The recent ruling came in the first-ever use of a new dispute resolution panel established by the U.S.-Mexico-Canada Agreement, or USMCA. The U.S. contended that Canada used a complex set of tariff-rate quotas to reserve a share of the dairy market exclusively for Canadian dairy processors in violation of the 2020 pact.

“Today’s decision is an important victory for U.S. dairy farmers,” said Jim Mulhern, the president of the National Milk Producers Federation. “The United States and Canada negotiated specific market access terms covering a wide variety of dairy products, but instead of playing by those mutually agreed upon rules, Canada ignored its commitments.”

Canada didn’t commit to a specific course of action but acknowledged a Feb. 3 deadline to resolve the matter. In a joint statement, Canada’s ministers of trade and agriculture said they “continue to stand up for its dairy industry, farmers and workers and the communities they support.”

If Canada doesn’t come into compliance by the deadline, the U.S. could begin the process of initiating tariffs or other countermeasures.

Although Canada said aspects of the ruling were in its favor, the panel’s report contained only one ultimate finding—that Canada’s practices were inconsistent with its obligations in the trade deal.

The Trump administration filed an initial complaint about Canada’s dairy quotas in December 2020, leading to discussions between the two nations but no resolution.

In May of 2021, the U.S. escalated that complaint and triggered the dispute resolution process of the USMCA for the first time. The three-member dispute resolution panel was chaired by Elbio Rosselli, a diplomat from Uruguay, under USMCA rules designed to ensure that panelists are independent and have expertise in international law and trade treaties.

Canada’s dairy producers have long fought against opening their market. The country has around 11,000 commercial farms that hold substantial political sway because they are located in a politically important region: rural central Canada, especially French-speaking Quebec.

Source: Wall Street Journal

The U.S. dairy industry has long complained about policies in Canada that prevent sales in their market, and the issue has won the support of many members of Congress who represent major dairy- producing states.

Canada’s dairy protection was one of the key sticking points during negotiations on the trade deal. The U.S. alleges in the dispute that Canada is not upholding the terms of the agreement.

“Launching the first panel request under the agreement will ensure our dairy industry and its workers can seize new opportunities under the USMCA to market and sell U.S. products to Canadian consumers,” said U.S. Trade Rep. Katherine Tai.

The U.S. alleges Canada has used a complex system of tariff-rate quotas that sets aside a share of the dairy market exclusively for Canadian dairy processors, and that the system is in violation of its trade agreement with the U.S. and Mexico.

The complaint predates the current administration. The Trump administration filed the initial complaint in December. The U.S. and Canada discussed the complaint then but failed to resolve it.

This escalation of the dispute requests review by a formal panel. If the U.S. prevails with the panel, Canada will have to bring its practices into compliance. If Canada does not comply, the U.S. could eventually impose tariffs.

“Canada is disappointed that the United States has requested a dispute settlement panel,” said Canadian Trade Minister Mary Ng. She said Canada is “confident that our policies are in full compliance,” with the agreement and “will vigorously defend our position during the dispute settlement process.”

Source: Wall Street Journal

The merger will provide direct rail service throughout Canada down to central Mexico and key agricultural and manufacturing hubs through the center of the U.S.

Executives from the railroads said the merger would create the first U.S.-Mexico-Canada rail network, furthering the ties of the U.S. Mexico Canada Agreement (USMCA).

In news from earlier in March, the Western Grain Elevator Association (WGEA) of Canada called on railroads to expand capacity and service offerings to the grain sector to ensure the sector’s increasing business needs are met.

Although increased volumes of grain in Canada have been moved by rail, service levels “fall far short” of demand, WGEA said.

“Grain production is increasing at a rate of 3 percent per year, which means exports will grow at a rate closer to 4 percent due to the fact that domestic consumption is not growing at the same rate as production,” said Wade Sobkowich, WGEA’s executive director.

Grain companies have expanded country elevator storage by 13.9 percent and port terminal storage by 11.2 percent. They also have increased system throughput by 16.5 percent over the past five years. Recent increases in rail capacity, however, have not kept pace with increased production and grain handling network growth, according to WGEA.

Sources: DTN, Progressive Railroading

“Industry wants the administration to show flexibility in the months before and after entry into force so they can focus on making payroll and avoiding layoffs,” said John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce.

Lindsay Meyer, co-chair of Venable LLP’s international trade group, said she has mixed feelings.

