Farm organizations, commodity groups and agribusinesses continue to push Congress and the Trump administration to come to an agreement and pass the U.S.-Mexico-Canada trade pact. Iowa leaders gathered for a roundtable discussion in Des Moines two weeks ago to talk about the importance of getting this agreement ratified and into place. The event was hosted by Tom Vilsack, president and CEO of the U.S. Dairy Export Council and former USDA secretary.
Mexico and Canada are the United States’ No. 2 and No. 3 trading partners, respectively. U.S. farmers have seen the benefits of trade with Mexico and Canada grow with the North American Free Trade Agreement, ever since NAFTA was enacted in 1994. The USMCA (sometimes referred to as NAFTA 2.0) is an updated version of NAFTA. A total of $43 billion of U.S. ag products are now exported to Canada and Mexico each year. Since 1994, U.S. soybean exports have quadrupled to Mexico and doubled to Canada.
USMCA needs to be passed in 2019
“Getting the USMCA agreement passed would create optimism and hopefulness about the future, which is very important for agriculture and the food industry,” Vilsack said. “USMCA would put an end to unfair dairy pricing practices in Canada, which would provide a fair and level playing field for U.S. dairy products to compete there. We anticipate several hundred million dollars of additional trade opportunities in dairy as a result of this agreement — if it gets passed and put into place.”
On June 19, Mexico became the first of the three countries to ratify and pass the USMCA. Mexican trade officials released a statement saying this is a clear signal Mexico is opening up its economy for more international trade. The USMCA is still awaiting passage by the U.S. and Canada.
Vilsack said USMCA is important for the future of jobs in the U.S., as there are 43 million jobs tied to the U.S. food and agriculture industry, or about 20% of the U.S. economy. “That’s why passage of USMCA is so important,” he said. “It’s vital to get the agreement ratified by Congress and signed yet this year. If that doesn’t happen and this drags over into 2020, it will get into the politics of the presidential and congressional elections which will make passage even more difficult.”
Passage would set tone for others
Passage of USMCA would set the tone and help improve prospects for a trade agreement with Japan, the fifth-largest market for U.S. soybean exports, he said. “If we fail to get USMCA through Congress and signed into law, the Japanese will have no confidence that this administration will be able to get the pending trade agreement with Japan and other trade agreements with other countries through the process. If you get one of these trade agreements approved, it creates momentum,” said Vilsack, a former two-term governor of Iowa.
Vilsack believes USMCA would be passed if Congress took it up for debate today. He said the Trump administration is holding off on sending its final recommended language on the trade agreement to Congress until enough votes are secured to assure passage. The Iowa Soybean Association and the American Soybean Association and other commodity groups recently joined with 963 other organizations in a letter sent to members of Congress, calling for ratification and passage of USMCA.
Iowa cattlemen advocate for USMCA
Cattle production provides considerable contributions to Iowa’s economy, generating $3.86 billion a year. However, there are many challenges in the ag economy currently, including tariffs and trade issues. “In order to keep farmers and young people in rural Iowa, we must have strong export markets for our products,” says Matt Deppe, CEO of the Iowa Cattlemen’s Association.
International trade is a top priority for ICA. Export markets add over $300 to the value of each head of cattle in Iowa, and Canada and Mexico are responsible for about $70 of that total, he says. Iowa’s 27,000 beef producers have enjoyed the benefits of the NAFTA agreement over the past 25 years. NAFTA has provided duty-free trade with Canada and Mexico, which adds gross value to cattle that producers raise, feed and market in Iowa.
Mexico is especially important because of the demand for variety meats like tongue, tripe and heart. In the U.S., these cuts are nearly worthless. “By exporting them, we are able to capture much greater value,” Deppe says.
Ag will lose if USMCA isn’t approved
Drew Mogler, policy director for the Iowa Pork Producers, says: “Trade is critical to the pork industry, too, as about 25% to 27% of U.S. pork production is exported each year. Japan is our No. 1 value market, but Mexico is our No. 1 volume market. About 1 in 4 hams produced in the U.S. ends up in Mexico.”
Deppe of ICA adds, “USMCA preserves the duty-free trade we beef producers have benefited from through NAFTA, and it supports other ag commodities as well. At the recent roundtable discussion, Tom Vilsack explained the importance of ratifying USMCA this year. If we extend the process into 2020, the agreement will get mixed up in presidential and congressional election politics, making it much less likely to get a vote on it in Congress.”
If the agreement isn’t approved, U.S. farmers risk losing $9.4 billion in total ag exports annually. Of that total, $1.8 billion comes from the cattle industry and $3.2 billion is from corn and corn coproducts.
“We need to get USMCA to a vote and finalized as soon as possible. ICA members are contacting their congressional delegates and asking for positive public support,” Deppe says. “Opportunity and certainty are important in today’s ag economy. Passing USMCA very soon and moving on to a bilateral agreement with Japan is vital to the U.S. ag industry.”