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May 8, 2019

From NAFTA to USMCA: What Has Changed and How Will It Affect Agriculture?

Looking back on the 25-year history of the North American Free Trade Agreement (NAFTA), the data and stories of success are plentiful. In our sector alone, U.S. fruit and vegetable suppliers are exporting nearly triple what was being done pre-NAFTA. That said, NAFTA has long received its fair share of criticism, including from the specialty crop industry.

The Trump Administration has actively pushed a tougher trade stance, even with longtime partners, in order to secure more fairness for American products and workers. NAFTA renegotiation was at the top of the to-do list, and the blanket imposition of tariffs on steel and aluminum imports since March 2018 all but ensured Mexico and Canada would come to the table. All three countries ultimately signed the new US-Mexico-Canada Agreement (USMCA) on November 30, 2018, setting the stage for domestic consideration and ratification.

What’s in the Deal

As of this writing, the full text of the USMCA has not been released. However, from what has been gathered from official summaries and conversations with officials, the agreement contains, at best, minor yet notable improvements for the U.S. specialty crop industry:

  • The no-tariff be lifted, and our opposition to any consideration of a complete NAFTA withdrawal—a threat the President continues to publicly levy as a means to force Congressional action.
  • The sanitary and phytosanitary chapter contains improvements and more transparency as they relate to import checks, certification processes, bilateral technical consultations, strong scientific justifications, and other provisions. For added perspective, what is included in USMCA is largely similar to what was negotiated under the Trans-Pacific Partnership (TPP).
  • Significant labor changes are included, predominately to address Mexico’s comparatively lax standards. This includes stronger collective bargaining protections and pathways for each country to sanction each other for violations. If ultimately enforced, this could result in a double-edged sword scenario for our growers. On one hand, stronger labor laws in Mexico could help shrink the cost-of-production gap between Mexican and U.S. produce, thus helping the latter be more competitive in the market. On the other hand, better wages and working conditions in Mexico could make it more difficult to attract workers to head north, potentially straining the U.S. labor shortage further.
  • There was no inclusion of new trade remedies for seasonal produce issues, a Southeastern region-generated request that garnered less-than-unanimous support from within (and outside) the specialty crop industry.

Ratification Roadmap

As is commonplace with any trade deal, ratification in the United States is shaping up to be a rocky road. Arguably the biggest roadblock to a timely passage is the continued imposition of the steel and aluminum tariffs. Industry stakeholders, Mexico and Canadian officials, and prominent members from both U.S. political parties have stated bluntly that ratification cannot—and will not—move forward as long as these tariffs remain. In response, the Administration has refused to remove the tariffs but continues to assure stakeholders that discussions are ongoing with Canada and Mexico to find a solution.

Regarding the substance of the deal itself, Democrats have raised concerns across several areas, including provisions on labor, environment, and pharmaceuticals, as well as proper enforcement of the deal. Both leadership and rank-and-file members have demanded that significant changes be secured before a vote moves forward; it remains to be seen through which avenues such demands can be satisfied, short of reopening the agreement—an option the U.S. government, Mexico, and Canada all say is not possible.

Timing and coordination with the other two countries’ processes are also key. The Canadian Parliament is set to conclude its session on June 21, not returning until mid-September. Mexico has more ground to cover to ensure ratification, given that the USMCA’s new labor provisions require Mexico to change some of its domestic laws; full enactment of this is also something Democrats want to see completed before considering the deal.

What Western Growers Has Done

Since the deal was signed, one of the agriculture industry’s main priorities has been to conduct widespread outreach to both new members and moderate Democrats, to educate them on the historical benefits of NAFTA and the importance of USMCA ratification. Several USMCA-focused coalitions have formed that Western Growers is a member of, and we are actively participating in meetings with targeted Congressional offices, alongside our friends in the commodity crop, livestock and dairy sectors.

Western Growers maintains near constant contact with the Administration to convey our support for the agreement, our urging that the 232 tariffs Looking back on the 25-year history of the North American Free Trade Agreement (NAFTA), the data and stories of success are plentiful. In our sector alone, U.S. fruit and vegetable suppliers are exporting nearly triple what was being done pre-NAFTA. That said, NAFTA has long received its fair share of criticism, including from the specialty crop industry.

The Trump Administration has actively pushed a tougher trade stance, even with longtime partners, in order to secure more fairness for American products and workers. NAFTA renegotiation was at the top of the to-do list, and the blanket imposition of tariffs on steel and aluminum imports since March 2018 all but ensured Mexico and Canada would come to the table. All three countries ultimately signed the new US-Mexico-Canada Agreement (USMCA) on November 30, 2018, setting the stage for domestic consideration and ratification.