A Few Thoughts by John Nalivka – USMCA completed and Asia trade is looking even better
October 4, 2018
Trade is the hot topic this week as the Trump Administration completed a new agreement with Mexico and Canada to replace NAFTA – the U.S.-Mexico-Canada Agreement (USMCA). Canada signed the agreement on September 30th as a U.S. imposed deadline neared the 11th hour. Non-tariff exports of U.S. beef and pork to Mexico and Canada remain in place and the red meat industry can now move forward with certainty toward our expanding North American trade opportunities. That said, the USMEF, though also applauding the agreement did express concern with the continued retaliatory tariffs kept in place by both Mexico and Canada in response to U.S. steel and aluminum tariffs.
So, let's talk trade. The USMCA is definitely important. I have expressed that since President Trump first made mention of renegotiating the 23 year old North American Free Trade Agreement. But, I also expressed that same opinion when asked about China trade – NAFTA is the priority. Why did I say that? Beef exports to China so far this year (January-July) account for 1 percent of U.S. exports in volume and 1 percent in value. This does not account for product exported to other Asian countries and trans-shipped to China and that's another story!
By comparison to China, Mexico accounts for 13 percent of total U.S. beef exported and 11 percent of the value of those exports this year while Canada accounts for 10 percent of total beef shipments and 11 percent of the value of exported beef. So, our partners in the USMCA represent about one-fourth of our total U.S. beef export business in both volume and value. U.S. beef exports were valued at $7.3 billion last year while U.S. pork exports were valued at $6.2 billion! That's part of the story.
Beyond Canada and Mexico, our primary trading partners for U.S. beef and pork in Asia are Japan and South Korea. This year, 27 percent of U.S. beef exports have gone to Japan at a value representing 24 percent of the total value of those total exports. For U.S. beef shipped to South Korea, the volume and value both represent 22 percent of our total beef exports. Together with Canada and Mexico, these four countries account for 73 percent of total U.S. beef going into global markets and 67 percent of the value. In addition, the recently completed U.S. – Japan Free Agreement not only will lower tariffs for U.S. beef and pork, it will greatly enhance the opportunity for the U.S. to negotiate and participate in free trade agreements across Asia including the ongoing Trans Pacific Partnership. This far surpasses any singularly focused trade opportunity with China under their one-sided stipulations – in my opinion. China's Belt and Road Initiative is not a free market plan.
As an economist, I am absolutely an advocate of free trade with the qualifications of fair and reciprocal with American industries and consumers at the forefront. The U.S. economy is strong and will likely remain so for the foreseeable future as the result of lower taxes and reduced regulatory burden. The economic environment could not be better for negotiating trade that will benefit U.S. agriculture into the future.
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