New North American trade pact announced

A new North American trade pact to be called the United States-Mexico-Canada Agreement, or USMCA, was settled late in the evening of Sept. 30, just hours shy of a U.S.-imposed deadline.

The agreement will need to be ratified by both houses of Congress.

It replaces the 24-year-old North American Free Trade Agreement, of NAFTA, which President Donald Trump had called a job-killing disaster.

Trump Oct. 1 called it a “great deal,” tweeting that it “solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world.”

 He added: “Congratulations to Mexico and Canada!”

The agreement gives U.S. farmers greater access to the Canadian dairy market. But it keeps a NAFTA dispute-resolution process that the U.S. wanted to jettison and offers Canada protection if Trump goes ahead with plans to impose tariffs on cars, trucks and auto parts imported into the United States.

Mexico’s future foreign relations secretary, Marcelo Ebrard, says the new trade agreement between Mexico, the United States and Canada “provides certainty for financial markets, investment and job creation.”

NAFTA tore down most trade barriers between the United States, Canada and Mexico, leading to a surge in trade among them. But Trump and other critics said it encouraged manufacturers to move south of the border to take advantage of low Mexican wages, costing American jobs.

Trump campaigned on a promise to rewrite NAFTA or get rid of it. Talks on a rewrite began more than a year ago. To placate Trump, Mexico agreed in August to provisions that would require 40 percent to 45 percent of a car be built in countries where auto workers earn at least $16 an hour to qualify for NAFTA’s duty-free benefits.

It was surprising that the United States found it easier to cut a deal with Mexico than with Canada, a longtime ally with a high-wage economy similar to America’s.

U.S. governmental and agricultural industry leaders all had praise—mixed with caution—for the new agreement.

 Senate Agriculture Committee Chairman Pat Roberts, R-KS, said, “I’m pleased to see the U.S., Canada, and Mexico have successfully delivered a renegotiated NAFTA for consideration, and I am eager to review the details. Since 1994, when the original NAFTA went into force, the value of U.S. agricultural exports to Canada has increased by 271 percent and to Mexico by 305 percent.

“That is no small impact on rural America, as well as the American economy. This trade pact will provide our farmers and ranchers with much needed export market certainty and will strengthen the relationship with two of our most important trading partners.”

Senate Agriculture Committee Ranking Member Debbie Stabenow, D-MI, said, “from the beginning that given NAFTA’s importance to our economy in Michigan, a modernization is long overdue. I’m encouraged that there have been positive steps forward. I’ll be reviewing the details of the agreement and speaking with workers, farmers and businesses in Michigan to determine whether it’s best for our state. The goal must be to export our products, not our jobs.”

House Agriculture Committee Chairman Mike Conaway, R-TX, said “President Trump promised to deliver a modernized NAFTA agreement that was better for America’s farmers, ranchers, businesses and workers—and I’m hopeful this newly announced agreement will do just that. The initial prospects released by the administration are encouraging. Between eliminating Canada’s ‘Class 6 and 7’ dairy pricing policies and removing Canada’s discriminatory grain grading standards, many of the key requests from production agriculture seem to have been addressed.”

Farm groups respond

Two U.S. agriculture groups most at odds with the Canadian government on trade policy are the nation’s dairy and wheat producers, notably for the Canadian dairy supply management program and the way Canada classes all U.S. wheat imports as feed wheat no matter the quality.

Both groups issued statements on the agreement.

The National Milk Producers Federation, the U.S. Dairy Export Council, and the International Dairy Foods Association issued a statement thanking trade negotiators for “fighting hard against Canada’s trade-distorting practices.”

In a statement, the groups said they look forward to reviewing the text of the USMCA, in particular the dairy provisions, to better understand the benefits to U.S. agriculture and dairy.

“Canada has strictly controlled imports for decades to limit the supply of milk in the country. Recently, as milk production in Canada has grown, it created the Class 7 pricing system to dump surplus milk proteins onto global markets, in direct competition with exports from the United States and other nations.”

From a strategic standpoint, the groups said the agreement will benefit America’s dairy sector because it preserves the overall structure of the 24-year-old North American Free Trade Agreement.

“The outlines of the NAFTA pact remain intact, which will allow the U.S. agricultural sector to continue developing new international markets for our farmers,” said former secretary of agriculture Tom Vilsack, now the president and CEO of USDEC. 

While Canada will remain a largely self-contained, protected milk market, “this agreement, when implemented, should give us additional marketing opportunities that will allow us to provide high-quality American dairy products to Canada, which means we’ve made incremental progress,” said Jim Mulhern, president and CEO of NMPF.

“Maintaining dairy market access in Mexico and improving market access into Canada were IDFA’s top priorities during the talks to modernize NAFTA,” said Michael Dykes, president and CEO of IDFA. “We’re also pleased that the administration was successful in getting Canada to eliminate Class 7 pricing. This new agreement will preserve our vital partnership with both countries and allow the U.S. dairy industry to seek more export opportunities.”

The dairy groups said that the ultimate benefit of the new USMCA will depend on how it is implemented. Now that a tentative trilateral agreement has been reached, the dairy organizations urged the governments of the three nations to remove their tariffs on agricultural exports—as well as steel and aluminum—that have been sticking points in relations between the United States, Mexico and Canada.

The National Association of Wheat Growers and U.S. Wheat Associates said in a statement they welcomed the administration’s decision to move ahead with an updated trade deal with Canada and Mexico and look forward to learning more about the details.

“We are pleased that the administration recognizes the need for policy certainty with some of our top customers. While NAWG and USW must review the language of the new deal, we hope to see provisions that are positive for wheat farmers,” the statement said.

“The current North American Free Trade Agreement is critically important for wheat farmers who depend on the enormous Mexican market that NAFTA built, but it did have room for improvements, particularly on grain trade with Canada. NAWG and USW called for a fix to the Canadian grain grading system which automatically designates U.S. wheat as the lowest grade simply because it is foreign. This means U.S. farmers producing the highest quality wheat arbitrarily get less value for their crop.

“Farmers need to understand that nothing has changed yet, but we are pleased to see that USTR has made progress in resolving this issue, with Canada agreeing to grade imported wheat with the same requirements as Canadian wheat. We will follow the implementation of this commitment closely to ensure U.S. farmers can finally have reciprocal access to the Canadian market.”

One group clearly upset with the deal was R-CALF USA, whose CEO, Bill Bullard, said, “The agreement does not appear to allow the U.S. to reinstate country-of-origin labeling requirements for beef. Meaning multinational packers can continue sourcing cheaper cattle and beef from Canada and Mexico and sell that beef to unsuspecting American consumers as a product of the United States. The lack of COOL has and will continue to allow multinational meatpackers to continually displace domestic production with undifferentiated imports.”

However, National Cattlemen’s Beef Association President Kevin Kester said, “This new agreement is great news for American cattle producers, and another sign that President Trump’s overall trade strategy is working. Over the past quarter century, free and open trade between the United States, Mexico, and Canada has been tremendously successful for our producers, and we’re pleased that we’ll be able to maintain our existing market access while seeing other U.S. producers get a better deal than they’ve gotten in the past.”

The Associated Press contributed to this story.

Larry Dreiling can be reached at 785-628-1117 or [email protected].