Agricultural Provisions of the U.S.-Mexico-Canada Agreement

Agricultural Provisions of the U.S.-MexicoCanada Agreement April 3, 2019 Congressional Research Service https://crsreports.congress.gov R45661 SUMMARY Agricultural Provisions of the U.S.-MexicoCanada Agreement On September 30, 2018, the Trump Administration announced the conclusion of the renegotiations of the North America Free Trade Agreement (NAFTA) and the proposed United States-Mexico-Canada Agreement (USMCA). If approved by Congress and ratified by Canada and Mexico, USMCA would modify and possibly replace NAFTA, which entered into force January 1, 1994. NAFTA provisions are structured as three separate bilateral agreements: one between Canada and the United States, a second between Mexico and the United States, and a third between Canada and Mexico. R45661 April 3, 2019 Anita Regmi Analyst in Agricultural Policy Under NAFTA, bilateral agricultural trade between the United States and Mexico was liberalized over a transition period of 14 years beginning in 1994. NAFTA provisions on agricultural trade between Canada and the United States are based on commitments under the Canada-U.S. Trade Agreement (CUSTA), which granted full market access for most agricultural products with the exception of certain products. The agricultural exceptions under NAFTA include Canadian imports from the United States of dairy products, poultry, eggs, and margarine and U.S. imports from Canada of dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products. The proposed USMCA would expand market access for U.S. exports of dairy, poultry, and eggs to Canada and enhance NAFTA’s Sanitary and Phytosanitary (SPS) provisions. It would also include new provisions for trade in agricultural biotechnology products, add provisions governing Geographical Indications (GIs), add protection for proprietary food formulas, and require USMCA countries to apply the same regulatory treatment to imported alcoholic beverages and wheat as those that govern their domestic products. Since 2002, Canada has been the United States’ top agricultural export market, and Mexico was the second-largest export market until 2010, when it became the third-largest market as China became the second-largest agricultural export market for the United States. U.S. agricultural exporters are thus keen to keep and grow the existing export market in North America. If the United States were to potentially withdraw from NAFTA, as mentioned several times by President Trump, U.S. agricultural exporters could potentially lose at least a portion of their market share in Canada and Mexico if the proposed USMCA does not enter into force. If the United States withdraws from NAFTA, U.S. agricultural exports to Canada and Mexico would likely face World Trade Organization (WTO) most-favored-nation tariffs—the highest rate a country applies to WTO member countries. These tariffs are much higher than the zero tariffs that U.S. exporters currently enjoy under NAFTA for most agricultural exports to Canada and Mexico. The proposed USMCA would need to be approved by the U.S. Congress and ratified by Canada and Mexico before it could enter into force. Some Members of Congress have voiced concerns about issues such as labor provisions and intellectual property rights protection of pharmaceuticals. Other Members have indicated that an anticipated assessment by the U.S. International Trade Commission (USITC) will be key to their decisions on whether to support the agreement. Canada, Mexico, and some Members of Congress have expressed concern about other ongoing trade issues with Canada and Mexico, such as antidumping issues related to seasonal produce imports and the recent U.S. imposition of a 25% duty on all steel imports and a 10% duty on all aluminum imports. Both the Canadian and the Mexican governments have stated that USMCA ratification hinges in large part upon the Trump Administration lifting the Section 232 tariffs on imported steel and aluminum. Similarly, some Members of Congress have stated that the Administration should lift tariffs on steel and aluminum imports in order to secure the elimination of retaliatory tariffs on agricultural products before Congress would consider legislation to implement USMCA. Congressional Research Service Agricultural Provisions of the U.S.-Mexico-Canada Agreement Contents Introduction ..................................................................................................................................... 1 Provisions of USMCA..................................................................................................................... 3 Expansion of Market Access Provisions ................................................................................... 4 Improved Agricultural Trading Regime .................................................................................... 7 US Agricultural Trade with Canada and Mexico............................................................................. 9 U.S. Agricultural Exports to Canada and Mexico ................................................................... 10 U.S. Imports from Canada and Mexico................................................................................... 13 Economic Effects of NAFTA versus USMCA .............................................................................. 14 U.S. Agricultural Stakeholders on USMCA............................................................................ 15 Outlook for Proposed USMCA ..................................................................................................... 16 Figures Figure 1. U.S. Agriculture Exports to Canada and Mexico ........................................................... 10 Tables Table 1. Chronology of North American Agricultural Market Liberalization ................................. 2 Table 2. Proposed Canadian Market Access for U.S. Agricultural Products Under USMCA........................................................................................................................................ 6 Table 3. Major U.S. Agriculture Exports to Canada ....................................................................... 11 Table 4. Major U.S. Agriculture Exports to Mexico...................................................................... 12 Table 5. Major U.S. Agriculture Imports from Canada and Mexico ............................................. 13 Contacts Author Information........................................................................................................................ 17 Congressional Research Service Agricultural Provisions of the U.S.-Mexico-Canada Agreement Introduction Since 2002, Canada has been the United States’ top agricultural export market. Mexico was the second-largest export market until 2010, when China displaced Mexico as the second-leading market with Mexico becoming the third-largest U.S. agricultural export market. In FY2018, U.S. agricultural exports totaled $143 billion, of which Canada and Mexico jointly accounted for about 27%. USDA’s Economic Research Service estimates that in 2017 each dollar of U.S. agricultural exports stimulated an additional $1.30 in business activity in the United States. That same year, U.S. agricultural exports generated an estimated 1,161,000 full-time civilian jobs, including 795,000 jobs outside the farm sector.1 U.S. agricultural exports to Canada and Mexico are an important part of the U.S. economy, and the growth of these markets is partly the result of the North American market liberalization under the North American Free Trade Agreement (NAFTA).2 On September 30, 2018, the Trump Administration announced an agreement with Canada and Mexico for a U.S.-Mexico-Canada Agreement (USMCA) that would possibly replace NAFTA. NAFTA entered into force on January 1, 1994, following the passage of the implementing Mexico-Canada Agreement Updated April 8, 2019 (R45661) Jump to Main Text of Report

