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WASHINGTON — The U.S. Senate passed a trade deal Jan. 16, revamping the 25-year-old North American Free Trade Agreement.
In an 89-10 bipartisan vote, the chamber agreed to send the United States-Mexico-Canada Agreement to President Donald Trump who is expected to sign it. The House passed the same agreement 385-41 in December.
The Mexican government already ratified the agreement and the deal awaits the Canadian government’s approval.
USMCA includes provisions to improve access to markets for farmers and dairy producers, mandates inspections of factories for labor violations, and establishes new digital trade rules.
It also creates stricter regulations for auto part rules of origin and requires at least 40% of the parts for a car to be produced in plants where workers make at least $16 an hour.
Canada will increase quotas on U.S. dairy products, benefiting American dairy farmers by $242 million. Canada also will treat wheat imports the same as domestic wheat for grading and pricing.
The Numbers
A U.S. International Trade Commission report estimates USMCA would raise U.S. real gross domestic product by $68.2 billion (0.35%) and U.S. employment by 176,000 jobs (0.12%). The model estimates that USMCA likely have a positive impact on U.S. trade, both with USMCA partners and with the rest of the world.
U.S. exports to Canada and Mexico would increase by $19.1 billion (5.9%) and $14.2 billion (6.7%), respectively. U.S. imports from Canada and Mexico would increase by $19.1 billion (4.8%) and $12.4 billion (3.8%), respectively, according to the USITC report.
The combined effect of all USMCA provisions would increase total annual U.S. agricultural and food exports by $2.2 billion (1.1%) when fully implemented.
A commission simulation that considered only the effects of the agriculture market access provisions in USMCA showed increased U.S. agriculture and food exports to the world of $435 million.
USMCA would lead to small increases in U.S. exports to Canada of dairy products, poultry meat, eggs and egg-containing products, as well as wheat and alcoholic beverages.
At the same time, it would lead to a small increase in U.S. imports of sugar and sugar-containing products and dairy products from Canada, the commission concluded.
Another Win
On the heels of the news that Phase 1 of the U.S.-China trade agreement was signed Jan. 15, agriculture groups celebrated the apparent doubleheader victories.
“Every step toward USMCA passage is cause for celebration. Trade with Mexico and Canada is a vital part of the market for Illinois corn, with both countries making up 25 to 30% of corn sales leaving the country,” said Illinois Corn Growers Association President Bill Leigh, Minonk.
“The Illinois Soybean Growers appreciates our senators’ support for the USMCA that ensures market and trade stability with the second largest export market for U.S. soybeans and leading export market for U.S. pork. Reliable access to export markets is critical for agriculture and the rural economy. We commend members of the U.S. Senate in voting in support of USMCA and look forward to continuing our valuable trade relationships with Mexico and Canada,” said ISG President Doug Schroeder, Mahomet.
“Passage of USMCA is welcomed news for Hoosier farmers, especially considering how challenging 2019 was for agriculture. The trade deal benefits family farms because it brings certainty to Indiana’s trade relationship with our North American partners,” said Randy Kron, Evansville, Indiana Farm Bureau president.
“The USMCA Senate passage is a significant day for agriculture. It is a victory for Illinois farmers and a step forward that is vitally important to Illinois agriculture. This agreement protects valuable trade relationships with our nearest neighbors,” said Illinois Farm Bureau President Richard Guebert Jr., Ellis Grove.
“It makes important improvements for Illinois farmers, providing new market access for dairy products and maintaining the zero-tariff platform on all other ag products. It will return certainty to the markets as Illinois farmers look for opportunity amid declining farm income levels.”
“Though USMCA is not a perfect replacement, it does make some important changes to its predecessor. We are particularly encouraged by the inclusion of stronger labor standards, more robust enforcement mechanisms, and better environmental protections. On top of that, we are pleased to see the partial elimination of investor-state dispute settlement arbitration procedure, which is the source of many of our aforementioned grievances against NAFTA,” said National Farm Bureau President Roger Johnson.
“That being said, there is still significant room for improvement. This trade deal still doesn’t restore commonsense country-of-origin-labeling, nor does it address import dumping. With that in mind, we urge Congress and the Trump administration to continue working to strengthen trade deals so they better support the success of family farmers and rural communities.”
Lara Moody, The Fertilizer Institute vice president of stewardship and sustainability, said the new agreement “will provide the millions of hard-working men and women in U.S. agriculture with a huge economic win and allow them to compete on the global stage by ensuring that markets with our strongest trading partners remain open and fair. Mexico and Canada are two of the United States’ biggest trading partners and together import over 60% of U.S. agricultural goods.”