Cattle industry leaders address U.S. Trade Representative about NAFTA
July 7, 2017
Wrapping up a 90 day notice to Congress that it plans to renegotiate the North American Free Trade Agreement, the Office of the U.S. Trade Representative (USTR) heard testimony from livestock industry leaders and others last week.
USTR also accepted public comment in written form on their upcoming NAFTA negotiations.
The USTR heard from a variety of industries for three days. It was cattle and beef's turn on June 27 when a panel of the following individuals addressed the USTR:
* Peter Tabor, Vice President, Regulatory and International Affairs, Pet Food Institute
* William Westman, Senior Vice President, North American Meat Ins titute
* Kevin Kester, President-Elect, National Cattlemen's Beef Association
* Bill Bullard, CEO, Ranchers-Cattlemen Action Legal Fund
* Kenny Graner, President, United States Cattlemen's Association
* Kent Swisher, Vice President, National Renderers Association
* Jaime Castaneda, Senior Vice President, Strategic Initiatives & Trade Policy, National Milk Producers Federation & U.S. Dairy Export Council National Milk/USDEC
President Clinton signed NAFTA into law Dec. 8, 1993.
President Trump, during his campaign, promised to break or renegotiate NAFTA, calling it "the single worst trade deal ever approved in [the United States]."
On May 18, the administration announced plans to renegotiate and called for public input.
According to Reuters, Mexican Foreign Minister Luis Videgaray said on July 7 that renegotiation discussions between the U.S. and Mexico would begin August 16.
According to the Sacramento Bee, President Trump and Mexican President Enrique Pena Nieto met on the sidelines of a Europeon summit this past week.
In a statement, the White House said on July 7 that Trump and Pena Nieto talked about how "to help workers in both countries" as part of the renegotiation of the North American Free Trade Agreement.
The statement also said that the two men talked over regional challenges like drug trafficking, illegal migration, and Venezuela.
The Mexican government reportedly released a readout saying the two men focused on "the importance of modernizing" NAFTA in a way that "results in tangible benefits for the economies and societies of North America."
In its federal register notice/reque.st for comments, the USTR had this to say:
The NAFTA was negotiated more than 25 years ago, and, while our economy and U.S. businesses have changed considerably over that period, NAFTA has not. The United States seeks to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities under NAFTA. Our specific objectives for this negotiation will comply with the specific objectives set forth by Congress in section 102 of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. The Office of the United States Trade Representative (USTR) is seeking public comments on matters relevant to the modernization of NAFTA in order to inform development of U.S. negotiating positions.
Graner said he appreciated the chance to testify before the USTR, to share the U.S. Cattlemen's Association's thoughts on the historic trade agreement.
His members want to see changes to NAFTA because the agreement has created a trade deficit in beef and cattle, he said.
"In layman's terms, we are importing more beef and cattle than we export," he said.
"The new administration is a big supporter of American jobs. If we get the livestock industry right and it becomes more profitable, we'll create jobs." Graner said that ranchers spend money in their local communities, so when the cattle market is good, the local economy benefits.
"Our big deal is that we should not be operating in a deficit – we should be in a surplus – that's the way we were before NAFTA."
Rather than reinstating NAFTA, the U.S. trade representatives should be making connections with countries that need beef.
"We are we writing trade agreements with countries that have larger herds than they can consume?"
Graner said before NAFTA was signed, the U.S. exported more beef to Mexico and Canada than it imported. Throughout the 24 years of NAFTA's existence, the U.S., as a result of currency exchange rates and international food companies' marketing strategies, now imports more live cattle and boxed beef from its neighbors than it exports.
Other issues need to be addressed, too, Graner said, like subsidy prevalence in other countries. "We're not opposed to subsidies but we have to take a look." Graner said in Mexico, subsidies are 6.58 percent of the value of total receipts, in Canada subsidies make up 2.58 percent of cattle producers' income and in the U.S. it is just .4 percent.
Speaking on behalf of R-CALF USA, Bill Bullard offered similar comments.
