NAFTA no more, new trade deal could open export doors for producers

Carol Spaeth-Bauer
Wisconsin State Farmer
President Donald Trump gives a thumbs up to the media as he walks along the colonnade near the Rose Garden of the White House in Washington, Monday, Oct. 1, 2018.

Having long contended that the North American Free Trade Agreement (NAFTA) was the "worst trade deal ever made," President Donald Trump shared "truly historic news" on Monday, Oct. 1, of successfully completing negotiations on a deal to replace NAFTA with an "incredible new U.S., Mexico, Canada Agreement called USMCA."

The agreement was forged just before a Sept. 30 midnight deadline imposed by the U.S. to include Canada in a deal reached with Mexico late in the summer. Trump vowed to sign the agreement by late November, but it would have to be ratified by Congress after that. The pact is expected to be signed by Canadian Prime Minister Justin Trudeau and outgoing Mexican President Enrique Pena Nieto before he leaves office Dec. 1.

In a Rose Garden ceremony, Trump said the U.S. has "racked up trade deficits totaling more than $2 trillion" since NAFTA's adoption 24 years ago. 

Trump touted USMCA as a "very, very good deal" for all three countries, putting them in "a position we've never been in before." 

"Once approved by Congress, this new deal will be a more modern, up-to-date and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed," said Trump.

President Donald Trump delivers remarks on trade between the United States, Canada, and Mexico, in the Rose Garden of the White House, Monday, Oct. 1, 2018, in Washington. (AP Photo/Evan Vucci)

The agreement helps the auto industry with new rules for automobile manufacturing and dairy farmers by reducing barriers for selling dairy products to Canada. The president said his administration had not yet agreed to lift tariffs on steel and aluminum imports from Canada, a contentious issue between the two neighbors. 

As part of the deal, the U.S. is getting expanded access to Canada’s protected dairy market, a contentious issue in the trade talks and one that threatened to shut down dozens of Wisconsin farms. 

Canada will ease restrictions on its dairy market and allow American farmers to export about $560 million worth of dairy products. That’s roughly 3.5 percent of Canada’s total $16 billion dairy industry.

Victory for farmers

"The new deal is an especially great victory for our farmers," Trump said. "Mexico and Canada will be opened up a lot more than they are now. And I think there will be a better spirit between the three countries, which is important for our farmers. The agreement will give our farmers and ranchers far greater access to sell American grown produce in Mexico and in Canada."

Trump pointed to "a substantial increase" in "opportunities to export wheat, poultry, eggs, and dairy, including milk, butter, cheese, yogurt and ice cream, to name a few."

"Those products were not being treated very fairly for those that produce them," Trump said.

U.S. Secretary of Agriculture Sonny Perdue, said the deal is "important for our economy, including the agricultural sector," by securing greater access to markets in Canada and Mexico and improving "the highly productive integrated agricultural relationship we have as nations."

Additionally, the deal eliminates Canada's Class 7 milk pricing scheme, cracks open additional access to U.S. dairy into Canada and imposes new disciplines on Canada's supply management system, according to a U.S. Department of Agriculture (USDA) news release. 

The agreement also preserves and expands critical access for U.S. poultry and egg producers and addresses Canada’s discriminatory wheat grading process to help U.S. wheat growers along the border become more competitive.

“As we celebrate this breakthrough, it is worth noting that there were many detractors who said it couldn’t be done. But this is further proof that President Trump’s trade negotiation strategy is working," Perdue said in the release. "A renewed USMCA, a new KORUS agreement, and the continued progress with Japan, can lead to further deals with other trading partners like the European Union and China. The dominoes are falling and it is good news for U.S. farmers.”

Big win

Governor Scott Walker labeled the agreement a "big win" for the state's dairy farmers. 

"This new deal will open up Canadian markets for our dairy farmers, eliminate certain tariffs, and eliminate Canada’s protectionist trade policies related to ultra-filtered milk that targeted Wisconsin dairy producers. We first raised this issue with President Trump in 2016, and we are glad that we did!" Walker said in a news release. "I thank President Trump for listening to our concerns and for joining me in going to bat for Wisconsin’s dairy farmers. I call on Wisconsin’s congressional delegation to support this trade agreement, and I encourage the U.S. Congress to approve it quickly.”

Shane Sauer (from left), his wife, Jennifer, their daughter Brooke and son Cole look over young heifers on their farm near Waterloo. The Sauers operate one of 75 dairy farms in Wisconsin dropped by their milk processor in 2017 over a change of trade police in Canada.

U.S. Rep. Ron Kind said, “American workers, farmers and families need an updated NAFTA agreement for the 21st century. The trilateral deal announced last night is a step forward in this process, but now it’s time for us to come together to discuss the outstanding issues that remain. Not only should we demand the highest possible labor and environmental standards, but ensure they are fully enforceable — a standard which many of our past trade agreements have not met.

Kind added, "I will continue to keep the pressure on the President to get the best deal for America’s Dairyland with both Canada and Mexico.”

Welcome news 

The American Dairy Coalition (ADC) applauded Trump and U.S. U.S. Trade Representative Robert Lighthizer for their diligence and determination in reaching a fair and updated trade deal, according to an ADC press release. 

