USMCA could “soften rough edges” on trade

USMCA could “soften rough edges” on trade
Congress is under pressure from agricultural industry members to ratify the U.S.-Mexico-Canada Agreement (USMCA) replacing the North American Free Trade Agreement (NAFTA). Photo: freepik.com

President Trump a year ago announced plans to withdraw from the North American Trade Agreement (NAFTA) between Canada and Mexico. Now, Congress is under pressure to ratify the U.S.-Mexico-Canada Agreement (USMCA), which agricultural industry groups say will not only bring back some trade stability but could also benefit Washington exporters beyond relations with those two countries.

“USMCA takes some rough edges off the system and makes it better for U.S. agriculture in general,” Washington Farm Bureau (WFB) CEO John Stuhlmiller said. “Overall, trade between the three is enhanced. Until then, everybody’s just a little bit hesitant to make decisions.”

For Washington dairy farmers like Leroy Plagerman, USMCA could provide some economic relief to a shrinking industry. When NAFTA was ratified, there were approximately 1,600 dairy farms in the state. Now, there are only 375.

One of the challenges those farmers now face are low milk prices. Last year, the average U.S. milk price was 26 percent below 2007 rates and the lowest since 2002. Plagerman attributes the low milk prices in part to NAFTA’s lopsided market access for Canadian dairy farmers in the U.S.

Last year Mexico imported $1.4 billion worth of U.S. dairy products, the most of any country; it also imports the most Washington-grown apples.

“With Mexico, when we can’t compete with other people, if there’s more tariffs, they get it from other places,” Plagerman said. “It (USMCA) opens us to more free trade between the U.S. and Mexico without the tariffs. It makes sense we would be the trading partners with them.”

For now, the lack of a new agreement has created a sense of hesitation in decision-making among some farmers, Stuhlmiller said. “Do we send (products) into that market, or will it be better in six months?”

However, he added that “with certain commodities, you can’t wait. Fresh cherries have to be in the hands of the consumer in four days, or they’re garbage. You can only let your harvest sit for so long, no matter what condition it’s in. That market continues as it is.”

Aside from the direct benefits that ratifying USCMA would bring to Washington farmers, both Stuhlmiller and Plagerman view it as an important stepping-stone to establishing better trade policies with countries such as China and Japan. The trade conflict with China has already cost American business and consumers an estimated $38 billion.

“USMCA is a big deal for one simple reason: The current administration can move forward on trade,” Stuhlmiller said. “Everybody is awaiting the first trade win for this administration.”

“A lot of countries are looking at the U.S.,” Plagerman said. “If they can’t work out the countries on their own border, that doesn’t speak well for us. We at least need to put this one away, then we can start negotiating on the other ones. That will definitely help us.”

He added that for Washington dairy farmers, better trade deals will be crucial if they’re to increase their exports. Currently, they export around 14 percent, but in four to five years the goal is to reach 20 percent, he said. “If we don’t have that trade export, we could really see a down cycle in our prices. The surplus is just going to drive down our prices. That’s going to hurt the dairy industry – not only in Washington, but everywhere (in the U.S.).”

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