By Daniel Flatley and Eric Martin / Bloomberg
In the cheerless days of the last recession, as Americans were spending less on Christmas trees, Oregon’s evergreen growers spotted an opportunity.
Demand had been growing for Northwest-grown firs in Mexico and the U.S. had a surplus. Agricultural officials from both countries forged a relationship that nearly doubled U.S. tree exports over four years, to $22.6 million in 2015. One in six of the state’s Christmas trees are now trucked south of the border.
Now, state officials are worried that their gains could become a casualty of President Donald Trump’s decision to reopen the North American Free Trade Agreement. If the U.S. ends up withdrawing from the agreement, as Trump has threatened, it could result in Mexico imposing a retaliatory tariff on the U.S. and pivoting to Canadian suppliers.
“The administration does not understand the importance of U.S. agricultural exports and is putting billions of dollars of export sales at risk, unnecessarily,” said Tim O’Connor, the executive director of the National Christmas Tree Association. Withdrawing from NAFTA “would be devastating to U.S. agriculture and the U.S. economy.”
Helmuth Rogg, the Oregon Department of Agriculture official instrumental in building the relationship with Mexico, said it would undo years of hard work. The state is now Mexico’s largest supplier of Christmas trees.
“The risk of getting rejected at the border and losing the trees and then a 20 percent tariff, I don’t think that would work for our growers,” he said.
The Trump administration is pushing for changes to NAFTA, which was established among the three nations in 1994 and now governs $1 trillion a year in commerce. Business groups such as the U.S. Chamber of Commerce have opposed key U.S. proposals, such as a bid to raise regional content requirements for cars and a reported demand for the deal to expire after five years unless the countries agree to extend.
But farm groups, while largely supportive of Trump, have tried to prevent the U.S. from exiting NAFTA and made the case for other free trade agreements, such as the Trans-Pacific Partnership. In one of his first acts as president, Trump pulled the U.S. out of that accord.
“The industry really needs these kind of trade agreements — TPP and NAFTA — to keep these markets moving,” said Chris Aldrich of Natives Northwest Company, a wholesale vendor of Christmas trees in Washington state.
If NAFTA gets tossed aside, it would leave each country to set tariffs on imports. That’s what has the tree farmers anxious.
U.S. growers say they have evidence the tariff would make an impact.
In 2009, the Mexican government imposed a 20 percent tariff on Christmas trees in retaliation for a U.S. ban on long-haul truckers from the country. That resulted in a 10 percent drop in demand for trees from McKenzie Farms, said Chief Executive Officer McKenzie “Ken” Cook. Last year, he shipped 250 truckloads of trees to Mexico.
While a Nafta withdrawal would “impact us greatly,” Cook says he’s not worried about his survival this year because a shortage of trees has stoked domestic demand and driven up prices. But a large percentage of U.S.-grown trees still go to Mexico.
“That’s a lot of trees to find another place to sell,” Rogg said.
Bob Schaefer harvests Christmas trees at the Noble Mountain Tree Farm using drones and helicopters. According to him, the Mexican government has “made the industry in the U.S. jump through a few hoops” to export there.
“They’ve tried to protect their industry with import restrictions,” he said.
Last year, Mexico’s Environment and Natural Resources Ministry introduced new requirements for imported Christmas trees, adding 10 more pests to the inspection list and reiterating the requirements that trees be sprayed with insecticides and mechanically shaken for a minimum of 15 seconds at 700 revolutions per minute before they are shipped.
“Mexico in particular is a huge market,” Schaefer said. Referring to the the NAFTA negotiators, he said “I can’t believe they’re going to shut down Christmas in Mexico.”
Mexico growers estimate they will sell about 700,000 trees this year — roughly equal to the number the nation imports from the U.S, according to the National Forestry Commission.
“We expect a positive outcome of the Nafta modernization process,” Raul Urteaga Trani, general coordinator of international affairs for Mexico’s agriculture ministry, said in an email. “Nevertheless, the current debate and threats of U.S. potential withdrawal of the agreement have made Mexican producers of Christmas trees to increase domestic production.”
Also, he said, Canada’s suppliers could satisfy the Mexican demand for years to come.
Looking past the holiday season, a U.S. withdrawal from NAFTA would have dire implication for the entire agricultural industry, according to O’Connor, of the U.S. National Christmas Tree Association.
“If our trade negotiators fold up the tent and say, ‘We’re done here, this isn’t working for us,’ all that agriculture trade is dead in the water and if that happens, those products sit in the domestic market and weigh on the supply,” he said.