Contents

• Introduction
• Provisions of USMCA
• Expansion of Market Access Provisions
• Improved Agricultural Trading Regime
• U.S. Agricultural Trade with Canada and Mexico
• U.S. Agricultural Exports to Canada and Mexico
• U.S. Imports from Canada and Mexico
• Economic Effects of NAFTA versus USMCA
• U.S. Agricultural Stakeholders on USMCA
• Outlook for Proposed USMCA

Figures

• Figure 1. U.S. Agriculture Exports to Canada and Mexico

Tables

• Table 1. Chronology of North American Agricultural Market Liberalization
• Table 2. Proposed Canadian Market Access for U.S. Agricultural Products Under USMCA
• Table 3. Major U.S. Agriculture Exports to Canada
• Table 4. Major U.S. Agriculture Exports to Mexico
• Table 5. Major U.S. Agriculture Imports from Canada and Mexico

Summary

On September 30, 2018, the Trump Administration announced the conclusion of the renegotiations of the North America Free Trade Agreement (NAFTA) and the proposed United States-Mexico-Canada Agreement (USMCA). If approved by Congress and ratified by Canada and Mexico, USMCA would modify and possibly replace NAFTA, which entered into force January 1, 1994. NAFTA provisions are structured as three separate bilateral agreements: one between Canada and the United States, a second between Mexico and the United States, and a third between Canada and Mexico.

Under NAFTA, bilateral agricultural trade between the United States and Mexico was liberalized over a transition period of 14 years beginning in 1994. NAFTA provisions on agricultural trade between Canada and the United States are based on commitments under the Canada-U.S. Trade Agreement (CUSTA), which granted full market access for most agricultural products with the exception of certain products. The agricultural exceptions under NAFTA include Canadian imports from the United States of dairy products, poultry, eggs, and margarine and U.S. imports from Canada of dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products.

The proposed USMCA would expand market access for U.S. exports of dairy, poultry, and eggs to Canada and enhance NAFTA's Sanitary and Phytosanitary (SPS) provisions. It would also include new provisions for trade in agricultural biotechnology products, add provisions governing Geographical Indications (GIs), add protection for proprietary food formulas, and require USMCA countries to apply the same regulatory treatment to imported alcoholic beverages and wheat as those that govern their domestic products.

