US ranchers saddle up for trade battle with Washington

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BBC | 22 March 2017

US ranchers saddle up for trade battle with Washington

By Zoe Thomas

"Tremendously important" is how rancher Coleman Locke describes the role of international trade to his cattle business.

The 72-year-old has worked on his family’s 10,000-acre ranch on the Gulf Coast of Texas for his whole life and has seen his fair share of struggles in the industry, including droughts and disease.

But now he is gearing up for a new threat - the potential loss of trade deals that could cut off a huge slice of his ranch’s yearly sales.

"In 2016, 25% of the breeding stock that we sold here at this ranch went out of the United States, it’s a tremendously important market for us," says Mr Locke.

He’s not alone. Last year the American beef industry earned over $6bn (£4.9bn) from overseas sales. Among the biggest purchasers are Canada and Mexico, partners with the US in the North American Free Trade Agreement (Nafta).

President Trump’s promise to renegotiate Nafta and possibly place tariffs on Mexico or other US trading partners has the industry worried.

"Nafta is extremely important to us. It’s one of the biggest trade deals that agriculture has ever had," says John Robinson from the National Cattlemen’s Beef Association (NCBA).

The beef industry is already reeling from the loss of the Trans-Pacific Partnership (TPP), which President Trump withdrew from in his first week in office.

The free trade agreement with Pacific Rim countries, including many in Asia, was set to expand America’s export market for beef. By some estimates, it could have added $400m in sales each year.

"It makes the market very nervous when they hear we aren’t going to do the TPP and we are going to change Nafta," says Jennings Steen, a cattle dealer based in Austin.

Mr Steen says he and his partner have been fielding dozens of calls since President Trump’s election, from ranchers desperate to know how changes to trade deals could affect their businesses. They are concerned about prices and hesitate to make long-term plans.

American suppliers particularly wanted increased access to Japan’s home market, where high tariffs on US beef have made it hard to compete with suppliers from Australia who can sell beef into Japan at lower rates.

But President Trump’s supporters say his experience in business will allow him to negotiate better deals for the US, focussing on bilateral agreements rather than bigger deals involving several countries.

Nafta changes

According to Texas agriculture commissioner Sid Miller, after 22 years Nafta is in need of a "facelift".

Mr Miller was an outspoken and early supporter of President Trump. But since the election, he has spent a lot of time reassuring the ranching community that trade with Mexico won’t disappear and new trade options will be opened up under the Trump administration.

Mr Miller says he takes "a softer kinder approach [than Donald Trump]," stressing that Texas needs trading partners like Mexico, but also that it needs new deals with countries like China and better deals with its existing partners.

President Trump’s vision for changes to Nafta has focused on ensuring more products are made in the US and he has called for tariffs on manufactured goods imported into the US from Mexico.

But such tariffs could result in retaliatory charges on US products sold into Mexico - including agricultural goods like cattle and beef.

Mr Miller is unshaken by this prospect, though. He acknowledges that US farmers produce more than the country can consume - including beef - but sees this as giving the US leverage over other trading partners.

"Agriculture is a good bargaining tool," he says. "People have to eat, they don’t have to buy manufactured goods."

More than trade

President Trump’s relationship with the cattle industry though isn’t as simple as a beef over trade.

Rural communities voted overwhelmingly in support of Mr Trump. Beef and cattle producers, like other members of the agricultural industry, would like to see the rollbacks on regulations that President Trump has promised.

"I think cattle producers and rural America, in general, are optimistic about the Trump administration," says the NCBA’s John Robinson.

Within President Trump’s first month, there were regulatory rollbacks that Mr Robinson calls "very encouraging". But he says he hopes the beef industry is given an equal seat to manufacturing when it comes to renegotiating Nafta.

That seat is crucial because the US produces more beef than it consumes. Without international markets, suppliers will have to reduce production or see a significant drop in prices, as the market is flooded with local beef.

There is no guarantee either that the bilateral deals President Trump has promised will be better than the ones he has walked away from.

As a part of TPP, US beef producers who currently face import duties of up to 38.5% on fresh and frozen beef entering Japan would have seen those tariffs phased out over 16 years.

Without that deal, many worry competition from countries that remained in TPP, like Australia, will increase.

For Coleman Locke on his ranch in Texas, it’s too soon to worry. No deals have been struck yet and business is still good.

But if President Trump wants to claim his title as America’s dealmaker in chief he’s going to have to be sure he doesn’t trade away this rancher’s livelihood.

source: BBC