MARCH 2018 FOOD & AGRICULTURE QUARTERLY PAGE 8
NAFTA , combined U . S . agricultural exports to Canada and Mexico increased by 243 percent .
What would happen if the current negotiations fail and the U . S . is no longer a member of NAFTA ? First of all , tariff preferences for all goods would be eliminated and tariffs between the three countries would increase from zero or low tariffs to Most Favored Nation ( MFN ) tariff levels . MFN tariff rates are not necessarily the highest tariff rates ; nonetheless , all members of the World Trade Organization must apply them on a non-discriminatory basis . If the tariff line is “ bound ,” the level cannot exceed the bound level without facing a dispute settlement action and possible retaliatory tariffs to compensate the affected countries . Second , and related to the first , U . S . agricultural exports would likely occupy a relatively smaller portion of the Canadian and Mexican markets . Higher-cost U . S . exports may cause consumers in those countries to seek alternatives . Third , and related to the first two market reactions to NAFTA being terminated , U . S . agricultural imports from Canada and Mexico would be more costly . Those higher-priced imports would not only affect the U . S . consumer , but also some U . S . processors that use agricultural inputs to produce a semi-finished or finished product , e . g ., tomato paste . Fourth , terminating NAFTA would disrupt supply chains . In NAFTA ’ s 20- plus years , agricultural supply chains between the U . S ., Canada and Mexico were established ; terminating NAFTA would terminate or disrupt many such chains as customers seek lower-cost goods . Last , should the U . S . withdraw from NAFTA , its negotiating leverage would likely be diminished . For example , without having a “ seat at the table ,” the U . S . would likely find it more difficult to influence its neighbors ’ agricultural policies , labor laws and environmental laws , among others .
From the foregoing , it appears a U . S . withdrawal from NAFTA would have lasting negative effects on U . S . consumers , U . S . processors and U . S . farmers , generally . But what about possible effects on U . S . soybean farmers and even Ohio soybean farmers , more specifically ? Tune in to our next FAQ to find out .
Will Sjoberg is a partner and focuses his practice on international trade . He can be reached at 202.778.3006 or wsjoberg @ porterwright . com .
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