Since 2002, Canada has been the United States' top agricultural export market, and Mexico was the second-largest export market until 2010, when it became the third-largest market as China became the second-largest agricultural export market for the United States. U.S. agricultural exporters are thus keen to keep and grow the existing export market in North America. If the United States were to potentially withdraw from NAFTA, as mentioned several times by President Trump, U.S. agricultural exporters could potentially lose at least a portion of their market share in Canada and Mexico if the proposed USMCA does not enter into force. If the United States withdraws from NAFTA, U.S. agricultural exports to Canada and Mexico would likely face World Trade Organization (WTO) most-favored-nation tariffs—the highest rate a country applies to WTO member countries. These tariffs are much higher than the zero tariffs that U.S. exporters currently enjoy under NAFTA for most agricultural exports to Canada and Mexico.

The proposed USMCA would need to be approved by the U.S. Congress and ratified by Canada and Mexico before it could enter into force. Some Members of Congress have voiced concerns about issues such as labor provisions and intellectual property rights protection of pharmaceuticals. Other Members have indicated that an anticipated assessment by the U.S. International Trade Commission (USITC) will be key to their decisions on whether to support the agreement. Canada, Mexico, and some Members of Congress have expressed concern about other ongoing trade issues with Canada and Mexico, such as antidumping issues related to seasonal produce imports and the recent U.S. imposition of a 25% duty on all steel imports and a 10% duty on all aluminum imports. Both the Canadian and the Mexican governments have stated that USMCA ratification hinges in large part upon the Trump Administration lifting the Section 232 tariffs on imported steel and aluminum. Similarly, some Members of Congress have stated that the Administration should lift tariffs on steel and aluminum imports in order to secure the elimination of retaliatory tariffs on agricultural products before Congress would consider legislation to implement USMCA.

Introduction

Since 2002, Canada has been the United States' top agricultural export market. Mexico was the second-largest export market until 2010, when China displaced Mexico as the second-leading market with Mexico becoming the third-largest U.S. agricultural export market. In FY2018, U.S. agricultural exports totaled $143 billion, of which Canada and Mexico jointly accounted for about 27%. USDA's Economic Research Service estimates that in 2017 each dollar of U.S. agricultural exports stimulated an additional $1.30 in business activity in the United States. That same year, U.S. agricultural exports generated an estimated 1,161,000 full-time civilian jobs, including 795,000 jobs outside the farm sector.¹ U.S. agricultural exports to Canada and Mexico are an important part of the U.S. economy, and the growth of these markets is partly the result of the North American market liberalization under the North American Free Trade Agreement (NAFTA).² On September 30, 2018, the Trump Administration announced an agreement with Canada and Mexico for a U.S.-Mexico-Canada Agreement (USMCA) that would possibly replace NAFTA. NAFTA entered into force on January 1, 1994, following the passage of the implementing legislation by Congress (P.L. 103-182).³).3 NAFTA was structured as three separate bilateral agreements: one between Canada and the United States, a second between Mexico and the United States, and a third between Canada and Mexico.4 4 Provisions of the Canada-U.S. Trade Agreement (CUSTA), which went into effect on January 1, 1989, continued to apply under NAFTA (see Table 1). CUSTA opened up a 10-year period for tariff elimination and agricultural market integration between the two countries. The agricultural provisions agreed upon for CUSTA remained in force as provisions of the new NAFTA agreement. While tariffs were phased out for almost all agricultural products, NAFTA (in accordance with the original CUSTA provisions) exempted certain products from market liberalization. These exemptions included U.S. imports from Canada of dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products and Canadian imports from the United States of dairy products, poultry, eggs, and margarine. Canada liberalized its agricultural sector under NAFTA, but liberalization did not include its dairy, poultry, and egg product sectors, which continued to be governed by domestic supply management policies and are protected from imports by high over-quota tariffs. Quotas that once governed bilateral trade in these commodities were redefined, under NAFTA, as tariff-rate quotas (TRQs) to comply with the Uruguay Round Agreement on Agriculture (URAA), which took effect on January 1, 1995.55 A TRQ is a quota for a volume of imports at a favorable tariff rate, which was set at zero under NAFTA. Imports beyond the quota volume face higher over-quota tariff rates. 1 USDA, Economic Research Service (ERS), Effects of Trade on the U.S. Economy, 2017 Data Overview. S. Zahniser and J. Link, Effects of North American Free Trade Agreement on Agriculture and the Rural Economy, ERS, WRS-02-1, July 2002. 3 For more information on NAFTA and the proposed USMCA, see CRS In Focus IF10047, North American Free Trade Agreement (NAFTA), by M. Angeles Villarreal; and CRS In Focus IF10997, Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement, by Ian F. Fergusson and M. Angeles Villarreal. 4 S. Zahniser et al., NAFTA at 20: North America’s Free-Trade Area and Its Impact on Agriculture, ERS, WRS-15-01, February 2015. 5 The URAA established the World Trade Organization (WTO) on January 1, 1995. For a discussion of U.S. agricultural commitments under the WTO, see CRS Report RL32916, Agriculture in the WTO: Policy Commitments Made Under the Agreement on Agriculture, by Randy Schnepf. 2 Congressional Research Service 1 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Table 1. Chronology of North American Agricultural Market Liberalization January 1989 Canada-United States Trade Agreement implemented. January 1994 over-quota tariff rates. Table 1. Chronology of North American Agricultural Market Liberalization

