In December of 2021, the U.S. expressed concerns about Canada’s dairy tariff rate quota (TRQ) being inconsistent with Canada’s part in the U.S.-Mexico-Canada Agreement (USMCA) trade agreement from 2018. The claim was that Canada continued to restrict access for dairy products entering the Canadian marketplace. Canada currently operates under a supply management system which helps protect Canadian dairy farmers selling into Canadian markets. However, U.S. dairy farmers were much more restricted and didn’t have much access to the Canadian market and a 200% tariff was threatened for anything above the TRQ level. But, the quota level was never challenged.
In response, Canada revised its TRQ allocation measures, but U.S. representatives still claimed these levels were inconsistent with Canada’s obligations under the USMCA according to the Office of the United States Trade Representative.
In a statement released in November of 2023, then-Secretary of Agriculture Tom Vilsack said, “The United States won the first USMCA case on Canada’s dairy TRQ allocation system with the ultimate goal of securing fair market access for U.S. dairy farmers, workers, processors, and exporters…..We will continue to voice deep concerns about Canada’s system.”
There have been three situations where consultations between the U.S. and Canada have met over this very issue. Two of those felt Canada was complying. Here lies one of the issues, that the findings are also inconsistent. There is no black and white answer even under the USMCA and has allowed Canada to push boundaries on trade agreements. This is one example among a multitude of issues that has spurred current trade tensions.
Today, this issue is being brought to light by the new administration as part of a much larger issue between the two countries. This is one tiny piece of an overarching situation this is unfolding.
In my column two weeks ago titled, “Trust the process,” I encouraged readers to see how this plays out. Our industries are being used as leverage. This is a painfully uncomfortable place for any of us to be in. The current administration is using all their power and weight to spark new negotiations between the U.S. and its trading partners. To be clear, I do not want added tariffs, but I am still trusting that this process will eventually be advantageous to the American producer and consumer. To be even more clear, one of the most vocal people supporting tariffs is R-CALF CEO Bill Bullard.
We oftentimes hear and read headlines about trade negotiations happening or their results. We hardly ever hear how our industries are being used and what could possibly go wrong if negotiations fail. This time, with this administration, we are. To reemphasize, this administration goes about their business not in a way that you or I would, but it has worked for President Donald Trump and his administration, and that is what I am trusting in.
Fears of a trade war are everywhere. Even the Federal Reserve decided to maintain interest rates when the stock market had predicted a drop. The Fed claimed fears of a trade war and subsequently lowered its economic growth projections by 0.4% and upped its core price inflation rate to 2.8%. They did concede that they predict two cuts to the federal interest rate aiming at 3.75-4% by year’s end.
This alone, in my opinion, is what needs to happen. Current interest rates have been one of the largest growth deterrents in agriculture in recent years. Simply put, input costs have gone out of control and have hindered all sectors of agriculture. If the people making the product can’t survive, export markets won’t matter if there’s nothing to export.
Blatantly, this administration is using its consumers as the negotiating piece. In an article published by Feedlot Magazine, they write that the U.S. government attains $80 billion in revenue from customs duties (tariffs). This equates to 1.8% of government revenue. Countries want access to the American consumer because of our purchasing power and volume strengthened by a strong currency value. However, when U.S. producers want to export our goods, we aren’t given the same consideration.
Last week, in a huge win for pork and poultry markets, China renewed export registrations for several hundred facilities. Keep in mind, many of these facilities had lapsed and were restricted. Unfortunately, at the time of this writing, beef facilities registrations lapsed on March 19. Hopefully by the time this issue reaches its readers, these have been renewed. The win in this would be that countries work with each other and a trade war doesn’t come to fruition, because I don’t think our producer, nor our consumer, can handle that right now. — LOGAN IPSEN
