Ag Trade: Senate Passes USMCA – DTN

Flags of Mexico and the United States of America. Photo: David Carillet1

The U.S. Senate on Thursday voted 89-10 for final passage of the United States-Mexico-Canada Agreement (USMCA), sending the trade agreement to President Donald Trump to sign into law.

Much as the House did in December, the Senate provided strong bipartisan support for the trade pact even in the midst of impeachment proceedings. Just after the Senate approved USMCA, House prosecutors began reading the articles of impeachment on the Senate floor.

Still, passage of the trade agreement marked the second day in a row that President Trump has been able to notch a significant trade victory for his administration. On Wednesday, the president took executive action and signed an agreement with China that does not require congressional approval.

Given that Mexico has already approved the trade deal, getting the pact into implementation will now fall to Canada’s government to ratify the agreement.

USMCA is expected to boost national exports roughly $68 billion a year, according to an International Trade Commission report last spring. That same analysis projected agricultural exports would increase about $2.2 billion. While ag exports are only pegged to rise roughly 1.6%, some sectors benefit more than others. Agricultural supporters said what the trade deal provides is certainty.

“The passage of USMCA is great news for America’s farmers and ranchers,” Agriculture Secretary Sonny Perdue said. “With congressional consideration now complete, our farmers and ranchers are eager to see the president sign this legislation and begin reaping the benefits of this critical agreement.”

Among the major winners in the trade pact are dairy producers, who will receive more export opportunities into Canada’s managed dairy market. The trade pact also requires Canada to remove a pricing class of dairy products that had further restricted U.S. dairy exports and had drawn the ire of both dairy producers and President Trump. Dairy exports are expected to increase by $314 million a year under the deal.

“USMCA makes important strides to break down trade barriers, opening the door to new opportunities and supporting the flow of high-quality American dairy products to two valuable export markets,” said Tom Vilsack, president and CEO of the U.S Dairy Export Council and former agriculture secretary in the Obama administration.

“The strong enforcement measures included in the final agreement give officials the tools necessary to hold our trade partners accountable and ensure the gains secured by USMCA are completely realized. We are grateful to the administration for the sizable accomplishments secured in USMCA on dairy. With this trade deal complete, negotiators can now turn their attention to other key markets around the world in order to gain further ground for U.S. dairy.”

Speaking to Bloomberg TV before the vote, Sen. Mike Rounds, R-S.D., talked about changes in the trade deal that require Canada to price U.S. wheat the same as Canadian wheat.

“For producers in South Dakota, both spring wheat and winter wheat producers, this gives them the opportunity to compete with Canadian wheat producers on an equal basis — long time in coming,” Rounds said. He added that 37,000 jobs in his state are tied to North American trade, and beef producers are also expected to benefit. Pointing also to the China deal, Rounds said, “We think it’s going to change the market for our commodities for farmers and ranchers.”

The U.S. Meat Export Federation highlighted that USMCA locks up trade for two key red-meat destinations and “bolsters our position as a reliable supplier to two leading markets that account for about one-third of all U.S. red meat exports,” said Dan Halstrom, president and CEO of USMEF. Halstrom noted Mexico and Canada accounted for $3.8 billion in red-meat sales in 2019, “and the U.S. red-meat industry looks forward to many years of further growth.”

Sen. Joni Ernst, R-Iowa, championed USMCA and said after the vote that the trade deal “will have a tremendous impact on Iowa’s economy, given that we trade more goods with Mexico and Canada than we do with our next 27 trading partners combined.”

Ethanol groups also praised the new deal. The Renewable Fuels Association pointed out that Mexico was the top market last year for distillers grains and a top-10 market for ethanol. Canada, meanwhile, ranked second for ethanol exports and was a top-10 market for distillers’ grains.

The trade deal also garnered significant Democratic support because of provisions added to protect labor and scale back the way businesses arbitrate grievances over laws. At the same time, those provisions drew criticism from Sen. Pat Toomey, R-Pa., who argued the trade agreement does more to restrict trade than grow it.

Senate Democratic Leader Chuck Schumer, D-NY, voted against USMCA despite good labor provisions because the trade pact does not address climate change. Still, Schumer’s statement also pointed out, “I also fought hard to make sure New York dairy producers would benefit from this deal …”

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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