Dairy milking parlor

Passage of the USMCA is good news for all rural America. Dairy farmers will see more opportunity to sell and ship milk and dairy products into Canada. Once the agreement has passed the Senate and signed by the President, the last step will be for Canada to ratify and pass the measure.

WASHINGTON, D.C. – With overwhelming bipartisan support, the USMCA (United States-Mexico-Canada Agreement) was passed by the House of Representatives on Dec. 19. The measure was passed by a vote of 385 to 41.

“The next step will be to take the bill up in the Senate,” said Angela Hofmann, with Farmers for Free Trade, on Jan. 7. “This is part of the normal process of passing a trade agreement. The next step will be the Senate Finance Committee marking up and passing the measure. After that, the bill will go the Senate Floor for a final vote by all members. If all goes right, this should happen in the upcoming weeks.”

President Donald Trump, Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau first signed the trade agreement on Nov. 30, 2018. It has taken over a year of congressional review, including efforts by a special task force of House members to secure House passage.

The bill was held up due to disagreements over a couple key areas. One area focused on pharmaceutical companies and the length of patents on new drugs. That language was removed completely from the bill.

The second area of contention was enforcement of labor laws in Mexico. To gain the full support of the House, a measure was added to create a panel of five experts that would oversee labor practices in the three countries.

While Mexico has expressed issue with that measure, they are still moving forward with the agreement and were the first country to have it pass through their legislative branch.

“Mexico has approved the agreement,” Hofmann said. “There has been continued consultations between the countries, and as a result we’ve been able to move forward with the added changes.”

In the U.S., the USMCA is on a fast track to get passed through the Senate.

The Senate finance committee reviews the bill and then it is brought to the Senate floor for a full vote. With trade promotion authority, the measure is not subject to amendment, so that is also helpful in speeding up the process.

The Senate could make recommendations for future changes, but it is highly unlikely anything will be introduced that would involve significant changes.

“Any change would also have to be ratified by the other countries,” she said. “At this time, there's a genuine interest in getting the USMCA passed quickly, certainly the senators are leading the effort – both Senator Grassley and Senator Wyden have been working together on a bipartisan basis to get the measure through. Both are staunch supporters of agriculture and know just how important it is to get this done on a timely basis. They recognize the importance and the timeliness of getting this done and getting rural ag back on its feet.”

It is possible that the USMCA will be on Trump’s desk for signing before the end of January.

Canada will be the last country then to pass the bill through their legislative branch.

“Canada had elections last fall and they have been out on recess,” she said. “They'll convene their new parliament at the end of this month, but they won't be able to take action before that.”

They will have to go through a similar process as the United States did with the USMCA. Their legislative branch will review the agreement, ratify it and then approve. It is possible that they will move quickly on this measure.

“They can potentially move pretty quickly, they were able to move quite quickly during the now Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Trans-Pacific Partnership (TPP) minus the U.S.,” Hofmann said.

When the original trade agreement between Canada, Mexico and the U.S. was up for renegotiation, NAFTA was dissolved and President Trump placed tariffs on Canadian and Mexican steel and aluminum. Canada and Mexico responded in kind with retaliatory tariffs on U.S. agriculture goods.

“Those tariffs were removed about six months ago, back to sort of normalized trade, so to speak,” she said. “Moving forward, because it's essentially free trade in these North American markets already, what we will see is a return to stability. The agreement does have some additional access for dairy and modernizes some of the standards for e-commerce and small businesses – some of those new chapters that had not been included in the past.”

Essentially, the USMCA modernizes the original NAFTA agreement.

U.S. dairy farmers will have more opportunity to sell milk and milk product into Canada.

Mexico remains the largest purchaser of U.S. corn and they also purchase a large amount of U.S. pork.

“Canada and Mexico are the United States’ number one and number two trading partners for agriculture and the North American supply chain is already highly integrated,” she said. “If you're a barley grower on the Northern Highline, you’ve been sending your barley to Mexico; it comes back as beer. That's been happening for decades now.”

Getting the USMCA fully finalized doesn’t just benefit growers, as agriculture equipment dealers and input retailers will also benefit from the agreement.

“It's important for us to recognize that a lot of ag equipment is also sold to our North American neighbors,” she said. “This agreement, USMCA, also makes sure that we're able to sell those and other supplies to our North American partners, which helps our rural communities.”