NAFTA under negotiation: the treaty and Idaho

The Trump administration has not backed down from their controversial stances at the NAFTA negotiations, which have some working in Idaho agriculture worried about the possibility of increased costs to export agricultural goods and the possibility of job losses in farming and food manufacturing.

President Trump has not changed his mind about possibly withdrawing from NAFTA and US Trade Representative Robert Lighthizer continues to push hardline stances at the negotiating table such as the sunset clause, which would terminate NAFTA unless all parties agree to keep the agreement in place every five years.

Critics worry that this proposal, as well as the threat of withdrawal, creates uncertainty for businesses and discourages trade and investment between the NAFTA parties, worries which extend to Idaho agriculture.

Withdrawal from NAFTA is a significant concern for those working in Idaho agriculture right now, according to Laura Johnson, the Marketing Bureau Chief at the Idaho State Department of Agriculture (ISDA).

“I think our number one priority in the NAFTA renegotiations is to preserve what’s working and do no harm to Idaho agriculture as a result,” said Johnson.

Dr. Rita Du, an agricultural economist at the University of Idaho, also advocates for staying in NAFTA.

“I think more than 90 percent of economists will agree that we are benefiting from NAFTA,” said Du.

According to Skylar Jett, an ISDA trade specialist, if the US exited NAFTA our tariff rates with Mexico could go back to World Trade Organization (WTO) levels.

As an example, if pre-NAFTA standards are an indicator, there could be a 20 percent tariff on frozen French fries exported from Idaho to Mexico.

According to ISDA data, Mexico is the destination of 24 percent of Idaho’s agricultural exports.

Trade with Canada, Idaho’s next largest trading partner for agricultural products, could be affected differently because of a bilateral trade agreement between Canada and the US.

NAFTA was built partially on this agreement, and according to Jett, while it is conceivable that the US could fall back on this agreement with Canada if the US exits NAFTA, the action is not for certain.

About 23 percent of Idaho’s agricultural exports go to Canada, and together with Mexico, exports to NAFTA partners make up nearly half of all Idaho’s agricultural exports.

According to Johnson, exiting NAFTA is not simply a matter of tariffs, however, as US withdrawal would mean disrupting entire supply chains as well.

“The supply chains are really quite integrated,” said Johnson, “we grow a lot of canola seed, it’s cleaned in Eastern Idaho, it goes to Canada, the raise canola and then it comes back here as oil.”

Withdrawal from NAFTA could affect consumers and producers alike, as rising costs caused by rising tariffs could lead to increased prices on produce not grown in Idaho, such as avocados or tomatoes.

Withdrawal could also cause job losses, since rising costs of exports could mean that farmers and employees of food manufacturers could be at risk of losing their jobs.

Food manufacturing makes up about 14 percent of all manufacturing jobs nationwide, but in Idaho that figure doubles, making up 28 percent of all manufacturing jobs in the state, according to the American Farm Bureau Association.

Rising costs could also lead some employers to automate parts of production that would have been done by a human workforce.

“Automation…is a bigger reason why we have less jobs, not because of NAFTA,” said Johnson.

While in the short term, Idaho may experience consequences because of the US exiting NAFTA, Du believes in the long term Idaho will be fine.

“(Idaho has) that comparative advantage to produce agricultural products,” said Du, “so we should not be worried about…the future of the agricultural sector.”

The NAFTA negotiations are still ongoing and it is unknown what the outcome of the negotiations will be.

The fifth round of negotiations will take place in Mexico City from Nov. 15 to Nov. 21, and the overall process will extend into early next year.

Graham Zickefoose is an intern with the University of Idaho McClure Center for Public Policy Research and the UI JAMM News Service.