The Immigration Guy

USMCA Substitute for NAFTA With Dr. Luis Ribera Part 1

September 07, 2022 Kyle Farmer Season 1 Episode 5
The Immigration Guy
USMCA Substitute for NAFTA With Dr. Luis Ribera Part 1
Show Notes Transcript

Kyle sits down with Luis Ribera, Professor and Extension Economist at Texas A&M, specializing in risk analysis, production economics, biofuels, and international trade this week. They discuss the implications for agriculture abroad as well as the effects on the labor market. 

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Produced & Edited By: Drew Tattam

Hey y'all. A couple years ago I recorded this interview with Dr. Louise Ribera. You'll hear some references to current events in 2020, but I thought our listeners would enjoy hearing what he has to say. Hope you enjoy. Hey y'all.

I'm here today with Dr. Louis Ribera. Uh, Dr. Ribera's originally from Bolivia, and he moved the United States to study agricultural economics with emphasis risk analysis, uh, simulation. Uh, he received his undergraduate and master's degree from the University of Arkansas and his Ph.D. from Texas A&M. Uh, Dr. Ribera has, uh, sense of knowledge of, among other things recent trade deals with Mexico, Canada, Japan, and China. And he's currently working as a professor and economist at Texas University College. Well, yeah. Let's, so let's dive into it a little bit. Um, let's talk about the USMCA. So, for those that aren't aware, uh, President Trump recently renegotiated NAFTA and he bought a new trade deal with Mexico and Canada, and the name of that trade deal is the USCMA right?

Yeah. So, I just talk to you little bit about that. I know whole bunch knowledge on it, so yeah. Tell, tell us a little bit, how do you feel from an agricultural perspective about the USMCA trade deal in comparison with NAFTA? Well, I get, I get asked that a lot. Um, uh, first, I, I always like to start with, with, uh, the importance of our foreign markets.

Uh, cause uh, we all know that we export a lot, but we don't know how much in, uh, just to put things in perspective, we are the largest agricultural exporter in the world. Uh, we, in 2019, we exported about 137 billion of our… Wow. The thing that is important to to point out is, is that, uh, export accounts were about 35% of, uh, U.S. Farm income, more than one of, uh, income for our farmers come from our market. 35%? Yes, sir. So, it, it's extremely important. And whenever there's any, uh, and unfortunately whenever there's any disruption on trade, usually affects our producers, our farmers, in a negative way because we're the largest agricultural export. And, and if there's a trade war, one of the, uh, products that, uh, the other countries are gonna retaliate with will be agricultural products.

And we've seen that with, with, uh, uh, Canada, Mexico, European Union. We've seen it. We also with, uh, Japan and, uh, and, uh, and China. So, so again, you know, that's, uh, it is, it's important to put those, those things in perspective. More than one-third of the income comes from our overseas market. So, we can be shutting them down.

We cannot, uh, antagonize and we need to open it. Uh, we need to open more markets and, uh, and increase our share on those markets because we're very, uh, efficient at producing the products that, that we explore. That is very interesting as, yeah. Cause when you and I had last. You told me that we're the largest agricultural exporter in the in the world.

I had no idea. I knew that we were big, but I didn't know that we were number one. That is pretty wild, and I had no idea. Yes, it's, it's, it's, it's, it's big. And the, the, the, on the other hand as well, we're the largest agricultural importer of the world. We imported about 131 billion in 2019. So, uh, our lifestyle depend on, on all those imports as well.

Oh, that's very interesting. And we're an importer, huh? Yes. Remember, you know, we import because either we cannot produce a year-round or we cannot produce some of the products. Like, for example, uh, bananas, about close to hundred percent of the bananas consuming this country or import. Uh, when you look at coffee, for example, it's another one.

It's about 99.7% of, uh, the coffee consuming these countries is, uh, important. So, the other things that we don't have to wait for, uh, fruits and vegetables to be in season anymore. We get 'em 24 7, you know, year-round. Yeah. Good quality produce, uh, at a good price. Uh, so it is important to, to, to, we stress a lot of our export markets, but at the same time, you.

For our consumers is very important. Us as a consumer, uh, we want to have those products year-round and, uh, not have to wait, uh, for things to be in C anymore. So, it's, it's a, it's a two-way, uh, uh, stream. You know, you export, you have to compete with, uh, producers all over the world. So that is very interesting, and I guess that, that actually makes a lot of sense.

Cause I remember during this time, whenever. President Trump was renegotiating the deals with, uh, Mexico, Canada, Japan, China. It seemed like all of it was very agricultural focus, I guess in is.

