Producers in farm country are eagerly awaiting passage of a new trade agreement with Canada and Mexico, and one industry that stands to benefit from the new terms of the U.S.-Mexico-Canada Agreement (USMCA) is dairy.
Washburn University’s School of Law professor Amy Deen Westbrook detailed how the new agreement would influence producers across the nation.
Her focus is international and commercial law, and she is co-director of the Business and Transactional Law Center. She was one of 10 agricultural law experts who covered topics ranging from water rights and tax law to ethnical issues during the Agribusiness Symposium at Hutchinson Community College in Hutchinson, Kansas, Sept. 13.
“If Canada implements the agreement as expected, the USMCA should enable increased exports for U.S. cheese and other milk and cream products,” Westbrook said.
For example, there will be increased U.S-specific tariff-rate quotas, which will create more opportunities for U.S. milk, cream, milk powder, cheese and butter, she said. In-quota products will enter duty free, and most of the volumes are set to increase rapidly during the first six years then level off at a 1% annual increase, she explained.
There will also be changes to Canada’s supply management system and milk pricing that should help reduce the disadvantage at which U.S. producers have been operating, she said.
“Of course, there will be more Canadian dairy products imported into the United States, too,” Westbrook said. “But, overall, the volume of new exports is expected to outpace new imports.”
There are also going to be changes to the technical barriers to trade that have limited U.S. wheat exports to Canada. Canada automatically classifies U.S. wheat at the lowest grade currently. Changing this would mean a small increase in market access, according to Westbrook.
There should also be more markets for poultry and eggs.
The new agreement calls for the tariff-rate quotas between the U.S. and Canada to be fair, timely and transparent. All of Mexico’s tariff-rate quotas on U.S. imports were already phased out under the North American Free Trade Agreement (NAFTA).
There were a number of problems with tariff-rate quotas in dairy under NAFTA, Westbrook explained. Quotas were allocated to producer groups, limited to processors or conditioned on the purchase of domestic production or the re-export of a good.
New sanitary and phytosanitary (SPS) measures aim to strengthen science behind protecting human and animal health. It requires each of the three countries to focus on risk management, as opposed to just risk assessment, as was the case under NAFTA.
“Under the USMCA, the three countries are required to weigh alternatives in light of a risk assessment in order to select appropriate measures that are not more trade restrictive than required,” she said. “So a lot of the change will be in connection with how countries set up, notify or monitor their SPS regulations.”
There are some changes in intellectual property protections and digital trade provisions that may affect producers as well. These deal with proprietary food formulations, which would apply to cheese.
Under USMCA, the three countries agree not to restrict market access for cheeses using certain common terms – many of which are named for places in Europe such as “Emmenthal” and “Swiss” cheese. USMCA provides guidelines for determining whether a name is customary in common use.
Mexico has a list of more than 30 cheese names that are allowed for import, Westbrook said.
Digital trade provisions will impact any industries that rely on cross-border data flows, Westbrook said.
“For agriculture, the impact will be on producers or processors that rely on data and information flows in their business models and supply chains,” she said.
USMCA requires all three countries to be transparent and timely in approving agricultural biotechnology. They must make public a summary of their risk assessments, take applications on an ongoing basis, and allow for the authorization process to begin even before products are authorized in another country, according to Westbrook.
“The USMCA also has guidelines for handling situations in which an importing country detects a low-level presence of a genetically modified crop that has passed safety assessments in another country but that is not yet approved for use in the importing country,” she said.
This has not been a problem under NAFTA, she said, but new provisions will reportedly provide a model for future agreements with other countries.
There is a 16-year sunset clause in USMCA with six-year review periods.
That creates a relatively short timeframe in which the three countries have to decide whether to keep the new agreement in place, she said.
“They might also introduce uncertainty and invite another politicized debate six years from now,” Westbrook said. “Given that any of the three countries can give notice and withdraw from the agreement at will, I am not sure how much the sunset review adds.”
Jon Burleson can be reached at firstname.lastname@example.org.