USMCA and Japan Trade Agreement: Alternatives to China Trade Deal

It seems farmers can’t catch a break with the roller-coaster news regarding trade talks with China. However, there are trade agreements pending that could soften some of those ups and downs.

It is up to Congress to ratify the USMCA, and the office of the United States Trade Representative (USTR) to finalize the trade agreement with Japan. These countries are some of our biggest trading partners with regards to agricultural products and could help offset some of the losses experienced.

USMCA

Agricultural exports from the U.S. to Canada and Mexico were $40 billion in 2018. U.S. farm and food exports to these countries accounted for 29 percent of all exports and supported 300,000 jobs. The agreement will add an additional $2.2 billion in economic activity.
A recap of how agriculture will benefit from the deal:

• U.S. Poultry producers will have new access to Canada for chicken and eggs and expanded access for turkey.
• Canada agrees to terminate its wheat grading system to treat it the same as domestic wheat, enabling growers to be competitive. The U.S. and Mexico have agreed that all grading standards should be non-discriminatory.
• Zero tariff platform on all ag products to Mexico, including corn and soybeans.
• Beef and pork producers maintain access to two of their biggest export markets, which accounts for close to $4 billion and over 25 percent of the market.
• Dairy farmers will have new market access of 3.6 percent in Canada, competitive pricing on skim milk solids, and Canada has agreed to eliminate its Class 7 milk pricing.
• The agreement addresses agriculture biotechnology, including gene editing, that information will be shared and reduce trade-distorting policies.
• Strengthen sanitary/phytosanitary disciplines for measures that protect human, animal and plant health.

Currently, the agreement remains in limbo in both the U.S. and Canada. The USTR expects to reach an agreement with House Democrats this month which opens the door for a vote. The longer a vote is delayed, the more likely it is to be addressed until after the 2020 election. Farm groups and Agriculture Secretary Sonny Perdue have ramped up their efforts urging Congress for a House vote.

Canada has indicated that it will move its ratification process in tandem with the United States. With the election occurring in October, the agreement will have to be reintroduced in the next parliament which could potentially have a new prime minister and governing coalition. Andrew Scheer, leader of the Conservative Party, stated the renegotiation of NAFTA a “failure,” and left Canada with, “a worse deal on NAFTA.” The Conservative Party has not indicated if it will ratify the USMCA as is or seek to renegotiate some of the terms.

Japan Trade Agreement

The USTR is negotiating a bilateral trade agreement with Japan covering market access in agriculture, some industrial goods, and digital trade.

Japan is the fourth-largest U.S. agriculture market, with exports of $12.9 billion in 2018. According to USTR’s Robert Lighthizer, the announced agreement will “open up markets to over $7 billion” of U.S. agricultural exports, and “lead to substantial reductions in tariffs and nontariff barriers.” Thus benefiting various products, including beef, pork, wheat, dairy, wine, and ethanol.

There are few details coming from the USTR, but agriculture groups are optimistic that it will provide equal treatment on U.S. farm products compared to those nations in the Comprehensive and Progressive Trans-Pacific Partnership (C.P.T.P.P.). The C.P.T.P.P. is the successor to the Trans-Pacific Partnership which President Trump withdrew from after taking office in 2017.

Implemented in May was the lifting of the ban on importing cattle older than 30 months. Recently a delegation of producers from 13 states, including North Dakota, toured with the U.S. Meat Export Federation (USMEF) to promote the added value that comes from these cattle.

The White House announced on September 16, plans to enter into an “initial trade agreement regarding tariff barriers” with Japan. Trump indicated that he planned to resolve tariff and digital trade issues in a series of negotiations that would not require congressional approval.

Thinking Ahead

Currently, China and the U.S. are laying the groundwork for high-level talks in October. The topics for last week are focusing heavily on agriculture with the U.S. demanding China increase purchases of commodities, and on intellectual property protections. However, according to Reuters, the Chinese delegates who were set to visit farms in Nebraska and Montana have called off their visit, signaling a potential breakdown in talks.

In the meantime, as farmers and ranchers, you can urge Congress and your local representatives to take up the matter of the USMCA. The passage could set a precedent for future negotiations with the European Union and the U.K., depending on Brexit.