I guess I didn't even consider the implications of all those things happening simultaneously in the European Union was another one you mentioned. Cause those were all going on at about the same time. Right. So, it was just back-to-back-to-back. Yes, it was. It was, uh, again, you know, this administration has taken a different approach on trade.

Um, um, I don't wanna say that positive or negative. We'll see, you know, but, uh, but, uh, it's just, you know, Trey's been on the, uh, on the news a lot. Uh, so, uh, again, you know, uh, hopefully things are settling down. Well, that was before this, this. Coronavirus pandemic. But, uh, uh, the outlook for this year started to look quite better given that, uh, USMCA was signed than the, the, uh, the, uh, trade, uh, with China also was signed.

The one with Japan was signed as well. So looked like, uh, negotiation with European Union, including agricultural, uh, trade was gonna start this year. Uh, I'm sure that was gonna bring a lot of, um, um, volatility into the market. But the same thing hopefully, uh, for the best and, um, uh, we'll just see what, uh, what the impact of this, uh, virus is.

Uh, but, uh, if you wanna go back into, um, USMCA, uh, one thing that I've also liked to point out is that NAFTA was, was very, very, um, Positive for all three countries. Uh, and, and the way that I, that I say if it was, uh, positive or successful is just looking at the, um, objectives of, uh, NAFTA. And there were two main objectives, increased trade and investment among member countries and the reduced tariffs and Ontario trade.

Both of those main objectives, objectives were accomplished under NAFTA. So, in my view, it was a successful, uh, agreement. And then when you look at, uh, again, you know, I wanna throw a lot of numbers because that's, as an economist, that's how we talk. Oh, we like numbers. Yeah. We talk with numbers. I like to make my my case, uh, my, my, uh, my examples.

You know, when you look at total us. Uh, from '94 to 2019, they increased by an almost 200%, almost, almost three four. From, sorry, from what years? From '94 To what? From '94 to 2019. U.S. Experts to the world are agricultural expert to the world. Increased by by, uh, uh, almost 200%, which is over three, four. Wow. Uh, but during the, that same period of time, U.S. Agricultural experts to Canada, Mexico increased by 294%.

So, one time more. It's like four or four increased to those two countries. So again, you know, it's, it's, it's, it's big. It's, uh, we are trading more with our, uh, neighbors on the north and in the south. Uh, so. When you look at, uh, of our agricultural exports, uh, what we export to NAFTA, we export about 137 billion.

40 billion goes to our, uh, uh, partners from the north to Canada and Mexico. So, a lot of the, of what we export goes to those two countries. And then when you look at imports of 131 billion that we import, 52 comes from Canada, Mexico. So, we're creating a lot more with them. This is just a lot of Yeah, just, uh, very fluid training.

There must be, so are there, are there tariffs on those? Most, most of our agricultural products are under zero tariffs. There's some, uh, uh, specific items like, for example, sugar. Uh, or Canada. It was, uh, you heard about the milk, the milk issue, but, uh, they have a, a supply system in Canada and it's not only milk, it's also eggs, it's also poultry.

Uh, but we were, we had some quota access to those markets, but in general, uh, most of our agricultural product were, there was just some handful of products that we still have tariffs, uh, uh, Canada will have tariffs to us in Mexico and, and vice versa, as. But most of them is, is zero tariffs. Oh wow. Okay. So, it's mostly zero tariffs.

And I guess that would probably make a lot of sense why there's so much, so I guess, such high transactions between those countries. Cause it's cheaper that way. Even we have different climates, you know, I would imagine that we're getting, um, lot of avocados and, you know, more tropical products from. Um, Mexico, whereas we can export a lot of pork there.

I i, they, they consume a bunch of pork and, you know, just kinda more of the livestock type. Um, yeah, they, they, they consume a lot of our, uh, pork or poultry, uh, wheat, um, soybeans. So, there's, there's a, and we, we, we are addicted to their, uh, produce. And, and the good thing about it's that we can get a year-round, you know, we're also agricultural exporters of, uh, horticultural products.

You know, we export, uh, tomatoes, we export, uh, pepper melons, you know, whenever we're in season. Uh, but we cannot, we cannot have a supply year-round, uh, because of the seasonality of these products. And you cannot store 'em unless you freeze somebody's, you know, it's not as good as say, afresh, right? So, we depend on imports.

So, so we can have it year-round and at a, at a, at a, you know, you can, you can't, you can't really tell, uh, when, um, our fruits and vegetable are off-season because we get it from other countries and it's, uh, and it's fairly. The other thing that I to point out, and this is because of good trade policy and good agriculture policy in general, is that we have the cheapest food in the world as a, as a percentage of our disposable income.

