NAFTA 2.0 creates few improvements for Washington agriculture
In one more event for this year of trade turmoil, the U.S. released a new agreement with our most important trading partners, Canada and Mexico. The U.S.-Mexico-Canada Agreement (USMCA), or NAFTA 2.0, will replace the 24-year-old North American Free Trade Agreement (NAFTA). Though it has been called the “worst trade deal ever,” NAFTA was anything but “the worst” for American agriculture. Exports have quadrupled from $11 billion in 1993 to more than $40 billion in 2017 and every $1 which crosses the border has generated $1.27 in economic value here at home.
Most farmers and agriculturalists say that preservation of NAFTA was a top priority and farm country is breathing a sigh of relief. The USMCA maintains the key agricultural agreements of NAFTA and opens Canadian markets to more U.S. poultry and dairy, and eases restrictions on wheat. The new agreement also protects agriculture’s ability to use and share new biotechnology across borders and improves the status of some food safety restrictions.
Do these enhancements make up for the cost of the trade war and the business we have already lost and still stand to lose with other trading partners? For Washington state, probably not.
Washington State Department of Agriculture estimates that the trade war with China and other partners may cost our state $1 billion in damages. Many of our state’s crops were targeted by the tariffs and only a few will receive targeted benefits from the relief package administered by the USDA. Additionally, the costs of lost markets will be felt for years to come by all our state’s farmers either directly or indirectly. The number and value of Washington crops made better by NAFTA 2.0 is low.
The benefits of USMCA do little to enhance the position of most Washington farmers. Washington dairy farmers, who export, can now compete with other American dairy farmers for 3.2% more of the Canadian market which is approximately $560 million of product, almost doubling our current exports to Canada. To put that in perspective, Washington state alone produced $1.187 billion in milk products in 2017, ranking 10th in U.S. milk production.
Washington farmers will still face challenges from the retaliatory tariffs which hopefully will be negotiated with Mexico and Canada and a later date. Additionally, the USCMA does not address the long-standing concerns of cattlemen about the Country of Origin Labeling and how meat packers can bring in Mexican grown beef, slaughter the cattle in the U.S. and label it as grown in the U.S.
Terry Humfeld, Executive Director of the Cranberry Institute said, “While we are pleased that the USMCA agreement was reached and will retain the duty-free access for US agricultural exports, there has been no change regarding the current US Section 232 tariffs on imports of steel and aluminum from Canada and Mexico. As a result, the Mexican retaliation tariffs, including the 20% Mexican tariff on dried cranberries and the 10% Canadian tariff on juice drinks, continue to remain in place. Senior administration officials indicated there would be further negotiations aimed at resolving these issues, but no timeframe has been provided for these talks.”
Matt Harris of the Washington Potato Commission said, “The potato industry is no worse off with USMCA. The new trilateral deal retains much of the existing NAFTA text, including duty-free access for US agricultural exports, and incorporates the components of the bilateral agreement that the US reached with Mexico last month. These include measures to strengthen sanitary and phytosanitary provisions, rules of origin for automobiles, meaning a certain percentage of parts have to be manufactured in each country to avoid tariffs, as well as new digital trade rules, intellectual property protections, and strengthened labor rules. There has been no change regarding the current US Section 232 tariffs on imports of steel and aluminum from Canada and Mexico. As a result, the Mexican retaliation tariffs, including the 20% Mexican tariff on US fries, continue to remain in place.”
Though some of the uncertainty over NAFTA is resolved, in no way does its resolution justify the ongoing and costly trade war with China, Turkey, India, and the European Union.
Shannon S.S. Herzfeld, Chairman of the Agriculture Policy Advisory Committee involved in the USMCA negotiations said, “When agricultural trade is burdened with tariffs, producers can no longer fairly compete with supply sources which carry a reduced tariff. Moreover, agricultural tariffs burden consumers by increasing their cost of food and other essential products. We recommend that bilateral discussions continue in order to drive down all agricultural tariffs to duty-free status.”
Instead of increasing the stakes in this tit-for-tat trade war and endangering trade agreements that have benefited our country, the Washington agricultural community and our nation’s families will be better off when we remove tariffs and create free trade agreements with more partners. If we don’t, the U.S. will be outpaced by more cooperative countries who are willing and eager to enter trade agreements and to give their farmers a place to compete on the global market.