Now that 232 tariffs are gone, what next for USMCA?
The U.S. has agreed to lift its steel and aluminum tariffs on Canada and Mexico, removing major obstacles for ratification of the renegotiated North American free trade pact by all three countries. But gaining congressional approval could still be a heavy lift.
President Donald Trump said he was "pleased to announce that we've just reached an agreement with Canada and Mexico," to lift Section 232 tariffs on imported steel and aluminum. The duties were seen as a major hindrance to the congressional consideration of the U.S.-Mexico-Canada trade deal, which many U.S. farm groups say is their top legislative priority of 2019.
Key lawmakers had warned the president that, if he didn't lift the 232 tariffs, there was no hope of ratifying a new deal with our two biggest trading partners this year. And that was not acceptable.
The USMCA contains provisions to boost U.S. dairy and poultry to Canada, establishes updated sanitary and phytosanitary controls, improves access for U.S. wheat and wine — among other things. But the primary benefit for U.S. farmers and ranchers is that it would maintain virtually zero tariffs between the three countries that were established in the current pact.
Farm organizations were patiently waiting for Trump to lift the tariffs, but the announcement May 17 caught a few by surprise.
"This agreement represents a key step toward approval and ratification of the U.S-Mexico-Canada Agreement, which will greatly benefit American farmers, ranchers, and agribusiness," said John Bode, president and CEO of the Corn Refiners Association. "We commend the efforts of President Trump toward overcoming this roadblock in negotiations, and strongly urge Congress to swiftly ratify the USMCA trade agreement."
The announcement is being praised by many U.S. farm groups, especially those who have seen their members lose business because of retaliatory tariffs. Mexico's retaliation stung particularly hard on U.S. pork, cheese, potato and apple producers, who all saw sales suffer.
Canada's retaliatory tariffs that impacted the U.S. ag sector were primarily on value-added products such as ketchup and yogurt.
"Mexico's 20% retaliatory tariff on U.S. pork has cost our producers $12 per animal, or $1.5 billion on an annualized, industry-wide basis," said National Pork Producers Council President David Herring. "Removing the metal tariffs restores zero-tariff trade to U.S. pork's largest export market and allows NPPC to focus more resources on working toward ratification of the ... USMCA, which preserves zero-tariff trade for U.S. pork in North America."
And Jim Mulhern, president and CEO of the National Milk Producers Federation, said: "This paves the way for Mexico to drop retaliatory tariffs that have harmed dairy, and for Congress to take its next step to help our producers — to vote on USMCA and quickly ratify it."
But the first vote in Congress on USMCA would be held in the Democrat-controlled House, where lawmakers are still far from a consensus needed to approve the new trade pact.
Top government trade officials met for hours Monday, May 20, with U.S. ag sector leaders at USDA headquarters, and one of the main messages from trade negotiators and USDA to farmers and ranchers was overwhelming optimism that Congress would ratify the U.S.-Mexico-Canada Agreement this year, sources tell Agri-Pulse.
U.S. Trade Representative Robert Lighthizer, USDA Trade Undersecretary Ted McKinney, and USTR Chief Ag Negotiator Gregg Doud and others sat down with a wide variety of ag groups representing beef, dairy, pork, rice and fruits and vegetables to discuss everything from USMCA to the trade war in China, which government officials were not optimistic about resolving anytime soon.
Meanwhile, Vice President Mike Pence told reporters Monday in Florida that the White House will try to address concerns that House Democrats have about USMCA with language in the text of the implementing legislation. "We're very open to that," Pence said.
House Speaker Nancy Pelosi and others remain adamant that the pact be altered to include measures such as a provision to ensure that Mexico will follow through on pledges to improve labor standards in the country.
When asked if the lifting of the steel and aluminum tariffs would garner USMCA support from House Democrats, House Majority Leader Steny Hoyer, D-Md., said: "That's not the issue on USMCA. Enforcement's the issue, so I don't think that will have a major effect."
Mexican leaders have generally scoffed at the calls for enforcement measures, pointing to the fact that both chambers of its legislature already have passed sweeping labor reform legislation that the country agreed to during USMCA negotiations.
The new Mexican law that, among other things, scraps government-run unions, allows workers to vote on their own representation and participate freely in collective bargaining agreements, is supported by newly elected President Andrés Manuel López Obrador.
But Mexico has a long history of low wages and toothless state-operated unions that are still blamed for spurring U.S. companies to move production facilities south of the border.
"I'm hopeful that we can get a trade agreement, but it has to be one that really works," Pelosi said recently. "I want to see ... enforcement language."
The road ahead for USMCA in the U.S. may still be rocky, but Canadian Prime Minister Justin Trudeau said he's hopeful.
"Now that we have had a full lift on these tariffs, we are going to work with the United States on timing for ratification, but we're very optimistic we're going to be able to move forward in the coming weeks."