Farmers have been crying loud for trade, not aid. And the most logical starting point to add certainty would be to ratify the U.S.-Mexico-Canada Agreement (USMCA). In a perfect world, it would be downright stupid not to approve the deal when it comes to agriculture. Even though it doesn't offer huge wins in future gains, if you go back to what it was 25 years ago, it would be devastating.
I’m not the gambling type, but I gave USMCA a 60/40 chance of passing this year -- and those chances decrease even further if we don’t see some significant advancements on the following outstanding issues:
1. President Donald Trump needs to remove Section 232 tariffs. This might be the most important prerequisite for USMCA to cross the finish line in any of the three countries involved. Section 232 tariffs on steel and aluminum were put in place in the name of national security, but with Canada and Mexico being the most important export destinations for many U.S. agricultural goods, it has definitely been detrimental to the relationship among the North American trading partners.
Canadian ambassador Dave MacNaughton recently said Canada will not move forward in ratifying USMCA until Section 232 tariffs are removed. Canada’s House of Commons adjourns June 15 ahead of its October elections.
“If this is unresolved, if [Section] 232 tariffs are still in place, the discussion about our relationship with United States will be central to the campaign, and it won’t be a positive conversation,” MacNaughton said. “The potential for rhetorical and other kinds of escalation are things I would rather avoid.”
2. The U.S. International Trade Commission (ITC) releases its report to Congress to assess the likely impact of USMCA. The much-anticipated ITC report, released April 18, was designed to give Congress a nonpartisan, quantitative analysis on what USMCA means for each industry as well as the overall impact on gross domestic product (GDP) and employment. The model estimates that, if fully implemented and enforced, USMCA would have a positive impact on U.S. real GDP and employment.
The combined effect of all USMCA provisions would increase total annual U.S. agricultural and food exports by $2.2 billion (1.1%) when fully implemented, ITC said. A commission simulation that considered only the effects of the agricultural market access provisions in USMCA showed increased U.S. agriculture and food exports to the world of $435 million. USMCA would lead to small increases in U.S. exports to Canada of dairy products, poultry meat, eggs and egg-containing products, wheat and alcoholic beverages. At the same time, it would lead to a small increase in U.S. imports of sugar and sugar-containing products and dairy products from Canada.
Dale Moore, executive vice president of the American Farm Bureau Federation, said the ITC report was not expected to reveal a huge increase in sales under USMCA for agriculture. “We’ve seen an increase in the last quarter-decade,” Moore added.
3. Mexico needs to update its labor regulations. U.S. lawmakers continue to push for enforcement language on labor reform laws in Mexico. However, just because Mexico may approve labor law changes doesn't mean it will actually happen. In a letter to U.S. Trade Representative Ambassador Robert Lighthizer, a group of representatives led by House Ways & Means Committee chairman Richard Neal (D., Mass.) highlighted their concerns with the current labor provisions in USMCA.
Two top Senate Democrats, Sen. Sherrod Brown (D., Ohio) and Senate Finance Committee ranking member Ron Wyden (D., Ore.), are crafting a labor enforcement proposal that could help ease the way for passage of the new North American trade deal. The duo are floating ideas to address Democrats' concerns about USMCA and build a consensus that could help it get through the Democrat-controlled House. The proposals include measures that would bar Mexican exporters from benefiting from the deal's reduced tariffs if they violate workers' collective bargaining rights.
4. Congressional appetite for approval. In an election year, too often no one wants to give the other party a “win.” However, even with elections not coming up until 2020, speaker of the House Nancy Pelosi (D., Cal.) has already seemingly drawn a hard line by avoiding handing Trump any political “wins.”
Moore said the biggest lift in the potential USMCA vote is convincing Pelosi to even bring it up for a vote. Moore said he’s “praying it comes up this year,” but that will require the White House to also lay all of its cards on the table to get the momentum going for passing USMCA this year.
This summer, especially ahead of the June 15 recess for Canada’s government, will be an important indicator of whether there’s an appetite for cooperation -- and eventually more certainty -- for USMCA approval this year.