With the announcement of a deal between the United States and Canada on Sept. 30, the governments of the United States, Mexico and Canada have successfully negotiated a trade agreement to replace the North American Free Trade Agreement (NAFTA), in effect since 1994.
The new trade agreement, the United States-Mexico-Canada Agreement (USMCA), has been submitted to Congress and is awaiting a vote. When and whether Congress will pass the agreement is unknown.
“It’s too early to know, but I guarantee it’s going to be controversial,” said Mark Powers, president of the Northwest Horticultural Council. NAFTA will remain in effect until USMCA is ratified and the three countries agree on an implementation date.
Canada and Mexico are the largest export markets for U.S. apples and pears, and Canada is a top export market for U.S. cherries as well.
Under the agreement, crops with zero tariffs will remain at zero, which includes those three crops.
However, a 20 percent tariff on U.S. apples, imposed by Mexico in June in retaliation for U.S. tariffs imposed on aluminum and steel, does not fall under the agreement and must be dealt with separately.
Other key issues for agriculture include:
—Sanitary and phytosanitary (SPS) rules: This chapter was modernized and now includes provisions for risk assessment, transparency and import checks. Much of what is contained in the USMCA came from the Trans-Pacific Partnership (TPP), a 2016 trade agreement President Donald Trump withdrew from in January 2017.
—Rules of origin: These rules were strengthened to require raw products be grown in one of the three countries, ensuring a product grown or canned someplace else won’t make its way into the U.S. under the USMCA. This issue was of particular concern for the canned pear industry, which faced potential pressure from European Union products coming to the U.S. through Mexico.
—Seasonal and perishable trade remedies: A U.S.-proposed provision would have made it easier for certain commodities, particularly those with shorter growing seasons, to seek trade remedy protections, but the provision was ultimately excluded from the agreement. Some growers, including tomato growers in the southeastern U.S. who contend they are being harmed by Mexican imports, wanted changes to rules governing anti-dumping and countervailing duties to better protect them during their season. Critics had argued the idea denigrates the benefits of free trade by carving out geographic exceptions and that trading partners are likely to retaliate by applying the same rules for other crops. One example is Mexican apple growers in the state of Chihuahua who have brought multiple dumping claims against the U.S. in the past two decades.
—Chapter 19 trade remedies: The U.S. sought to remove this provision that allows affected industries to challenge a trade remedy procedure through a tri-national panel. U.S. officials objected to the perceived loss of national sovereignty, but the provision was retained at Canada’s insistence.
With the new trade agreement in place, Powers hopes attention can shift to other significant matters. Finishing the USMCA negotiations removes one of the obstacles to finding a solution on the Section 232 retaliatory tariffs on apples imposed by Mexico, Powers said.
“We’re very supportive (of the negotiated agreement) and we think it will work for our growers, but the real problem right now, which is causing harm, is this Section 232 retaliatory tariff,” he said. “We need a negotiated solution for that.”
—by Jonelle Mejica