U.S. House Democrat leaders this week announced a deal has been reached with President Trump regarding the U.S.-Canada-Mexico Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA). Aside from aiding the 330,00 Washington jobs supported by trade between the two countries, some state agricultural industry members say if Congress ratifies the treaty it could lead to improved trade relations with larger trading partners such as China. However, other trade experts are less optimistic.
Those encouraged by the agreement include Washington Farm Bureau (WFB) CEO John Stuhlmiller, who told Lens: “the Administration said ‘We’re going to dump NAFTA and recreate it. (It’s a) big deal in the trade world. Now this proves that it can be done. When USCMA passes, that says to the world: ‘We’re open for business, and we can get the business done.’”
Washington Council on International Trade (WCIT) President Lori Otto Punke said in a statement that the new trade deal “is critical for Washington State’s interests and is a much-needed positive step in an otherwise uncertain trade environment.“
However, former Washington gubernatorial candidate and U.S. trade advisor Bill Bryant views the new deal more as a modernization of NAFTA than an overhaul. “This has updated the original agreement, which was needed.” Bryant is also a former vice president of the Northwest Horticultural Council.
Among benefits the agreement provides is a more level playing field for milk exports between the U.S. and Canada. Washington State Dairy Federation Executive Director Dan Wood told Lens that NAFTA as written allowed Canada to come up with a new class of milk to subsidize its dairy farmers “no matter what happened to the market and the trade opportunities. That will go away (with USMCA).”
A WCIT 2018 study of the trade agreement noted that “proximity to Canada means Washington dairy farmers are well situated to capture this increased trade. Washington state can continue exporting fresh apples, cherries, pears, dairy and other agricultural commodities tariff-free under USMCA as was the case under NAFTA.”
“Trade between countries is great for cooperation on so many other things, on national security, on environmental issues, on borders,” Wood said.
While China is the state’s largest trading partner, Mexico imports the most Washington apples. WCIT’s study concluded that the agreement “preserves market access opportunities in Mexico, our most important market for agricultural exports.”
The tentative deal if ratified could also mean an end to trade uncertainty between the countries that has caused some producers to hold off on exports or sales.
“If Congress can come together to pass USMCA it will deliver a measure of certainty farmers badly need right now,” Co-Executive Director of Farmers for Free Trade Angela Hofmann said in a statement. “Farmers have been struggling in the face of bad weather and unpredictable trade policy. Passing USMCA will guarantee that our farmers’ closest and most important markets will remain free from tariffs and red tape.”
It’s unknown to what extent the new agreement will affect U.S. trade relations with other countries. Right now, the U.S. and China are currently engaged in a trade war resulting in retaliatory tariffs on exports from both countries. Overall, the trade disputes costs Washington $2.4 billion a year.
Stuhlmiller believes USMCA’s ratification might encourage an end to the dispute with China. “There’s reason to negotiate with the Trump Administration, because they can get the job done. China obviously is the market we want and need. They’re huge, even when we’re not trading well with them. If you look at the numbers, it’s mind boggling how much we do even though the tariffs are heavy.”
However, Bryant believes USCMA would have no effect, arguing the situations aren’t comparable. “It’s a very different discussion. This is sort of amending and refreshing an agreement that we already have. We don’t have a trade agreement with China.”
Bryant added: “If this were an important first step and really integrated the economies of the United States, Canada and Mexico, it could in a long game provide a counterbalance to the Chinese economy. We would certainly be in an incredibly strong position relative to China and other trading partners.”
Yet, Wood shares Stuhlmiller’s view on USCMA’s potential beyond its direct impacts. “China is huge. We need that one to come through, but negotiations are pretty tough. The more agreements we have with other nations and other regions, then the less desperate we are for the market in China. That in turn, I believe, puts us in a stronger bargaining position.”