Washington Insider: Worries About Mexican Trade Retaliation

There is more than a little anxiety in ag trade circles as discussions regarding NAFTA get underway, Bloomberg says. As a result, USDA Secretary Sonny Perdue has weighed in with his view that trade tensions are unlikely to drive Mexico to abandon the U.S. as a supplier of corn and soybeans.“I did not get any indication that they're seriously considering that,” Perdue told the press on Friday’s conference call when asked if Mexico planned to buy more corn and soybeans from Brazil and Argentina. He spoke after meeting with Mexican Agriculture Secretary Jose Calzada Rovirosa in Merida, Mexico, ahead of the negotiations that are set to begin Aug. 16.Mexico earlier launched talks with other major corn-exporting countries after threats by President Trump that he would withdraw from NAFTA. “While they may feel they need to say they're looking elsewhere, we have great history and relationships and supply chains they hope won't be disrupted,” Perdue said.The U.S. has a “corner store” location and “frankly we will continue to take advantage of that,” Perdue said. It also has a “productive and logistical advantage” that rivals such as Brazil and Argentina cannot match, he added.At a July 26 House Agriculture Committee hearing, Floyd Gaibler, director of trade policy & biotechnology at the U.S. Grains Council, said the council had “strong but unconfirmed evidence” that Mexico is slated to purchase seven to eight cargoes of corn from South America beginning in August and September. He said U.S. corn exports to Mexico have declined 7 percent by value since the start of the year.Perdue was also asked how the administration planned to balance the concerns of agriculture with manufacturers. While the agriculture sectors both in the U.S. and in Mexico have “benefited tremendously” under NAFTA, U.S. manufacturing has not, he noted. President Donald Trump is “very rightly” concerned about that, he said.“How we reconcile those two concerns will remain to be seen,” Perdue said, adding that the hope is to “do it without diminishing the beneficial impact that NAFTA has had on the agricultural sector.” More education is needed on how many manufacturing jobs are created by agricultural production, he said.The administration also understands that not all agricultural sectors have benefited equally from NAFTA, Perdue said when asked about the dumping of Mexican fruits and vegetables. There is some overlap in growing seasons between Mexico and South Florida, he said.Florida fruit and vegetable producers have complained that Mexican producers have flooded the market with unfairly low priced tomatoes, bell peppers, and cucumbers, among other commodities. The administration would welcome ideas from this sector on what could be done to ameliorate the situation, according to Perdue.The administration is also working on a legal guest worker program for Mexican citizens, Perdue said, adding that he did not expect this to be addressed in the NAFTA talks.Perdue is right to be concerned that more than a few of the beneficial trade arrangement now in place under NAFTA could be rattled by insensitive diplomacy—as has been the case in the recent past. In fact, some of the agricultural provisions in the current agreement were negotiated only with difficulty and could be upended significantly if the upcoming negotiations are not conducted with these fully in mind.Secretary Perdue is a long-time expert in international trade, and he is right to emphasize that the comparative advantage of US products in Mexico is very significant. But, Floyd Gaibler also is a long time trade expert and the Council has an extensive and able staff in Mexico – and his danger signals need to be taken very seriously. In general, the upcoming NAFTA talks are potentially very important to U.S. producers and should be watched closely as they proceed, Washington Insider believes.