Trade is an especially important issue for both equipment manufacturers and dealers. About 30 percent of agricultural equipment manufactured in the United States is intended for export, according to a 2017 report by the Association of Equipment Manufacturers (AEM). The 2016 U.S. presidential election injected trade and trade agreements into the center of the policy discussion in the agriculture equipment industry. As a candidate, Donald Trump pledged to revisit existing U.S. trade agreements. As president, he has largely followed through on that promise by withdrawing from the Trans-Pacific Partnership (TPP) and opening up the North American Free Trade Agreement (NAFTA) for renegotiation. While Canada and other countries continue to pursue the TPP, President Trump has expressed his desire to enter into bi-lateral trade agreements in an effort to promote and protect U.S. interests.
AEM and the Equipment Dealers Association (EDA) surveyed their members in May to gauge the industry’s perception of these trade developments and how they might impact the agricultural equipment market.
The majority of survey takers, both equipment dealers (36 percent) and manufacturers (59 percent), said that they were largely satisfied with the existing terms of NAFTA but that some small changes were needed. Despite this consensus, manufacturers and dealers comments on the issue differed significantly. Some of the dealers indicated concerns that the United States was bearing too much of the cost under NAFTA and that Mexico was benefiting from more favorable terms. On the other hand, manufacturers noted that they were hoping to see NAFTA updated to reflect new technologies and the state of business while others expressed concern about the protectionist dialogue and how it would impact the equipment industry as many manufactures are based outside the U.S.
Equipment dealers and manufacturers also had varied perspectives on TPP and the strategy of pursuing bi-lateral trade agreements. Only 15 percent of equipment dealers believe that TPP would have led to better trade terms for the equipment industry while 41 percent of equipment dealers believe that bi-lateral trade agreements will lead to better trade terms for the equipment industry. Meanwhile, equipment manufacturers are more evenly split as to whether bilateral agreements (38 percent) or multilateral agreements (38 percent) would yield better results.
Survey comments from participating equipment dealers and manufacturers give us some insight into these figures. Equipment dealers cited concerns that TPP would lead to the U.S. providing inequitable subsidies to its trading partners while others noted that they believed that bi-lateral trade agreements would make it easier for American farmers to export their goods and, in turn, create American economic growth. Manufacturers conveyed a sense of disappointment in the abandonment of the TPP, citing concerns that TPP could have provided an incentive for non-parties to the agreement, namely China, to start seeking and complying with higher standards in their trade own trade agreements with other nations.
Equipment dealers and manufacturers in Canada had markedly more positive views of trade. Eighty percent of Canadian equipment dealers who responded to the survey expressed satisfaction with the terms of NAFTA. Over half of Canadian equipment manufacturers said they were completely satisfied with NAFTA’s terms, more than double the number of U.S.-based manufacturers who said the same thing.
EDA and AEM will continue to keep members abreast of these trade issues as the NAFTA re-negotiation gets underway later this summer.