Late last year, U.S. Agriculture Secretary Sonny Purdue made a statement that should be a wake-up call for all Montana farmers. When asked about President Trump’s repeated threats to withdraw from the North American Free Trade Agreement (NAFTA), Purdue revealed that he’s working on a “contingency plan” for what happens if the U.S. is no longer part of the 25-year-old trade agreement.
That statement is worrisome not only because of what was said, but also who said it. Purdue, the nation’s Ag Secretary, is the chief advocate of American agriculture in Washington D.C. He understands the immense benefits that NAFTA has delivered to farmers and ranchers. He’s been one of NAFTA’s biggest champions. The idea that he’s working on a potential backup plan means that NAFTA withdrawal is a real possibility.
The continuing threat of NAFTA withdrawal is one of the big reasons last year we joined together to start Farmers for Free Trade, a bipartisan campaign focused on building grassroots support for agriculture trade. It’s also why we’re working to ensure that farmers and policymakers in rural states understand exactly what an exit from NAFTA would mean for rural communities.
For Montana the consequences of withdrawal couldn’t be any more stark. Half of all goods exported from Montana go to NAFTA countries. Last year alone, more than $1.3 billion in exports left Montana bound for either Mexico or Canada. For our farmers, who’ve seen farm incomes decline since 2014, foreign markets like Canada and Mexico are crucial to their continued viability. And that’s true across Montana’s biggest commodities.
Last year, Montana farmers exported to Canada and Mexico more than $58 million in grains, more than $7 million in dairy, and nearly $8 million in cattle. What happens to this bounty of Montana agriculture if NAFTA goes away? The answer is that it will be taxed, heavily.
This tax comes in the form of export tariffs which, without NAFTA, would snap back to the levels that countries like Mexico charge to everyone they don’t have trade agreements with. It’s a tax that will ultimately come out of the pockets of Montana farmers in lower profits and lost sales.
For our grain farmers the tax in Mexico would reach as high as 15 percent. Our cattle farmers would see a tax as high as 25 percent. Eggs, dairy, soy and other Montana farm staples could be taxed as much as 45 percent.
These taxes would make many American agricultural products far less competitive in markets that are driving a significant share of farm income. Even as NAFTA renegotiations continue, we are already seeing Mexico buy wheat from Argentina that they once imported from the U.S. Losing NAFTA export markets would depress incomes in many rural communities that are already under stress.
NAFTA withdrawal not only would impact more than 1 million jobs directly supported by farm trade, it also would threaten the secondary and tertiary jobs that agriculture creates in rural communities: from growers, harvesters, processors, and packagers to grain elevator operators, railroad workers, truck drivers, and port operators.
Of course, NAFTA withdrawal doesn’t have to happen. We need to make sure that the voices of farmers in Montana and across the country are being heard so that the livelihoods of farmers and the strength of rural America can be preserved.
Farmers for Free Trade Co-Chairs Richard Lugar and Max Baucus wrote this piece. Max Baucus is a Democrat from Montana who served in the U.S. Senate for six terms before being tapped by President Obama to represent the U.S. as ambassador to China, a post he held from 2014 to 2017.
Richard Lugar is a Republican who represented Indiana in the U.S. Senate from 1977 to 2013. During his distinguished career, he served as chairman of both the Senate Foreign Relations Committee and the Senate Committee on Agriculture, Nutrition and Forestry.