BY ALLISON FINNAMORE • PHOTO COURTESY OF THE UNITED STATES DEPARTMENT OF STATE
The United States–Mexico–Canada Agreement (USMCA) was signed in late November by Canadian Prime Minister Justin Trudeau, American President Donald Trump and then Mexican President Enrique Peña Nieto. The three nations must ratify the agreement in upcoming months, but in the meantime, the NAFTA agreement remains in effect. Technically referred to as the Canada–United States–Mexico Agreement (CUSMA) in Canada and T-MEC in Mexico, those in the agriculture sector of all three countries are now examining the impact of the agreement on their farmers.
The agricultural trade provisions of the deal do differ from those of NAFTA, most notably with regard to the Canadian supply-managed sectors of dairy, eggs and poultry, but for grains, the beneficial terms of NAFTA have been maintained.
Kevin Bender, former chair of the Alberta Wheat Commission (AWC), doesn’t expect a change in imports or exports with USMCA. Importantly, he noted, the new agreement secures continued access to the U.S., which is Canada’s largest wheat export market at 2.3 million tonnes annually and its second-largest barley market at 183,000 tonnes. Between them, the U.S. and Mexico account for 15 per cent of total Canadian wheat exports. “About 90 per cent of American wheat imports are grown on Canadian farms, making Canada the dominant supplier,” said Bender. “Maintaining access through [USMCA] gives Canada a continued edge over our competitors, which is very good news.”
Within the deal, Canada’s agreement to provide official grain grading to U.S.-grown Canadian varieties is a bit of a contentious issue, Bender added. But, he pointed out, the low value of the Canadian dollar doesn’t make U.S. wheat exports to Canada a financially viable option for Americans right now.
According to Carlo Dade, director of the Trade and Investment Centre of the Canada West Foundation, negotiations stalled over the issue of grain grading. Under NAFTA, any variety of American grain coming into Canada is classified as feed grain, although U.S. farmers are free to negotiate a higher price if the grain meets milling specifications. Under the USMCA agreement, American wheat delivered to Canadian elevators will be eligible to receive a grade, but only if the variety is registered in Canada.
“There was resentment and principled anger in the U.S,” said Dade. The Americans aren’t going to ship grain up here, but the Americans in the grain associations are upset on the principal that Canada remains a varietal system and discriminates against American grain.”
Former Alberta Barley chair Jason Lenz said the barley industry is happy the agreement has been signed and is especially pleased about new access to Mexican markets. “There is potential for new barley exports into Mexico,” said Lenz. “Their demand seems to be growing, especially in the last few years. Mexico, like some of the Asian countries, is starting to demand higher quality beer and, in order to do that, you need high-quality barley.” He suggested this can be supplied by Alberta farmers.
Lenz echoed Bender and Dade on market access. “We wanted to maintain tariff-free access to the U.S. and Mexico. With the political climate in the U.S., we wanted to make sure we maintained that competitive advantage. Logistically, it works out very well,” he said.
Lenz said one wish Alberta Barley wasn’t granted was agreement between Canada’s Pest Management Regulatory Agency and the U.S. Environmental Protection Agency on crop inputs. “We asked for regulatory alignment … for crop inputs that the U.S. has access to that we don’t here,” said Lenz. While that wasn’t achieved, he was hopeful it may still happen.
Dade also said given the current political upheaval in the United States administration caused by the president’s often unpredictable decision making, the USMCA deal isn’t especially disadvantageous for Canada. “Generally, we held on to what we had. In ag, it’s generally a sigh of relief,” said Dade. “A good deal under the Trump administration is not losing your shirt.”
However, when President Trump appeared at the American Farm Bureau closing general session in mid-January in New Orleans, he characterized the wheat trade as a win for the U.S. “This landmark trade deal will increase exports of wheat from Montana, dairy from Wisconsin, chicken from Georgia and products from farmers all across our country. As part of the USMCA, Canada agreed to give fair treatment to American wheat farmers. They will now grade American wheat just like they grade their own wheat,” said Trump.
Dairy sector concessions proved contentious. Canada will provide U.S. access to its dairy market in the form of tariff rate quotas as well as the elimination of tariffs on whey powder and margarine. Milk classes six and seven will also be eliminated six months after USMCA takes effect. As well, Canada will set up a monitoring system for skim milk powder exports, milk protein concentrates and infant formula. These products could be subject to tariffs if exports exceed established limits.
Benefits to other Canadian ag sectors under USMCA will include tariff-free margarine export to the U.S. Under NAFTA, margarine from Canada was subject to an eight per cent tariff. Canadian sugar exports to the U.S. will also see reduced tariffs. According to the Canadian Sugar Institute, under NAFTA, U.S. imports of refined sugar are restricted to 22,000 tonnes and Canada’s refined sugar beet industry is limited to a 10,300-tonne share. Exports above the allotted quota are subject to a duty of US$357 per tonne. Melody Garner-Skiba, executive director of Alberta Sugar Beet Growers said USMCA will open the door to even more. “We received an additional 9,600 metric tonnes access on top of our 10,300 tonnes of current access, and it is beet-sugar specific,” Garner-Skiba said.
With the integrated North American food system, a renegotiated trade agreement reduces uncertainty caused by Trump’s commitment to revisit the deal, said Brian Innes, Canadian Agri-Food Trade Alliance (CAFTA) president. “The Canada–U.S.–Mexico agreement maintains our tariff-free access. It keeps what’s working and makes it better.”
He added CAFTA members and staff continue to watch remaining trade barriers and will work to resolve them. These include the requirement that Canadian meat going into the U.S. be re-inspected. “This is a regulatory hurdle, and we are put at a disadvantage. That is something we expect to be addressed between our governments,” said Innes.
While industry representatives expressed relief with the signing of USMCA, many believe market opportunities lie with recent trade deals such as the Comprehensive Economic and Trade Agreement between Canada and the European Union as well as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. “We’re certainly very happy with our Canadian government for negotiating those deals. We’ve seen renewed interest from Japanese feed barley buyers … and we expect our exports to increase into Japan in 2019,” said Lenz.
Until Canada, the United States and Mexico ratify USMCA, it is business as usual for most Canadian farmers, including grain growers. Even after full implementation, changes are expected to be minimal—with no more, but also no less—wheat and barley crossing North American borders.