January 1989

Canada-United States Trade Agreement implemented.

January 1994

NAFTA enters force, tariffs eliminated for many products, including:   U.S. tariffs on Mexican corn, sorghum, barley, soymeal, pears, peaches, oranges, fresh strawberries, beef, pork, poultry, most tree nuts, and carrots; and   Mexican tariffs on U.S. sorghum, fresh strawberries, oranges, other citrus, carrots, and most tree nuts. January 1998

January 1998

Completion of 10-year transition period between Canada and the United States.   Remaining Canadian tariffs on U.S. products eliminated, except for exempted products such as dairy, poultry, and eggs.   Remaining U.S. tariffs on Canadian products removed, except for dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products.   U.S. tariffs eliminated on Mexican non-durumnondurum wheat, soy oil, cotton, and oranges.   Among others, Mexican tariffs eliminated on imports of U.S. pears, plums, apricots, and cotton. January 2003

January 2003

Completion of nine-year transition period under NAFTA between Mexico and the United States.   Among others, U.S. tariffs eliminated on imports of Mexican durum wheat, rice, dairy, winter vegetables, frozen strawberries, and fresh tomatoes.   Among others, Mexican tariffs eliminated on imports of U.S. wheat, barley, soybean meal and soybean oil, rice, dairy products, poultry, hogs, pork, cotton, tobacco, peaches, apples, oranges, frozen strawberries, and fresh tomatoes. January 2008

January 2008

Completion of 14-year transition period under NAFTA between Mexico and the United States. In 2008, the remaining few tariffs were removed.   U.S. tariffs eliminated on imports of Mexican frozen concentrated orange juice, winter vegetables, sugar, and melons.   Mexican tariffs eliminated on imports of U.S. corn, sugar, dried beans, milk powder, high fructose corn syrup, and chicken leg quarters. May 2017

May 2017

Trump Administration sends a 90-day notification to Congress of its intent to renegotiate and modernize NAFTA. August 2017 Renegotiation talks begin. September 30, 2018

August 2017

Renegotiation talks begin.

September 30, 2018

Trump Administration sends a 90-day notification to Congress of its intent to enter into an agreement with Mexico and Canada to modify and modernize NAFTA. November 30, 2018 President Trump and presidents of Canada and Mexico sign proposed USMCA. April 2019

November 30, 2018

President Trump and presidents of Canada and Mexico sign proposed USMCA.

