The potato industry is one of the most successful specialty crops in terms of growth in exports. These gains have been the product of careful trade negotiations and enforcement actions over many decades and the commitment of time and resources by our industry in support of those efforts. In addition to the vital North American markets of Canada and Mexico, Asian markets, especially Japan, China, Korea and Taiwan, are top export destinations for fresh and processed potatoes. U.S. potatoes are a U.S. agriculture export success story.
Trans-Pacific Partnership Agreement (TPP)The Obama administration completed the negotiations on the TPP, an Asian-Pacific regional free trade agreement with 11 other countries in the Pacific Rim. The TPP was never brought before Congress for consideration and it was uncertain there were enough votes to support passage. Shortly after taking office, President Trump withdrew the U.S. from the TPP process ending the possibility that the U.S. would be a part of a finalized TPP.
The remaining TPP countries officially signed the agreement on February 3, 2016. They are: Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, Canada, Mexico and Japan. President Trump announced he intends to be active in negotiating bilateral trade deals and will not participate in broad multilateral deals. The U.S. withdrawal from the Trans-Pacific Partnership will negatively impact exports in markets such as Japan and Vietnam as competitors have signed free trade agreements with those countries and negotiate lower tariffs. These countries will continue to seek free trade agreements around the world to lower the prices of their products. With TPP off the table, initiating and completing bilateral agreements with key export markets, including Japan and Vietnam, are immediate priorities for the U.S. potato industry.
In October, the U.S. announced that it intends to begin bilateral negotiations with Japan. NPC is urging that those negotiations include, at a minimum, the terms agreed to under TPP as they relate to potatoes.
North American Free Trade Agreement (NAFTA)
The U.S., Canada and Mexico completed negotiations on a revised NAFTA (dubbed the U.S. Mexico Canada Agreement or “USMCA”) in September 2018. Prior to the commencement of those negotiations, NPC sent President Trump a letter outlining our priorities for enhancing NAFTA and encouraging the administration not to withdraw. Mexico is the third largest export market for U.S. potatoes. Most exports are processed potatoes, particularly fries. Under NAFTA, frozen, dehy and fresh potatoes are entitled to enter Mexico duty-free due to NAFTA. Had the U.S. withdrawn from NAFTA, U.S. frozen potato exports to Mexico ($122 million export value) and dehy ($32 million export value) would immediately face Mexico’s Most Favored Nation tariff of 20 percent. U.S. fresh potatoes to Mexico ($37 million in export value) would face either a 50 percent or 70 percent tariff. Canadian processed potatoes would likely continue to enter the Mexican market duty-free. Over $150 million in export sales could have been lost to Canada if the U.S. failed to either renegotiate a trilateral NAFTA agreement or complete a bilateral deal with Mexico.
In the summer, Mexico eliminated the NAFTA 0% tariff and replacing it with a 20% rate due to the U.S. imposition of steel and aluminum tariffs. Despite the announcement of the USMCA, retaliatory Mexican tariffs remain in place against frozen fries. Those tariffs will not be removed until the U.S. takes action to remove the initial steel and aluminum tariffs.
Updated October 2018