Good outcome for Nafta would benefit New Zealand

William Bailey. Photo / Sarah Twidwell

Throughout his campaign - true to form - Trump was heavily critical of the North American Free Trade Agreement (Nafta), calling it "the worst trade deal ever made by any country in the world." Under Nafta, most tariffs on US agricultural exports have dropped to zero. Although the president had threatened to end the US participation in Nafta, he decided in April to renegotiate with Mexico and Canada rather than terminate.

William Bailey, Chair of Agribusiness at Massey University for 13 years and now Dean, College of Business and Technology, at Western Illinois University provides his perspective on how the result of Nafta negotiations could impact New Zealand agriculture.

Since President Trump took office, the process to renegotiate the North American Free Trade Agreement (Nafta) has started. The outcome of this could have an impact, potentially significant, on New Zealand agricultural trade.

Reversing his pre-election position, President Trump says the Nafta treaty will remain but will be renegotiated. Both Mexico and Canada have agreed. The goal - for all three countries - is to have negotiations finished by the first quarter of 2018. Like TPP, the legislators in all three countries must approve the treaty.

Recently, and indicating the difficult environment facing Nafta negotiations, two agricultural trade issues have arisen - the US has imposed a lumber tariff on imported Canadian lumber to punish Canada for harming US dairy exports and has proposed limits on imports of Mexican sugar into the US.

The US position on these two issues is not consistent; it is asking Canada to open up its markets to US dairy exports, a move which is supported by the US dairy industry, while attempting to close the US market to Mexican sugar imports, a move supported by both the US corn industry and sugar industry.

Though the outcome of the sugar dispute will not have a direct impact on New Zealand agricultural exports, how the US and Canada deal with the dairy issue will.

A more open Canadian market will benefit both the US and New Zealand dairy industries. However, the dairy and sugar issues are linked because the success of Nafta negotiations depends on agreement between all three countries on all issues.

An unsuccessful Nafta could create significant trade barriers between the three countries, with a follow along negative impact on all trade - imports and exports - elsewhere in the world. For example, if Canada closes its doors to US dairy products, might the US return to dairy export subsidies to help its dairy industry?

New Zealand agriculture would benefit from a successful Nafta outcome, which encourages more open trade.