The Trump administration wasted little time Monday in announcing a preliminary trade agreement with Mexico, following a weekend negotiating marathon between trade officials from the two countries in Washington, D.C.
Michigan Farm Bureau President, Carl Bednarski, a Tuscola County cash-crop farmer, called the news of an agreement a significant break-through, but cautioned that considerable work remains to bring Canada back to the North American Free Trade Agreement (NAFTA) negotiating table as well.
“NAFTA has proven very beneficial to Michigan agriculture, representing $128 million in exports to Mexico in 2017, and an additional $951 million in exports to Canada,” Bednarski said. “So we hope this announcement will motivate a much quicker resolution on negotiating a satisfactory trade agreement with Canada.”
It’s expected that the new trade agreement will at least get a handshake by Dec. 1, 2018, before Mexico’s new President, Andrés Manuel López Obrador takes office. If so, the agreement is expected to result in Mexico dropping tariffs on several agricultural commodities including pork, apples, potatoes, different types of cheese.
Calling the announcement, “nothing short of a great victory for farmers,” USDA Secretary Sonny Perdue said the Trump administration is delivering, as promised, on renegotiating the 25-year old trade agreement.
“The agreement specifically addresses agricultural biotechnology to keep up with 21stCentury innovations,” Perdue said. “And we mutually pledge to work together with Mexico to reduce trade-distorting policies, increase transparency, and ensure non-discriminatory treatment in grading of agricultural products.”
Perdue said the new agreement includes important improvements that will ensure U.S. farmers are treated more fairly by holding trading partners accountable. He said locking in access to Mexican markets is critical to supporting a struggling farm economy and strengthening rural communities.
According to the U.S. Grains Council figures, Mexico set a new record as the largest export market for U.S. corn in 2016/2017, purchasing 13.9 million metric tons (547.2 million bushels) worth $2.5 billion. Mexico was also the top market for U.S. DDGS, importing 2.06 million tons in 2016/2017.
Mexico continues to rank as the top U.S. corn market in 2017/18 marketing year (September 2017-April 2018), increasing purchases by 8 percent from this past year, despite ongoing NAFTA talks. Mexico is also the No. 1 buyer of U.S. DDGS with the purchase of 1.43 million tons thus far to meet the need for high-quality feed from the country’s livestock sector.
“We now hope that Canada will see the need to settle all of the outstanding issues between our two nations as well, and restore us to a true North American Free Trade Agreement,” Perdue said.
Specific agricultural NAFTA negotiations with Canada are in somewhat of a stalemate, according to Bednarski, with the ongoing dispute concerning Canadian dairy policy and their reliance on supply management and the creation of Ultra-filtered milk class being tagged as a deal-breaker by the Trump Administration.
“With the current dairy economy, many Michigan dairy farmers view Canadian dairy policy akin to having your cake and eating it too,” Bednarski said. “Many would argue that if you’re going to have supply management dairy policy, then manage the supply – don’t create new classes of product that allow Canadian dairy producers to dump surplus product onto the world market below our cost of production.”
Michigan’s automotive industry also appears to be a major winner
According to the U.S. Trade Representative’s (USTR) office the new agreement will create more balanced, reciprocal trade that supports high-paying jobs for Americans and grows the United States and Mexican economies.
The USTR says the agreement includes new rules of origin and origin procedures, including product-specific rules for passenger vehicles, light trucks, and auto parts.
“This update to the rules of origin will provide greater incentives to source goods and materials in the United States and North America,” said USTR. “This deal encourages United States manufacturing and regional economic growth by requiring that 75 percent of auto content be made in the United States and Mexico.”
According to USTR the stronger rules of origin exceed those of both NAFTA 1.0 and the Trans-Pacific Partnership (TPP), including for autos and automobile parts and other industrial products such as chemicals, steel-intensive products, glass, and optical fiber through streamlined certification and verification of rules of origin and that promote strong enforcement.