Really? The United States has the cheapest food in the world. Yes, sir. We spent, that's crazy. We spent about 6.4% of our disposable income on food, and that's food at. When you add the food away from home, that's about 12.9%. Wow. But going back to and do our numbers by, uh, uh, the, uh, USDA economic reaches is economic research service they put put out every, every year.

So, the numbers that I'm calling for 2018-19 are not out. But when you look at, uh, the top 10 countries of terms of, uh, uh, consumer expenditures on food, The U.S. Is number one with 6.4, then you got Singapore, 6.9, you got a 8.1 Canada. It's there at, uh, at 9.1%, uh, Mexico, for example, about 24%. And then you got all the way down on the bottom of the list, you got Nigeria with about 60%.

And, and, and why is that? Why is it important? It's because, uh, food is a, is a, is not a luxury. It's an. Now what you eat, organic, vegan, or whatever you want, say that, that that's your choice. But, uh, but you have to eat. So now, if you only spend 6.4% of your disposable income on food, that means you have a lot of money to spend on other things and help the economy.

That's what we have, you know, the latest iPhones and two or three cars, and we travel a lot and, and we innovate as well because if, if you can cover your necessity with 6.4%, then you can invest and, and think about, uh, innovations, uh, on, on how I can supply goods to, to the people, the consumers in general, as opposed to Nigeria that if, if, if you're the, the, the, the, the person that the, the, the dad or the person that provides food to your family.

If 60% of your income on average goes on food, you're so worried about how, what are you gonna bring the next day or the next week, that you cannot, uh, uh, uh, invest or innovate? You know, you worry about feeding your family. You know, so there's a lot of things that, uh, that, uh, wish I could, I can send you the table, but it's, there's a lot of angles that you can talk about.

That's a good agricultural trade policy. That's what we have. We have the lowest tariffs of food tariffs in the world. Uh, and we also, you know, we're very competitive, but producing the, uh, products that we produce are corn, soybean, with very, very efficient, uh, very. So that our consumers, they benefit because again, we only spend about 6.4% of our disposable. 

That is interesting and it so is that because. We have, um, we have high income and the low cost of food because I would imagine that if you just have a low, uh, you know, just a low per capita income, that regardless of how cheap your agriculture, your how cheap it's to eat is still a high percentage. And so, I guess, is it just a combination of those two things?

Yes. And, and, and when you look at, uh, consumer expenditures, uh, um, will be, uh, on an average, the disposable income after taxes and all that, the average in the U.S. Is about 40, $42,000. And you come, you wanna compare that to, uh, Mexico, for example, is 6,400, you know, so, uh, yes, it, it's, it's a percentage of what we make.

Uh, that's what we have the cheapest. Uh, but as a, as a, as an overall per person, Food at home, we spend about a little bit over $2,600 per year per person. So, uh, when, when you add that up, you're talking about about 11 or $12,000 for a family of four per year. Right. Okay. But, but you, even when you put it as a, as, as an overall, let's, let's talk about Brazil, because Brazil, we compete with Brazil on, on, on, on the international market, on, on soybeans, on corn, on, uh, meat, you know, poultry beef, uh, pork.

The, the average that they spend, they spend about, uh, 15 points, 7% of their income on food, and that accounts about $866 per person per. Okay, so again, they as a percentage, they spend more than we do, but as an actual value, it's a lot less. But we, we did a, a study in Brazil and I, and I mentioned to you that we have it on our website and I, and I encourage you to, to download Review Haven.

We did a comparison of a, of a. Basket of goods, uh, between the, uh, Brazil and we started all the way from the, from the south side of Brazil, from Rio de Janeiro and in Sao Paolo all the way to Berlin on the north part of Brazil. We went to probably about, uh, 25 to 30 different grocery stores across Brazil.

And then we compared to the same basket of goods or Texas, uh, just because we're here in the coal station, Bryan Coal station area, Houston, and, uh, my wife's from Louisiana. So, whenever I went to visit, I, I, I went to the, to the, uh, grocery stores and I collected some prices too. So, the basket of bees will have, uh, white rice, pin to beam, uh, beef, uh, whole chicken.

Uh, we also wanted some, uh, um, uh, more, uh, consumer, uh, ready products like Coca-Cola, white bread, spaghetti, et cetera. And we compare that with, with the, uh, uh, the ones that are the basket in Brazil. And even under absolute value, we, here in Louisiana, Texas, we have a cheaper cost of food than in Brazil by about 20%.