“On the one hand, given the pandemic, there are challenges in the supply chain, which from a North American perspective are most pronounced in the order by Mexican President Manuel Obrador to halt manufacturing operations in Mexico,” Meyer told FreightWaves. “That has been a pinch for some U.S. manufacturers who rely on Mexican-made parts and components.”

Because of the pandemic, the Mexican government suspended all non-essential activities—including the closure of hundreds of factories along the U.S.-Mexico border—on March 30.

Meyer added that “it is going to take some time for North America to get opened up in light of what we are learning about our new social distancing requirements, which I think are most challenging in manufacturing capacities.”

The Commercial Customs Operations Advisory Committee (COAC) sent a letter to the Trump administration recommending delaying implementation of the USMCA for at least another six months.

A trade association in Canada said the USMCA could cost dairy farmers across that country more than $100 million in lost revenue if it goes into effect July 1.

“We’re talking adjustment to products, portfolios—the product mix of my members, so that means that it requires plants retooling, new products, you have to find a new market. Now we’re left to do all of this basically within 30 days,” Mathieu Frigon, president and CEO of the Dairy Processors Association of Canada.

U.S. Trade Representative Robert Lighthizer said April 24 that USMCA will begin as planned on July 1.

“The crisis and recovery from the COVID-19 pandemic demonstrates that now, more than ever, the United States should strive to increase manufacturing capacity and investment in North America,” Lighthizer said.

Source: Benzinga

Lawmakers and business groups have ramped up pressure on the administration to grant tariff relief to companies reeling from the coronavirus pandemic and the economic fallout.

Myron Brilliant, executive vice president for the U.S. Chamber of Commerce, said the relief would provide “welcome breathing room for American businesses and consumers.”

In other trade news, the USMCA will not go into effect on June 1 after officials in the U.S., Mexico and Canada failed to meet a deadline last week. The earliest date that the updated North American trade deal can enter into force is July 1.

U.S. Trade Ambassador Robert Lighthizer issued a statement saying now that the USMCA has been approved by all three countries, a historic new chapter for North American trade has begun.

He called it the “gold standard by which all future trade agreements will be judged.”

The Canadian House of Commons approved the trade deal midday Friday with the Canadian Senate following suit later the same day.

The USTR’s office says the three countries now have three months to hammer out the regulations that govern the mechanics of the agreement.

The USMCA is expected to increase annual U.S. agricultural and food exports by $2.2 billion, or 1.1 percent, according to the U.S. International Trade Commission. That comes from small increases of U.S. dairy, poultry, wheat and alcohol exports to Canada.

More sugar and products with sugar would come to the U.S. from Canada.
In 2018, Mexico and Canada were the two biggest buyers of U.S. farm goods, representing $40 billion in sales.

Specifically, Canada needs to ratify the deal. Canadian Prime Minister Justin Trudeau urged legislators last week to quickly approve the new continental trade pact, but the main opposition party said it wanted to study the deal, indicating the ratification process could be slow.

Trudeau lost his legislative majority in the October election.

Ratification in Canada is expected to wrap up by April, but the passage of USMCA does not trigger a timeline for the deal to become enforceable.
All three countries need to meet their obligations, and that’s a heavy lift.

Officials in the U.S., Mexico and Canada must spend the next months working to meet all the necessary obligations outlined in the deal. That includes Mexico making sure it is prepared to protect workers’ union rights and that all three countries have updated their rules that govern how cars qualify for reduced tariffs.

Once the countries have completed all the required preliminary work, leaders will notify each other in an exchange of letters. The deal will enter into force about 60 days after that exchange of letters.

The three countries are aiming for the pact to go into effect this summer, but trade experts say that’s an ambitious timeline.

A former aide to the president has cautioned that the pact may not be in force until 2021.

Sources: Politico, Reuters

Here are the eight Democrats, one Republican and one independent who voted against the USMCA:

• Senate Minority Leader Chuck Schumer, D-N.Y.
• Sen. Kirsten Gillibrand, D-N.Y.
• Sen. Cory Booker, D-N.J.
• Sen. Kamala Harris, D-Calif.
• Sen. Ed Markey, D-Mass.
• Sen. Sheldon Whitehouse, D-R.I.
• Sen. Brian Schatz, D-Hawaii 
• Sen. Pat Toomey, R-Pa.
• Sen. Bernie Sanders, I-Vt.

