New Hope for a New Trade Deal with Mexico and Canada
Dairy farmers and the U.S. economy need this
It would be nice if the U.S. dairy industry, which supports more than three million jobs, could have time to savor real progress on trade. But that seems like a luxury when turbulence is the new normal.
The long-overdue end to Mexico’s retaliatory tariffs against U.S. cheese exports last month was a positive development and so was the Mexican Senate’s passage Wednesday of the U.S.-Mexico-Canada Agreement (USMCA). That made Mexico the first of the three North American countries to ratify the new trade pact replacing the North American Free Trade Agreement (NAFTA).
But much work remains before we can feel confident we’ve turned the corner on reestablishing a dependable trading relationship with Mexico and making significant progress ratifying this critical trade agreement between the U.S., Mexico and Canada.
Why every American has an economic stake
If you’re not in the dairy industry or even a dairy lover why should you care about dairy trade?
Because dairy is an economic driver of the U.S. economy that affects your pocketbook. Increasing exports is a vital goal of ours to continue to create jobs, especially in rural areas that have not seen the prosperity many urban areas have enjoyed.
The International Dairy Foods Association (IDFA) has released an updated version of its economic impact tool, Dairy Delivers®. If that sounds familiar it’s because the first version has been cited frequently here on this “Got Jobs?” publication jointly managed on Medium by IDFA, the U.S. Dairy Export Council and the National Milk Producers Federation, where I serve as president and CEO.
IDFA’s updated analysis shows the dairy industry:
- Supports more than 3 million total jobs.
- Contributes 1% to national GDP.
- Adds $620 billion in total economic impact.
- Provides a $64.5 billion contribution to federal, state and local taxes (not including sales taxes paid by consumers).
- Generates $38 billion in direct wages for workers in the dairy industry.
Without a thriving dairy industry, there would be fewer jobs and higher taxes for everyone else to pay.
Mexico: a $1.4 billion market for U.S. dairy
First, the good news: Removing the tariffs, a barrier that has harmed trade with our largest international partner, is important progress in improving dairy’s fortunes.
The end of the Mexican retaliatory tariffs put the U.S. fully back as the preferred supplier to what last year was a $1.4 billion dairy market. The May 17 agreement ending U.S. tariffs against Canadian and Mexican metals that prompted the retaliation in the first place shows that for all the frustrations farmers have felt in the ongoing trade wars, progress can occur.
The end of the tariffs also improves prospects for passing the U.S.-Mexico-Canada Agreement (USMCA), which would replace the longstanding North American Free Trade Agreement (NAFTA).
Mexico has revised its labor laws, which should help gain support for the agreement in the U.S. Congress, and Canada is vowing “full steam ahead” for ratification. Meanwhile, producer margins are improving, and a better safety net has arrived with signup beginning this week for the new Dairy Margin Coverage Program, giving producers several reasons for greater optimism about dairy’s economic fortunes.
Momentum for trade agreement replacing NAFTA
But the threat of new tariffs President Trump raised in early June, meant to change Mexico’s behavior on immigration issues that are unrelated to trade or agriculture, raised the specter of renewed retaliation.
With the resolution of that threat, we are hoping that USMCA momentum, temporarily slowed, may revive and that we can again focus on repairing and expanding U.S. dairy’s relationship with its largest customer.
To help build that groundswell of support in Congress, NMPF sent a joint dairy letter on USMCA, together with USDEC and IDFA, to two dozen of the top dairy state delegations in Congress. A day later NMPF joined with almost a thousand other food and agricultural organizations and companies, including many NMPF members, to send a unified message to the Hill urging movement on the trade agreement.
Trade with China
At the same time, turbulence continues with China. New U.S. tariffs on Chinese goods, the result of derailed negotiations between the world’s two largest economies (and the third-biggest importer of U.S. milk), are likely to invite further retaliation, compounding the sharp drop in dairy exports we’ve already seen to China.
To ease the blow for producers, the Trump Administration, through the U.S. Department of Agriculture, has promised to help producers across agricultural commodities to lessen the near-term economic damage from the trade war with up to $16 billion in a new round of aid.
We at NMPF have been in discussions with the department, suggesting how to target limited resources to best ameliorate the damage.
But we don’t yet know what will be in the assistance package, which means yet more question marks; we’ll keep pushing hard for assistance that mitigates the more than $2.3 billion in damages dairy farmers have faced because of the trade war.
But no assistance package can completely capture the full effects of the market uncertainty, interrupted relationships and markets lost to unencumbered competitors who are seizing market share. That’s why we certainly hope the aid package isn’t just as fair as possible — we hope it’s the last one farmers need.
What dairy farmers need
Significant work remains on numerous trade policy fronts to help dairy producers fully recover. In addition to working for USMCA passage, we will continue urging the White House to resolve the renewed tariff spat with China and conclude a bilateral agreement that lowers tensions and improves market access.
We also need swift and robust progress in trade discussions with Japan, which the president has promised, so that U.S. dairy interests are not further punished by tariffs and TRQs that each year let our European and Oceania competitors gain ground due to the terms of their trade treaties with Japan.
These steps are necessary to provide certainty, opportunities and improved prices for U.S. dairy producers, something badly needed after the economic turmoil of recent years. If dairy truly is getting back on its feet — and positive signs are emerging — then the next step will be to start moving forward. The end of Mexico’s retaliatory tariffs put us on firmer ground.
The dairy industry can move ahead, despite the tremors that continue to shake things up. If our industry and the more than 3 million jobs we support prospers with increased trade, the U.S. economy benefits, bringing new hope to hard-hit farmers in rural communities.