Opinion: Hurdles remain for North American trade agreement

Capital Letters with Kelsey Johnson of iPolitics

The chance of the United States-Canada-Mexico Agreement (USMCA) being ratified before the next Canadian federal election has likely slumped after a new American commission report found the deal would have a moderate impact on the American economy.

The U.S. International Trade Commission (ITC) released its highly anticipated analysis of the pending trade agreement in mid April.

It found the deal, upon ratification, would have a moderate impact on the American economy overall after considering eight of the deal’s key provisions, including agriculture, automobiles, labour, and cross-border services.

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Canada, the United States and Mexico reached the USMCA deal at the end of September after U.S. President Donald Trump repeatedly threatened to withdraw the U.S. from the North American Free Trade Agreement (NAFTA).

USMCA would replace NAFTA upon ratification. However, ratification of the deal has stalled in recent months, thanks in large part to the fact American tariffs on steel and aluminum remain in place.

Canadian officials have said it is unlikely Canada will ratify the trade agreement before the tariffs are removed, a position largely supported by industry groups, including the agriculture sector.

The Justin Trudeau government imposed more than $16 billion in retaliatory tariffs on a host of American products last Canada Day in protest of the Trump administration’s tariffs. Canadian officials have since said Canada is looking at whether to expand its list since the tariffs remain in place.

That expanded list, officials have said, could include more targeted tariffs on American agricultural goods. Canada’s current retaliatory list does not include any U.S primary agriculture.

Canada’s upcoming federal election is also affecting the USMCA ratification prospects.

With about five weeks left in the parliamentary sitting calendar, the likelihood of Canada passing the trade deal before it rises for summer recess is slim.

South of the border, several high-ranking Democrats have said they want changes to the USMCA agreement, a position that, based on initial reactions from Democrats on Capitol Hill, has likely been bolstered thanks to the ITC’s moderate findings.

“This report confirms what has been clear since this deal was announced — Donald Trump’s NAFTA represents at best a minor update to NAFTA, which will offer only limited benefits to U.S. workers,” Senate finance committee ranking member Ron Wyden said in a statement.

“As I’ve said for months, the administration shouldn’t squander the opportunity to lock in real, enforceable labour standards in Mexico and fix the enforcement problems that have plagued NAFTA.”

As for the agriculture industry, the ITC found that it would grow if the pending USMCA deal is passed into law, but at a lesser rate than other sectors – thanks in large part to the fact most agricultural trade under the existing NAFTA is already duty-free.

One agricultural area that could see some trade growth, the report noted, was in the dairy, poultry, wheat and alcoholic beverage sectors. New sanitary and phytosanitary provisions were also expected to help bolster trade within North America.

On dairy, the ITC cautioned the American dairy industry would see “small gains in market access for the U.S. dairy sector upon implementation of USMCA, with small export gains contributing to limited positive impacts on dairy production and employment.”

Increased dairy exports to Canada would likely be driven mostly by goods like cheese and other milk and cream products, the report said, noting American dairy imports would likely increase slightly as well, although they would remain small compared to domestic consumption.

If all new quotas for dairy products were filled, the ITC estimated the increased access to Canada’s dairy market would be worth about $230 million, using 2017 prices.

As for poultry, the report found USMCA “would provide additional access or clarify the level of access to the Canadian import markets for U.S. poultry, eggs, egg products, and hatching chicks and eggs. U.S. products already claim the majority share of Canadian imports of most of these products.”

About the author

Contributor

Kelsey Johnson is a reporter with iPolitics.ca in Ottawa. Born and raised in Alberta, Kelsey credits her Western roots for sparking her interest in all things related to Canadian agriculture. In her spare time, she can be found hiking, camping or curled up with a mug of tea and book.

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