Euphoria Over USMCA Tempered by Reality
The euphoria of the announced trade deal among the United States, Mexico and Canada Agreement (USMCA) that was announced in September has been tempered somewhat as more details emerge.
There’s both good and “hold-on-a-minute” news that has emerged.
First, the good news. The USMCA will open American access to Canada’s dairy market by another 3.59%. Under the Trans Pacific Partnership (TPP), access to Canadian dairy markets would have increased by 3.25% but shared with all TPP participating countries. Remember that President Trump withdrew from TPP almost immediately after he took office. The USMCA opening of 3.59% is for U.S. products in addition to the 3.25% opened to TPP participants. That’s a win for U.S. dairy farmers and President Trump, but another reason Canadian dairy farmers feel like they have become pawns in the wider trade negotiations.
Cheese makers that process products that bear generic food names such as “mozzarella,” “cheddar,” “provolone” and others are praising the USMCA because it protects these common names for the first time in a major trade agreement. “These explicit considerations safeguarding generic terms are essential,” says Errico Auricchio, CCFN chairman and president of BelGioioso Cheese. “The European Union (EU) continues to move the lines on which cheeses, meats, wines and other products are fair game when it comes to abusing GI policies and monopolizing common names and terms.”
Note: USMCA wasn’t a total win on GIs. The Mexican government has given up a several highly used common names to Europe within the Mexico-EU free trade agreement. “We continue to work with the U.S. government and others to ensure that current trade to Mexico is minimally affected,” says Jaime Castaneda, CCFN executive director.
Now, the not so good news. The steel/aluminum tariff kerfuffle with Mexico continues to be negotiated on a separate track. Mexico has imposed tariffs on U.S. cheese in retaliation. While U.S. exporters are paying the cheese tariffs in some cases, August cheese exports to Mexico still declined some 21%. The cheese tariffs are unlikely to be lifted until the steel/aluminum dispute is resolved.
In addition, the USMCA must be approved by all three governments. Those approvals might not come until next year. Even then, all the changes in the trade agreement have phase-in periods.
For example, Canada has agreed to eliminate its Class 7 program. Remember that Class 7 undercut U.S. milk protein concentrate sales to Canada, and subsidized Canadian exports of the diafiltered proteins that displaced U.S. and European sales in other countries. But the elimination of that program could take up to a year after the USMCA is signed. The phase-in period for U.S. access to the 3.59% of Canadian dairy markets could take seven years.
The bottom line is that U.S., Mexican and Canadian trade negotiators have agreed to changes to the old North American Free Trade Agreement (NAFTA) that go beyond what was contained in the Trans Pacific Partnership. But it will take some time, even years, before those agreed to changes are fully implemented.
“We have kept NAFTA intact, but with a different name,” says Chris Galen, director of Member Services and Strategic Initiatives for National Milk Producers Federation. It’s progress, but only incremental progress, he says.