As NAFTA talks heat up, Minnesota ag, other industries weigh in

WASHINGTON – Randy Spronk climbed off a combine in Edgerton, Minn., this week and boarded a Delta flight to the nation's capital to deliver a warning.

If President Donald Trump withdraws from the North American Free Trade Agreement (NAFTA), "the giant sucking sound you hear will be the air going out of the agricultural economy of rural America," Spronk told a forum at U.S. Chamber of Commerce headquarters.

Spronk's twist of the phrase echoed one-time presidential candidate Ross Perot, who once used it to describe how NAFTA would take jobs away from Americans. Now it underscored Spronk's feelings about the stakes of Trump's attempt to improve or remove what he once called the worst trade deal ever made.

Spronk, a hog farmer who also raises corn and soy beans, did not mince words in describing the impact he and others in the Minnesota agricultural sector will feel if the president's rhetoric blows up the 23-year-old trade deal between the U.S., Mexico and Canada.

"It will be," Spronk told the Chamber forum, "a financial catastrophe. I'm not sure if everyone in the administration understands that."

U.S. Trade Representative Robert Lighthizer reinforced the White House position after the fourth round of NAFTA talks in mid-October. "The United States had two objectives in these talks," Lighthizer said. "First, we wanted to update a 23-year-old agreement to reflect our modern economy. Obvious areas for modernization included intellectual property, digital trade, anticorruption, technical standards, financial services, and others.

"Our president has been clear about our second objective. NAFTA has resulted in a huge trade deficit for the United States and has cost us tens of thousands of manufacturing jobs. The agreement has become very lopsided and needs to be rebalanced. We of course have a 500 billion dollar trade deficit. So for us, trade deficits do matter. And we intend to reduce them."

"The more we look as this issue, the more specific and personal it gets," Donohue said in a speech at the forum. "People are getting discouraged. I'm interested in getting aggressive. … This deal has got to survive."

Minnesota is playing a major role in trying to make that happen. Republican Rep. Tom Emmer laid out some numbers that explain why: "In 2016, more than 30 percent of Minnesota's exports went to Canada and Mexico, injecting over $1 billion into the Minnesota economy."

Shortly before Spronk spoke live at an event entitled "The Future of NAFTA: The Stakes for American Agriculture and Business," the chamber played videos of business people from around the country who rely on NAFTA. Among them was Rick Gessler, a vice president of Delkor Systems, Inc., a packaging company in Arden Hills.

Free-trade agreements remain a difficult issue for many in Congress, including some in Minnesota's delegation. For example, Rep. Rick Nolan, the Democrat who represents the state's Iron Range, has been sharply critical of NAFTA, but wants to keep trading with Canada.

"The North American Free Trade Agreement has hurt Minnesota's businesses and industries and cost us thousands of jobs," Nolan said. "As the Trump administration moves to renegotiate, fix, and modernize NAFTA, I support changes that benefit all sectors of the Eighth District, including agriculture. We need to protect our strong trade relationship with Canada, which supports nearly 18,000 good paying jobs in the district and over $60 million in Range iron ore exports."

Republican Rep. Erik Paulsen sits on the Ways and Means Committee, which is responsible for trade policy. Paulsen acknowledged NAFTA's role in Minnesota. "For decades, NAFTA has been important to the success of Minnesota agriculture and farmers," he said. "I am working to modernize and improve NAFTA to make sure Minnesota and U.S. interests are met."

Spronk credits NAFTA for much of the success of his multigenerational farm. Since he and his brothers established a pork production business in 1991, U.S. trade agreements have helped it grow from 6,000 hogs a year to 120,000. Spronk, who is a past president of the U.S. Pork Producers Association, said a blown NAFTA renegotiation could cause his family to lose "around $2.5 million" a year.

NAFTA renegotiations have slowed down as the three sides have reached sticking points, among them a five-year sunset on any agreement and a rejiggering of trade balances.

For business people like Spronk, five years is too small a window on which to base things like capital expenditures.

For Lighthizer, it is a risk of doing business.

The stumbling block of trade balances is also huge. If the Trump administration thinks it is going to get major concessions from Mexico on trade balances, it is wrong, Iowa State agricultural economist Dermot Hayes told the chamber panel. Mexico is already looking for other trading partners, including a billion-dollar deal to buy wheat from Argentina.

What the U.S. could get if it walks away from NAFTA, the professor said, are 20 percent tariffs on meat exported to Mexico and 45 percent tariffs on dairy and corn exports.

"The pain," Hayes pointed out, "would be localized in counties in flyover country."