Wednesday, March 22, 2017

Trump NAFTA reform could be good news

If Trump aims for major reforms on agriculture trade by scrapping the North American Free Trade Agreement, he could be shooting himself in the foot.

At new study by Al Mussell and Doug Hedley of Agri-Food Economic Systems based in Guelph finds that the U.S. food industry is a major beneficiary of NAFTA as it exists.

Food processors import raw materials from Canada and the U.S. processors export their products to Canadians.

It’s what has concerned Canadians for a couple of decades as they have watched processing plants, such as Heinz ketchup at Leamington and Kellogg’s breakfast cereals in London, close and transfer operations to the U.S.

“The U.S. food processing industry is vulnerable to any change limiting its access to Canadian bulk or intermediate product imports and/or the Canadian consumer market for its outputs”, says Hedley, Agri-Food Economic Systems Associate and co-author of the policy note.

“Canada has wrestled with how to effectively expand and retain its food processing sector to process Canadian farm products." he writes.
“Meanwhile, the U.S. has been a major beneficiary of its imports of Canadian bulk and intermediate products in expanding its food processing industry- with ready access to the Canadian market for the output.”

The threat to the U.S. from Mexico in NAFTA is reduced access to imports of fruits and vegetables that benefit from Mexican labour. 

This workforce is scarce in the U.S. and poised to become further limited due to Trump’s proposed changes in U.S. immigration policy.

Mussell says “the evidence does not support U.S. agri-food as victim of NAFTA, and the U.S. actually has much to lose in a NAFTA renegotiation.

“Understanding what is at stake will condition the negotiating positions of Canada and Mexico in agri-food, and should give pause to the U.S. in its pursuit of NAFTA renegotiation”.