April 2019

U.S. International Trade Commission report assessing potential economic impacts of USMCA submission to the President and Congress expected. Source: For NAFTA, S. Zahniser and J. Link, Effects of North American Free Trade Agreement on Agriculture and the Rural Economy, Economic Research Service, WRS-02-1, July 2002; H. Brunke and D. A. Sumner, “"Role of NAFTA in California Agriculture: A Brief Review,”" University of California, AIC Issues Brief# 21, February 2003; S. Zahniser and Z. Crago, NAFTA at 15: Building on Free Trade, USDA Report WRS-09-03, March 2009; and CRS Report R44981, NAFTA Renegotiation and the Proposed United States-Mexico-Canada Agreement (USMCA), by M. Angeles Villarreal and Ian F. Fergusson. The United States and Mexico agreement under NAFTA did not exclude any agricultural products from trade liberalization. Numerous restrictions on bilateral agricultural trade were eliminated immediately upon NAFTA’'s implementation, while others were phased out over a 14-year period. Remaining trade restrictions on the last handful of agricultural commodities (such as U.S. exports Congressional Research Service 2 Agricultural Provisions of the U.S.-Mexico-Canada Agreement to Mexico of corn, dry edible beans, and nonfat dry milk and Mexican exports to the United States of sugar, cucumbers, orange juice, and sprouting broccoli) were removed upon the completion of the transition period in 2008.66 Under NAFTA, Mexico eliminated all the tariffs and quotas that formerly governed agricultural imports from the United States. In addition to directly improving market access, NAFTA set guidance and standards on other policies and regulations that facilitated the integration of the North American agricultural market. For example, NAFTA included provisions for rules of origin, intellectual property rights, foreign investment, and dispute resolution. NAFTA’'s sanitary and phytosanitary (SPS) provisions made a significant contribution toward the expansion of agricultural trade by harmonizing regulations and facilitating trade.77 Because NAFTA entered into force before URAA, NAFTA’'s SPS agreement is considered to have provided the blueprint for URAA’'s SPS agreement. Regarding trade in agricultural products, the Office of the U.S. Trade Representative (USITC) asserts that USMCA would build upon NAFTA to make “"important improvements in the agreement to enable food and agriculture to trade more fairly, and to expand exports of American agricultural products.”8 "⁸ For USMCA to enter into force, Congress would need to ratify the agreement. It must also be ratified by Canada and Mexico. The timeline for congressional approval of USMCA would likely occur under the Trade Promotion Authority (TPA) timeline established under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (P.L. 114-26).⁹).9 At various times, President Trump has stated that he intends to withdraw from NAFTA.1010 Some observers have suggested that delays in congressional action on USMCA could make it harder for Canada to consider USMCA approval this year because of upcoming parliamentary elections in October 2019.11 11 Provisions of USMCA USMCA seeks to expand upon the agricultural provisions of NAFTA by further reducing market access barriers and strengthening provisions to facilitate trade in North America. An important change in USMCA compared to NAFTA is that the United States agreement with Canada would expand TRQs for imports of U.S. agricultural products into Canada. Other important changes from NAFTA include the agreement between the three countries—Canada, Mexico, and the United States—to further harmonize trade in products of agricultural biotechnology and apply the 6 Sugar trade between the United States and Mexico is governed by antidumping duty and countervailing duty suspension agreements that imposed several limitations on this trade beginning in December 2014 and subsequently revised in June 2017. See CRS In Focus IF10693, Amended Sugar Agreements Recast U.S.-Mexico Trade, by Mark A. McMinimy. 7 For more information, see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson. 8 Office of the U.S. Trade Representative, “United States-Mexico-Canada Trade Fact Sheet: Strengthening North American Trade in Agriculture,” October 2018, https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/ october/united-states%E2%80%93mexico%E2%80%93canada-trade-fa-2 9 See CRS Report R43491, Trade Promotion Authority (TPA): Frequently Asked Questions, by Ian F. Fergusson and Christopher M. Davis; and CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy, by Ian F. Fergusson. 10 For example, Andrew Restuccia et al., “Trump Says He Will Withdraw from NAFTA, Pressuring Congress to Approve New Trade Deal,” Politico, December 2, 2018. 11 World Trade Online, “Analysts Flag Shutdown, Election, 232 Concerns as Possible Roadblocks to USMCA Approval,” February 20, 2019. Congressional Research Service 3 Agricultural Provisions of the U.S.-Mexico-Canada Agreement United States—to further harmonize trade in products of agricultural biotechnology and apply the same health, safety, and marketing standards to agricultural and food imports from USMCA partners as for domestic products. Expansion of Market Access Provisions As agreed upon by the leaders of the United States, Canada, and Mexico, all food and agricultural products that have zero tariffs under NAFTA would remain at zero under USMCA. Under USMCA, agricultural products exempted from tariff elimination under the agreement signed between the United States and Canada would be phased out for further market liberalization. Canada currently employs a supply management regime that includes TRQs on imports of dairy and poultry under its NAFTA and World Trade Organization (WTO) market access commitments. Under NAFTA, U.S. dairy has access into the Canadian market under Canada’'s WTO commitment provisions. For poultry, NAFTA TRQs were established in accordance with the original CUSTA provisions as a percentage of Canada’'s domestic production.1212 When Canada joined the WTO in 1995, it committed to provide poultry market access at the level that is the greater of its commitment under the WTO or under NAFTA.1313 For chicken meat, the NAFTA TRQ, set at 7.5% of the previous year’'s domestic production, is higher than the WTO TRQ set at 39,844 metric tons.1414 Canada’'s chicken meat NAFTA TRQ was 90,100 metric tons in 2018, and the estimate is 95,000 metric tons for 2019.15 15 Both the poultry and dairy TRQs under NAFTA are global rather than specific to U.S. imports. The WTO dairy TRQs often have specific allocations for individual countries. For example, the bulk of Canada’'s WTO cheese quota is allocated to the European Union (EU), and the entire WTO powdered buttermilk TRQ is allocated to New Zealand.1616 Overall, Canada’'s TRQs appear to have restricted imports of dairy, poultry, and egg products, as the imported volumes for these products have regularly equaled or exceeded their set quota limits.17 17 Under USMCA, Canada agreed to increase market access specifically to U.S. exporters of dairy products via new TRQs that are separate from Canada’'s existing WTO commitments. These additional TRQs apply only to the United States. For chicken meat and eggs, the USMCA replaces the NAFTA commitment with U.S.