Progress is made on trade
Monday, October 15, 2018
Posted by: Aaron Stauffacher, assoc. dir. of govt. affairs
Tensions were tight as negotiators worked right up to deadline, but there is a new trilateral United States-Mexico-Canada Agreement (USMCA). Only days before the deal’s announcement, Canada’s inclusion in a deal was looking improbable due to several sticking points, dairy included.
Edge applauded the USMCA soon after the announcement. Keeping Canada in the trade agreement is critical to build on the success of the NAFTA trading relationship. The USMCA also restores certainty to the Mexican marketplace keeping dairy export tariffs at zero.
The USMCA includes two important dairy provisions with respect to Canada. First, Canada will have to eliminate pricing classes 6 and 7, and the ingredients from these classes will be moved into a class based on the use of the end product. Secondly, while the deal does not eliminate Canada’s supply management system, U.S. dairy will receive additional market access to Canada (Even more market access than what Canada conceded in the Trans-Pacific Partnership (TPP)). To ensure transparency and fairness, strong rules were put in place to deter abuse of market access mechanisms.
The USMCA also takes a giant leap forward by protecting common food names, therefore safeguarding our cheese exports. The European Union sought to protect geographical indications (GIs) for many cheese names in a recent deal with Mexico. The U.S. and Mexico agreed that a list of cheese names, like cheddar, gouda and Havarti, will not be restricted. The deal also includes advanced GI protections, giving common food name users the ability to challenge GI applications.
While the agreement is welcome news, the work is not done. The U.S., Mexico and Canada each needs to sign the agreement before the current Mexican president leaves office. Signing is expected on Nov. 30. Once signed, a list of required changes of law must be reported followed by a U.S. International Trade Commission Report. Congress must then approve the agreement, which is not expected until February or March. Congress will also have to vote to end NAFTA because there cannot be two trade agreements.
It is important to note that while the USMCA is a crucial step forward in strengthening free trade in North America, the agreement does not address the U.S. steel and aluminum tariffs and related retaliation by Mexico and Canada. U.S. officials have been unwilling to exempt our northern and southern trading partners from these tariffs, prompting retaliatory tariffs directed at certain agricultural products. The tariffs are not automatically resolved with USMCA as the administration has repeatedly reiterated they are on a “separate track.”
We are making progress on trade, but we cannot take our foot off the gas. The agricultural community should celebrate USMCA not only because it’s good news for ag but also because of our collective efforts to amplify the importance of free trade to agriculture. Our officials understand the message and have heard our voices and have moved to put them into action. Only a few days before the USMCA announcement, the U.S. and South Korea finalized an update to the existing free trade agreement. Just two days later, the U.S. and Japan announced intentions to begin negotiations on a new free trade agreement. This is a big step forward to strategically position our exports in the Pacific Rim after U.S. removed itself from the TPP.
The administration also remains committed to seeking new export opportunities across the pond. Trade talks are on the horizon with the European Union and U.S. Trade Representative Ambassador Robert Lighthizer has made it clear that agriculture needs to be made part of any potential future agreement with the conglomerate. That is in addition to the discussions U.S. trade officials are having with the United Kingdom on a potential trade deal post-Brexit.
Edge will keep you updated as progress is made. Please reach out to me at email@example.com with questions or comments.