Ag Groups Say a NAFTA Withdrawal Notice Would Cause 'Immediate' Harm

At whose expense
Nov 02, 2017
WASHINGTON, DC -- Last week, a coalition of more than 80 major food and agricultural industry groups, including USA Rice, responded to President Trump's threat to send a notice to Congress to withdraw from NAFTA and recent comments by Commerce Secretary Wilbur Ross that the potential danger of a NAFTA withdrawal to U.S. agricultural producers is an "empty threat."  The groups warned that if the administration issues the notice to pressure Canada and Mexico into meeting U.S. demands, it risks causing substantial harm to the U.S. economy.

In a letter sent to Commerce Secretary Wilbur Ross, the groups argued, "We are sadly confident that issuance of a notice of withdrawal from NAFTA would trigger a substantial, immediate response in commodity markets as market-specific focus would turn to a scheduled return to trade-prohibitive tariff rates."

The letter also noted that, "Contracts would be canceled, sales would be lost, able competitors would rush to seize our export markets, and litigation would abound, even before withdrawal would take effect."  The groups added, "A move to send a NAFTA withdrawal notice and wager that renegotiation could be completed within the six-month withdrawal period outlined in the agreement's rules gravely underestimates the business complexity and contracting periods involved."

The in-depth letter described the impact withdrawal from NAFTA could have on multiple commodity sectors, including rice.  

“By signing on to this letter, we’ve made it clear to Secretary Ross that the global market is distorted by subsidies and government import controls that artificially increase world rice stocks,” said USA Rice President & CEO Betsy Ward.  “NAFTA is a proven shield against these distortions, and the infrastructure and trade relationships built through NAFTA are not transferable to other markets.”

Ward continued, “Mexico and Canada account for nearly 30 percent of all U.S. rice exports and exiting NAFTA will open these markets to competitors from Asia and Brazil with no obvious home for displaced U.S. sales as the global market is not short of rice.”   

The threat of NAFTA’s collapse is being taken seriously and Mexico is making preparations to identify alternative sources of commodities. Last year the Mexican government removed the tariff on rice from Southeast Asia, and in July of this year, began importing rough rice from Guyana - the first time it’s imported paddy from a country other than the United States.  Additionally, last month Mexico signed a phytosanitary agreement with Argentina to allow for the importation of wheat for the first time.