would result in a loss of 5% of U.S. pork production at a cost of more than $12 per hog; the cumulative impact on the U.S. pork industry would be $1.5 billion. The annual cost to my farm would be more than $2.5 million!
That’s why I’m urging the administration and Congress to require that an economic impact assessment be carried out by the U.S. International Trade Commission before notice can be issued of U.S. intention to withdraw from any trade agreement.
If the administration follows through on its threat to withdraw from NAFTA, the “giant sucking sound” you’ll hear will be the air going out of the economy of rural America as farmers and ranchers take a major financial hit. We can’t let that happen.