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Southwest agriculture will suffer over Mexico border tax

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Agriculture producers across the U.S. Southwest are voicing their concerns over possible trade sanctions with Mexico, warning the White House of the damaging implications of trade barriers, renegotiating the North American Free Trade Agreement (NAFTA) and of President Trump’s plans to force Mexico to pay for a border wall.

In a report examining which U.S. states would most be negatively impacted by a trade war with Mexico; Texas was ranked No. 1, Arizona No. 2, and New Mexico No. 4. But the damage would not stop there. Utah is ranked No. 7, Missouri 8, Mississippi 9, California 11, Iowa 10, and Colorado 24. In short, even outside the greater Southwest, agriculture-production states across the nation will suffer if Mexico imposes a tariff on goods being imported into their country.

Such tariffs, or sanctions, are likely according to trade experts, if the Trump Administration follows through with threats to force Mexico to pay for a proposed border wall, a measure Mexican officials have said they will aggressively oppose.

One of Trump proposals also includes taxing U.S. goods headed across the border. This so-called “border-adjusted tax” would be imposed on U.S. corporations to discourage them from offshoring business.

WHAT’S AT RISK?

But what, exactly, is at risk for agricultural producers?

In terms of agriculture exports to Mexico, USDA reports export numbers have climbed 63 percent since NAFTA was adopted in 2006, to $17.7 billion in 2015, the latest numbers available. Leading ag exports in 2015 included: corn ($2.3 billion), soybeans ($1.4 billion), dairy ($1.3 billion), pork ($1.3 billion), and beef ($1.1 billion). These are the U.S. commodities most at risk if trade sanctions were issued by Mexico.

Adding insult to possible injury, the Trump administration has recently said they would add to the bill they expect Mexico to pay an assessment to establish additional immigrant holding facilities on U.S. soil.

In response to the initial suggestion that the U.S. would force Mexico to pay for the wall, Mexico’s economy minister, Idelfonso Guajardo, said in an interview with Mexican television that his country would need to be prepared to “immediately neutralize” the impact of any U.S. border tax.

“And it is very clear how – take a fiscal action that clearly neutralizes it,” he said.

According to a report in the Texas Tribune, the idea of a tariff on Mexican imports or a radical change to the North American Free Trade Agreement worries many Texas agriculture industry leaders who say it is in the state’s best interest to continue fostering a positive trade relationship with Mexico.

Indeed, Mexico is Texas’ largest single trade partner, with more than $92 billion in trade leaving the state and crossing the Mexican border in 2015 alone, according to the latest available numbers from USDA.

TEXAS CATTLE IMPACT

The Texas cattle industry, the leader in U.S. cattle production, would be one of the hardest hit if sanctions or tariffs were imposed by Mexico. According to the Texas and Southwestern Cattle Raisers Association (TSCRA), over half of Texas’ cattle imports come from Mexico and Canada. Any changes to NAFTA would affect imports from both those nations.

On the export side, TSCRA says international trade adds about $300 of value to each head of Texas cattle, and sanctions or any type of trade barrier would represent a loss that would be hard to absorb.

The same holds true for crops raised in Texas. Luis Ribera, an associate professor at Texas A&M University’s Center for North American Studies, said sanctions imposed by Mexico would negatively affect just about all Texas-grown commodities traded across the border, and they would adversely affect U.S. consumers who would largely be responsible for the added costs.

“We’re going to lose that [Mexican] market, or…we’re going to get tariffs on the products that we send to Mexico,” Ribera told the Tribune. “So it’s going to make our products less competitive when we compete with the rest of the world.”

It’s not just Texas producers that rely heavily on trade with Mexico.

NATIONWIDE ISSUE

According to the WalletHub report, Mexico is the third-largest trading partner of the U.S., with exports and imports combined totaling $583.6 billion in 2015, as well as sustaining about 1.1 million jobs in the previous year.

Arizona agricultural producers rely heavily on Mexico as a trading partner. According to Arizona trade officials, Mexico’s economy is the 15th largest in the world, and is projected to become the 6th largest by 2050. They say Mexico is evolving, and remains an incredibly complex and often contradictory place. Yet as Arizona’s single largest trading partner, it requires the state’s sustained focus in order to strengthen its economic relationship.

Any type of trade barrier between the U.S. and Mexico could be devastating to Arizona’s economy, they say.

In Colorado, the situation, while not as critical, is still a major issue. Tom Lipetzky, trade spokesman for the Colorado Department of Agriculture, said if a U.S. tariff were implemented, the U.S. could expect Mexico to retaliate by imposing similar tariffs on U.S. products being exported to Mexico.

Mexico is the second-highest export market for Colorado producers, according to the U.S. Department of Commerce, and losing that income would gouge producers already hurting from low commodity prices in the states. According to the USDA, Mexico imported $1 billion in goods from Colorado in 2015. Top exports from Colorado include beef, potatoes and corn. Lipetzky said dairy products and dry beans also are major exports to Mexico.

In New Mexico, a Mexican tariff would carry a greater impact on the state’s agricultural industry. Beef, dairy, and grains represent the leading ag products exported to Mexico. New Mexico is ranked the fourth in state’s that export goods across the border.

IMMIGRANT LABOR ISSUE

In addition, in New Mexico and other border states, the decline in immigrant farm workers has greatly affected agricultural production in recent years, and farmers in New Mexico fear a pending trade war with Mexico would only exacerbate that problem. Each year the New Mexico green chile industry experiences more difficulty finding enough farm labor, and many fear Trump policies related to immigration and trade will compound those problems.

The border between the U.S. and Mexico may soon expand into a 40-foot high, 1,000-mile long concrete barrier, if the Trump Administration carries through with its promise. But the $25 billion dollar question is who will pay for the wall.

While the administration says Mexico will ultimately pay for it, Mexican officials say they will not. Farmers and ranchers across the Southwest—and in many other states—are  worried that ultimately they may be stuck with the bill in the form of fewer exports and reduced production if alternative markets are not secured before the trade balloon bursts.

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