GRAND RAPIDS — The potential reversal of the 23-year-old North American Free Trade Agreement (NAFTA) could jeopardize West Michigan farmers and food processors.
Experts say the success of the state’s agricultural industry hinges on the continuation of NAFTA, an agreement between the United States, Mexico and Canada that removes most tariffs on goods, eliminates trade barriers and increases the flow of those goods across national borders.
Hog farmer Harley Sietsema of the Allendale-based Sietsema Farms Inc. said ending NAFTA would hurt the state’s food and agricultural industry, which is estimated to contribute $101.2 billion annually to the state’s economy.
“I’m hoping and praying (President) Trump is just blowing a lot of smoke,” Sietsema told MiBiz regarding pulling out of NAFTA. “I hope everyone sees through it, and I hope we retain NAFTA to a minimum of where it is. … NAFTA is vitally important to agriculture, and it continues to improve.”
Sietsema’s farm produces 800,000 swine annually and is a major supplier to the new Clemens Food Group plant in Coldwater, Mich., roughly 40 miles from Battle Creek. The farm also raises 1.3 million turkeys annually.
Any changes to NAFTA could shake the domestic agricultural industry that’s heavily reliant on exports. In Michigan alone, food and agricultural product exports totaled $3.18 billion in 2016, according to the Michigan Department of Agriculture and Rural Development (MDARD).
A report sponsored by MDARD and issued earlier this year by Euromonitor indicated that the state’s largest food processing exports were in fruits and vegetables, breakfast cereals, baked goods, dairy and beer.
Given the importance of exports for in-state producers, Michigan food and agriculture groups last month joined their peers nationwide in sending a letter to U.S. Commerce Secretary Wilbur Ross. In it, they urge the government to stay in NAFTA, despite President Donald Trump’s imminent warning in August that efforts to continue the agreement were futile.
“We’ll end up probably terminating NAFTA at some point,” Trump said at the time.
Despite the warning from Trump, the 86 groups signing the letter contend that ending NAFTA would “cause immediate, substantial harm to American food and agriculture industries and to the U.S. economy as a whole.”
The groups added that “under NAFTA, American food and agriculture exports to Canada and Mexico grew by 450 percent.”
The groups signing the letter to Ross included the Lansing-based Michigan Agri-Business Association (MABA) and Michigan Agricultural Commodities Inc.
“We are extraordinarily concerned about the questioning of NAFTA and the threats from the president on NAFTA,” said Jim Byrum, president of the MABA. “In many of our commodities, our biggest trade partners are Mexico and Canada, so there are major potential negatives for Michigan agriculture.”
Similarly, Mary Kelpinski, CEO for the Lansing-based Michigan Pork Producers Association, said free trade agreements like NAFTA help the farming sector remain competitive.
While pork pricing has been volatile over the last few months, the demand for the meat remains high, said Kelpinski, noting that producers export more than 25 percent of the pork raised in the U.S.
Michigan farmers raised 593 million pounds of hogs valued at $297 million last year, according to data from the USDA.
“It is our hope that the administration will revise NAFTA and not make any changes to pork exports. It has been a very good agreement for most of agriculture,” she said in an email to MiBiz. “The U.S. is a very efficient and economical producer of pork, which happens to be the most widely consumed source of protein worldwide.”
Mexico is the No. 1 importer of U.S. pork by volume and Canada is the fourth largest, Kelpinski said.
If NAFTA were reversed, it would result in a loss of approximately 250,000 U.S. jobs and a $13 billion drop in the Gross Domestic Product from the farming sector alone, according to a study from ImpactECO.
In 2016, the industry exported roughly $43 billion worth of food and goods to Canada and Mexico, lowering the price of “various inputs throughout the supply chain” and “making U.S. agriculture more competitive,” the groups wrote in the letter to Ross.
“This letter surfaced because (Commerce Secretary) Wilbur (Ross) said the agriculture sector was overreacting,” Byrum said. “We wanted him to see the impact of (NAFTA) on agriculture. … Some sort of hiccup of NAFTA could cause a major upheaval in not just the state but the United States.”
If the agreement goes south, the farming industry faces major problems, Byrum added.
One problem is the country’s surplus of food, he said, explaining that goods like black beans, pork and corn are heavily exported to Mexico.
If the U.S. loses its ability to market these commodities, “we lose the ability to sell,” Byrum said.
“We grow far more than we can consume here so we have to export,” he said. “I think we are headed to a dismal time (under the repeal of) NAFTA.”