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What’s next? USMCA approved by Senate

Progressive Dairy Editor Dave Natzke Published on 17 January 2020

The U.S.-Mexico-Canada Agreement’s (USMCA) long journey has made it through Congress and is headed to President Trump’s desk, where his signature is expected next week. The U.S. Senate passed the USMCA on a bipartisan vote of 89-10 on Jan. 15, nearly a month after it was overwhelmingly approved in the House.

The agreement, ratified by Mexico last December, must still pass through Canada (where it’s called the CUSMA). Members of Canada’s Parliament were scheduled to return from a winter break on Jan. 27.

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Trade negotiators from the U.S., Mexico and Canada released initial provisions of the agreement – created to replace the North American Free Trade Agreement – in late 2018, and U.S. dairy was seen as a winner. Read: Trade deal seen as victory for U.S. dairy.

A USDA fact sheet summarized “key achievements” to increasing dairy market access (see Agriculture: Market Access and Dairy Outcomes of the USMC Agreement).

Among top priorities for the U.S. industry is the elimination of Canada’s Classes 6 and 7 milk pricing programs within six months after the agreement takes affect. Canada will ensure that the price for skim milk solids used to produce nonfat dry milk, milk protein concentrates and infant formula will be set no lower than a level based on the U.S. price for nonfat dry milk.

Canadian measures include resumption of its program to use skim milk domestically as animal feed and a new commitment to cap its exports of skim milk powder, milk protein concentrates and infant formula.

To assist with monitoring implementation of Canada’s new program, the U.S. and Canada have agreed to review the agreement after five years and every two years thereafter.

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Canada will phase in new tariff rate quotas – over a period of up to 20 years – exclusively for U.S. milk and U.S. dairy products, which should provide market access gains. Those tariff rate quotes will affect fluid milk, cheese, cream, skim milk powder, butter and cream powder, concentrated and condensed milk, yogurt, whey and other products. Preliminary calculations estimated the U.S. will have access to about 3.6% of Canada's dairy market, up from the current 1% and above the 3.25% market access Canada would have given the U.S. as part of the Trans-Pacific Partnership. The U.S. will provide reciprocal access on a ton-for-ton basis for imports of Canada dairy products through first-come, first-served tariff rate quotas.

According to the International Trade Commission, U.S. dairy exports are projected to increase by more than $314 million a year. USMCA also strengthens the relationship between Mexico and the U.S. and establishes new protections for products that rely on common cheese names, such as parmesan and feta.

U.S. dairy organizations celebrate

The leaders of several U.S. dairy organizations released statements celebrating congressional passage of USMCA:

  • Tom Vilsack, president and CEO of the U.S. Dairy Export Council (USDEC): “USMCA makes important strides to break down trade barriers, opening the door to new opportunities and supporting the flow of high-quality American dairy products to two valuable export markets. The strong enforcement measures included in the final agreement give officials the tools necessary to hold our trade partners accountable and ensure the gains secured by USMCA are completely realized.”

  • Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF): The agreement “will deliver a more certain future for our dairy farmers and rural economy. The U.S. must now remain diligent and proactively work with Canada and Mexico to implement USMCA in both letter and spirit. Full compliance is essential to achieving more fair trade with Canada and protecting American-made cheeses in Mexico.”

  • Brody Stapel, president of Edge Dairy Farmer Cooperative and a dairy farmer in eastern Wisconsin: “With USMCA having now reached the finish line, we should celebrate this as a landmark victory not only for dairy farmers and processors but for our country as a whole. Mexico and Canada account for 40 percent of all U.S. dairy exports – a value of $2 billion each year and tens of thousands of American jobs.

“Trade is a key to the stability and long-term success of the dairy community. Farms of all sizes and business models benefit when we have more opportunities for free and fair trading, which allows us to capture markets that are expanding as the population does.”

  • Jeff Lyon, general manager of FarmFirst Dairy Cooperative: “This new trade agreement addresses the Class 6 and 7 pricing distortion issues and expands market access for U.S. dairy into Canada, while also affirming our strong trade relationship with Mexico. Mexico is our top dairy export country, and this trade agreement allows for that relationship to continue to flourish.”

  • Laurie Fischer, American Dairy Coalition CEO: “This is another important step forward for dairy farmers throughout the U.S. After suffering severe economic losses over the last five years, the nation’s dairy farmers look forward to stability, certainty and growth of dairy products into the markets of Mexico and Canada.”

Canadians brace for impact

While U.S. dairy leaders celebrated passage of USMCA, Canadian dairy leaders have opposed the agreement since it was first negotiated. If enacted, the agreement would transfer the equivalent average production of some 520 Quebec dairy farms to the U.S., according to Pierre Lampron, president of the Dairy Farmers of Canada (DFC), a national policy, advocacy and promotional organization.

Last fall, Canada’s federal government unveiled a compensation package to offset the negative impact of two previous trade agreements – the Comprehensive Economic and Trade Agreement (CETA), and the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) – on the country’s dairy farmers.

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DFC estimated CETA, CPTPP and CUSMA, in addition to other market access granted through the World Trade Organization, will result in the annual loss equivalent to more than 8% of the country’s milk production.  end mark

Dave Natzke
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