It’s a new year! The new year is usually a time to write a new chapter and set new courses, but for U.S. trade agreements, the recent past will cast a shadow over the future.
On Dec. 30, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—also called TPP11—took effect. TPP11 was the reformed agreement between the remaining 11 countries that were part of the original Trans-Pacific Partnership after President Donald Trump pulled the U.S. out of it.
Most relevant to U.S. cattle and beef producers is the cutting of tariffs and easing of quotas in Japan, the top export destination for U.S. beef by volume and value. The reduced trade barriers of TPP11’s implementation mean that participating U.S. beef competitors—Canada, Australia, and New Zealand—will have greater access to Japan’s beef market.
“The United States was the driving force in the TPP in opening agricultural markets in Japan,” said Barbara Weisel—the chief American negotiator of the pact who retired from the U.S. trade representative’s office last year—as quoted by Dow Jones.
“Foreign businesses will reap the benefits of the access the U.S. negotiated, while U.S. firms are left standing on the sidelines.”
On Friday, Dec. 21, the Office of the U.S. Trade Representative released a report on the effort to theoretically get the U.S. back into the game. The report, titled, “United States-Japan Trade Agreement (USJTA) Negotiations,” summarized specific negotiation objectives. In summary, these were “to address both tariff and non-tariff barriers” to achieve a “fairer, more balanced trade” with Japan.
The report notes that the U.S. and Japan together represent 30 percent of the world’s gross domestic product, and that both countries figure massively in each other’s trade strategies, valued in the tens of billions of dollars.
“Despite these significant trade volumes, U.S. exporters in key sectors such as automobiles, agriculture, and services have been challenged by multiple tariff and non-tariff barriers for decades, leading to chronic U.S. trade imbalances with Japan,” read the report’s introduction.
“In fact, the trade deficit in goods with Japan was $68.9 billion in 2017, virtually unchanged from the previous year.”
Though the report asserted, “We are committed to concluding these negotiations with timely and substantive results for U.S. consumers, businesses, farmers, ranchers, and workers,” the report did not mention a timeline or solid goal for the beginning of negotiations, let alone completion and implementation.
In addition to the TPP11 implementation, the implementation of the European Union-Japan Economic Partnership Agreement begins a month later on Feb. 1. That agreement will offer many of the same or similar benefits to the TPP11, particularly regarding agricultural goods.
Though the beef producers in the EU are not as large as those in the Americas and Oceania, the U.S. will have to compete against the EU beef producers of France, Spain, Italy, and the Netherlands for beef market share in Japan.
USMCA concerns
On a more domestic level, efforts are underway to move the U.S.-Mexico-Canada Agreement (USMCA) forward. U.S. International Trade Commission (ITC) is in the processes of developing a report for President Trump and Congress. In that process, it has been accepting comments and hearing oral arguments from stakeholder groups.
On Dec. 20, the Ranchers-Cattlemen’s Action Legal Fund (R-CALF) filed submissions to the ITC, arguing that the USMCA would substantially and negatively impact the U.S. cattle industry.
In general, the group argued that the USMCA adopts the same provisions for beef and cattle trade found in the original North American Free Trade Agreement (NAFTA), which it argues was disastrous for the industry “because they empowered multinational beef packers to indiscriminately displace domestic cattle and beef production with cheaper, undifferentiated imports of both cattle and beef.”
R-CALF additionally called claims by the North American Meat Institute (NAMI) and the National Cattlemen’s Beef Association (NCBA) of the benefits of beef exports, estimated at $320 per head, as “baseless and false.”
“Proceeds from export sales are not based on cattle prices paid to domestic cattle producers; they are based on what packers and other wholesalers receive and that is why packers are now earning record margins while U.S. cattle prices remain depressed,” said R-CALF CEO Bill Bullard in his oral testimony before ITC.
When the USMCA was signed at the end of November 2018, NCBA’s President Kevin Kester praised the effort, saying, “The agreement brings the trading relationship with our neighbors into the 21st century—and clearly rejects the failed beef and cattle trade policies of the past. Open markets have helped U.S. producers flourish and created billion-dollar markets for U.S. beef.”
The USMCA must pass through both houses of Congress, as well as the legislative bodies of both Canada and Mexico. Concerns have been raised about its ability to pass both domestically and abroad.
Prior to the signing of the USMCA, congressional Republicans put pressure on Trump to remove language that would extend workplace protections to employees based on sexual orientation and gender identity. This was an important item for Canadian Prime Minister Justin Trudeau. Similarly, congressional Democrats have voiced misgivings amounting to an ultimatum on what they’ve described as lacking environmental and labor protections. — WLJ
