International trade talks on topics of consumer goods and agricultural products continue on a number of fronts, and although President Donald Trump withdrew from participation in Trans-Pacific Partnership (TPP) discussions, the United States is still very much involved in renegotiating the North American Free Trade Agreement (NAFTA).
The fifth round of NAFTA negotiations, which involves the United States, Mexico and Canada, formally began Nov. 17 in Mexico City, although chief negotiators confirmed that some negotiating groups began meeting on Nov 15. This follows the last meeting which was held Oct. 11-17 in Arlington, VA.
At the conclusion of the fourth round, a trilateral statement said, “The parties have now put forward substantially all initial text proposals. New proposals have created challenges and ministers discussed the significant conceptual gaps among the parties. Ministers have called upon all negotiators to explore creative ways to bridge these gaps. To that end, the parties plan on having a longer intersessional period before the next negotiating round to assess all proposals.”
Still there it was less than a month before the fifth round of talks started. A trilateral statement posted on the website of the U.S. Trade Representative on Nov. 15 noted that nearly 30 negotiating groups will be meeting until Nov. 21.
In addition, the statement read, “NAFTA ministers met separately at the Asia Pacific Economic Cooperation (APEC) leaders’ meetings in Da Nang, Vietnam, and instructed NAFTA chief negotiators to focus on advancing discussions on tabled proposals as much as possible. It went on, “Given the substantive discussions held between ministers at APEC, ministers agreed not to attend the fifth round so negotiators can continue to make important progress on key chapters advanced in round four.” Although the respective ministers will not be in Mexico City, the statement indicated chief negotiators from Mexico, United States and Canada will be in constant communication with them, providing reports on any progress.
Going into this round, Dave Salmonsen, senior director of congressional relations for the American Farm Bureau Federation, said provisions of most concern to the broader business community concerned those offered by the U.S. regarding the automobile industry rules of origin, and a sunset clause that would force the trading partners to reconsider the agreements every five years. He said something to watch will be whether Canada and Mexico react to the proposals, offer counter proposals, or ignore them.
A breakdown in talks could lead to a withdrawal by the U.S. or one of the other countries, which is allowed under the current agreement with a six-month notice by the withdrawing party. Trump has threatened to withdraw since talks began in August, reiterating his preference for bilateral trade agreements.
Salmonsen said agriculture-related issues offered last month primarily dealt with dairy and poultry trade with Canada. He noted, “In a sense it is kind of up to Canada and Mexico to react to those things that were put out by the U.S. and to continue the regular discussion that will involve all of the other chapters.” He added, “I don’t know if there is any great expectation of anything concrete being resolved in this round—but there are a lot of issues to discuss.”
While so far, Salmonsen said he hasn’t heard any specific talks regarding beef trade, the discussion circles back to what would happen if the U.S. did withdraw from NAFTA. Reiterating that there are a lot of “ifs” involved, he said trade tariffs would return to the standard rate without NAFTA.
He explained that the U.S. leaving NAFTA would have a different impact with Canada. The Canada-U.S. Free Trade Agreement was agreed to in 1987 and brought into force on Jan. 1, 1989. It was suspended by NAFTA but still exists and could be revived.
Some groups, including R-CALF, continue to push for reinstatement of mandatory country-of-origin labeling (COOL) for beef, something Salmonsen said is unlikely since it would be proposed by the U.S., and Canada and Mexico have already won their case against COOL.
COOL was included in the 2002 farm bill, but due to challenges from Canada and Mexico, the World Trade Organization (WTO) ruled numerous times that it violated free trade agreements. On Dec. 18, 2015 Congress repealed the COOL law and it was signed by President Barack Obama.
Still, supporters of COOL collected nearly 34,000 (as of Nov. 8) signatures on a petition addressed to U.S. Commerce Secretary Wilbur Ross urging him to reinstate the measure. A press release from R-CALF said the response to its petition shows “widespread support within the ranching community for reinstating COOL during the Trump administration’s renegotiation of the North American Free Trade Agreement.”
Joe Schuele, vice president of communications for the U.S. Meat Export Federation, told WLJ, “Red meat trade does not seem high on the list of ag topics to be addressed in the NAFTA talks, and frankly that’s a good thing. We are obviously hopeful that other issues can be resolved so that NAFTA is successfully modernized without any interruptions in trade.”
National Cattlemen’s Beef Association Director of International Trade and Market Access, Kent Bacus, told WLJ, “Whether negotiators make further progress at the upcoming round is anybody’s guess, but from our perspective we would like to see NAFTA 2.0 negotiations wrap up as quickly as possible. It is difficult to improve on unrestricted, duty-free access to Canada and Mexico—we would prefer to pursue other market access opportunities in fast-growing Asian economies.”
Salmonsen also spoke of the importance of maintaining good relationships with Canada and Mexico, saying, “It’s always best to trade with the neighbors,” noting that overall about a third of U.S. ag exports go to those two countries.
NAFTA has been largely successful for almost 25 years, a point not lost on Salmonsen as he told WLJ, “There is a lot of positive history to it, so when you are thinking of making changes—especially in the ag states—it makes people nervous.”
Additional NAFTA negotiations are expected to be scheduled through the first quarter of 2018.
TPP without U.S.
The TPP is another trade deal getting attention recently. The U.S. was included in the original talks, which includes 11 other countries, but as previously reported, Trump withdrew from the talks upon taking office last year. Still part of the group, now sometimes referred to as the TPP-11, are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Asked what impact the agreement moving ahead without the U.S. may have for U.S. beef exports, Schuele said, “If this agreement moves forward it will further heighten concerns about U.S. beef and pork being at a disadvantage in Japan, as well as in Vietnam. Australian beef already holds a significant tariff rate advantage over U.S. beef in Japan and the TPP-11 could move beef from Canada, New Zealand and Mexico into a similar position.”
Salmonsen noted that Japan is an important market for the U.S. but so far there hasn’t been much movement to open those talks. He said some reports from Trump’s recent visit to Asia indicate he would like to start the discussion, but the Japanese negotiators are currently focused on completing TPP-11.
Bacus also said he hasn’t seen much movement to reopen additional market access with the TPP-11 countries. The U.S. involvement in TPP was supported by NCBA, Bacus said, because it would have lowered the standard tariff from 38.5 percent to 9 percent in 16 years.
As TPP-11 moves forward, Bacus was asked how hard it will be for the U.S. to “catch up” if and when a bilateral agreement is reached with the Pacific Rim countries. He responded, “The superior taste and quality of U.S. beef gives us a leg up over our competitors in Asia, but if we are not able to sell our product for a competitive price we will lose market share—and once market share is lost it is very difficult to get it back. Our ask of the administration continues to be landing a bilateral trade agreement with Japan that meets or exceeds the terms of TPP.” — Rae Price, WLJ editor
