Wisconsin farmers hopeful about trade deal with Mexico, but auto industry could be sticking point

Rick Barrett | Milwaukee Journal Sentinel

Wisconsin dairy farmers and cheesemakers say they’re hopeful that a new trade deal between the U.S. and Mexico will shore up business in one of the state’s most important export markets.

While the full details haven’t been released, early indications are the deal announced Monday by President Donald Trump calls for zero tariffs on dairy and agricultural products. Mexico also has agreed to not restrict market access for commonly named U.S. cheeses, a major point for Wisconsin producers.

“This is terrific news. No country imports more of our dairy products than Mexico. The prospect of losing that market has caused a lot of anxiety over the past several months,” said Brody Stapel, who farms in Cedar Grove who is president of Edge Dairy Farmer Cooperative.

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“Let’s face it. These are tough times for dairy farmers — tough enough even without all the uncertainty created by trade wars. So we should celebrate this for the major step forward that it is,” Stapel said.

In an Oval Office announcement, Trump said the new agreement would be called the United States-Mexico trade agreement and would replace the North American Free Trade Agreement, which he said had “bad connotations” for the U.S.

“It’s a big day for trade,” he said. “It’s a big day for our country.”

Trump said that he intends to terminate NAFTA, and that the U.S. would immediately begin negotiations with Canada, the third party in the trilateral trade pact that he has called the “worst deal ever.”

“If they would like to negotiate fairly, we will do that,” Trump said. He said it’s possible that a separate deal could be reached with Canada.

Mexico and Canada are two of Wisconsin’s biggest trading partners.

The state’s dairy industry has been hammered in trade disputes with Mexico, China and Canada, putting farms already in trouble at even greater risk.

RELATED: Already in trouble, Wisconsin dairy farmers are now getting hammered by tariffs

Mexico buys nearly a quarter of all dairy products exported by the U.S., and the American dairy industry has reeled from Mexican tariffs — of 15 to 25 percent — on cheese.

“We are very happy that this deal has been reached,” said Jeff Schwager, president of Sartori Cheese in Plymouth.

Sartori, which buys milk from 130 Wisconsin dairy farms, exports products to 49 countries. Only about 10 percent of its sales are in exports, but it's been a fast-growing part of the company's business, according to Schwager.

With the trade deal, “I think we will go back to pretty rapid growth in Mexico. But we need Canada, too,” he said, adding that the Canadian tariff on some U.S. dairy products is as high as 270 percent.

A major focus of the trade deal was the automotive industry. The Trump administration has looked to Mexico to boost wages in vehicle factories to $16 an hour. And as of last year, auto worker wages south of the border were as low as $2 an hour, The Associated Press reported in September.

The agreement also reportedly calls for greater use of U.S. steel in vehicles.

Automotive has been the “sticking point,” said Michael Slattery, a Wisconsin Farmers Union economist who spent nearly 20 years working in domestic and international finance, including 12 years for Japan’s largest bank.

The U.S. hopes it gets a final deal signed with Mexico before Mexican President Enrique Peña Nieto leaves office Dec. 1.

Slattery said he can’t imagine that President-elect Andres Manuel Lopez Obrador would be conducive to signing the deal, as he has called for tough negotiations with the U.S.

Slattery also is skeptical of Trump’s claims to have a deal.

“Anything that Trump does is highly suspect. I think it’s a lot of theater … and Mexico may only agree if Canada does,” Slattery said.

Still, farmers remain hopeful that a trade agreement would preserve one of their most important export markets, and the Mexican sales wouldn't go to South America.

“Any trade deal is better than no trade deal,” said Brad Kremer, a dairy farmer in Pittsville.

His farm, which milks 200 cows, has lost hundreds of thousands of dollars in revenue from depressed dairy and grain prices — some of those losses tied to reduced exports.

“That’s real money out of our pockets,” Kremer said.

“We don’t want a (government) program or a subsidy. We need that money to go into market development and trade improvements, free trade and open markets,” he said.

"We are in danger of losing a generation of farmers. Agriculture, the rural economy and that way of life is in a dire situation."

Small dairy farms have been disappearing from the rural landscape for decades, but the problem has been compounded by a sharp decline in farm-milk prices that's now in its third year and has spread across the country.

Farm cooperatives have urged members to think twice about adding more cows to their operations when the marketplace is awash in milk. Some have even offered incentives for members to quit farming altogether.

Federal court data shows the Western District of Wisconsin had the highest number of Chapter 12 farm bankruptcies in the nation in 2017, and that's only a glimpse into the problem since Chapter 12 is a relatively rare tool used in bankruptcies.

USA Today contributed to this report.