Below are some of the Key Provisions:

Increasing Dairy Market Access
America’s dairy farmers will have expanded market opportunities in Canada for a wide variety of dairy products. Canada agreed to eliminate the unfair Class 6 and 7 milk pricing programs that allowed their farmers to undersell U.S. producers.

Biotechnology
For the first time, the agreement specifically addresses agricultural biotechnology – including new technologies such as gene editing – to support innovation and reduce trade-distorting policies.

Sanitary/Phytosanitary Measures
The three countries agree to strengthen disciplines for science-based measures that protect human, animal, and plant health while improving the flow of trade.

Poultry and Eggs
U.S. poultry producers will have expanded access to Canada for chicken, turkey, and eggs.

Wheat
Canada agrees to terminate its discriminatory wheat grading system, enabling U.S. growers to be more competitive.

This agreement calls on China to dramatically increase its imports of U.S. farm goods. In exchange, the U.S. canceled new tariffs on roughly $156 billion in Chinese imports that were set to take effect last month. The Trump administration also agreed to slash the tariff rate in half on about $120 billion of Chinese goods.

According to U.S. negotiators, China has agreed to buy an average of at least $40 billion annually in agricultural goods starting in 2020—nearly twice as much its peak purchases before the trade war began in 2018. To reach those numbers, China might need to reduce purchases from agricultural exporters like Brazil and Argentina.

The Senate Finance Committee last week overwhelmingly voted to advance legislation associated with the United States Mexico Canada Agreement. The USMCA now goes to the Senate floor, where final approval is expected as early as this week.

Both developments come amid news from the U.S. Commerce Department that the nation’s trade deficit shrank in November by just over 8 percent. If the trade imbalance stays on that path in December, it would be the first time that the yearly trade deficit went down on a year-to-year basis in six years.

Sources: Wall Street Journal, Atlanta Journal-Constitution

It was this news that the agriculture community had waited months to hear as the House of Representatives were ‘working to get to a yes’ on USMCA. A few hours later, Senate Majority Leader Mitch McConnell announced that his chamber wouldn’t be able to push USMCA across the finish line until 2020.

The growing divide in Congress is hard to watch. Our farmers and ranchers are relying on Congress to finish its due diligence on the upgraded trade agreement as quickly as possible. With much frustration, many of us in the heartland are wondering how much longer it might be until the ink dries on this agreement.

American farmers and ranchers and the people in industries that support them go to work every day with a list of things that needs to get done. That list changes as the day progresses, but their goal remains the same. They want to raise the best food, fiber and fuel for their communities and beyond while leaving their farms stronger for the next generation. That’s their job, and it is your job to build the equipment and manage the operations that help farmers do their work as efficiently as possible.

Collectively, it’s the role of presidents, congressional leaders and trade representatives to ensure that the American agriculture industry is being treated fairly in the global marketplace. Completing their due diligence is an important part of that process. They help negotiate, craft and approve trade deals that create a level playing field. That’s their job.

Those of us in rural America are asking Congress to finish their job on USMCA as quickly as possible.

History has proven that agriculture is consistently used by other countries as a pawn when they’re unhappy. Agriculture has felt the hit of trade barriers over the years, including complete bans of our products without sound scientific evidence. Our farmers, ranchers and agribusinesses deserve better from our trade partners.

USMCA is positioned to boost American small businesses, specifically agriculture. Mexico and Canada are Missouri’s top two trading partners. Since NAFTA was signed in 1994, the agreement helped quadruple U.S. agriculture exports to these two countries. In total, USMCA is expected to create an additional 176,000 jobs and inject $68 billion into the U.S. through increased exports. The agreement further maintains zero tariffs with Mexico and makes modest improvements to dairy, poultry and egg market access.

The U.S. Farmers & Ranchers Alliance “30 Harvests” video reminded many of us in agriculture that we are approximately 30 harvests away from needing to feed 9 billion people in the world each year. That major increase in production will only be accomplished with the help of agriculture technology. The new agreements the Trump administration is working on recognize and prioritize those important pieces for American agriculture today. Case in point, USMCA will modernize biotechnology provisions.

Your immediate support of USMCA has never been more important. This Association encourages our members to voice their support for the swift ratification of USMCA.

Chris Chinn is the Missouri director of agriculture. His original article was modified for Association members.