Agricultural Trade: Understanding the Implications of Replacing NAFTA with USMCA
Editor’s note: This story first appeared in AgriBusiness Global’s May/June print magazine. We now also distribute the magazine digitally for added circulation and convenience. Preview the digital edition here.
It is springtime and, with the warm weather, thoughts of juicy, vine-ripe tomatoes enter one’s mind. Spring fever has everyone rushing to the garden store to purchase young, tender transplants. However, those plants require care, and we are still months away from harvesting those tasty tomatoes. But good news! The U.S.’s agricultural partner and neighbor to the south has provided local grocers with plenty of choices of tomatoes, peppers, and strawberries to get us through the long winter and spring months. Thank you, Mexico!
According to the Office of the U.S. Trade Representative, Mexico was the largest supplier of agricultural imports to the U.S. in 2017. Total imports of agricultural products were $25 billion. Leading commodities were fresh fruit ($6 billion), fresh vegetables ($5.5 billion), wine and beer ($3.3 billion), snack foods ($2.1 billion), and processed fruit and vegetables ($1.5 billion).
Agricultural trade with Mexico (and Canada) is important to all stakeholders. It is important to understand the implications of replacing the North American Free Trade Agreement (NAFTA) with the United States-Mexico-Canada-Agreement (USMCA), in particular for the agricultural sector.
USMCA was signed in November to replace NAFTA by the respective presidents in the U.S., Mexico, and Canada. But the agreement still needs to be ratified by each government. In the U.S. this means a congressional vote will be needed before the bill will be implemented. The primary impacts of USMCA extend beyond those changes that influence the agricultural business and include: dispute resolution; automotive rules of origin and labor provisions; digital trade; extending intellectual property; and inclusion of a sunset clause to the agreement. Terms of the agreement will remain in effect for 16 years, with the possibility of renegotiation after six years. The goal is to modernize USMCA with the ability to change and adapt as new technologies become available. Additionally, USMCA will contain a new Agreement on Environmental Cooperation (ECA) that includes environmental commitments in the body of the agreement to address concerns such as improving air quality, reducing marine litter, conserving biological diversity, and managing natural resources.
In the agricultural sector, change and new opportunities exist in the following areas:
- Wheat — Canada has agreed to grade wheat imports in no less favorable terms than its own. In addition, the U.S. and Mexico agreed that grading standards and services will be non-discriminatory for all agricultural goods.
- Dairy products — new access to sell fluid milk, cream, butter, skim milk powder, and cheese for American dairy farmers into Canada, including elimination of tariffs on whey and margarine. Canada will also eliminate milk classes 6 and 7.
- Poultry markets — new access for the U.S. into Canada for chicken and eggs as well as increased access for the turkey markets.
- Geographic Indications — agreement to provide safeguards for recognition of new geographic indications to protect products originating in certain regions, especially for certain cheese names.
- Biotechnology — text is included in the agreement to cover new technologies, including gene editing in addition to traditional recombinant DNA technology not previously addressed in NAFTA. Key provisions for exchange of information and cooperation on agricultural biotechnology trade are also addressed.
- Proprietary Food Formulas – protection of confidentiality of information in the same manner for
domestic and imported products.
- Alcoholic Beverages — continued recognition of Bourbon Whiskey, Tennessee Whiskey, Tequila, Mezcal, and Canadian Whisky as distinctive products.
With implementation of USMCA, the agreement will further strengthen the agricultural relationship of the North American partners and solidify the commitments toward fair and science-based trade.