U.S., Canada Renegotiate Trade Agreement

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U.S., Canada Renegotiate Trade Agreement

10/01/2018
U.S., Canada Renegotiate Trade Agreement USMCA NAFTA
The newly negotiated United States-Mexico-Canada Agreement will provide U.S. dairy farmers with greater market access

The United States and Canada have come to an agreement, alongside Mexico, on what the parties described as “a new, modernized trade agreement for the 21st century: the United States-Mexico-Canada Agreement (USMCA) [that] 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.”

The agreement, which will take the place of NAFTA, was worked out just before the Oct. 1 deadline, in fulfillment of President Donald Trump’s campaign pledge to renegotiate the old trade deal. President Trump had threatened to leave Canada out of any future North American trade agreement if the talks were unsuccessful.

“We look forward to further deepening our close economic ties when this new agreement enters into force,” noted U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland in a joint statement.

USMCA “will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half-billion people who call North America home,” the trade officials added.

A key feature of the new agreement is increased dairy-market access for American farmers in the areas of fluid milk, cheese and cream, among other items. Other provisions include new market-access opportunities for U.S. exports to Canada of poultry and eggs, while the United States will provide new access to Canada for dairy, peanuts, processed peanut products, and a limited number of sugar and sugar-containing products.

"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 Tom Vilsack, president and CEO of the Washington, D.C.-based U.S. Dairy Export Council. “We also need to pursue new free-trade agreements with other nations and resolve our trade conflicts with China. It is imperative that the United States remains an integral player in driving the global trade agenda.” 

Laurie Fischer, Green Bay, Wis.-based American Dairy Coalition Inc., applauded USMCA for its elimination of Canada's "Class 7" pricing system for milk ingredients and its opening of the Canadian dairy market to U.S. exports at an additional 3.59 percent, an increase from the 3.25 percent negotiated by the Obama administration under the Trans-Pacific Partnership (TPP).

Fischer observed that greater access to Canadian markets for American dairy products and the termination of Class 7 pricing were major sticking points during the negotiations, noting: "The program saturated the international market with subsidized skim milk powder and cut the demand from Canadian cheesemakers for ultra-filtered milk from the U.S.  USMCA will include the development of new safeguards to prevent major export increases for certain dairy products."

Additionally, the National Milk Producers Federation and the International Dairy Foods Association offered thanks to Trump Administration officials for negotiating the agreement.

Geoff Freeman, president and CEO of the Washington-based Grocery Manufacturers Association, called the deal “a victory for American consumers and an important step in building the world’s strongest trading partnership.”

Noting that trade among the three participating countries “has quadrupled since NAFTA went into effect more than two decades ago, totaling nearly $18 billion in 2017, [with] Canada and Mexico [buying] about half of all U.S. processed product exports,” Freeman asserted that “this agreement will expand that success,” as it “will drive future growth; create more jobs in American food, beverage and household product manufacturing; and provide American consumers with greater choice and affordable goods.”

"The strong relationships our members have established between these three countries have helped enable the growth of the fresh produce industry over the last quarter-century," noted Tom Stenzel, president and CEO of the Washington-based United Fresh Produce Association, adding that "the announcement of this revised agreement highlights the importance of our continued engagement on key policy issues by those in the produce industry.”

The American retail sector also came out in favor of the agreement, with Matthew Shay, president and CEO of the Washington-based National Retail Federation, expressing the trade organization’s approval of “a deal … that preserves NAFTA’s trilateral framework, which is critical to protecting North American supply chains that support millions of American jobs. The [Trump] administration, as well as officials from Canada and Mexico, should be applauded for months of hard work aimed at modernizing NAFTA for the 21st century — a goal retailers have shared from the start.”

Still, not all U.S. industries were satisfied with the renegotiated agreement. Leo W. Gerard, president of Pittsburgh-based United Steelworkers (USW) International, observed, “Efforts to protect the rights of workers in all countries that will be party to this deal are not finished,” although he acknowledged that USMCA “goes farther than any prior trade agreement” in this respect.

President Trump's earlier instituted tariffs on imported steel and aluminum will remain in place for the present.

In Canada, meanwhile, dairy farmers said they were “deeply disappointed” by the news.

“The announced concessions on dairy in the new USMCA deal demonstrates once again that the Canadian government is willing to sacrifice our domestic dairy production when it comes time to make a deal,” noted Pierre Lampron, president of Ottawa, Ontario-based Dairy Farmers of Canada. “The government has said repeatedly that it values a strong and vibrant dairy sector – they have once again put that in jeopardy by giving away more concessions.”

President Trump has said that he plans to sign the trade agreement by the end of November, at which time it will go to Congress to be ratified. Most of the key provisions won't take effect until 2020.