-specific TRQs. For turkey and broiler hatching eggs and chicks, Canada’'s NAFTA commitment would be replaced with a minimum access commitment under USMCA, which is not specific to U.S. imports but applies to imports from all origins. While USMCA would expand TRQs for U.S. exports, U.S. over-quota exports would still face the steep tariffs that currently exist under Canada’s WTO commitment.18 12 Canada-United States Free Trade Agreement, Article 706, http://www.worldtradelaw.net/nafta/Cusfta.pdf.download. Agriculture and Agri-Food Canada, “Canada’s Poultry Import Regime,” http://www.agr.gc.ca/eng/industry-marketsand-trade/canadian-agri-food-sector-intelligence/poultry-and-eggs/poultry-and-egg-market-information/imports-andexports/canada-s-poultry-import-regime/?id=1384971854404 . 14 Canada-United States Free Trade Agreement, Article 706; Agriculture and Agri-Food Canada, “Canada’s Poultry Import Regime.” 15 USDA, “Canada, Poultry and Products,” Annual GAIN Report CA18050, August 15, 2018. 16 WTO, “Tariff Analysis Online,” http://tao.wto.org/report/TariffQuotas.aspx. 17 Richard Barichello, “A Review of Tariff Rate Quota Administration in Canadian Agriculture,” Agricultural and Resource Economics Review, vol. 29, no. 1 (April 2000), pp. 103-114; personal communication with R. Barichello, March 18, 2019; WTO, “Notification-Canada-Tariff Quotas,” G/AG/N/CAN/128; Anastasie Hacault, “The Impact of Market Access Reforms on the Canadian Dairy Industry,” thesis submitted to the University of Manitoba, 2011, http://www.cdc-ccl.gc.ca/CDC/userfiles/file/Hacault%20Thesis.pdf. 18 USDA, “Canada, Poultry and Products.” 13 Congressional Research Service 4 Agricultural Provisions of the U.S.-Mexico-Canada Agreement 's WTO commitment.¹⁸ The United States, in turn, agreed to improve access to Canadian dairy products, sugar, peanuts, and cotton. The United States would increase TRQs for Canadian dairy, sugar, and sweetened products. Tariffs on cotton and peanut imports into the United States from Canada would be phased out and eliminated five years after the agreement would take effect. As for U.S.-Mexico trade in agricultural products, under NAFTA, Mexico eliminated all the tariffs and quotas that formerly governed agricultural imports from the United States, and the proposed USMCA provides for no further market access changes for imports by Mexico of U.S. agricultural products. The proposed changes in the market access regime for U.S. agricultural exports to Canada under USMCA are summarized in Table 2. Canada’'s import restrictions on U.S. dairy products was a high-profile issue for the United States in the USMCA negotiations, so it is noteworthy that under USMCA, Canada agreed to reduce certain barriers to U.S. dairy exports, a key demand of U.S. dairy groups. For one, Canada would make changes to its milk pricing system that sets low prices for Canadian skim milk solids, which is believed to have undercut U.S. exports. Six months after USMCA goes into effect, Canada would eliminate its Class 7 milk price (which includes skim milk solids and is designated as Class 6 in Ontario) and would set its price for skim milk solids based on a formula that takes into account the U.S. nonfat dry milk price. In the future, the United States and Canada would notify each other if either introduces a new milk class price or changes an existing price for a class of milk products. Under USMCA, Canada would maintain its dairy supply management system, but the TRQs would be increased each year for U.S. exports of milk, cheese, cream, skim milk powder, condensed milk, yogurt, and several other dairy categories. While existing in-quota tariffs for U.S. dairy exports to Canada are mostly zero, the over-quota rates can be as high as 200%-300%.19 19 USMCA includes provisions on transparency for the implementation of TRQs, such as providing advance notice of changes to the quotas and making public the details of quota utilization rates so that exporters could monitor the extent to which the quotas are filled. While WTO TRQs are available to U.S. dairy product exporters under the current NAFTA provisions, the new TRQs proposed by Canada under USMCA would expand the access that U.S. dairy products would have into Canada. Large portions of Canada’'s WTO TRQs are allocated to other countries, such as cheese to the EU and powdered buttermilk to New Zealand. Thus, USMCA TRQs would open additional market opportunities for U.S. dairy exports to Canada. For example, the 64,500 metric ton fluid milk TRQ currently provided under NAFTA is available only for cross-border shoppers, but USMCA would allow up to 85% of the proposed new fluid milk TRQ, which would reach 50,000 metric tons by year 6, to U.S. commercial dairy processors. In response to another concern raised by the U.S. dairy industry, Canada agreed to cap its global exports of skim milk powder and milk protein concentrates and to provide information regarding these volumes to the United States. USMCA includes a requirement that the United States and Canada meet five years after the implementation of the agreement—and every two years after that—to determine whether to modify the dairy provisions of the agreement. Under USMCA, Canada has proposed to replace its NAFTA commitments for poultry and eggs with new TRQs. Under USMCA, the duty-free quota for chicken meat would start at 47,000 19 USDA, “Canada: Dairy and Products,” Annual GAIN Report CA18057, October 25, 2018. Congressional Research Service 5 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Table Table 2. Proposed Canadian Market Access for U.S. Agricultural Products Under USMCA Tariff Rate Quotas (TRQs) NAFTA commitments continue: Tariffs eliminated for USMCA  

