Keeping the NA in NAFTA

By John Holevoet, director of government affairs

The economic impact of the North American Free Trade Agreement (NAFTA) has been debated since the agreement became law in 1994. Different economic sectors were impacted in wildly differing ways by the agreement. That is one of the challenges in evaluating the agreement’s impacts.

The effect on agriculture and dairy is easier to determine. NAFTA has been very good for our nation’s dairy farmers and processors. Growth in dairy exports, particularly to Mexico, has been significant since the deal was implemented. Given new tensions and uncertainty surrounding trade, the agreement’s importance to dairy farmers is even greater.

All three nations that signed onto the agreement acknowledge it could benefit from updating. The question has been how many changes should be made. Trade skeptics, primarily in the United States, also saw the renegotiation of NAFTA as an opportunity to sink the agreement. 

Edge has been a vocal supporter of NAFTA. We have reached out to people in the Trump administration and Congress to urge renewal of the agreement, while also suggesting potential improvements.

After several rounds of talks, the parties deadlocked on some contentious issues. Eventually, talks resumed, but not between the U.S., Mexico and Canada. Instead, bilateral talks with Mexico continued. Canada was sidelined.

On Aug. 27, the White House announced an agreement was reached with Mexico. The deal, which is avoiding the NAFTA name, would maintain zero tariffs on dairy and all other agricultural products. Mexico also agreed to not restrict market access for commonly named U.S. cheeses.

At the press event announcing the agreement, Mexico’s president, Enrique Peña Nieto, expressed support for Canada joining the deal, but it was not clear how or when Canada will be brought into the talks. There is pressure to get congressional approval for a final deal soon so that Mexico’s current president can sign the agreement before he leaves office in November. His successor, Andrés Manuel López Obrador, is a left-wing populist; there are fears he could upend any deal.

This good news about the progress with Mexico should not take away from the fact that the agreement is meant to be between three countries. President Trump has indicated a willingness to move forward without Canada. Some business groups have signaled that they will not support congressional approval of any deal that does not include the Canadians. This may be setting the stage for an interesting political showdown, and this type of drama would likely hurt dairy markets. It should be avoided if possible. 

It is in dairy farmers’ best interest to keep this an agreement between three North American counties. We cannot just pay lip service to getting the Canadian government to buy into a new deal negotiated without them. We should try to hammer out a triparty agreement as soon as possible. We spent over two decades building one of the most integrated international trade blocs on the globe. We should not hesitate to spend some time and political capital to help preserve it.