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Trump’s historic USMCA trade deal now in effect: Here’s what it means for the US farmers

Marking the beginning of a historic new chapter for North American trade, the United States-Mexico-Canada Agreement (USMCA) has officially replaced NAFTA (North American Free Trade Agreement) and entered into force on July 1, 2020.

Renegotiating the 25-year-old NAFTA was a signature goal of the Trump administration. After nearly 2 years of negotiations, the three countries – the US, Mexico and Canada – signed the new agreement in November 2018; then another year of congressional debate followed before bipartisan majorities gave approval to the deal in January.

North America’s Economic Integration

The USMCA largely preserves the duty-free trade and economic integration of North America that began in 1994 with NAFTA. The new trilateral agreement contains a range of fresh provisions, including new rules covering intellectual property, digital trade and measures governing energy trade.

USMCA’s Sunset Clause

The USMCA is a revision and replacement for the twenty-five-year-old North American Free Trade Agreement (NAFTA), a regional trade agreement that has generated billions of dollars’ worth of goods and services traded among the three nations. The new deal assures that duty-free and quota-free trade within North America will continue for at least sixteen years.

As the agreement contains a 16-year sunset clause — which means the agreement’s terms would expire after 16 years. In addition, the deal is also subject to a review every 6 years, at which point Canada, the US, and Mexico, can decide to extend the USMCA. In other words, the parties have to hold a joint review every 6 years in order to evaluate how the agreement is working and, hopefully, agree on needed updates as well as adjustments.

The USMCA mostly follows NAFTA with the addition of new laws on intellectual property protection, the Internet, investment, state-owned enterprises, and currency.

‘Historic breakthrough for American agriculture’

“I made a solemn promise to the American people that I would end the job-killing failure called [NAFTA] and replace it with a better deal for our workers, farmers, ranchers, and businesses,” US President Donald Trump said.

“The USMCA is the largest, fairest, and most balanced trade agreement ever negotiated and contains innovative provisions to help grow the economy and support American jobs. It is a tremendous victory for our manufacturers and autoworkers, meaning more cars and trucks will be produced in the United States,” the US President said.

“The USMCA is also a historic breakthrough for American agriculture. Canada will provide greater access for American dairy products, poultry, and eggs, and finally give fair treatment to American-grown wheat. In addition, the USMCA includes groundbreaking provisions to address digital trade, services, small business, and more, which will protect America’s competitive edge in technology and innovation,” he added.

‘Improved access to markets’

“USMCA helps all of America’s diverse agricultural industries. This new and improved deal secures greater access to markets and lowers barriers for our agricultural products,” Sonny Perdue, U.S. Secretary of Agriculture, said.

‘Milestone in the American History’

US Trade Representative Robert Lighthizer termed the day as a “milestone in the history of American trade policy.”

US states’ governors, including Mike Dunleavy, Kim Reynolds, Jim Justice and Doug Burgum, also took to the micro-blogging site and congratulated Mr Trump for the landmark deal.

Key Provisions of USMCA for farmers:

Better Market access for US exporters

According to the available data, Canada and Mexico are the top export markets for US agriculture, totalling a combined $40 billion in 2018. Nearly 30% of all U.S. farm and food exports went to its North American neighbours last year.

The new deal will make a good trade relationship even better, ensuring preferential market access for U.S. agri-exporters and strengthening commitments to fair and science-based trade rules.

Biotechnology

For the first time, the agreement specifically addresses agricultural biotechnology – including new technologies such as gene editing – in order to support innovation and reduce trade-distorting policies. Improves the transparency and functioning of approval processes for biotech crops.

Geographical Indications

The agreement institutes a more rigorous process for establishing geographical indications (GIs) and lays out additional factors to be considered in determining whether a term is a common name.

Safeguarding Human, Animal, and Plant health

The parties agree to strengthen disciplines for strong measures to protect the animal, human, and plant health while improving the flow of trade.

Dairy

America’s dairy farmers will have new market opportunities in Canada for a wide variety of dairy products. Canada also agrees to eliminate the unfair milk pricing program that allowed its farmers to undersell U.S. producers. Specific to dairy trade with Canada, the agreement made gains for U.S. milk products, cheese, and poultry.

Poultry

U.S. poultry producers would have new access to Canada for chicken and eggs and expanded access for turkey. The landmark agreement also increases market access for US farmers with new export opportunities.

Wheat

Canada, under the deal, decided to terminate its discriminatory wheat grading system, enabling US farmers along the border to be more competitive.

Wine & Distilled Spirits

The three countries – the US, Mexico & Canada – agreed to avoid technical barriers to trade through non-discrimination and transparency with regard to sale, distribution, labelling, and certification of wine as well as distilled spirits.

Processed Fruits

The agreement updates origin rules for processed fruits to assure that preferences benefit U.S. producers.

Long-standing non-tariff barriers addressed

Addresses longstanding non-tariff barriers to the ability of U.S. producers to export wheat and wine to Canada.

Boost to Agricultural Exports

In a press briefing, White House press secretary Kayleigh McEnany said agricultural exports are expected to increase by $2.2 billion under the new agreement.

Prevents Trade Barriers

The new trilateral deal helps in reducing trade barriers disguised as food safety and animal/plant health measures by such measures to be based on sound science.

Strong Environment Obligations

Provides the strongest labour and environment obligations in any U.S. trade agreement and makes them fully subject to the enforcement and dispute settlement

North America’s Economic Growth

“A new trade agreement between the U.S., Mexico and Canada would add $68.2 billion to the U.S. economy and create 176,000 new jobs,” according to a study from the International Trade Commission.

According to experts, the agreement will mutually benefit North American businesses, workers, ranchers, growers, and shippers. Its implementation is likely to improve trade by introducing more balance as well as reciprocity, improving the regional economy in a comprehensive manner by strengthening and modernizing North American agriculture and food trade.

Editorial Desk at Agrigate.Global

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