Last week, the House of Representatives voted 385-41 to pass the United States-Mexico-Canada Agreement (USMCA), a top priority for almost all agricultural and food groups.
But, what is it and what it means for the food industry?
The USMCA is an updated version of the nearly 25-year-old, trillion-dollar North American Free Trade Agreement (NAFTA). It includes major changes sanitary and phytosanitary measures, agriculture, textiles, and apparel, digital trade and more. However, this article will center around how it affects the food industry landscape.
During his 2016 presidential campaign, Donald Trump promised to renegotiate NAFTA, which he called “the worst trade deal ever made.” As president, he fulfilled this promise. The result is the USMCA, which was signed by the three countries in November 2018.
This brief guide to the trade deal between Canada, Mexico, and the U.S. highlights the major impact points on the food industry.
Canada and Mexico are our first and third largest export markets for United States food and agricultural products, making up 28 percent of total food and agricultural exports in 2017. These exports support more than 325,000 American jobs.
Here’s a brief overview of what’s in it:
- All food and agricultural products that have zero tariffs under the North American Free Trade Agreement (NAFTA) will remain at zero tariffs. However, the USMCA will create new market access opportunities for U.S. exports to Canada of dairy, poultry, and eggs. In exchange, the U.S. will provide new access to Canada for dairy, peanuts, processed peanut products, and a limited amount of sugar and sugar-containing products.
- Canada will provide new tariff rate quotas exclusively for the United States. The agreement includes market access gains for the following American products: Fluid Milk, cheese, cream, skim milk powder, butter and cream powder, concentrated and condensed milk, yogurt and buttermilk, whey, and other products of natural milk constituents.
- Six months after entry into force of the USMCA, Canada will eliminate milk price classes 6 and 7. Canada will ensure that the price for skim milk solids used to produce nonfat dry milk, milk protein concentrates, and infant formula will be set no lower than a level based on the U.S. price for nonfat dry milk. Canada to adopt measures designed to limit the impact of any surplus skim milk production on external markets.
- In addition to the $600 million worth of poultry and egg products that the United States exported to Canada in 2017, Canada will provide new tariff rate quotas for the following U.S. products: Chicken, egg and egg products, turkey and broiler hatching eggs.
- Unprecedented standards for agricultural biotechnology. For the first time, the agreement specifically addresses agricultural biotechnology to support 21st century innovations in agriculture. The text covers all biotechnologies, including new technologies such as gene editing. Specifically, the United States, Mexico, and Canada have agreed to provisions to enhance information exchange and cooperation on agricultural biotechnology trade-related matters.
- Fair treatment for quality requirements for wheat and other agricultural products. Canada has agreed to grade imports of United States wheat in a manner no less favorable than it accords Canadian wheat and to not require a country of origin statement on its quality grade or inspection certificate. Canada and the United States also agreed to discuss issues related to seed regulatory systems.
- To facilitate the marketing of food and agricultural products, Mexico and the United States agreed that grading standards and services will be non-discriminatory for all agricultural goods and will establish a dialogue to discuss grading and quality trade related matters.
The United States, Mexico, and Canada agreed to non-discrimination and transparency commitments regarding sale and distribution, and labeling and certification provisions to avoid technical barriers to trade in wine and distilled spirits.
They agreed to continue the recognition of Bourbon Whiskey, Tennessee Whiskey, Tequila, Mezcal, and Canadian Whisky as distinctive products.
Proprietary food formulas
To meet technical regulations and standards related to prepackaged food and food additives, governments may require information from companies relating to the companies’ proprietary formulas.
The United States, Mexico, and Canada agreed on the Annex on Proprietary Food Formulas, which requires each Party to protect the confidentiality of such information in the same manner for domestic and imported products. It also limits such information requirements to what is necessary to achieve legitimate objectives.
Trade-distorting policies & standards
Building on NAFTA, the United States, Mexico, and Canada agreement improves on several provisions to reduce the use of trade-distorting policies affecting trade among countries while ensuring non-discriminatory treatment for agricultural product standards.
- To not use export subsidies or World Trade Organization (WTO) special agricultural safeguards for products exported to each other’s market.
- Improved commitments to increase transparency and consultation regarding the use of export restrictions for food security purposes.
- If supporting producers, to consider using domestic support measures that have minimal or no trade distorting or production effects and ensure transparency of domestic support programs.
- Canada and the United States also agreed to strong rules to ensure tariff-rate quotas are administered fairly and transparently to ensure the ability of traders to fully use them.
Sanitary & phytosanitary measures
In the Sanitary and Phytosanitary (SPS) Measures chapter, the United States, Mexico, and Canada agreement strengthens disciplines for science-based SPS measures while ensuring Parties maintain their sovereign right to protect human, animal, and plant life or health.
- Increasing transparency on the development and implementation of Sanitary and Phytosanitary Standards (SPS) measures.
- Advancing science-based decision making
- Improving processes for certification, regionalization and equivalency determinations
- Conducting systems-based audits
- Improving transparency for import checks
- Working together to enhance the compatibility of measures.
The new agreement would establish a new mechanism for technical consultations to resolve issues between the Parties.
Disciplines on Geographic Indications
The Parties agreed to provide important procedural safeguards for recognition of new geographical indications (GIs), including strong standards for protection against issuances of GIs that would prevent United States producers from using common names, as well as establish a mechanism for consultation between the Parties on future GIs pursuant to international agreements.
The Senate vote
The USMCA is thus a landmark trade agreement for food industry constituents and could have a major impact on agriculture and our food system, in all three countries.
Now it heads to the Senate where majority leader Mitch McConnell (R-KY) stated it will be considered after Trump’s impeachment trial in January
Even in the Senate, As opposed to Mexico, Canada hasn’t ratified the deal yet, and likely won’t consider it until the new year. But if the USMCA gets through Congress, Canada will likely become the second country to pass it.