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NPPC white paper focuses on NAFTA trade benefits

If Mexico places a 20% duty on U.S. pork, it would eventually lead to a 5% reduction in U.S. pork production.

Following the recent notification by the Trump Administration that it will renegotiate the North American Free Trade Agreement (NAFTA), the National Pork Producers Council (NPPC) released a white paper on the benefits of the trade deal among the U.S., Canada and Mexico.

The paper, which focuses primarily on trade with Mexico, makes the case for not abandoning the 23-year-old pact and for not disrupting trade in sectors for which the agreement has worked well, including U.S. pork. Mexico is the number-two export market for U.S. pork, and Canada is number four.

For all U.S. goods and services, Canada and Mexico are the top two destinations, accounting for more than one-third of total U.S. exports, adding $80 billion to the U.S. economy and supporting more than 14 million American jobs, according to U.S. government data.

While considerable attention has been given to the $63 billion trade deficit the U.S. has with Mexico, NPPC’s paper highlights two key facts:

1. When NAFTA took effect Jan. 1, 1994, trade between the U.S. and Mexico was only $50 billion each way. Last year, U.S. exports to Mexico were nearly quintuple that amount, at $231 billion, and those exports supported 5 million U.S. jobs.

2. While U.S. imports from Mexico were $294 billion, those also supported millions of U.S. jobs. (Nearly 40% of imports from Mexico include U.S. content.)

For U.S. agriculture, Canada and Mexico are the second- and third-largest foreign markets. They imported more than $38 billion of U.S. products in 2016, comprising 28% of all U.S. agricultural exports. Those exports generated more than $48 billion in additional business activity throughout the economy and supported nearly 287,000 jobs.

Disrupting U.S. agricultural exports to Mexico and Canada, the NPPC paper points out, would have devastating consequences for America’s farmers and for the U.S. processing and transportation industries. U.S. pork producers would be particularly hard hit.

Iowa State University economist Dermot Hayes calculated that if Mexico placed a 20% duty on U.S. pork – a likely response to a U.S. withdraw from NAFTA – and allowed other countries duty-free access, the U.S. pork industry eventually would lose the entire Mexican market. That equates to a loss of 5% of U.S. pork production, which would reduce the U.S. live hog market by 10%, at a cost of $14 per hog, or a nearly $1.7 billion aggregate loss to the industry.

“A loss in exports to Mexico of that magnitude would be cataclysmic for the U.S. pork industry,” said NPPC vice president for global government affairs Nick Giordano, who shared highlights of the paper at the “NAFTA: From Cars to Carrots” panel discussion hosted by the Global Business Dialogue on May 24. “Pork producers will support updating and improving NAFTA, but only if duties on U.S. pork remain at zero and pork exports are not disrupted.”

The NPPC paper also notes that NAFTA has provided benefits beyond trade, including improved relations with Canada and Mexico, better regional investment and supply chains, increased cooperation with Mexico in fighting drug trafficking and terrorism and greater political stability in that country.

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