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Producers Need Contingency Plan if U.S. Pulls Out of NAFTA, USDA’s McKinney Says

U.S. Trade Talks Not Going As Well As Hoped.

Farmers need to have a backup plan in the event the U.S. exits the North American Free Trade Agreement (NAFTA), said Ted McKinney, the U.S. undersecretary for trade and foreign agricultural affairs, in an exclusive interview with Agriculture.com. Abandoning NAFTA still seems to be a real possibility, amid reports negotiations aren’t going as well as hoped.

Talks between the U.S., Mexico, and Canada have been ongoing after President Trump signed an order shortly after taking office to renegotiate the deal amid concerns that the U.S. trade deficit with Mexico is unsustainable and to eliminate what the administration deems as unfair subsidies. Negotiations started in August and continue this week in Washington.

U.S. Trade Representative Robert Lighthizer said in a statement after the fifth round of talks, which ended last month, that negotiators have made some progress to “modernize” NAFTA, but that he remains concerned about the lack of progress. So far, he said, there’s no evidence that Canada or Mexico is willing to “seriously engage” in provisions that would lead to a new agreement.

While McKinney said he and others within the Agriculture Department are optimistic that Lighthizer will successfully “carry the day” during the negotiations, it would be prudent for crop and livestock producers to look at some contingencies in the event the U.S. were to exit the 23-year-old NAFTA.

“The administration knows very well where farmers and the food and ag industries stand, but I would advise anybody to be prepared with contingencies,” he said. “Diversification might be an opportunity, and we should always be on the lookout for those. We should be thinking of that in the best of times.”

USDA officials, including Secretary Sonny Perdue, believe Lighthizer and other negotiators have the best interests of farmers and ranchers in mind, McKinney said. Still, U.S. growers must remember that NAFTA is a multifaceted agreement and encompasses more than just agriculture, he said.

“We know the president and others working with trade have heard ‘do no harm to food and ag,’ and we hope that remains at the fore, but we in ag must also remember the president was elected to serve all industries, not just ag,” McKinney said. “We’re doing our best. If anybody is wondering whether Team USDA is making its views known, yes we are. Sometimes it’s a whisper; sometimes it’s a megaphone turned on loudly.”

Senate Ag Committee Chairman Pat Roberts, a Kansas Republican, said on C-SPAN that he saw the president at the White House Chirstmas Party and, “Before I could even say ‘Merry Christmas, Mr. President,’ he looked at me, put his thumb up, and said, ‘We’re going to be all right on NAFTA.’ ”

Goldman Sachs, however, said it believes the U.S. will withdrawal from NAFTA before the talks are completed. 

Trump said in August that the U.S. will “probably” end up exiting the deal, and after the fourth round of talks in October said if an agreement can’t be reached, NAFTA will “be terminated and that will be fine.”

Farm groups, however, don’t share the president’s enthusiasm about ending the talks.

U.S. Grains Council President Tom Sleight said in August when the negotiations started that it’s important to remember those in the ag industry have worked “diligently” for decades to build relationships with trade partners in Canada and Mexico supported by NAFTA’s “strong policy.”

"Both farmers and negotiators must understand how important these markets – and free trade – are to agriculture’s profitability,” McKinney said. “The ingenuity of the American farmer is something I would never underestimate.”

Kevin Skunes, the president of the National Corn Growers Association, said in a statement last week that American growers and ranchers are closely watching the NAFTA negotiations and want to be sure their voices are heard.

“Farmers and ranchers from all sectors are sending a powerful message to the president about the importance of remaining in NAFTA,” Skunes said. “America’s corn growers stand with the administration as it negotiates an improved trade agreement, but it must ensure that these vital markets remain open to U.S. agricultural exports.”

Growers in the U.S. who are facing low crop prices, rising input rates, and increasing borrowing costs are in desperate need of a win. While McKinney said he doesn’t have all the facts about the ongoing NAFTA talks, he hopes growers and ranchers will stay positive no matter the outcome of the negotiations.

“I try not to provide a crystal ball … but all I can say is that our farmers are optimists,” he said. “I hope they retain that optimism. The USDA is doing everything it can to make sure all the points, all the facts, and all the charts that go with ag trade are heard.”

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5 Interesting Tidbits on Ag Trade: Successful Farming editors spoke with Ted McKinney, the Undersecretary for Trade and Agricultural Affairs, in an exclusive interview on Monday. Here are five things we learned about his role in agricultural trade.

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