Exports to norther, southern neighbors reflect more than 325,000 U.S. jobs. The U.S. and Canada, in a last-ditch effort to meet a midnight deadline, have agreed to a revamped trade agreement to replace the 24-year-old North American Free Trade Agreement.
The new deal, reached late on Sept. 30, will be called the United States-Mexico-Canada Agreement, or USMCA.
Adding Canada to the trade agreement follows a renegotiated pact between the U.S. and Mexico settled Aug. 27. President Donald Trump had campaigned on either eliminating NAFTA entirely or renegotiating the agreement to provide a fairer deal for the U.S. Trump had blamed NAFTA for the loss of American jobs and causing U.S. companies to move manufacturing facilities overseas.
U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland, in a joint statement, said: “Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA) will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region. It will strengthen the middle class, and create good, well-paying jobs and new opportunities for nearly half a billion people who call North America home.”
Canada and Mexico are the U.S. first and third largest export markets for U.S. food and agricultural products, making up 28 percent of total food and agriculture exports in 2017. These exports reflect more than 325,000 U.S. jobs.
U.S. Secretary of Agriculture Sonny Perdue said that with the new trade arrangement, “We have secured greater access to these vital markets and will maintain and improve the highly productive integrated agricultural relationship we have as nations.” One facet of the agreement is the Office of the U.S. Trade Representative, in addition to the $600 million worth of poultry and egg products that the U.S. exported to Canada in 2017, Canada will provide new tariff rate quotas for the U.S. as follows:
- Chicken: 57,000 metric tons by year six of the agreement, growing one percent for an additional 10 years. The U.S. will still be eligible to export up to 39,844 metric tons under Canada’s World Trade Organization (WTO) tariff rate quota regime.
- Egg and Egg Products: Ten million dozen eggs and egg-equivalent products in year one of the agreement, growing one percent for an additional 10 years. Canada has agreed to allow 30 percent of import licenses for shell egg imports to be granted to new entrants as well. As with chicken, the U.S. will still be eligible to export up to 21.37 million dozen egg and egg equivalent products under Canada’s WTO tariff rate quota regime.
- Turkey: Canada has agreed to provide the U.S. and other country members of the World Trade Organization access equivalent to no less than 3.5 percent of the previous year’s total Canadian turkey production. This will allow the U.S. to export additionally up to 1,000 metric tons of turkey products each year for the next 10 years than the current access and potentially more thereafter.
- Broiler Hatching Eggs: The U.S. continues to maintain current access as agreed to under Canada US Free Trade Agreement (CUSFTA) of 21.1 percent of Canada’s domestic production.
Other agriculture aspects of the U.S.-Canada deal eliminates Canada’s “Class 7” milk pricing scheme, opens additional access to U.S. dairy into Canada, imposes new disciplines on Canada’s supply management system and addresses Canada’s wheat grading process.
The conclusion of the trade deal was met with approval by several agricultural industry groups.“Mexico and Canada are key export markets for the U.S. turkey industry,” stated the National Turkey Federation.” The USMCA will help ensure that America’s turkey growers and process have fair access to these markets and takes important steps to stabilize the U.S.’s trade relationship with our neighbors.”
The American Soybean Association said the bilateral trade agreement is “welcome news for soy growers.”
The ASA noted that soy exports to Canada and Mexico were almost $3 billion in 2017 and Mexico is now the second largest export market for U.S. soybeans and meal “so a modernized NAFTA is timely and beneficial for our farmers and rural communities.”
The National Corn Growers Association said, “NAFTA has been an unequivocal success story for American agriculture, opening markets that since enactment have become vitally important to U.S. corn farmers…We applaud USTR for reaching a new agreement and look forward to thoroughly evaluating it to determine if it continues to benefit American agriculture.
The agreement “represents a positive step in preserving duty free access to two of the U.S. meat and poultry industry’s most critical foreign market,” stated the North American Meat Institute. The agreement “safeguards the core tenants of NAFTA that have strengthened the U.S. meat sector and overall economy.”
“The new U.S.-Mexico-Canada Agreement (USMCA) will build on the progress of the former North American Free Trade Agreement (NAFTA), while facilitating greater market access, regulatory transparency and accountability among the three trading partners,” said the American Feed Industry Association, adding, “the USMCA will not only allow U.S. animal food exports to remain strong, but to grow in the face of intense global competition.”
The American Farm Bureau Federation said the new agreement is welcome news, adding that “trade is critical to agriculture, especially trade with our two closest neighbors. The USMCA builds on the success our farmers and ranchers have seen from NAFTA.
Other aspects of the trade deal between the U.S. and Canada include:
- Cars or trucks beginning in 2020, must have 75 percent of its components manufactured in North America, up from the current 62.5 percent amount.
- By 2020, at least 30 percent of work on cars and trucks must be by workers earning at least $16 an hour. This moves to 40 percent for cars by 2023.
- The 25 percent tariffs on Canadian steel remain in effect, although the two countries are still discussing lifting those tariffs.
- USMCA upgrades environmental and labor relations, especially relating to Mexico, such as requiring that Mexican trucks that cross the border into the U.S. must meet higher safety regulations and Mexican workers must have more ability to organize and form unions.
The Trump administration will send the new deal to Congress, which has 60 days to review the agreement. Congress can suggest changes during that time. Legislatures in Canada and Mexico must also approve the agreement before it can enter into force. Mexico wants to have current President Enrique Pena Nieto sign the deal before his successor takes over Dec. 1
Source: Poultry Times, Issue: October 15, 2018
