U.S.-Mexico trade relationship examined at FPAA Spring Policy Summit

The strong but sometimes tenuous U.S.-Mexico trade relationship was the focal point of an April 21 session of the Fresh Produce Association’s virtual Spring Policy Summit.

The session, moderated by FPAA president Lance Jungmeyer, also included Kenneth Smith, former lead NAFTA negotiator for Mexico and current partner with AGON, and Britton Mullen, president of the Border Trade Alliance and principal with Clarke Consulting.

With the U.S. Mexico Canada Agreement becoming effective in July 2020 and the North American Free Trade Agreement in place for more than two decades before then, Smith said the last 25 years has been a success story for agricultural trade between the two countries.

There is over $50 billion in trade in the ag sector between Mexico and the U.S., and that number was just $8 billion when NAFTA started more than 25 years ago.

Mexico is almost exporting to $40 billion in ag products to the U.S. every year, and about half of those are fruits and vegetables. In turn, Smith said the U.S. is a big exporter of many ag commodities to Mexico, including corn, meat, oilseeds and more.

During USMCA talks, U.S. trade negotiators were trying to narrow the trade deficit with Mexico, but Smith said Canada and Mexico rejected provisions that would have restricted access for some Mexican products by way of seasonality provisions or deficit triggers.

“All of this was rejected by Mexico and by Canada at the end of a very long negotiation, almost 18 months,” he said. “We were able to obtain positive results on agriculture, and free trade was preserved across all products between Mexico and the U.S.

In addition, USMCA brought stronger disciplines in sanitary and phytosanitary measures to increase transparency, facilitate trade, and ensure animal and plant safety, he said. Provisions that address biotechnology also were folded into USMCA.

In addition, there were solid trade remedy provisions that were preserved from the NAFTA and strengthened. The USMCA should be a big opportunity for furthering U.S. Mexico agricultural trade, but Smith said there have been irritants to agricultural trade in the past two years on both sides of the border.

The new administration in Mexico has adopted ideological positions against agricultural biotechnology, which has the potential to delay authorizations for new biotechnology products.

That touches key U.S. commodities, including soybeans, corn and GMO cotton seeds.

Mexico could be “shooting itself in the foot” with the policies against biotechnology, he said, noting that GMO cotton seeds have allowed Mexican growers to double their yields and reduce pesticide use by 50%.

“By blocking (GMO varieties) for ideological reasons, we’re essentially hurting our farmers in Mexico because (growers) cannot use this essential input,” he said. 

“When you establish these types of prohibitions, not only are you in violation of the USMCA because you are not being transparent or clear in the sense of why you’re establishing certain regulations that creates trade barriers, but you’re also hurting your own agriculture,” he said.
The Office of the U.S. Trade Representative is already placed Mexico’s restrictions in their trade barriers report, he said. 

Those issues, along with the Mexican ban on the import of glyphosate into Mexico and the possibility of banning U.S. GMO corn, represent dark clouds in the U.S.-Mexico trade relationship, he said.

Troubling issues persist on the U.S. side as well, he said, including strong protectionist efforts in the form of seasonality investigations to restrict Mexican fruits and vegetables and the long wait for USDA approval to open the entire Mexican territory for exports of avocados to the U.S.

While the International Trade Commission found no injury to U.S. growers from blueberry imports, squash, cucumbers and strawberries also could come under the ITC microscope, he said. 

Considering trade tensions, Smith said Mexico needs to be careful of actions that would encourage protectionism in the U.S. by fresh produce growers in Florida, Georgia and other states.

Despite the potential disputes on both sides of the border, Smith said the outlook is “not all gloom and doom.”

“There is a way forward,” he said. Bilateral agricultural trade between the U.S. and Mexico has increased over the last year and a half, despite the COVID crisis.

“The COVID crisis showed that agricultural trade and the free flow of food is essential,” he said.

“The best way to defuse what could be a very damaging potential trade war between the U.S. and Mexico is for these (USMCA) sanitary phytosanitary working groups to get together to start the technical work to analyze each item individually,” he said. “There is no reason why the majority of this issue these irritants should not go away.”

Decision makers in both countries must put aside regional and political ideological considerations that could hurt agricultural trade, he said.

DC view

Mullen said a strong trade relationship between the U.S. and Mexico is needed to build strong economies after the COVID crisis. But it will not be easy, she said.

“From the Trump administration to the Biden administration, there’s been nothing simple about this,” she said.

A chief challenge is the issue of seasonality trade remedies . The political importance of Georgia and Florida in presidential elections heightens the stakes for that issue, she said. 

The Border Trade Alliance, along with the FPAA, has working on educating members of Congress why seasonality should not move forward.

Any U.S. protectionist measures would likely be met with steps to slow U.S. ag exports to Mexico, she said. 

The infrastructure package, which will be considered by Congress over the next several weeks, will be important to evaluate relative to trade issues, she said.

“We’re advocating to direct new dollars to border port infrastructure and (funds) to modernize our ports and surrounding roads and highways to increase competitiveness of regions struggling from the pandemic induced economic downturn,” she said.

The current status of migrants at the U.S. Southern border “complicates everything,” she said, noting the large number of deaths that have happened as people have attempted to cross the border in recent months.

Potato hope

In a question-and-answer session, Smith said the quest to expand U.S. potato export access to Mexico may be settled within a few months.
An agreement signed in 2003 between Mexico and the U.S. called for the gradual opening of access for U.S. fresh potatoes beyond the 26-mile border region. That was supposed to happen in 2006 but never did.

“There has been an effort, and in fact, a ruling in Mexico to open up the access of U.S. fresh potatoes into the entire Mexican territory,” he said. Injunctions by Mexican potato producers are now being considered by the Mexican Supreme Court, which was supposed to start the review of the issue by 2018. 

That has not happened yet, but Smith said that he has heard the court could finally take up the issue in the next few months. 

“It is a thorny issue,” he said. “I do believe that there is light at the end of the tunnel.”

Resolving that issue favorable for U.S. potato access could be helpful for Mexico’s quest to expand avocado access to the U.S. from all of its growing regions. “The reality is that there are important political pressures surrounding both potatoes and avocados,” Smith said.