NAFTA 2.0 Will Help Corporations More Than Farmers
Above Photo: HUNI GAMING/Flickr
President Trump touts NAFTA 2.0, otherwise known as the United States-Mexico-Canada Agreement, as a boon for farmers. In theory, opening Canadian markets to more U.S. exports will help farmers by increasing demand and farm income, especially for dairy. The reality is not so simple: Increasing demand promotes overproduction and lower prices that actually benefit the corporate processors and retailers of agricultural commodities.
In comments after USMCA negotiations with Canada, Trump emphasized, “dairy was a deal breaker.” The president continued, saying, “the deal includes a substantial increase in our farmers’ opportunities to export American wheat, poultry, eggs, and dairy — including milk, butter, cheese, yogurt, and ice cream, to name a few.” Trump seems to think Canada is now open for U.S. farmers to sell their production and rake in the bucks.
The reality is something else. Agribusiness corporations will see some benefit from expanding export markets, but will farmers? Not so much.
Let’s look at recent export trends, specifically Trump’s obsession with dairy. According to the U.S. Dairy Export Council, which charts a variety of goods, exports originating from the United States increased from $3.8 billion in 2008 to $7.2 billion 2014. That’s nearly a doubling in export earnings for a variety of dairy products, including fluid milk, as well as cheese, ice cream, and whey.
Did farmers benefit financially from this increase? According to the president’s rationale, farmers should have been doubling their earnings and rolling in cash. But did they? No. USDA figures on the price paid to dairy farmers for their milk do show an increase in 2014 when compared to 2008, but also how higher feed costs effectively erased these gains. Moreover, in years like 2014 when prices temporarily improve, any additional income is used to pay down debts that had been incurred in previous years of rock- bottom milk prices.
So, where do the profits go? The people who work the land and get their hands dirty do not benefit from these short-lived increases in exports and higher prices. In fact, according to the National Farmers Union in 2018, on average farmers receive just $0.14 for every dollar spent for food. The profits go to marketing firms, retailers, and food processors. When export earnings rise, it’s Walmart, Dean Foods, and Krogers, not small, family farms and struggling farm families that benefit. Meanwhile, farm families have to search for off-farm employment to keep their operations alive.
Exports can marginally improve farmer income, yet corporate agribusiness benefits more by taking a disproportionate share of the food dollar.
Current low farm prices, not only for dairy, but also for soy, corn, and wheat, is not Canada’s fault. Trump’s trade war with China — which the USMCA does nothing to alter — does not help. The real problem is the myth of the free market in agriculture, which since the 1970s has prompted farmers to plant “fence row to fence row” in the belief that the free market is always a fair market. Since the 1980s, price floors were systematically removed to favor the limitless production of commodities, making farmers prone to violent price fluctuations for their produce.
Canadian farmers, especially in the dairy industry, work according to a different model, one called supply management. Commodity prices, which producers negotiate with processors, along with production quotas and import control measures, ensure that farmers receive prices for their product that cover their cost of production plus a reasonable profit. Consumer prices might be slightly higher, but they are assured of a constant supply produced locally from a system that requires no government subsidies. While dairy farmers in Wisconsin file for bankruptcy and receive suicide hotline information with their milk checks, their counterparts in Canada are paid a fair price.
If Trump wants to help farmers, he should look to the Canadian supply management system rather than trying to destroy it. The truth is that Trump’s interest lies in increasing the corporate bottom line, not helping farmers.