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‘Dairy Was a Deal-Breaker’ in Writing NAFTA’s Successor, Says President

President Trump veered between predicting easy approval of the new Canada-Mexico-U.S. trade agreement and expressing concerns about opposition — “Anything you submit to Congress is trouble” — on Monday while declaring that the agreement linking the three largest economies in North America “is a very, very big deal for our farmers.” The pact should aid the flow of wheat, poultry, eggs, and dairy exports, he said, adding that for U.S. negotiators, “Dairy was a deal-breaker.”

For the White House, a key achievement in the trade pact, which will be called the United States-Mexico-Canada Agreement, or the USMCA, will be the elimination of Canada’s Class 6 and Class 7 milk prices. Trump took particular interest in Class 7, which U.S. dairy farmers say is a barrier to exports of ultra-filtered milk, and tweeted repeatedly about it while the negotiations were under way.

Under the USMCA, many food and ag exports from the U.S. will continue to have duty-free entry to Canada and Mexico, as they do under NAFTA. For many farm groups, maintaining that duty-free access was paramount, followed by hopes of expanding access in areas such as dairy. Canada and Mexico are the two largest customers for U.S. farm exports, which provide more than 20¢ for each dollar in farm income.

“The agreement includes a substantial increase in our farmers’ opportunities to export American wheat, poultry, eggs, and dairy, including milk, butter, cheese, yogurt, and ice cream, to name a few. I want to be very specific,” Trump said during a 75-minute celebration of the trade agreement in the Rose Garden.

In exchange, the U.S. will offer additional access to dairy, peanuts, processed peanut products, and a limited amount of sugar and sugar-containing products from Canada, said the U.S. trade representative’s office.

Trump can sign the USMCA after a 60-day review period and submit it to Congress, where a vote is likely next year. “If it’s fair, I believe it will pass easily,” said Trump. Later, he said he was “not at all confident of the outlook.” The pact “shouldn’t be” a major issue in the November 6 congressional elections, he said, though he should be. “Congress is on the ticket. I try to tell my people that’s the same thing as me.”

Agriculture Secretary Sonny Perdue said the USMCA is a validation of Trump’s policy of trade confrontation and it would be a template for future trade agreements. China and the U.S. have exchanged rounds of tit-for-tat tariffs in a trade war that started early this year and has included Canada, Mexico, and the European Union — all of them major ag trade partners. Trump said it was too early for negotiations with China. Asked what China needs to do to resolve U.S. complaints, Trump said, “We’ll have to see what happens with China.” Tariffs are a negotiating lever, he told a reporter who asked if more U.S tariffs are likely. “If we are unable to get a fair deal, then we’ll have tariffs.”

Senior administration officials said Canada would allow larger dairy imports than it offered to the U.S. under the Trans-Pacific Partnership. Trump pulled the U.S. out of the TPP right after taking office in 2017. The Canadian news site iPolitics said the changes in dairy access may need approval from Canadian provinces. By law, the provincial and federal governments in Canada share responsibility for agriculture.

U.S. dairy groups said that while Canada “will remain a largely self-contained, protected milk market” under the USMCA, there would be opportunities to expand sales to Canadian consumers and processors. That is “incremental progress,” said chief executive Jim Mulhern of the National Milk Producers Federation. “We appreciate that the Trump administration continually raised the profile of our issues at the negotiation table.” The U.S. failed to achieve its goal of eliminating Canada’s supply-management system for dairy, poultry, and eggs.

“We also need to pursue new free trade agreements with other nations and resolve our trade conflicts with China,” said Tom Vilsack, chief executive of the U.S. Dairy Export Council. “It is imperative that the U.S. remains an integral player in driving the global trade agenda.” Vilsack was agriculture secretary in the Obama administration.

The USMCA would remove an irritant in the cross-border grain trade with a provision under which Canada would grade imported U.S. wheat on an equal standard with domestic wheat. U.S. wheat groups have complained that Canada now classifies their grain as lower-value, feed-quality wheat.

“Farmers should understand that nothing has changed yet, but we are pleased to see … Canada agreeing to grade imported wheat with the same requirements as Canadian wheat. We will follow the implementation of this commitment closely to ensure U.S. farmers can finally have reciprocal access to the Canadian market,” said the National Association of Wheat Growers and export promoter U.S. Wheat Associates.

While farm and export groups applauded the trilateral agreement, they also said they needed to review it in detail. The National Pork Producers Council urged Congress to ratify the USMCA, “and we’ll monitor this as a key vote for our members.” Mexico is the No. 1 market for U.S. pork exports and Canada is No. 4. The NPPC asked the White House to remove steel and aluminum tariffs on Mexican metal so that Mexico would remove a 20% tariff on U.S. pork.

During his news conference, Trump said the steel and aluminum tariffs were a separate issue from the USMCA, and that they would remain in place “until such time as we do something different, such as quotas. We’re working on that now.”

Two grain trade groups, the National Feed and Grain Association and the North American Export Grain Association, said the USMCA “represents a significant, positive step in modernizing and further enhancing North American food and agricultural commerce.”

For a fact sheet on agricultural provisions of the USMCA, click here.

For a fact sheet on dairy, poultry, and egg access to Canada under the USMCA, click here.

To watch a video of President Trump’s comment on the trade agreement, click here.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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