Farmers welcome signs of progress on trade issues

Issue Date: December 18, 2019
By Ching Lee

Movement in getting a new North American trade deal ratified and news of a limited agreement with China has farmers cautiously upbeat about prospects for improved agricultural trade.

More than a year after the three countries signed the United States-Mexico-Canada Agreement, the U.S. House of Representatives is expected to vote on—and likely approve—a bill to implement the deal later this week. This comes after House Speaker Nancy Pelosi reached a compromise with the Trump administration last week to move forward with the pact, which updates the 1994 North American Free Trade Agreement.

The White House also announced late last week completion of "phase one" of a U.S.-China trade deal, which U.S. officials said would increase Chinese purchases of American farm products. As part of the agreement, the U.S. held off on raising new tariffs on $156 billion of Chinese imports that were set to take effect Dec. 15. The administration also cut in half existing 15% tariffs imposed in September on $120 billion of Chinese goods.

For the USMCA to go into force, it must be ratified by the legislatures of all three countries.

With the House session ending this Friday, usual steps for getting the agreement to the House floor will be accelerated or dropped, said Dave Salmonsen, senior director of congressional relations for the American Farm Bureau Federation.

Traditionally, the House has 90 days to approve the final implementing bill once the White House submits the legislative text to Congress.

To win passage, the agreement needs a simple majority in the House. It also needs approval by a simple majority in the Senate, which can vote on the bill once it is received from the House, Salmonsen said. Senate Majority Leader Mitch McConnell has said the Senate will likely not take up the agreement until next year after the president's impeachment trial.

Mexico's Senate, which passed an initial version of USMCA earlier this year, approved a revised version of the deal late last week that now includes new labor-enforcement provisions and other changes that won backing from House Democrats.

Canada's parliament, which is on winter break, is expected to approve the agreement when legislators return in late January.

Farm groups, including the California Farm Bureau Federation, welcomed progress on USMCA, which they've been calling on Congress to pass for months.

"We're encouraged by prospects for a quick, positive vote on USMCA in the House of Representatives," CFBF President Jamie Johansson said. "The sooner that happens, the sooner Californians will begin reaping the benefits the agreement will bring."

Though the new agreement as a whole is not a major overhaul of NAFTA, it does provide improvements for agriculture while maintaining duty-free status for food and farm products, trade experts say. The agreement strengthens science-based sanitary-phytosanitary measures and contains specific provisions that benefit farm exports, including processed fruits, milk and dairy products, beef, wine, poultry and eggs.

Dairy farmers, in particular, will benefit from Canada's agreement to stop using its Class 7 milk-pricing program that allowed its farmers to undersell U.S. producers, contributing to low powder prices in recent years. Canada has also agreed to impose export surcharges on dairy products that exceed thresholds.

California agricultural exports to Canada and Mexico totaled $4.4 billion in 2017, according to the California Department of Food and Agriculture. Canada is the state's second largest export market. Mexico ranks No. 5.

Though a full text of the U.S.-China agreement has not yet been released, White House officials said both countries hope to sign a deal in early January. Word of the tentative agreement is seen as an easing of trade tensions between the world's two largest economies.

The Trump administration said China has promised to purchase $40 billion to $50 billion of U.S. farm products during the next two years. Chinese officials, however, have declined to specify what commodities or how much China expects to buy. China also did not say it would drop current retaliatory tariffs on U.S. farm exports, including tariffs on California specialty crops such as fruit, nuts and wine.

AFBF President Zippy Duvall said the organization looks forward to further progress in resolving U.S. trade with China.

"America's farmers and ranchers are eager to get back to business globally," he said. "Progress restoring our ability to be competitive in China is a key component of that, and this development is welcome news."

Some observers have cast doubt that China will buy the amount of farm products the White House announced, which would be more than twice the annual level China purchased before the trade dispute. The administration announced similar commitments from Beijing back in October, only to have negotiations collapse.

Brian Kuehl, an executive director for Farmers for Free Trade, said the ongoing trade dispute has given an advantage to U.S. competitors, with China now buying farm products from a wide array of countries, "making it difficult, if not impossible, to quickly purchase such a large amount solely from the U.S." He also pointed to market conditions, and inspections and regulations that create "enormous barriers to completing these purchases next year."

He said though any relief is welcome, "only ending the trade war will provide farmers with the certainty they need to re-establish productive trading relationships with China and return to reliable yearly export levels."

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.




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