Ag groups say USMCA trade pact signing first step, but questions remain

Colleen Kottke
Wisconsin State Farmer
Any U.S. lifting of metal tariffs on Mexico, and eventually Canada, would be positive news for U.S. ag markets due to those two countries placing countermeasure tariffs on U.S. farm products.

While President Donald Trump and the leaders of Mexico and Canada signed a revised trade pact this week that revamps the rules governing the free flow of commercial goods across North America, agriculture leader and groups across Wisconsin and the U.S. say the United States-Mexico-Canada Trade Agreement (USMCA) has a long road ahead to ratification. 

The ceremony was held on the first day of the G-20 summit in Buenos Aires, Argentina, on Nov. 30.

“There’s still a lot of work to do on this deal before we hit the finish line,” said Daniel Ujczo, an international trade attorney in Ohio.

The United States-Mexico-Canada Agreement will replace the 24-year-old North American Free Trade Agreement. That agreement, known as NAFTA, essentially eliminated tariffs on most goods traded among the three countries.

Trump, Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau have all lauded the new pact as good for their countries’ economy and for workers.

But the agreement still must be ratified by the legislative bodies of all three countries – a process that could take months and could be complicated by the Trump administration’s tariffs on aluminum and steel and by the House Democrats’ return to power in January.

Countermeasure tariffs

"While this agreement gives us momentum in the right direction, we also need to note that retaliatory tariffs are still in place," said Wisconsin Farm Bureau Federation President Jim Holte. "The remaining retaliatory tariffs over steel and aluminum are not helping our already over-burdened farmers and need to be eliminated as soon as possible."

Jim Holte, Wisconsin Farm Bureau President

American Farm Bureau Federation President Zippy Duvall says that the new agreement is just as good, if not better than, the one first implemented in 1994. However, he believes tariffs on steel and aluminum may hinder the flow of agricultural projects across the border.

"The administration needs to redouble its efforts to come to an agreement on those outstanding issues so we can regain the markets we had not long ago," Duvall said. 

Mexico is expected to go first. Mexico’s incoming president, Andres Manuel López Obrador, will take office Saturday. The Mexican Senate is expected to ratify the trade pact quickly so the new administration can focus on its domestic agenda.

In Canada, where the agreement has been met with skepticism by dairy farmers and others, Parliament is unlikely to take up the pact until after it is ratified by the U.S. Congress.

U.S. Secretary of Agriculture Sonny Perdue says the USMCA has secured greater access to the Mexican and Canadian markets.

"The deal eliminates Canada's unfair Class 6 and Class 7 milk pricing schemes, opens additional access to U.S. dairy into Canada, and imposes new disciplines on Canada's supply management system....and addresses Canada's discriminatory wheat grading process to help U.S. wheat growers along the border become more competitive," Perdue said.

While the FarmFirst Dairy Cooperative expressed its pleasure with the passage of the USMCA, it cautioned leaders to make sure all partners maintain the agreement.

"U.S. dairy represents 75 percent of all the dairy products imported into Mexico, and the new agreement outlines greater market expansion for U.S. dairy into Canada as well as provisions to address any pricing structures to ensure fair trade practices," the organization said. "It will be imperative that the U.S. verifies that Canada maintains its commitments and is consistent to the agreement's disciplines.

Holte noted that while the USMCA eliminates aspects of Canada's dairy program used to undercut U.S. dairy products, the specifics of that system are still unknown.

Not so fast 

Observers say that a vote in Congress may not come until spring, or even be delayed until next fall.

House Democrats’ return to power in January could slow the ratification process further. The new agreement includes some policies embraced by Democrats, including stronger labor and environmental provisions. But critics have complained those provisions don’t go far enough and are filled with too many loopholes.

US Rep. Ron Kind

Wisconsin House Democrat Ron Kind says he has "serious questions" for the Trump administration about the agreement that need to be answered before he can support the deal.

"These issue include enforceability of labor and environmental standards, and lifting the tariffs on Mexico and Canada that continue to hurt Wisconsin workers, farmers and businesses," said Kind who is a senior members of the Ways and Means Committee. "Without the inclusion of the Democratic party, the odds of finalizing the agreement are low."

U.S. Senator Tammy Baldwin says she opposed NAFTA, saying the trade deal cost Wisconsin thousands of manufacturing jobs and was long overdue for "fixing".

"Wisconsin needs better trade deals, not trade wars so now Congress needs to do its job and make sure this new deal works for farmers, manufacturers, businesses and workers," Baldwin said.

The Wisconsin senator says unfair trade practices have harmed the state's agriculture economy and trade wars and tariffs have made things worse.

Sen. Tammy Baldwin speaks with a Wisconsin dairy farmer.

"There is still more work to be done in Congress to ensure that any final agreement stops the outsourcing of jobs to other countries, strengthens Buy America, puts in place real enforcement of labor provisions and allows the United States to take action on currency manipulation," she said. 

The U.S. International Trade Commission will release its report on the trade deal’s impact on the economy early next year, probably in March. Congress will almost certainly wait for that report before scheduling a vote on the deal, analysts said.

Not far enough

The National Farmers Union concedes that while the USMCA makes important improvements over the old deal, the group says the deal doesn't go far enough to institute a fair trade framework that benefits family farmers and ranchers or restoring the sovereignty of the U.S.

"For decades, family farmers and ranchers have taken a backseat to corporate interests in international trade negotiations. And if allowed to take effect without changes, USMCA will continue this trend," said NFU President Roger Johnson.

Roger Johnson

Johnson says flaws in the original framework of NAFTA contributed to the country's $500 billion trade deficit, and helped to send jobs out of the country and lower wages.

"the reworked agreement makes improvements to eradicate investor-state dispute settlement (ISDS), the agreement still maintains ISDS provisions for some oil and gas companies," he said. "And while this is the first U.S. trade pact to include rules on currency manipulation, these rules lack teeth they need to be effective. As of right now, only the transparency requirements are binding."

He also takes issue with the loss of County of Origin Labeling (COOL).

"Canada, Mexico and multinational meatpackers pressured Congress - using NAFTA provisions- to scrap the commonsense COOL for beef and pork that American consumers and producers benefited from," he said. "These labels should be allowed under a new USMCA."

Former U.S. Secretary of Agriculture, Tom Vilsack applauded the important first step.

“The signing of the USMCA gives America’s dairy industry greater confidence as we head into 2019,” said Tom Vilsack, president and CEO of U.S. Dairy Export Council.

Michael Collins of USA TODAY contributed to this report.