The new North American Free Trade (NAFTA) deal has been widely debated since it was first announced President Donald Trump was seeking big changes, and although the U.S., Canada, and Mexico signed the U.S.-Mexico-Canada Agreement (USMCA) in November 2018, as of June, Canada was the only member country to move toward ratification.
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The University of Georgia recently published a study asserting the USMCA would cost some Georgia vegetable and fruit growers revenue and jobs and is against the new agreement.
Jeffrey H. Dorfman, PhD, professor, agricultural and applied economics at the University of Georgia and director for UGA’s Land Use Studies Initiative, says the school was asked to do the study by the Georgia Fruit and Vegetable Growers Association, which was concerned about the economic damage being done to its members by subsidized imports from Mexico.
“The key takeaway from our study is that Georgia’s small fruit and vegetable growers are being financially harmed by low-priced Mexican imports which have both the advantage of low labor costs and government subsidies to build greenhouses and high tunnels,” he says. “If these subsidies continue and no action is taken by the U.S. government, many growers will be forced out of business.”
Concerns of the Study
The study shows that Mexico has widely expanded the weeks during which their imports compete directly with Georgia fruits and vegetables in recent years, and this deal only makes things worse.
“Georgia’s natural seasonal advantage has been diminished by Mexican imports arriving during Georgia’s selling season at prices well below Georgia’s production costs,” Dr. Dorfman says. “Mexico has accomplished this expansion of import supply over a longer season by a government-subsidized surge in protected growing acres (greenhouses and high tunnels).”
Based on collected data, the estimated economic damage from government-subsidized Mexican producers will impact blueberries, bell peppers, cucumbers, eggplants, squash, and tomatoes. Though if Mexico expands production in a similar manner into other vegetables, the USG report theorizes Georgia vegetable growers will face even larger economic difficulties.
Therefore, the study concluded that if the U.S. approves the USMCA as currently negotiated, the economic losses to the Georgia blueberry and vegetable industries will be considerable.
Disputing the Study
U.S. Agriculture Secretary Sonny Perdue, who oversees the nation’s farm policy, took issue with the UGA trade deal study, calling its assertions that Georgia farmers would lose revenue and jobs “flat wrong” and asserted the USMCA is “good for Georgia’s farmers and all American agriculture.”
“The UGA study assumed we lost ground, but the facts are it wasn’t ground we had to begin with,” Perdue says. “Since the inception of NAFTA more than 20 years ago, agricultural trade between our three countries has boomed. U.S. exports to Canada and Mexico increased by about 300 percent and our imports increased by almost 500 percent, benefiting producers and consumers on both sides of our borders.”
In the last decade, the state’s agriculture department revealed Georgia’s vegetable growers experienced a 23 percent increase in sales, while fruit and nut sales more than doubled. Additionally, farm income in the state rose by more than 20 percent during the last 10 years.
While NAFTA is being replaced, Purdue notes the new deal ensures improved market access and solidifies commitments to fair and science-based trade rules.
“On my first day as secretary, President Donald Trump promised he’d fight for better deals for American farmers—USMCA is proof of that,” he says.
While Dr. Dorfman admits the impact of the USMCA on the state of Georgia (or the U.S.) is really pretty small, and overall, the deal probably is a small, net positive for U.S. economic growth, he warns that all trade creates both winners and losers.