WASHINGTON, D.C., U.S. — In what is being viewed as a generally positive development for North American grain producers, Canada has agreed to join the United States and Mexico in a trade deal that will replace the North American Free Trade Agreement (NAFTA).
Although the finer details of the new agreement, called the United States-Mexico-Canada Agreement (USMCA), were still being examined, the initial reaction from the agricultural sectors affected by the deal was favorable.
“No trade agreement has had more impact on our sector than NAFTA, which prompted explosive growth in our export sales to both countries as well as the development of a fully-integrated grains and livestock supply chain within North America,” said Jim Stitzlein, chairman of the U.S. Grains Council. “Over the past two decades, this agreement has proven beneficial for the producers, agricultural sectors and economies of all three countries.
“We appreciate the dedicated, hard work of our negotiating team to achieve this outcome with our neighbors and customers and look forward to fully examining the new text as the process of approving the new agreement begins a new phase.”
Steve Mercer, vice-president of communications for the U.S. Wheat Associates, told World Grain: “U.S. Wheat Associates is pleased that the administration has put in such a strong effort to complete negotiations on a new agreement that, fortunately, includes Canada. Mexico has imported more U.S. wheat the past two marketing years than any other country and over the long term is one of our top buyers consistently. The NAFTA agreement underpins that trading relationship and we hope the new agreement maintains that opportunity. There is a lot to review in the new agreement and we look forward to digging into the details to better understand its potential impact.”
John Bode, president and CEO of the Corn Refiners Association, commented: “This is a milestone. Mexican and Canadian markets are very important to American farmers, ranchers, and agribusiness. We commend President Trump for his efforts to conclude this trilateral agreement. We look forward to reviewing the agreement text released today.”
The National Grain and Feed Association (NGFA) and the North American Export Grain Association (NAEGA) issued a joint release in which they called the announcement “a significant, positive step in modernizing and further enhancing North American food and agricultural commerce.”
“Given the integrated nature of the North American economy … it was extremely important to reach a trade agreement that included all three countries,” said NGFA President and CEO Randy Gordon and NAEGA President and CEO Gary Martin.
They added, “Our industry is encouraged about reports that the final agreement takes steps to modify some existing impediments to agricultural trade, including dairy, and will preserve some form of the trilateral Chapter 19 tariff dispute-settlement mechanism contained in the North American Free Trade Agreement,” Gordon and Martin said.
As part of the new deal, Canada will offer the United States greater access to its dairy market than the United States would have achieved through the Trans-Pacific Partnership, a trade treaty that Trump withdrew from last year.
While the Canadian diary industry expressed displeasure with the deal that will increase their competition, the Canadian grain industry, including Cereals Canada, struck a positive tone.
Cam Dahl, President of Cereals Canada, said the USCMA will modernize the agreement in crucial areas, including new chapters on biotechnology and new plant breeding techniques, bringing the agreement up to date with modern technology.
“USCMA also sets the stage for equal treatment by the Canadian grading system for farmers on both side of the Canada/U.S. border,” he said. “Again, this is a modernization that addresses issues that did not exist when the original NAFTA was drafted.
Dahl noted that there was some concern that the adjustments to the grading system would undermine Canadian’s classification system for wheat.
“This is not the case as the agreement continues to allow both countries the ability to develop national policy.”
Signed in 1994, NAFTA fundamentally reshaped North American economic relations, driving an unprecedented integration between Canada and the United States’ developed economies and Mexico, a developing country.
NAFTA has been a big winner for U.S. agriculture. Since NAFTA was implemented 24 years ago, U.S. farmers have quadrupled their exports to Canada and Mexico and the two nations rank second and third, after China, as markets for U.S. farm goods.
Canada also has benefited as its total agricultural exports to Mexico and the United States have tripled.
Meanwhile, Mexico’s results have been mixed, as some economists have blamed NAFTA for exposing Mexican farmers, especially corn producers, to competition from heavily subsidized U.S. agriculture. A study from the Center for Economic Policy and Research found that NAFTA put nearly 2 million small-scale Mexican farmers out of work.
Trump said shortly after his election in 2016 that the United States would withdraw from NAFTA if its terms were not renegotiated.
U.S. and Mexican negotiators on Aug. 27 reached what the Office of the U.S. Trade Representative termed “a preliminary agreement in principle” on a new bilateral accord to supplant NAFTA.
In Monday morning tweets, Trump hailed the new agreement as “a historic transaction.”
“It is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our farmers and manufacturers, reduce trade barriers to the U.S. and will bring all three great nations closer together in competition with the rest of the world,” Trump said.
Canadian Prime Minister Justin Trudeau, said of the deal on Twitter: “A good day for Canada and our closest trading partners.”