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U.S. inks new trade deal with Mexico and Canada
 

By RACHEL LANE

WASHINGTON, D.C. — After a busy weekend in U.S. trade, the United States-Mexico-Canada Agreement has been signed and representatives of the Chinese and U.S. governments have agreed to stop future tariffs – for now.

The Chinese-U.S. discussion over 90 days is not a trade deal. No one has said what will happen with the tariffs already in place, which are negatively impacting the U.S. agriculture industry, but it is a step toward removing current trade barriers.

The conversation took place during the G-20 Summit on Saturday in Argentina between President Donald Trump and Chinese President Xi Jinping.

“This is the first positive news we’ve seen after months of downturned prices and halted shipments. If this suspension of tariff increases leads to a longer-term agreement, it will be extremely positive for the soy industry,” said John Heisdorffer, American Soybean Assoc. president.

“We want to begin repairing damage done to our trade relations with China, which has been essential to successful soybean exports for years.”

According to Saturday’s agreement, the tariffs already in place will not increase to 25 percent from the current 10 percent levels. A statement from the White House indicates the Chinese will immediately start purchasing more ag products.

On Friday, after more than a year of negotiating, the USMCA deal was signed by the three countries involved. The re-negotiated North American Free Trade Agreement (NAFTA) was signed on Nov. 30, the last day the outgoing Mexican president, Enrique Peña Nieto, was in office before the new president was inaugurated.

The three leaders sat together at the G-20 Summit to sign the paperwork.

Over the next few months, the changes will be researched and results of the economic research will be discussed with members of the U.S. Congress, and the equivalent bodies in Mexico and Canada. It may be months before any changes are implemented.

Most of the changes made in the 24-year-old NAFTA modernize the agreement. Some of the technology and concerns addressed in the new pact were not around when the original agreement was signed.

Other changes are an attempt to balance some areas of trade among the three countries. The automotive industry, for instance, will be impacted by concessions Mexico made to require a higher wage for a percentage of workers working on the vehicles and parts being constructed.

The agreement among the three countries makes this region the largest economy in the world. Goods may be shipped over the borders multiple times before being sold to consumers. Cattle, for example, maybe born in Canada and raised and slaughtered in the U.S. before being sold for consumption in Canada.

Some areas have needed improvement. The Canada dairy industry changed the pricing levels regarding milk byproducts and cheese; as a result, U.S. dairy farmers selling to cheese-makers in Canada were shut out of its market. The global market also experienced a glut of surplus skim milk from Canada.

Canada agreed to reduce the global output of powdered milk in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and made similar assurances to the U.S. in the USMCA.

The agreement also protects common names of dairy used by the U.S. market in the Mexico market, adds transparency provisions for oversight of Canada’s internal pricing structure and limits certain Canadian exports.

Mexico is the U.S. dairy market’s most important trading partner, said Brody Stapel, president of Edge Dairy Farm Cooperative. “At minimum, this gives hope to our dairy farmers who have been fighting to make it through a very difficult time. You can’t overstate the value of having certainty at times like this,” he said.

Stapel added eliminating some of the pricing system in Canada is welcome news, but he is concerned that it remains unclear how the system will change and how the new structure will work.

It is not his only concern. The steel and aluminum tariffs the U.S. imposed on Canada and Mexico, and the retaliatory tariffs those nations placed on U.S. agriculture imports, remain in place. Canada and Mexico are among the top five countries importing U.S. ag products in almost every segment of the industry.

“In the latest marketing year, Mexico and Canada again proved to be top buyers of U.S. feed grains in all forms,” said Tom Sleight, CEO and president of the U.S. Grains Council. “Both countries still hold significant potential for market expansion, given the right trade policy frameworks, and the robust market development we intend to undertake there with our partners.”

The steps forward are promising, but trade will remain a primary topic of conversation and concern in the ag industry in the coming year.

12/5/2018