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New North American trade deal negotiated prior to deadline

Just prior to the Sept. 30 midnight deadline the United States, Canada, and Mexico reached an agreement in principle on the North American Free Trade Agreement (NAFTA), renamed the US-Mexico-Canada Agreement (USMCA). Mexico had been on board weeks earlier, but negotiations with Canada went right to the wire.

As with all things trade related, there was criticism of the deal.

“We have really hurt relationships with our major ally … for the sake of a few gallons of milk,” Jeffrey Rosensweig, a business professor at Emory University, said on CNN.

While those gallons of milk may not seem like much to some, however, the dairy portion of USMCA and the trade deal as a whole was a very big deal for U.S. agriculture.

In a joint statement, U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland said, “USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region. It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home. We look forward to further deepening our close economic ties when this new agreement enters into force.”

Trump administration officials said the USMCA eliminates Canada’s “Class 7” pricing system for milk ingredients and opens the Canadian dairy market to U.S. exports at an additional 3.59% (an increase from the 3.25% that was negotiated by the Obama administration under the Trans-Pacific Partnership).

Increased access to Canadian markets for dairy products was a major point of contention in trade talks, as was the termination of Class 7 pricing. The program saturated the international market with subsidized skim milk powder and cut the demand from Canadian cheesemakers for ultra-filtered milk from the U.S. USMCA will include the development of new safeguards to prevent major export increases for certain dairy products.

The American Dairy Coalition, National Milk Producers Federation, (NMPF), the U.S. Dairy Export Council (USDEC), and the International Dairy Foods Association (IDFA) thanked Trump Administration negotiators for fighting hard against Canada’s trade-distorting practices.

“The outlines of the NAFTA pact remain intact, which will allow the U.S. agricultural sector to continue developing new international markets for our farmers,” said Tom Vilsack, president and CEO of USDEC. “We also need to pursue new free trade agreements with other nations and resolve our trade conflicts with China. It is imperative that the United States remains an integral player in driving the global trade agenda.”

While Canada will remain a largely self-contained, protected milk market, the new trade deal does make progress.

“This agreement, when implemented, should give us additional marketing opportunities that will allow us to provide high-quality American dairy products to Canada, which means we’ve made incremental progress,” said Jim Mulhern, president and CEO of NMPF. “We appreciate that the Trump Administration continually raised the profile of our issues at the negotiating table.”

Crop producers too were pleased with the trade agreement.

“Farmers across the country have been closely following NAFTA negotiations and reminding the administration of its promise to ‘do no harm’ to agriculture,” said Lynn Chrisp, National Corn Growers Association president. “NAFTA has been an unequivocal success story for American agriculture, opening markets that since enactment have become vitally important to U.S. corn farmers, and providing certainty to farmers and the rural economy. We applaud USTR for reaching a new agreement and look forward to thoroughly evaluating it to determine if it continues to benefit American agriculture.”

Last year the United States exported $3.2 billion of corn and corn products to Mexico and Canada, supporting 25,000 rural jobs. The U.S. Chamber of Commerce estimates that trade with Canada and Mexico supports 14 million U.S. jobs across many sectors.

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