A new trade deal the United States reached over the weekend with Mexico and Canada will tamp down uncertainty for American farmers and manufacturers, though concerns remain about a broader trade war.
President Donald Trump on Monday touted the agreement’s safeguards for intellectual property and protections for workers, as well as provisions that he said will help American exporters of a wide range of agricultural products. He said the agreement closes “loopholes” that allow car companies to assemble vehicles in Canada and Mexico and sell them in the United States duty-free.
“This landmark agreement will send cash and jobs pouring into the United States and into North America — good for Canada, good for Mexico,” Trump said.
Trade harmony across North America is important to a wide range of businesses in Minnesota. Canada and Mexico were the top export markets for Minnesota products last year, with Mexico just ahead of third-place China, according to the state Department of Employment and Economic Development.
Some points of contention remain. Notably, the deal does not remove U.S. tariffs on steel and aluminum on Canada and Mexico — tariffs the United States has also imposed broadly on other countries, leading to retaliatory countermeasures by some. China aimed counter-tariffs on U.S. agriculture products, for instance.
But the deal removes the prospect of reversion to pre-NAFTA barriers on the movement of food and other goods between the United States, Canada and Mexico. Such a change would have disrupted American farmers, food processors and buyers for several years as growing and buying patterns adjusted.
Cargill, the Minnetonka-based company that is the one of the world’s largest agriculture processors and a leading trader, issued a cautiously optimistic statement on the new deal while noting it is examining the details. “We strongly support the continuation of the trilateral trading bloc established 24 years ago between the United States, Mexico and Canada under NAFTA,” Cargill said.
“The appropriate measure, in our view, is whether USMCA [United States-Mexico-Canada] is better than NAFTA, which has transformed North America into one of the world’s most competitive and successful trading blocs,” the company said. “At first glance, we’re encouraged with efforts to modernize some chapters that specifically affect trade in agricultural goods.”
The new trade agreement includes steps that aim to address issues the United States has had with Canada’s dairy industry, such as ending a Canadian-created program for selling skim milk powder in the world market without regulation. Some Minnesota farmers found the program unfair, said Dave Buck, president of the Minnesota Milk Producers Association.
Canada also weakened some mechanisms it uses to manage the supply of dairy products, said Steve Suppan, a policy analyst at the Institute for Agriculture and Trade Policy, a think tank in Minneapolis.
But because the Canadian dairy market is small, Suppan believes it is “preposterous to think that gutting Canadian supply controls will help” Minnesota dairy farmers or others in the overproducing U.S. dairy industry very much.
For farmers, the big problem remains the trade war with China, which Trump made clear is not close to resolution. Even so, more than 70 percent of rural Americans and farmers say they would vote for Trump for president again, according to a new poll from DTN/Progressive Farmer. The poll surveyed 1,271 rural residents and farmers and has a margin of sampling error of 2.5 percentage points.
Farmers have been battered by Trump’s trade policy. Only 45 percent said they were very or somewhat satisfied, according to the DTN poll, and only 30 percent said Trump devotes enough attention to rural America.
Tariffs have especially driven down the prices of soybeans and pork, two key agricultural exports for Minnesota. But farmers remain hopeful that he can secure better trade deals for American business in general.
“As someone who has 20 to 25 years of production ahead of me, I may never see this level of trade negotiations in my career again. We have to get it right this time around,” Marc Arnusch, a farmer near Keenesburg, Colo., told Progressive Farmer.
On Monday, Trump sang the praises of Mexican President Enrique Peña Nieto and president-elect Andres Manuel López Obrador, gave grudging regards to Canadian Prime Minister Justin Trudeau, and talked tough on China and the European Union.
“China wants to talk very badly, and I said frankly it’s too early to talk. Can’t talk now, because they’re not ready,” Trump said. “They’ve been ripping us for so many years. It doesn’t happen that quickly.”
The new North America trade deal includes requirements designed to increase well-paid automobile manufacturing jobs in the U.S. and Canada, said Sharon Treat, an attorney at the Institute for Agriculture and Trade Policy and a member of an advisory panel for the U.S. trade representative.
Canada’s greatest fear in being cut out of the trade deal was the impact of punitive 25 percent tariffs on its critically important auto industry, trade specialists said.
The new rules increase the percentage of vehicle assembly that must take place in the U.S., Canada or Mexico in order for a vehicle to be built duty-free. The rules also prescribe that certain auto production jobs must be performed by workers making at least $16 an hour. The pay figure pushes jobs to the U.S. and Canada, which pay roughly three times as much as Mexico and many other countries where the work might otherwise be done.
Treat, who met with U.S. and Canadian negotiators, said the new agreement does little, if anything to address critical concerns such as climate change or affordable medical devices and drugs. And outside of autoworkers, she said, the impact on industry is not assured.
“This is a better deal for autoworkers,” Treat said. “Does it help the average worker in the U.S.? I don’t see it.”