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Perdue meeting on agriculture a prelude to NAFTA renegotiation

Adverse weather conditions have pushed benchmark futures in Chicago to their best start to a year in a decade. (Associated Press)
By Alan Bjerga Bloomberg

Agriculture Secretary Sonny Perdue meets Tuesday with his counterparts from Canada and Mexico for what he called candid talks on “irritants” in the three-way trade relationship that will be a prelude to a renegotiation of NAFTA set to begin later this summer.

New rules on Canada’s dairy-supply system and how Mexico plans to enforce a recently concluded agreement limiting its sugar exports to the U.S. will be among the topics of discussion when Purdue plays host to Canadian Agriculture Minister Lawrence MacAulay and Mexican Agriculture Secretary Jose Calzada in Savannah, Georgia.

Farmers tend to support the North American Free Trade Agreement, but agricultural shifts since its 1990s implementation require a review of the accord, Perdue said in an interview. Frank discussions now may make farming issues less divisive during the formal negotiations on revamping NAFTA that may begin as soon as August.

“All three countries in the ag sector have benefited from the NAFTA relationship but there are some important differences in things we need to deal with,” Perdue said. “This is not a ‘hide the ball’ strategy where we go in and sneak-attack them.”

President Donald Trump’s talk of pulling the U.S. from NAFTA spooked markets this year, pushing the Mexican peso to a record low in January. But the prospect of a major upheaval in North American trade eased in recent weeks after Trump backtracked on his threats and started the process of renegotiating the terms of the deal.

While Mexico drew most of Trump’s ire over trade during the campaign and early in his presidency, there’s been greater friction recently with Canada. Trump in April pledged to aid U.S. dairy farmers claiming harm from new Canadian policies that match domestic production with demand through quotas. U.S. producers contend that has depressed U.S. exports.

“If you have a supply management system, the supply has to be managed,” Perdue said. “They have created a glut on the market.”

Perdue said changes to Canada’s system of wheat classification and the policy in the Canadian province of British Columbia to only allow local wines on grocery-store shelves also will be up for discussion.

Canada’s MacAulay said in a statement that he is committed to working on ways that “agriculture trade can continue to grow between our three countries.”

With Mexico, enforcement of an agreement that cuts the amount of refined sugar that Mexico can send the U.S. will require further talks, Perdue said. Mexico, meanwhile, has been seeking out alternative corn sellers in case trade relations with the U.S. sour.

In addition to their meetings Perdue, the former governor of Georgia, will give MacAulay and Calzada a tour of the Georgia Ports Authority and some of the state’s farmland. They are scheduled to conduct a joint news conference at 11:15 a.m. local time.

After China, Canada and Mexico are the second- and third-biggest buyers of U.S. farm goods. The three nations sold $91.6 billion of farm goods to one another last year, according to United Nations data. Mexico buys more U.S. corn and dairy products than any other country. The U.S. is the biggest export market for Canadian beef and pork and the U.S. buys about two-thirds of Canada’s canola oil.

Since its adoption, NAFTA has knit the three agricultural economies more tightly, with effects ranging from cattle being raised and processed across borders to U.S. dependence on Mexican avocados for guacamole at Super Bowl watch parties. It’s widely seen as a success in agriculture, said Joe Glauber, a former USDA chief economist and the top U.S. agricultural negotiator during the Doha round of global trade talks.

A withdrawal from NAFTA would be “devastating” to rural America, a point Perdue said he’s impressed upon Trump, who won election to the White House in part due to wide victory margins in small towns and farming communities.

“By and large, the agriculture sector feels like it’s fared fairly well,” under NAFTA. But, he said, “There are things that need to be changed, because the world has changed quite a bit.”