According to the ADC release, the pact would open the Canadian dairy market to U.S. exports at an additional 3.59 percent (an increase from the 3.25 percent that was negotiated by the Obama administration under the Trans-Pacific Partnership).

"Increased access to Canadian markets for dairy products was a major point of contention in trade talks, as was the termination of Class 7 pricing," the ADC release stated. "The program saturated the international market with subsidized skim milk powder and cut the demand from Canadian cheese makers 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."

American Farm Bureau Federation (AFBF) President Zippy Duvall called the agreement a "hard-fought win."

As the Farm Bureau reviews details of the new treaty as they become available, Duvall said the "elimination of Canada’s Class 7 dairy pricing program is a clear victory for our farmers. We also now have access to an additional 3.6 percent of Canada’s dairy market, which is even better than what we would have achieved under TPP.

“Trade is critical to agriculture, especially trade with our two closest neighbors. The USMCA builds on the success our farmers and ranchers have seen from NAFTA" Duvall added. “Mexico, meanwhile, is still an $18 billion market for U.S. ag products. The USMCA includes new provisions to provide science-based trading standards, timely review of products produced through biotechnology and gene editing and new provisions on geographic indications."

Wisconsin Farm Bureau Federation President Jim Holte said Wisconsin farmers welcome the new agreement with opened arms.

"The USMCA is very good news as it builds upon our already-established trade relationships with Canada and Mexico in several key areas," Holte said in a press release. "This new agreement eliminates aspects of Canada’s dairy program that were being used to undercut U.S. dairy products. U.S. dairy gained access to 3.6 percent of Canada’s dairy market. This is greater than what would have been achieved through TPP (Trans Pacific Partnership)."

Holte added, "Additionally, the USMCA includes measures to address cooperation, information sharing and other trade rules related to agricultural biotechnology and gene editing. This is the first time we are seeing measures like this in a trade agreement."

The National Milk Producers Federation, (NMPF), the U.S. Dairy Export Council (USDEC) and the International Dairy Foods Association (IDFA) look forward to reviewing the text of the agreement, specifically the provisions for agriculture and dairy. 

From a strategic standpoint, the agreement will benefit America’s dairy sector because it preserves the overall structure of the 24-year-old North American Free Trade Agreement (NAFTA), according to a press release. 

“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,” Tom Vilsack, president and CEO of USDEC said in the release. “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.” 

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 in the release.

“Maintaining dairy market access in Mexico and improving market access into Canada were IDFA’s top priorities during the talks to modernize NAFTA,” Michael Dykes, D.V.M., president and CEO of IDFA said in the release. “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 agreement should do more to institute a fair trade agreement framework that benefits family farmers and rural communities, according to National Farmers Union (NFU).

“After more than a year of escalating trade tensions, the prospects of progress on trade with our two closest trading partners is encouraging. Farmers have seen their income plummet over the past five years, only to have farm prices further depressed by trade disruptions," said NFU President Roger Johnson. "While this agreement is certainly no cure-all, it is hopefully a start to repairing our trade relationships around the world, to restoring our reputation as a reliable trading partner, and to resolving longstanding issues with discrimination against U.S. wheat.

Yet, Johnson points to a couple of areas in the agreement that appear to fall short for farmers and ranchers.

"Progress was made on the dispute settlement mechanisms — provisions that place tremendous power in the hands of multinational corporations — but the ISDS framework remains," Johnson said in a news release. "And country-of-origin labeling, which is supported by 90 percent of Americans, was unfortunately left out of the agreement.”

American Soybean Association (ASA) called the agreement welcome news for soy growers that will bring stability back to the North American markets.

According to ASA, under NAFTA, U.S. soy exports to Canada and Mexico were almost $3 billion in 2017, and U.S. soy exports to Mexico have grown four-fold under the agreement. 

ASA President and soybean grower from Keota, Iowa, John Heisdorffer said, “Our soybean harvest this year is large, and we are facing great uncertainty in China, so a modernized NAFTA is timely and beneficial for our farmers and rural communities.”

With news of USMCA, and last week's announcements of new trade agreements with Korea and progress with negotiations with Japan, Heisdorffer said ASA is "hopeful that a negotiated solution to the China tariffs could be in sight.”

The U.S. Grains Council (USGC) was also pleased to see the United States, Mexico and Canada reaching a new agreement. 

In a statement on the agreement, USGC stated, "No trade agreement has had more impact on our sector than NAFTA which prompted explosive growth in our export sales to both countries as well as the development of a fully-integrated grains and livestock supply chain within North America. Over the past two decades, this agreement has proven beneficial for the producers, agricultural sectors and economies of all three countries."

National Corn Growers Association (NCGA) President Lynn Chrisp said, “Farmers across the country have been closely following NAFTA negotiations and reminding the administration of its promise to ‘do no harm’ to agriculture. NAFTA has been an unequivocal success story for American agriculture, opening markets that since enactment have become vitally important to U.S. corn farmers, and providing certainty to farmers and the rural economy. 

According to NCGA, last year the United States exported $3.2 billion of corn and corn products to Mexico and Canada, supporting 25,000 rural jobs. 

The Associated Press and Milwaukee Journal Sentinel's Rick Barrett contributed to this story.