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ITC report shows nominal gains for ag under USMCA

TAGS: Policy
Marc Bruxelle/Getty Images US, Canada, Mexico flags
Ag groups note ITC report offers partial, but not full, picture of USMCA value as many gains experienced over last two decades.

The U.S. International Trade Commission (ITC) report on the U.S.-Mexico-Canada Agreement (USMCA) is now public. The 379-page report assesses the likely impact of USMCA on the U.S. economy as a whole and on specific industry sectors. It shows slightly positive gains for agriculture, but USMCA still has a long way to go to become authorized.

The ITC report is a required step before Congress can consider ratification of the deal. ITC concluded that USMCA will have an overall favorable impact on the U.S. economy, increasing U.S. exports to Mexico and Canada by nearly 7% and 6%, respectively.

The report noted that 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. 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.

Specifically, modeling results estimate a $226.8 million (0.1%) gain in total dairy product output, including $314.5 million (7.1%) of additional exports -- $227.0 million to Canada and $50.6 million to Mexico -- over the baseline. Increased exports to Canada would be driven largely by more exports of cheese and other milk and cream products. New country-specific tariff-rate quotas (TRQs) in Canada would create additional opportunities for U.S. exports of milk and milk powder, cheese, butter and other products.

USMCA would require Canada to establish a duty-free TRQ for live chickens and chicken meat of U.S. origin. The TRQ volume in the first year would be 47,000 metric tons. It would increase by 2,000 mt annually through the sixth year of USMCA and then increase by 1% per year to 62,963 mt in year 16, remaining at that level in following years. Model results indicate that U.S. poultry meat exports to Canada would increase by $183.5 million (or nearly 50%) in year 6 of the agreement.

Senate Finance Committee chairman Chuck Grassley (R., Iowa), who will be the one to shepherd approval of USMCA in the Senate, said he plans to conduct a thorough and thoughtful review of this and other studies of the economic impact of USMCA in the coming days. He also noted that he will be briefed by ITC officials early in the week of April 22.

Many of the significant improvements in USMCA are reducing non-tariff barriers and implementing rules and fair practices that will help U.S. workers, jobs and businesses tremendously over the coming years. The USMCA makes critical updates to rules on intellectual property, currency practices, digital trade, customs, state-owned enterprises, sanitary and phytosanitary measures and technical barriers to trade that will be valuable to many American farmers and businesses, even though their impact on [gross domestic product] has historically been inherently difficult for economists to measure,” Grassley said.

In response to the report, many agricultural groups noted that many of the benefits under the North American Free Trade Agreement (NAFTA) have already been realized for the agriculture industry.

“While the ITC report is an important step in the process of considering trade agreements, the benefits of North American trade are already well understood, particularly by farmers and ranchers. Under NAFTA, ag exports to Canada and Mexico grew from $8 billion in 1993 to $40 billion last year,” according to Brian Kuehl, co-executive director of Farmers for Free Trade, a bipartisan coalition supported by American agricultural commodity groups.

In a news release, the American Soybean Assn. (ASA) said the value of USMCA to soybean producers goes beyond the details of the ITC report. “The report is a good tool, yet it does not account for valuable non-tariff provisions in the ‘new NAFTA’ – or look back historically on the myriad benefits to agriculture since NAFTA’s inception,” ASA said.

ASA president Davie Stephens, a soybean grower from Clinton, Ky., said, “USMCA builds upon the strong foundation set by the original NAFTA. Under NAFTA, the value of agricultural exports to Canada and Mexico increased to roughly $43 billion each year. Soybean exports to Mexico quadrupled under NAFTA, making Mexico the number-two market for U.S. soybeans, meal and oil. We also saw a doubling of soybean exports to Canada, making it the number-four market for soybean meal and the number-seven market for soybean oil.”

Stephens continued, “We know that the modernizations included in USMCA will make trade with our North American neighbors even smoother. These non-tariff enhancements include the highest enforceable sanitary and phytosanitary standards of any trade deal to date, an enforceable biotechnology chapter that supports 21st-century innovations and create a rapid response mechanism to address trade challenges. These provisions not only serve to update the North American agreement but set a paradigm for future free trade agreements.”

Agricultural groups also used the ITC report as further reason for Congress to advance passage of USMCA.

Nick Giordano, National Pork Producers Council (NPPC) vice president and counsel, global government affairs, said the group supports ratification of USMCA because the agreement preserves zero-tariff access to markets that represent more than 30% of total U.S. pork exports.

"We are eager to see the removal of U.S. metal tariffs that prompted Mexico's 20% retaliatory tariffs nearly a year ago. Members of Congress have said that ratification of USMCA will be delayed and the benefits of the agreement diluted as long as this trade dispute goes unresolved."

Giordano added, "The value of U.S. pork exports to Mexico are down 32% this year due to punitive tariffs. Our farmers need zero-tariff trade restored to our largest export market."

NPPC has designated USMCA ratification as a "key vote" and will closely monitor support of the agreement among members of Congress. U.S. pork exports to Mexico and Canada support 16,000 U.S. jobs.

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