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The renegotiated North American Free Trade Agreement (NAFTA)—now called the U.S.-Mexico-Canada Agreement (USMCA)—was announced Oct. 1. However, the expansive agreement is close to 2,000 pages long, containing countless little details often glossed over in early coverage that are nonetheless important to agriculture and ranching.
The full text of the USMCA is broken out into almost three dozen topic-specific chapters. The first of these chapters, after the preamble and definitions, focuses on agriculture. The agriculture chapter is additionally the most detailed, including numerousannexes.
As reported in the Oct. 8 issue of WLJ, little changed between NAFTA and USMCA. Cattle and beef will continue to trade between the three countries unrestricted without tariffs or tariff rate quotas.
The exception to beef trading tariff-free between the countries is the Canadian tariffs on cooked beef products from the U.S. put in place in retaliation for the U.S. Section 232 tariffs on steel and aluminum. Similar retaliatory tariffs from Canada and Mexico on U.S. pork remain in place.
However, other chapters also include numerous other details relevant to agricultural concerns. These include tariff rate quotas (TRQs) on other agricultural items, and issues related to rules of origin, sanitary and phytosanitary (SPS) measures, and labor.
Dairy and poultry TRQs
Despite the lack of tariffs on beef, there will remain TRQs on a number of trade goods, particularly dairy items between the U.S. and Canada, and U.S. poultry items to Canada.
Canadian dairy products such as cheese, milk powders and derivatives, yogurts, creams, and others coming into the U.S. will be subject to TRQs. A growing quota of these items can enter the U.S. duty-free before a tariff kicks in. In most cases, the quota will grow a specified amount annually over 20 years from the point USMCA takes effect.
In addition to the increasing TRQs on Canadian dairy products, the U.S. has several flat TRQs on several sugar items from Canada. For example, 9,600 metric tons of sugar derived from Canadian-sourced sugar beets would be allowed to enter the U.S. duty-free under USMCA. The same TRQ volume exists for sugar products like flavored sugar beet-derived sugars, maple syrup, cocoa powder, etc.
Canada also has TRQs for numerous U.S. products. These include turkeys, broiler and turkey eggs/chicks, most all dairy products, chicken meat, turkey meat, and table eggs. As with the U.S. TRQs, the Canadian TRQs increase annually for 20 years.
Rules of Origin
Chapter 4 of USMCA defines “originating goods” of a country. These are any native good (mineral, naturally occurring substance, plant or plant derivative, live animal born or raised there or derivative of such an animal, or waste/scrap of any of those items) “wholly obtained” in that country, entirely produced in that country using native goods, or entirely produced in that country using “non-originating materials.”
SPS Measures
Chapter 9 of the USMCA adopts the same definition for SPS measures as used by the World Trade Organization and outlines other relevant definitions and responsibilities. Among these, it specified that “the Parties recognize the importance of ensuring that their respective sanitary and phytosanitary measures are based on scientific principles.”
Additionally, SPS measures are to be based “on relevant international standards, guidelines, or recommendations.” In situations where a provisional SPS measure is based on insufficient scientific evidence, the countries agree to seek additional information to make the decision more objective, complete risk assessments, and review and revise the SPS measure in light of that additional information and risk assessment.
Labor
In Chapter 23 of the USMCA, the countries agree to abide by the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work. This includes such things as the right to association and collective bargaining, the “elimination of all forms of forced or compulsory labor,” prohibitions against and “effective abolition” of child labor, and eliminating discrimination at the workplace. These rights and related labor laws must be enforced by the countries.
Specifically, regarding migrant workers, the USMCA reads: “The Parties recognize the vulnerability of migrant workers with respect to labor protections. Accordingly, in implementing [aforementioned ‘Rights at Work’], each Party shall ensure that migrant workers are protected under its labor laws, whether they are nationals or non-nationals of the Party.”
Going forward
The USMCA has not yet been signed and is effectively just a proposal now. All three countries have until the beginning of December to approve it. The agreement will take effect 60 days after the last country has approved it.
If it is approved, the agreement is required to undergo review at year six and will sunset in 16 years after going into effect. Renewal would require written agreements between the countries. If a country wishes to withdraw from the USMCA, it must provide written notice to the others and withdrawal will occur six months following. The agreement would remain in effect for the other two countries. — Kerry Halladay, WLJ editor
