Passage of USMCA critical this year06/20/2019 | Soybean Exports, Policy, Soybean News, Ag Awareness, Economics
By Bethany Baratta, ISA senior writer
The ratification and passage of the U.S.-Mexico-Canada Agreement (USMCA) would mean more market potential for U.S. ag products and a renewed sense of optimism for farmers, Iowa commodity group leaders said earlier this week during a discussion about the USMCA. The event was hosted by Tom Vilsack, president and CEO of the U.S. Dairy Export Council and former U.S. Secretary of Agriculture.
U.S. soybean farmers have already witnessed the benefits of trade with Canada and Mexico under the North American Free Trade Agreement, or NAFTA. The USMCA is an updated version of NAFTA, sometimes referred to as NAFTA 2.0.
“Since the enactment of NAFTA in 1994, soybean exports have quadrupled to Mexico and doubled to Canada,” Iowa Soybean Association (ISA) Public Policy Director Michael Dolch said.
U.S. soy exports to Canada and Mexico were almost $3 billion in 2017, according to the American Soybean Association (ASA). Mexico is now the second largest export market for U.S. soybeans and soy meal. A total of $43 billion of U.S. agriculture products are exported to Canada and Mexico every year.
The USMCA puts an end to unfair dairy pricing mechanisms in Canada, Vilsack said, which would provide a fair and level playing field for the United States dairy industry to compete there.
“We expect and anticipate several hundred million dollars of additional trade opportunities in dairy as a result of this agreement,” Vilsack said.
The agreement also provides protection for the dairy industry from expansion of Europe’s geographic indicators in Mexico, which is limiting market opportunities. Geographic indicators identify products by where they originate. This side letter of the USMCA protects the U.S. dairy industry from EU indicators which wouldn’t allow the United States to sell cheese labeled with common names such as parmesan, feta and asiago. The USMCA creates a process wherein the United States could challenge the Mexican government’s determination and use of those geographic indicators.
On Wednesday, Mexico became the first country to ratify and pass the USMCA. Jesús Seade, Mexico's undersecretary for foreign affairs, wrote on Twitter that it was clear signal of Mexico opening up its economy. He said he was confident that the country’s partners in the agreement—the United States and Canada—will soon do the same.
USMCA is important for the future of American jobs, Vilsack noted. There are 43 million jobs tied to the U.S. food and agriculture industry; 20 percent of the U.S. economy is tied to those industries.
“Anything that impacts and effects the food and ag industry, obviously impacts the economy,” Vilsack said.
That’s why the passage of the USMCA is so important, he said. It’s vital to get the agreement ratified and signed yet this year, Vilsack said.
“It's fair to say that if this thing blends over into 2020, it gets into presidential and congressional politics which makes passage more difficult,” Vilsack said.
The passage of the USMCA would set a tone for future trade agreements, like a trade agreement with Japan, the fifth-largest market for U.S. soybean exports. Soybean shipments to Japan were valued at $976 million in 2017, according to the ASA.
“The passage of USMCA sends a message to Japan and to everyone else that when trade agreements are negotiated with the U.S., we get it through the process. If we fail to get USMCA through, then obviously the Japanese have no confidence that our administration will be able to get the other agreements through the process. If you get one through it creates more momentum,” Vilsack, a former two-term Iowa governor, said.
Letter of support
Vilsack said he believes that USMCA would be passed if it were taken up today. But he said the Trump administration is holding off on sending final language on the trade agreement until votes are secured to ensure passage.
ISA and ASA recently joined 963 other organizations in a letter to members of Congress supporting ratification and passage of the USMCA.
“USMCA builds on the success of the NAFTA agreement, and will ultimately lead to freer markets and fairer trade. This modernized trade agreement makes improvements to further enhance U.S. food and agricultural exports to our neighbors and would deliver an additional $2.2 billion in U.S. economic activity,” the groups said in the letter.
Passage of the USMCA would not only ensure a fairer and level playing field for U.S. agriculture, it would also create some optimism in a year where farmers could use it.
“Having this agreement passed creates optimism, creates a hopefulness about the future … that things are going to be better,” Vilsack said. “The momentum piece of this is really important.”
Contact Bethany Baratta at email@example.com.
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