That is why I’m so concerned about President Trump’s growing threats to end the North American Free Trade Agreement, which may send tingles of joy up the spines of the minority of Americans who believe Mexico is getting the best of the United States, but certainly would send shock waves through the Iowa economy.
Interestingly, while 56 percent of Americans say NAFTA has been good for our country compared to 33 percent who think it has been bad, Republican sentiment is almost exactly opposite (35-54 percent), according to a newly released Pew Research Center poll. A smaller percentage say “Mexico (30 percent) or Canada (20 percent) benefit more from the agreement than the U.S. does.”
But there are other numbers that are even more important to the U.S. dairy industry and Iowa’s place within it.
As Farm Bureau economist Veronica Nigh and Director of Market Intelligence John Newton have noted: “The importance of NAFTA to U.S. dairy farmers cannot be overstated. In recent years, dairy exports to Canada and Mexico averaged nearly $2 billion per year and accounted for 30 to 40 percent of all dairy exports. For comparison, in 2016 only 2 percent and 8 percent of U.S. dairy exports flowed to EU-28 and China, respectively.”
They add: “It is on the back of NAFTA that the U.S. now exports nearly 15 percent of its annual milk production – equivalent to one day’s worth of milk production each week. Dairy industry economists will point out that the value of milk in the U.S. reached a record high in 2014 due to these export opportunities.”
Jim Mulhern, CEO of the National Milk Producers Federation, describes Mexico as our most important market, adding that if U.S. producers didn’t have access to the Mexico market or had to pay pre-NAFTA duties, “We wouldn’t have the exports we have there.”
“It would be a serious harm to the U.S. dairy industry if we didn’t have NAFTA,” Mulhern said recently.
There’s another twist. President Trump’s decision to withdraw from the Trans Pacific Partnership leaves New Zealand, the globe’s leading dairy exporter, and No. 2 Canada in a better position to capture more of the Mexico market.
Iowa is home to approximately 1,200 dairy herds and 20 plants that process dairy products and is the nation’s 12th largest milk-producing state. Our dairy farms produced roughly 560 million gallons of milk and $837 million in milk sales in 2015. More than 22,000 Iowa jobs are directly tied to dairy production, according to the Iowa Dairy Association.
And, it’s not just dairy farmers who have a stake in NAFTA, of course.
Iowa has 14 processing plants across the state that create good jobs and contribute greatly to their communities.
Are there areas where NAFTA could be improved? No doubt. Is it possible NAFTA could be updated to increase dairy exports? Maybe, maybe not.
But at the moment, all the talk seems to be about throwing NAFTA away. That would be a disaster for Iowa and have repercussions beyond the dairy sector. Higher tariffs and reduced demand for Iowa corn, soybeans, pork, livestock and poultry could drive already low commodity prices even lower. None of that would be good news to farm machinery manufacturers, ethanol producers, meat processers and other agribusinesses across the state and Midwest.
All of this uncertainty has Iowa agriculture leaders openly expressing concerns that withdrawing from NAFTA could drive Iowa agriculture into a deep recession.
I’ve been around agriculture long enough to remember when federal administrations interfered with a respectable farm economy. Like 1970, when President Nixon’s executive order froze wages and prices for 90 days. And President Carter’s 1980 grain embargo to punish the Russians, which many claim led to the 1980s farm crisis that drove thousands of farm families off the land. Each proved that the farm community ends up paying the price of federal interference in our marketplace.
Iowa’s own Chuck Grassley is known for calling out vexing inconsistencies with this succinct observation: “The rhetoric doesn’t match the record.” When balancing NAFTA’s benefits to our state versus its shortcomings, President Trump’s rhetoric doesn’t match the record and we cannot afford to let political posturing kill an agreement that continues to benefit Iowa agriculture.
Craig Lang, a farmer from Brooklyn, Iowa, is a former president of the Iowa Farm Bureau.