"Our members strongly support trade between Canada and Mexico," he began. But that trade must be reciprocal and balanced, it must support our national security interests by optimizing our domestic supply chain, it must be transparent to consumers and it must provide accurate rules of origin while providing protections for perishable and import-sensitive products and all producers must adhere to the highest health and safety standards possible. "NAFTA has failed," Bullard said, adding that is has weakened the live cattle industry, which is a related industry to the beef industry, but like steel and automobiles, it is a separate entity with different economic interests.
"Since NAFTA was put in place, our industry has shrunk at an alarming rate," Bullard said, explaining that 20 percent of producers and 75 percent of independent cattle feeders have gone out of business since the year NAFTA was signed. Losing those 80,000 farmer feeders with "small environmental footprints," has had a dramatic impact on market transparency, Bullard said.
According to Bullard the drop in cattle numbers equates to a 32 billion dollar deficit that the industry has absorbed, equating to 1.3 billion dollars on average which translates to roughly 6,000 non-livestock production jobs lost throughout the economy that the cattle industry could have supported, if the numbers had remained at pre-NAFTA levels.
The U.S. has essentially sent Canada and Mexico about two billion dollars worth of cattle and beef and it receives about four billion dollars worth of the same from those two countries, he said.
"Clearly Canada and Mexico will play that game until we decide to quit."
But the incoming president of the National Cattlemen's Beef Association, Kevin Kester said his organization fears that changes to NAFTA would saddle the industry with risk.
"NCBA strongly supports NAFTA. Canada and Mexico are important export markets for U.S. beef," he said.
"We strongly encourage you to focus efforts on specific areas but leave alone areas that benefit the U.S. beef an cattle industry. It's hard to improve on duty free, unlimited access to Canada and Mexico."
Cuts that aren't popular in the U.S., like tongue, skirts, stomachs, are more marketable in Mexico, he said.
While NAFTA opponents blame the trade agreement for loss of cattle numbers and cattle producers, NAFTA should not be the whipping boy, he said. "They pin problems on NAFTA but fail to recognize other problems like the BSE case that closed our export markets, the strengthening of the U.S. dollar, drought and the regulatory onslaught of previous administrations."
NCBA strongly opposes any attempt to use NAFTA as a vehicle to resurrect failed policies of the past like COOL, Kester said.
"Opponents want to use COOL to theoretically drive up cattle prices – this was the goal of COOL and it failed. It backfired by forcing feedyards and some packing facilities to close permanently," he said.
But R-CALF and USCA nearly begged for COOL to return.
"The single most important thing we can do with NAFTA is to re-instate COOL and change the rule of origin," so that only beef born, raised and slaughtered in the U.S. can bear a U.S. label, Bullard said.
Graner said U.S. producers proved that they like U.S. beef when, after the BSE case, the U.S. was unable to export so 100 percent of U.S. produced beef was being consumed in the U.S. "Beef consumption went up during that time. They didn't know they were eating U.S. beef but they were, and they liked it. I truly believe there will be and there is value to COOL."
Other agricultural industries, from strawberries to tomatoes to textiles testified about origin, he said. "It was interesting. There are rules written that a certain amount of product, in some cases, has to be purchased domestically. That's good. But when to get to beef – origin is out the window. They want to just say beef is beef. I disagree."
Graner said COOL wasn't in place long enough to prove that it "didn't work."
Some stores continue to label meat but without a rule in place, there is no government oversight to the labeling process, he said.
"They are still labeling the product – how do we know that this product is truly product of the U.S.? Here in North Dakota, the beef is still being labeled," said Graner. "If there wasn't any value in it, why are they still labeling it?"
Graner said that international meat companies can benefit greatly from currency exchange rate differences. "Trump gets it. This administration is all about currency," he said.
"Meatpackers are in every beef producing country – they sit back and say 'we've got production in Argentina, Brazil, Australia' and they look at the currency exchange to see where there is a chance for the most profitability." But as a cattle producer, that international chess game often doesn't work in his favor, Graner said. "I'm a producer from the state of North Dakota. I'm not global."
"I just keep coming back to President Trump's mission: stimulate the economy and make it profitable for everyone, not just corporate America."