"Don't fix what isn't broken." That was the message from a trade delegation from Mexico, representatives from the U.S. Grains Council, National Corn Growers Association, and Nebraska Corn Board that joined Nebraska Governor Pete Ricketts at the Nebraska State Capitol May 16 to discuss the role trade with Mexico plays for U.S. corn growers.
The trade delegation's meeting at the Capitol came in response to talk circulating from the White House regarding the renegotiation or withdrawal from the North American Free Trade Agreement (NAFTA) – a trade agreement those at the meeting said is a win-win situation for the U.S. and Mexico.
Gov. Ricketts noted Mexico is the No. 1 market for corn from Nebraska and from the U.S. – Mexico recently surpassed Japan as the biggest importer of U.S. corn.
Mexico purchased about $287 million worth of Nebraska corn last year, in addition to $2.5 billion worth of U.S. corn. "[Trade with Mexico] supports almost 34,000 jobs in our state," said Gov. Ricketts. "About 1 out of every 10 acres in this country is planted for exports to Mexico."
However, with President Trump's talk of renegotiating or even withdrawing from NAFTA, ag organizations and growers worry this mutually-beneficial trade relationship may be compromised.
"[If NAFTA were withdrawn] that $287 million worth of corn exports to Mexico would most likely go to South America and Brazil. All of a sudden you put pressure back on the market here for Nebraska growers," said Kelly Brunkhorst, executive director for the Nebraska Corn Board. "With two of the last three years seeing record corn production in Nebraska and across the U.S., we're sitting on a lot of corn. And anything that disrupts that trade only puts downward pressure on the market."
Producers, buyers react
Jon Doggett, executive vice president of the National Corn Growers Association, noted the rumors earlier this spring that the Trump Administration was considering withdrawing from NAFTA. "I have not seen in some time the level of concern and the active reaction by our growers to such a rumor," Doggett said.
While ag organizations breathed a collective sigh of relief after hearing the U.S. would not be pulling out of the agreement, Doggett noted the president's rhetoric had a negative effect.
"This rhetoric is making a difference, and not a good difference," Doggett added. "If we continue down this road, it's going to have a negative impact."
One member of the delegation, Felipe Basarte, purchasing manager for Ganaderos Asociados de Querétaro (GAQSA), a livestock cooperative in Querétaro, noted the markets react negatively when this kind of rhetoric circulates.
"What we are dealing with is a situation in our markets, where any rough comment may make the market react," Basarte said. "The United States needs us as buyers, and we need United States grain."
Meanwhile, the Mexican government has been looking into other options to source its corn – notably South American countries like Brazil and Argentina. "Mexico's government is looking for easier ways to import from Brazil," Basarte said. "But they [Brazil] also don't have the infrastructure needed, and the logistics wouldn't be as easy as importing from the states."
However, growers and consumers in Mexico realize the benefits of a strong trade relationship with the U.S., said Arturo Basulto, general manager of Inter Industrias del Sureste, an ag supplier in Yucatán. "Growers in Mexico couldn't understand why, with all these years working so well within NAFTA, why there was a need to renegotiate or withdraw from it," Basulto said, speaking through a translator. "This morning someone said, 'Why are we going to fix something that has not been broken?'"
Moving forward with NAFTA
The group encouraged updating or modernizing NAFTA in a way that maintains this relationship, rather than trying to fix or renegotiate the agreement.
While there has been discussion on modernizing NAFTA, Thomas Sleight, president and CEO of the U.S. Grains Council, notes when it comes to grain trade, there isn't much updating needed – although there are some components that came out of Trans Pacific Partnership (TPP) negotiations that could be incorporated into NAFTA, including provisions on handling sanitary and phytosanitary issues. "There is some slight modernization that we can do," Sleight said. "But these are very small changes."
The challenge now, Sleight said, is getting started. "Let's get this thing going – let's get the negotiation started," he said. "The U.S. wants to get it done by the end of the year. Mexico certainly wants to get it done by the end of the year. Canada has indicated similar things. Let's get our positions figured out, and let's have a reasonable negotiation."