ND could be one of the most affected states if US withdraws from NAFTA
FARGO — The U.S. Chamber of Commerce released a list of the states most likely to be negatively affected if the U.S. withdraws from the North American Free Trade Agreement, placing North Dakota at third, behind only Michigan and Wisconsin.
Rounding out the list were Texas, Missouri, Ohio, Iowa, Indiana, Arizona, Nebraska, Pennsylvania and North Carolina.
North Dakota's position on the list sounds about right to officials in the North Dakota Trade Office.
"Absolutely," says Lindsey Warner, director of marketing and events at NDTO. "The unfortunate thing is, if NAFTA goes away, no matter how you look at it, it's going to hurt a lot of our exporters."
NAFTA, implemented in 1994, over time eliminated almost all agricultural tariffs and quota restrictions among the U.S., Canada and Mexico. The three countries have undergone several rounds of negotiations in an effort to produce a modernized version of the agreement.
The chamber report explains North Dakota leads the nation in terms of the share of its exports going to Canada and Mexico, at 84 percent, with $3.5 billion in exports sent to the two countries. It estimates withdrawing from NAFTA would put 33,000 jobs at risk in the state.
While the report specifically mentions North Dakota as being a big provider of soybeans to Mexico, Nancy Johnson, executive director of the North Dakota Soybean Growers Association, says that's not exactly the case. North Dakota sends 66 percent of its soybeans whole to the Pacific Northwest, where they are shipped to Asian countries, primarily China, Thailand, the Philippines and Taiwan, according to North Dakota Soybean Council statistics.
However, Johnson says, Mexico is a major importer of soybean meal, which is used as swine and poultry feed. So while North Dakota itself crushes a very small amount of soybeans at this time, the soybean industry as a whole does send a substantial amount of meal to Mexico. The location for a soybean crushing plant in Spiritwood, N.D., being planned by Minnesota Soybean Processors, was chosen in part because of access to rail to take products like soybean meal to Mexico or Canada, Johnson says.
Relationships with buyers and sellers of various products over the years have been built in the years since NAFTA was approved, Johnson says.
"There's a whole generation of traders who work at these big companies who really haven't done anything but trade under these rules," she says.
And while those relationships are strong, she says adding tariffs into the equation would change trade substantially. Right now, someone in Mexico who feeds swine reliably buys soybean meal from U.S. sources, in part because of the convenience of train delivery. But if the price of the meal goes up, "he's going to be looking around," possibly to sources in Argentina or Brazil, Johnson believes.
The NDTO's purpose is to help North Dakota exporters build relationships with potential customers outside U.S. borders. Warner and Sharon May, director of business development, say the organization is educating North Dakota exporters on the possibility of NAFTA withdrawal and what their options are if it happens.
It's not just North Dakota agriculture that would be affected. Manufacturing, including food processors, ag machinery and small companies that have a primary market in Canada, could be devastated, May says.
She adds that about 50 percent of North Dakota exports go to Canada. Without NAFTA, a portion of those products still could potentially qualify for duty deferral, but not all of them.
Though much of the rhetoric surrounding the potential withdrawal from NAFTA has focused on loss of U.S. jobs, May says North Dakota has many jobs supported by exports.
Warner and May say the trade office has had discussions with the state's congressional delegation about NAFTA — and they say the state's representation has a strong grasp on the issue. Both of North Dakota's U.S. senators, Republican John Hoeven and Democrat Heidi Heitkamp, have signed onto a letter to Secretary of Commerce Wilbur Ross stressing the importance of NAFTA to agriculture. The Nov. 20 letter has been signed by 18 senators.
"With 95 percent of consumers residing outside of the U.S., farmers and ranchers must have access to export markets to sell their high-quality product," the letter, spearheaded by Sen. John Boozman, R-Ark., said. "Free trade agreements have allowed the U.S. agriculture industry to establish itself as a trusted supplier. International markets have taken years to build, and it is imperative that no steps be taken to jeopardize these gains. We must continue to move the global presence of U.S. agricultural products forward, not backward."
Johnson does believe there will be a price impact for soybeans if the U.S. leaves NAFTA. Though the Trump administration has said negotiations would have a "do-no-harm" goal for agriculture, Johnson says Mexico already has been seeking out other trade partners.
"Right now, the rhetoric about the willingness to pull out is already doing harm," she says.