That basket of goods had about 38 cost, about 32.92, um, uh, dollars, uh, for that basket of good in Louisiana, Texas. And in Brazil we was $40 and 51. So even though the Brazilians, they make less. Uh, the same basket of goods is cheaper here, uh, than it is in, uh, in, in, in Brazil. And one more thing that I want to point out again, you know, numbers, that's, that's how we make our points is that when you look up, for example, in papaya and pineapple, if you have to guess, so you think that Brazil will be a next X export of papayas and pineapple in excess import?

Yeah. An exporter. Oh, I would think so. Yes. Do you think we are? No. No, because again, you know, we need more, uh, tropical and so tropical, um, uh, climate. So, we can produce those things. We produce sound, but we're not net export. We're net importers. But when you look at the price of those papas in Brazil was 69 cents.

Uh, um, uh, per unit, well here in the U.S. Is 67 cheaper and then pineapples. It's crazy. Go ahead. Oh no, I was just saying that's nuts cuz we have to import it and then it goes through the whole market and it's still 2 cents cheaper than it's there where they have enough to export. Right. And then you got pineapples in Brazil, they paid $2 and 56 cents per unit while we paid about $2 and 50 cents per unit.

So again, it's also cheaper. Why is that? Because. We, we produce what we're good at producing, but we import what we're not good at producing and we have low import tariffs. So, our consumers, they benefit, and they spend less on food that they have to, even though Brazil is an ex… Exporter of those products, their consumer have to pay more.

And one of the reasons is that most of the, uh, fruits and vegetable production, Brazilians in the north side, but they have a state tax. So, every time that, and most of the, the, the, the consumers are on the south side, south Paolo, Rio area, so every time that they have to bring food from the north side to the, to the south side, every time that they go through a state, they have to pay a state tax.

So, they add the cost to the consumer. It doesn't make any sense, but that's, that's how they do it. And consumers have to pay the price for that. We, you basically reduce what the money that they have to spend on, or they have to pay more for the food that they should be paying a lot less than we do. So, you see how that benefit, uh, our consumers and also benefits the economy because there's more disposable income to spend on other.

Yeah, I love that point that you made. Um, and I don't know if you've ever heard this Ed Edgar Broman quote, he said that turning a hundred dollars into $110 is hard work. Turning a hundred million into 110 million is inevitable. And that's interesting to me because it kind of plays back into what you were saying, where we as a country, 6.4% of our income on, uh, eating a basic necessity, which allows us the flexibility with the rest of our income innovate to basically prosper.

And so, it's interesting, it really get people to care domestically about the price of food, at least. Because, you know, I, I've heard this a lot. You know, I'll, I'll be, it's I'll tell people, hey, these tariffs will cause the price of your food, let's say to go up 3%. They're like, okay, I don't care. You know, 3% is not gonna make or break me.

Big deal. But it's not the 3% that matters. It's the 3% across everyone that it strangles, or I guess not strangles, but restricts our ability to, like you were. Innovate, invest in things that improve our standard of living, invest in things that continue to grow us as a country. So that is very interesting to me.

Sure. And also, the, the other question is that why should you pay more? You know, I mean, you know, I mean, why, if, if, if, if, if the production system is in. Why should you pro, uh, pay more for a tax that the government decided to sell? That I think that's anti, um, consumer. No, I don't think, I'm sure it's, it's definitely yourself.

Why should I pay more what I'm supposed to? Uh, I pay less. I can afford it, but why should I pay more? Yeah. Yeah. So anyway, those, those are numbers. He has to put things in perspective, and when you look at what's going on with USMCA, uh, uh, NAFTA has been very, very, very good for, uh, for our, uh, our consumers.

Now, of course, there's always some, um, sectors that are negative, effective. You know, our, our fruits and vegetable producers, you know, have a negative impact because now they have to. With, uh, other countries, uh, uh, we also have to compete with Brazil and with, uh, with, uh, uh, Canada, you know, Canada and wheat production, Brazil on, on, uh, on corn and soybean.

But, but again, you know, that is part of, uh, what makes, uh, uh, foods cheap is because we have to compete and we had to innovate and, and let the, the, the most efficient, uh, uh, country, our producers, you know, stay in. Uh, again, there's always some negative, but on the overall, the whole economy benefit and consumers definitely benefit cause of, uh, of all this trade agreement that happened with NAFTA.

