Cheers to USMCA: With New Deal In Place, Dairy Exports Ready for Growth
By Michael Dykes, D.V.M.
Today is the day we raise a tall, cold glass of milk to our North American trading partners.
For the past 25 years, consumers in the United States, Mexico and Canada have enjoyed an abundant, diverse selection of food — dairy products, fruits, vegetables, grains, and meat — thanks to a reciprocal relationship that became a model for most large, multinational trade agreements that came later. Since the 1990s, the U.S., Mexico and Canada have protected intellectual property, established dispute resolution mechanisms, and created safeguards to protect labor rights and environmental standards through our longstanding trade relationship. Most importantly, our nations have avoided a major disruption in trade, leading to sustained economic growth across the continent.
Today begins a new chapter in North American trade thanks to the U.S.-Mexico-Canada Agreement, which takes effect today. For America’s dairy industry, USMCA strengthens and modernizes our relationship with our closest, most reliable trading partners. Some have said that USMCA is simply NAFTA (USMCA’s predecessor, the North American Free Trade Agreement) with a new name. Not only is that an inaccurate characterization, but it is also unfair to the U.S. negotiating team and members of Congress who worked tirelessly for months to win important, unprecedented concessions from Canada and Mexico that will benefit the U.S. economy for decades to come.
For our dairy industry, the deal meets our top priorities for ensuring a more level playing field by preserving duty-free market access to Mexico, eliminating Canada’s unfair, protectionist pricing program and increasing market access to the Canadian market. Moreover, the agreement includes more robust dispute resolution mechanisms for when unfair barriers to trade crop up that require action by the United States government. While NAFTA pioneered labor and environmental provisions, USMCA has gone a step further to achieve stronger enforcement for labor policies, even gaining the support of large U.S. labor unions.
By all accounts, USMCA is a win for U.S. dairy producers and processors. In many ways, the modernization of North American trade more than two decades ago led the U.S. dairy industry to invest more heavily in exports. Until the mid-1990s, U.S. dairy was primarily a domestic industry. Today, the United States sends American dairy products to more than 140 countries. U.S. dairy exports nearly tripled since the early 2000s, and the United States became the world’s third-largest dairy product exporter behind New Zealand and the European Union (EU). Today, approximately one day’s worth of U.S. milk is exported, or roughly 15% of all production.
The U.S. International Trade Commission estimates that exports of U.S. dairy products to Canada will increase by $227 million under USMCA, and exports to Mexico will grow by $50 million. Overall, the new trade deal is expected to raise U.S. GDP by $68.2 billion and create about 176,000 new American jobs.
Before USMCA took effect, Mexico and Canada purchased roughly 40% of U.S. dairy exports. Mexico is our largest dairy trading partner, accounting for $1.54 billion of U.S. dairy exports in 2019; Canada is a close second, accounting for $667.0 million in 2019. Altogether, that’s a lot of milk, cheese, whey, ice cream and other dairy products that support a lot of American jobs — roughly 900,000 American jobs, in fact, across food and agriculture thanks to North American trade.
USCMA will not only improve on dairy’s bottom line, but the deal’s provisions also set a new precedent for trade agreements going forward. Relying on rules-based, market-oriented principles to grow trade is USMCA’s calling card. USMCA made important changes to investor state dispute settlement, for example, which will help ensure that Americans investing abroad are provided the same kinds of basic legal protections that we provide in the United States to Americans and foreigners doing business within our borders. Another important component to dispute resolution is the Chapter 19 provisions of USMCA which, similar to NAFTA, provide for review of trade disputes by a binational panel composed of private citizens from the two countries. In fact, the International Dairy Foods Association wasted no time in contacting the Office of the U.S. Trade Representative (USTR) this week to voice our concern for protectionist measures by Canada related to the importation of U.S. dairy products. We believe Canada is limiting certain U.S. dairy exports by maintaining restrictive tariff rate quotas (TRQs) and not moving quickly enough to implement a TRQ administration system that is consistent with USMCA.
The bottom line for U.S. dairy is that USMCA offers a big improvement over NAFTA. USMCA will grow American jobs, expand U.S. export markets across North America, and give U.S. dairy producers and processors the foundation on which to become the world’s leader in dairy foods.
In other words, today is a very good day. Cheers!
Michael Dykes, D.V.M., is president and CEO of the International Dairy Foods Association
