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New NAFTA, Trade War, Oh My!

December 27, 2018

On Nov. 30, the United States-Mexico-Canada (USMCA) Agreement was officially signed by North American leaders at the G-20 Summit in Buenos Aires. However, each country has to get their respective legislatures to approve it before it officially goes into effect.

The signing comes two months after the three countries announced that they agreed on this updated version of the North American Free Trade Agreement (NAFTA). The USMCA will return certainty to Canadian and Mexican export markets for U.S. producers. It will also give farmers access to a robust and vital marketplace while providing countless jobs and boosting national and rural economies.

Under NAFTA, more than $43 billion of U.S. agriculture products are exported to Canada and Mexico every year. The USMCA benefits agricultural trade by:

·     not including the controversial regional, seasonal anti-dumping and countervailing language

·     maintaining the Chapter 19 dispute settlement

·     expanding market access for dairy products into Canada

·     supporting agricultural biotechnology, including plant breeding and improving sanitary and phytosanitary chapters

However, the USMCA did not resolve the 232 tariff issues between the countries.

Now that the USMCA has been signed, it will need to be ratified by Congress using the Trade Promotion Authority (TPA) timeline and process. This vote is unlikely before March 2019.

China/U.S. Tariffs and G20 Agreement

President Donald Trump and Chinese President Xi Jinping met after the G20 Summit in December, where they agreed to not raise tariffs further while trade negotiations continue. Tariffs on $200 billion worth of goods will not increase to 25 percent on Jan. 1 from the current 10 percent level. The temporary agreement also includes a 90-day moratorium for both sides to come to resolution on issues such as technology transfer, intellectual property protection and other concerns.

According to a White House statement, China agreed to purchase more U.S. agricultural and other products. Details have not been announced regarding the quantity, but the White House said purchases of agricultural products would begin immediately.

Hanna Abou-El-Seoud is a trade specialist at Gordley Associates based in Washington, D.C.

 

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