It is expected that the United States will move swiftly to negotiate a renegotiation economy of this agreement. North American Free Trade Agreement (NAFTA) which is a 23-year-old tripartite agreement that eliminated tariffs and greatly increased trade between Canada as well as Canada, the United States and Mexico.
The agreement has come under a lot of critics by Donald Trump as both candidate and president. In the past Trump’s White House had indicated that negotiations to renegotiate the deal as a key campaign pledge would likely to begin at the end of 2017.
The president of the United States, Trump seems eager to force a renegotiation deal in the future with Canada and Mexico At one point, he was suggesting that the US could even leave the agreement, according to an April 26 article published in New York Times.
Worst Trade Deal Ever Economy
Trump has declared NAFTA as the worst trade deal ever noting that it is responsible for the US trade deficit that surpassed Mexico that reached US$63.2 billion in the last year.
The country has the fourth largest trade deficit, which is second only to China, Japan and Germany. The deficit between America and the other NAFTA country, Canada, was slightly above US$11 billion in 2016.
However, that’s just one part of the picture. Take away cars and auto parts imports, as an example and you’ll see that the US gap with Mexico practically disappears.
In the end, NAFTA has been beneficial for Mexico, Canada and the US alike. Since its signing on the 14th of April 1994, the number of foreign direct investment (FDI) to Mexico have been on the rise, averaging 2.6 percent of the country’s GDP (compared at 1% the preceding two decades prior to NAFTA). In the present, annual bilateral trade between US as well as Mexico is estimated at $580 billion.
Agriculture Gains Economy
It’s not entirely certain what a renewal could entail. However, much of Trump’s old-fashioned protectionist stance is based on the manufacturing industry, outsourcing work in Mexico in addition to immigration. Agriculture, a crucial connection between the two countries is not believed to have been a factor in his plans up to now.
Globalisation could have resulted in job losses for manufacturing in the US However, it has also brought advantages for the American agriculture sector. US exports for agricultural goods towards Mexico have increase five times since NAFTA was approve.
For the 2014-15 commercial year US crop production reached 360 millionmetric tonnes, 13 percent of which was export. Mexico was responsible for 23% of the exports. In 2016 Mexico imports US$17.9 billion worth of American agriculture products. US$2.6 billion from corn. US$1.5 billion worth of soybeans US$1.3 billion from pork products and US$1.2 billion worth of dairy products.
The majority of corn that makes up a major part in the Mexican diet is source directly from the US. Mexico also purchases 7.8 percent of US pork produced.
What has been beneficial for US farmers is actually hurting Mexican agriculture. In a state of constant supply of inexpensive US agricultural products and low transport costs, and believing that the current economic conditions will last, Mexico has not diversified its imports of agricultural products. It relies heavily in US farmers to supply their people, putting at risk Mexico’s food security in the long run.
America Losing Ground
In the United States, US is the top exporter of agricultural goods, but there are also other breadbaskets like Brazil, Australia, Russia, Argentina and Ukraine. These rivals have adopted more modern agricultural and farming practices , and upgraded their transport and infrastructure for handling products over the past few years, America’s export share in the world is steadily decreasing.
Sometimes, political decisions have led to this decline. In 1979 the US prohibited grain sales to the Soviet Union at the time because of the attack on Afghanistan. This caused the USSR to boost its own production of grains and in 2016, Russia surpassed the US for the first time in the export of wheat. Could the Trump administration be in the midst of a similar moment of watershed to American agriculture?
As America could shut down its export doors to agriculture in Mexico. It has hurt the country’s faith with its main supplier possibly permanently. In an article published in January 2017 by the Washington Post opinion piece, the former Mexican head of state Ernesto Zedillo wrote. That it was an waste of time to play NAFTA tweaking games with the Trump Administration.
Free Trade Agreements
Although Mexico does have free trade agreements in place with 45 nations (more than the average nation around. The globe) agriculture has always become the largest sensitive topic of Mexico’s agreements on free trade. Trump has made a change in this.
Today, the nation is speeding up its search for partners to help meet its nation’s requirements economy for agricultural production. In search of long-term potential, Brazil and Argentina two of the biggest exporters of wheat, beef soybeans. As well as other highly important US agricultural products are advancing towards the top of the list of potential partners. Both do not have an agreement on free trade with Mexico.
Economy Minister Juan Carlos Baker
Mexico’s deputy Economy Minister Juan Carlos Baker has said that Mexico is pretty well ahead of Brazil. Argentina is just a couple of steps in the wrong direction. Which means that Mexico might be able to offer South American producers terms. Similar to the terms currently used by American farmers if it’s in our favor.
Brazilian Agriculture Minister Blairo Maggi has announced that Brazil will be back in the game. Mexico is also discussing bilateral agreements that would include Australia as well as New Zealand. Two other important exporters of food.
In addition to government-to-government agreements, companies. That produce and trade agricultural products are also seeing Mexico’s vast import market with new eyes. One such company is Adecoagro that is the owner and leaser of 434,000 acres of farmland located in Brazil. Argentina and Uruguay and harvests around two million tonnes of agricultural goods annually.
The Buenos Aires-based company, whose main shareholders include Hungarian-American investor George Soros. The Dutch Pension Fund PGGM and the Qatar Investment Authority. Currently exports agricultural goods such as wheat, corn as well as cotton, soybeans and corn in Africa, Asia and Middle East.
It considers the NAFTA-relate uncertainty as an opportunity to gain entry into its way into the Mexican market. Particularly in the event that Brazilian or Argentinian products are given preferential US-style export agreements.