April 8, 2019

China Deal Nears Finish Line, New Snags For USMCA

 |  By: Anna-Lisa Laca

As farmers await completion of two trade agreements that will undoubtedly impact the farm economy, one analyst says a deal with China is just a month from completion. Meanwhile, politics are the reason for a new snag on the U.S.-Mexico-Canada Agreement ratification.


“I think we're more I think we're down the homestretch [on China],” Randy Russell of the Russell Group told AgriTalk host Chip Flory. “I think if I likened it to running a one-mile race, we're in the last lap, and probably very frankly, headed into the final curve.”


Some of the issues like intellectual property theft and the rules governing foreign investment have been causing problems for 20 years, according to Russell. He says it’s no surprise agreement has taken a bit longer than most people thought it would. 


“I think by May, probably by mid-May or so, we'll have we'll have a deal,” he said adding it will be great for U.S. agriculture. “If you go back to 2017, we were exporting about $20 billion to China. This year we're projected to be about $9 or $10 billion because of the tarriffs, etc. I think if you use $20 billion as a high-water mark, we will be northward of $30 billion, maybe as high as $40 billion, over the next three to five years after this agreement.”


When it comes to USMCA, the new NAFTA agreement, Russell isn’t as clear on the timeline. The key player: House Speaker Nancy Pelosi.


“She holds the cards. In the end, the administration is not going to send up implementing legislation until they know that she is going to schedule a vote,” he said. “The Trade Promotion Authority requires Congress, once the bill was introduced, to consider the vote within a certain period of time. It's got to be an up or down vote, unamendable. So you can't change the agreement. But she holds the cards in terms of whether it will be considered or not.”


Pelosi’s first request was that Mexico change their labor laws to bring it in compliance, something Russell said is likely. Now there's some talk that she would like to see changes in the end enforcement mechanisms, according to Russell.


“The problem is you can't change this agreement,” he said. “We've had a new government takeover in Mexico that may have a different view of the world about some of these provisions, and if we try to reopen it, I'm sure they'd have plenty of things they would like to change.”


Additionally, Canada is heading into an election which could cause problems if the agreement were reopened.


“This agreement cannot be changed in its substance,” he said. “Now, can there be side letters, can there be side agreements? Certainly that can that can be the case, but this agreement can't be changed and needs to be voted on.”