Food & Agriculture Quarterly January 2019 | Page 16

Trade, tariffs and
soybeans: Recent past,
present and outlook for
the immediate future
WILL SJOBERG
In a previous Food & Agriculture Quarterly, we
described what the trade landscape would look
like should the United States withdraw from the
North American Free Trade Agreement (NAFTA)
and promised to address the issue of whether such
a withdrawal would affect U.S. soybean farmers,
particularly Ohio soybean farmers. Since that article
was published, so much has happened that the trade
landscape it is hardly recognizable. It is therefore
even more important to examine trade and tariff
issues facing soybean farmers in the context of
today’s trade landscape. Before doing so, however,
it is important to review soybean’s place in United
States trade.
In 2017, the United States produced and exported
soybeans valued at $41.0 billion and $21.5 billion,
respectively. The top three export destinations for
U.S. soybeans were China ($12.2 billion), Mexico ($1.6
billion) and Japan ($0.9 billion). In 2017, the United
States exported soybeans valued at $0.2 billion
to Canada. In terms of Ohio soybeans, its farmers
produced soybeans valued at $2.4 billion, thereby
making soybeans Ohio’s number one cash crop, but
only 0.5 percent of total U.S. soybean production
(by quantity). Also in 2017, Ohio exported soybeans
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valued at $1.8 billion. The top three destinations for
Ohio soybeans were China ($0.7 billion), Mexico ($0.4
billion) and Bangladesh ($0.2 billion).
NAFTA/USMCA and soybeans
On Nov. 30, 2018, the United States signed the
United States Mexico Canada Agreement (USMCA),
which the parties intend to replace NAFTA.
According to the United States, USMCA improves
NAFTA in the following areas: automotive rules of
origin, dispute settlement, currency manipulation,
labor, dairy and sunset (i.e., termination). Unlike
NAFTA, USMCA provides a 16-year term, i.e.
“sunset,” with a review after six years. Additionally,
the Canadians have agreed to partially open their
market to U.S. milk exports. Other than these
changes, the rules of origin and duties on agricultural
goods in USMCA remain virtually unchanged from
NAFTA, including those pertaining to soybeans.
Given the relative importance of Mexico and, to a
lesser extent, Canada to U.S. soybean farmers, it
would initially appear that those farmers had $1.6
billion at risk in the NAFTA/USMCA negotiations. As
set forth below, that was not necessarily the case.