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Ag Calls for USMCA Certainty
Wednesday, December 4, 2019 3:07PM CST
By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- With a little more than two weeks left before Congress adjourns for the holidays, supporters of the U.S.-Mexico-Canada Agreement know time is slipping away fast, and the trade deal could land right in the middle of presidential politics.

Talks continue in Washington over what it will take for House Democratic leaders to sign off on a deal, but appeasing Democrats is now causing pushback from Mexico.

As Politico reported Tuesday, Mexican officials are now resisting U.S. proposals for supervisors who would ensure Mexico upholds its labor reforms under the trade deal. The Mexican Business Coordinating Council, a major business lobby, is criticizing new labor demands as "extreme in nature and completely unacceptable." The Business Coordinating Council includes banking, agricultural and other business groups.

SUPPORTERS OF AGREEMENT

Supporters in agriculture, such as the group Farmers for Free Trade, keep putting rural Democrats front and center to call for passage of the trade agreement. On Tuesday, former U.S. Agriculture Secretary Tom Vilsack and former Sen. Blanche Lincoln of Arkansas, each reiterated the need to move quickly on USMCA rather than allowing the trade deal to carry into 2020.

"There should be nothing stopping this and working across the aisle to get this done quickly," Lincoln said.

Lincoln pointed out U.S. agricultural exports account for about $20.5 billion in sales to Canada and $18.5 billion to Mexico. USMCA can be a big victory for ag that farmers and ranchers deserve and need, Lincoln said.

"USMCA is a top priority for American agriculture," Lincoln said. "This kind of certainty puts us in the driver's seat to go back and do what they do best. Farmers are watching this debate very closely."

According to an International Trade Commission report last spring, USMCA would add about $68 billion in overall U.S. exports when implemented, including about $2.2 billion in additional agricultural exports.

RISKS OF DRAGGING ON

Lincoln talked about the risks of USMCA talks dragging on. "That would just be devastating, as it would just languish or linger on into this unknown about what was going to happen," she said.

That is essentially what happened with the Trans Pacific Partnership, as resistance built up among presidential candidates as 2016 moved forward. One of President Donald Trump's first actions when he took office in 2017 was to pull the U.S. out of TPP.

On a weekly press call with agriculture reporters, Sen. Charles Grassley, R-Iowa, said "things are very unpredictable" in a presidential year. "But I think you have got to realize what Americans don't want -- Congress playing political games with real-world issues -- and I hope that would encourage the Democratic House to move this as quickly as we can."

Grassley indicated if the House were to get its work done before the end of the year, he was confident the Senate could take up USMCA shortly after Congress returns on Jan. 6 next year.

"If it moved through the House and didn't get through the Senate, next year it's going to be a lot easier for us to get it up in the Senate than what (House Speaker Nancy) Pelosi is going through in the House," Grassley said.

Grassley said that, on the Senate floor, an agreement needed to be reached this week or there wasn't much chance of the trade deal being done this year. "So I stick with that."

Reflecting some of the complexity and uncertainty currently facing trade, in his weekly call with reporters, Grassley took questions about USCMA, the state of trade talks with China, steel and aluminum tariffs against Argentina and Brazil, and tariffs against French goods over France's digital services tax.

TALKS CONTINUE

Grassley said he was optimistic on USMCA largely because talks continue between U.S. Trade Representative Robert Lighthizer and House Democrats. Further, negotiators from Canada and Mexico continue to be engaged as well.

"I want it because Iowans are asking for it," Grassley said of the USMCA. "They need the certainty it would bring, particularly to agriculture," Grassley said.

"It would also be confidence-building for what we are doing in China," and also in England and other trade talks, Grassley added.

Vilsack, on a later call, defended Pelosi's efforts to satisfy labor demands for more enforcement oversight in Mexico.

"In fairness to the speaker, an agreement is only as good as the enforceability, and it appears they are making efforts and making improvements to the enforceability of the agreement," Vilsack said.

FUTURE OPPORTUNITIES

Looking at opportunities going forward, Michelle Jones, a fourth-generation wheat and barley farmer in Montana, joined the call with Lincoln and Vilsack. Jones said the North American Free Trade Agreement has been a major success story for U.S. crops such as barley. Jones highlighted that almost 80% of U.S. barley is malted, then shipped to Mexico to make beer, which is then frequently exported back to the U.S.

"It just highlights how important those integrated supply chains are," Jones said. She added, "Not having a set trade agreement, a long-term trade agreement like NAFTA, or improving it with USMCA, puts a lot of our markets at risk."

Vilsack stressed the trade deal is an improvement over NAFTA, partially because of provisions to periodically review it and change terms of the deal. There are also specific provisions that trigger open access for dairy products to Canada that are restricted now under Canada's supply management program. Canada's class 7 dairy pricing system also has distorted markets, Vilsack said, "And it needs to be changed and eliminated."

Citing USDA figures released last week, Vilsack also pointed out 31% of farm income came from federal payments this year. Farmers want markets, not federal payment, he said, but they also have faced significant market challenges in recent years.

"Farmers are now trying to deal with a challenging economy," Vilsack said. He said dairy prices have increased because of a number of factors, including exports. "But there has still been a lot of pain out there in the countryside, a lot of bankruptcy, a lot of folks making decisions to leave a farming operation that has been in the family for generations. They are looking for a ray of hope. They are looking for a light at the end of the tunnel, and they have placed a lot of faith and a lot of interest and a lot of passion and a lot of hope into passage of USMCA as a signal they are going to have opportunities in these important markets."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/ES)


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