The U.S.-Mexico-Canada Agreement would be an overall win for the U.S. farm sector, reforming biotechnology and phytosanitary standards, but it would also allow for only “slight increases” in exports of some U.S. agricultural commodities, according to a 379-page analysis released today by the U.S. International Trade Commission.
U.S. dairy, poultry and egg producers would get a direct bump in exports to Canada from USMCA provisions, but Canadian dairy, sugar and sugar-containing products also would benefit from increased access to U.S. importers. In an ITC simulation considering only the market access provisions in the agreement, ag exports increased $435 million and imports saw an $80 million hike. Considering the agreement's overall language — including provisions impacting things like intellectual property rights, labor, and investment provisions — ag exports jumped $2.2 billion annually, a 1.1 percent increase.
One of the biggest beneficiaries would be U.S. dairy. Canada agreed to increases for U.S. access to its tightly controlled domestic market through new tariff rate quotas for milk, cheese, cream, skim milk powder, butter, ice cream, whey and other dairy products. Canada also pledged to eliminate its Class 7 dairy pricing system, which U.S. producers say flooded the international market with skim milk powder.
The International Dairy Foods Association highlighted the estimated $227 million in additional exports to Canada as a result of UMCA.
“We believe the USMCA is a big win for the U.S. dairy industry and this report confirms that fact,” said IDFA President and CEO Michael Dykes. “The next step is for Congress to swiftly take up the agreement and vote to pass the USMCA.”
It’s not fair to judge USMCA strictly on increased exports, according to organizations like the U.S. Chamber of Commerce and the National Corn Growers Association. That’s because the pact is essentially a continuation of the North American Free Trade Agreement that reduced most agriculture tariffs to zero more than two decades ago.
“The USMCA makes critical updates to rules on intellectual property, currency practices, digital trade, customs, state-owned enterprises, sanitary and phytosanitary measures and technical barriers to trade that will be valuable to many American farmers and businesses, even though their impact on GDP has historically been inherently difficult for economists to measure," said NCGA President Lynn Chrisp.
The bottom line is that USMCA is needed to keep the tariffs at zero and keep exports flowing to Mexico and Canada, two of the largest and most dependable foreign markets, according to the umbrella group Farmers for Free Trade.
“The true benefit that USMCA delivers for American farmers is certainty and stability,” said Brian Kuehl, one of the group’s executive directors. “Especially right now, American farmers need a victory. USMCA will guarantee that their most important export markets remain open for business and free from red tape,”
Perhaps one of the most important reasons farmers are hoping USMCA will be implemented is the fact that President Donald Trump continues to threaten to pull the U.S. out of NAFTA, even if the replacement isn’t in place. Trump campaigned on pulling out of NAFTA, an act that could result in Mexico and Canada resurrecting pre-NAFTA tariffs on U.S. commodities.
Earlier this year, Trump said he would be okay with pre-NAFTA conditions.
For some in the U.S. ag sector, like U.S. pork producers, those pre-NAFTA conditions are already here. That’s because Mexico slapped U.S. pork with a 20 percent tariff last year in retaliation to U.S. steel and aluminum tariffs.
The ITC analysis did not take into consideration retaliatory tariffs imposed by both Mexico and Canada.
"We are eager to see the removal of U.S. metal tariffs that prompted Mexico's 20 percent retaliatory tariffs nearly a year ago,” Nick Giordano, a vice president for the National Pork Producers Council, said today. “The value of U.S. pork exports to Mexico are down 32 percent this year due to punitive tariffs. Our farmers need zero-tariff trade restored to our largest export market."
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