Now, USMCA is starting, but what I've seen on USMCA I get asked, is it, is it a good deal? I said, well, NAFTA was a good deal and USMCA, it has most of the things of NAFTA. Plus, they updated some new. Uh, like more, more, um, access to all meal products to Canada. Uh, that was a big deal. They setting standards or agricultural biotechnology back in '94, we didn't have no many of transgenic or, or um, uh, this type of, uh, uh, GMO products.

Now we have quite a bit, we need to know more about information on that. They have some, uh, treatment on, on quality requirements for we. So, when you look at USMCA compared to NAFTA Yes. It's a, it's an. The question that I, that I said is that it is not if it's better or not because it is, you know, the other one was about what, 25-year-old pro uh, uh, agreement.

Uh, but the question is, was it worth going through two years of back and forth and, and, and, and, uh, volatility in the market? Well, I don't know. We, we'll see. But I, but the good thing, the good thing about this already, sun is into place. We already have the, uh, rules of the game. Now let's play it and compete.

Yeah, yeah, yeah. That, that is very interesting and it's something that you brought up a second ago, uh, is something that I hear a lot. So, we do a lot of H-2A applications for agricultural companies. They range from agricultural construction companies to custom harvesters to actual farmers that are growing, producing, and harvesting those crops.

And uh, so one thing that you brought up is the competition with foreign markets like Mexico, for example, where the cost of labor substantially lower. And it's hard for our agricultural farmers to compete with those markets because the cost of labor is so low. So that would be some area where I would really like to see here in the United States us resolve from an immigration standpoint as how can we lower that cost of labor that we bring in from Mexico to be competitive.

With the markets in Mexico, but not hurt the American worker. That's something that, uh, I mean that, that's probably a topic for another day, but that is a big issue here. But then something else that you brought up, I think is exactly right, is what that does is that puts pressure on us that either puts the pressure on us as farmers, innovate from a technological standpoint, from a productivity standpoint, uh, it, it puts some pressure on like agricultural robotics.

I know that that is, they're trying to automate a lot of the processes right now that are, uh, currently done manually with robotics. And that is, you know, necessities, the, the mother of innovation. That's, that's where it all comes from. And so, I, it's uh, it's definitely an interesting dynamic and yeah, that is it.

Yeah, I think that you see it a lot in the, the fruit and vegetable area. So, what are some of the implications that you see for USMCA for our livestock, you know, for our beef, for our pork, for our poultry? Well, again, you, you mentioned labor is, is a major issue. There's no question about it. Uh, and, and I don't, I don't think, well, again, you know, we, we, we should tackle it.

And, and, and there is supply of labor south of us that we is gonna help us, uh, labor to be, uh, to reduce the cost of labor. But, uh, but more than that, I think we should concentrate on, on, uh, making the labor more productive. Uh, you know, cause uh, that's what I think it got us off. To to be a power half agricultural production.

When you look at the level of input to the level of output, we're the most efficient country producing food in general. You know, and that's because the productivity of our labor is also better than in other countries. So how do you make it better again, you know, better variety, better production system, better technology, uh, innovation, you know, try to use, uh, drone, big data, all those things.

You know, labor is gonna cost. And I think it's really hard unless you, again, you know, start importing, uh, labor. But you have to also understand that in those other countries, as they grow, they're gonna start paying more to their own people as well. So, we're gonna have issues of getting, uh, workers from, let's say, Mexico, and then we've seen that already cause of this boom of our agriculture in, in, in, uh, in Mexico.

Many of the, of the farms in Mexico now competing directly with, with uh, uh, Labor, uh, that used to come to the U.S. Now they stay in Mexico because again, you know, they don't have to, you know, travel so much. They stay home and they can get, not as much, but you know, a very good, uh, source of income on the country so much that we've been importing more labor from Central America.

I'm from Mexico, you know, and, and, and then once those economies start growing too, the, the labor cost is gonna start increase. So, I. And it's not easy to do, you know, to, uh, increase the level of productivity. There is a technology have to come into place and, and producer have to be willing to try new things.

But, uh, but uh, just the labor component, I don't think it's a good, it's a good, uh, strategy. For the long run. It might be for the, for the, for the short or the medium run, but not for the long run. In the long run, I think has to be, we need to be, we need to keep that edge and be as, uh, the most product productive and efficient, uh, producers in the world.

Stay tuned for part two next week. Thank y'all for listening to the Immigration Guy Podcast. We really appreciate it. You can find us on our website. Go to You can find me on LinkedIn and Twitter. Just search at Kyle Farmer, FLPC. You can find our law firm on Twitter, Instagram, YouTube.

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