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To help ranchers, US should change NAFTA's rule of origin


The renegotiation of the North American Free Trade Agreement (NAFTA) has quieted the mantra that all free trade agreements are good for America. Consequently, we now can analyze NAFTA's impact on the largest segment of American agricultural, the U.S. cattle industry. A focus on the U.S.-Mexico portion of that agreement reveals President Trump should expand his NAFTA negotiating objectives.

American agriculture is divided into two distinct segments. The first consists of actual farmers and ranchers who grow and sell livestock and raw commodities, such as cattle and wheat. The second consists of industrial processors and meatpackers who buy those raw commodities and livestock and manufacture them into food products, such as a bag of flour or a beef roast.

America's farmers and ranchers are, therefore, the domestic supply chains for America's industrialized food processors and meatpackers. Unsurprisingly, there is often an inverse relationship between profits at the supply chain level and profits at the manufacturing level.

Consistent with the World Trade Organization's objective to create global supply chains so multinational manufacturers can declare their goods "Made in the World," rather than assigned a country of origin, NAFTA, too, was designed to expand cattle supply chains beyond domestic borders, albeit regionally, and make them indistinguishable components of the final food product.    

Four giant meatpackers control market access for 85 percent of the nation's fed cattle sold by American ranchers. This level of concentration is among the highest of any industry in the U.S. and exceeds levels known to elicit noncompetitive conduct and poor economic performance.

This is the hand dealt to America's 729,000 widely dispersed and mostly family-owned cattle ranchers who market about 24 million fed cattle annually, about 20 million of which are sold to meatpacking giants Tyson, JBS, Cargill and National Beef.

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