Tariff Rate Quotas (TRQs)

Tariff Rate, %

NAFTA commitments continue: Tariffs eliminated for almost all agricultural products under NAFTA  

0

NAFTA liberalization exemption:: Dairy and poultry imports into Canada Tariff Rate, % 0 TRQs opened under WTO commitments 0 in-quota; WTO MFN over-quota tariffs Dairy, U.S. Dairy, U.S.-specific TRQs, in addition to TRQs under WTO, proposed by Canada Fluid milk TRQ begins at 8,333 MT and increases by 1% each year for 13 years after year 6 50,000 MT by year 6, 56,905 MT by year 19 0 in-quota; WTO MFN over-quota >200% Skim milk powder TRQ begins at 1,250 MT and increases by 1% each year for 13 years after year 6 7,500 MT by year 6 0 in-quota; WTO MFN over-quota >200% Cheese TRQ begins at 2,084 MT and increases by 1% each year for 13 years after year 6 12,500 MT by year 6 0 in-quota; WTO MFN over-quota >200% Cream TRQ begins at 1,750 MT and increases by 1% each year for 13 years after year 6 10,500 MT by year 6 0 in-quota; WTO MFN over-quota >200% Whey TRQ begins at 689 MT and increases by 1% each year after year 6, until year 10 4, 135 MT by year 6 0 after year 10

0 after year 10

Other dairy products (butter and cream powder, concentrated and condensed milk, yogurt and buttermilk, powdered buttermilk, ice cream, other dairy and margarine) begins at 2,561 MT and increases by 1% each year for 13 years after year 6 15,365 MT by year 6 0 in-quota; WTO MFN over quota >200% Margarine, 0 after year 5 Poultry Poultry Products, New TRQs proposed by Canada Chicken meat, to increase by 1% each year for 10 years after year 6 47,000 MT in year one, reaching 57,000 MT by year 6 0 in-quota; WTO MFN over-quota >200% Turkey meat, TRQ increase restricted to ≤ 1,000 MT after year 10 ≥ 3.5% of Canada’s previous year’s domestic production 0 in-quota; WTO MFN over-quota >200%

≥ 3.5% of Canada's previous year's domestic production

0 in-quota; WTO MFN over-quota >200%

Eggs and products (eggs and egg-equivalent), to increase by 1% for 10 years after year 6 1.67 million dozen in year one, reaching 10 million dozen in year 6 0 in-quota; WTO MFN over-quota >163% Broiler hatching eggs and chick products ≥ 21.1% of Canada’s 's domestic production for that year 0 in-quota, >200% over quota quota Source: Agreement between the United States of America, the United Mexican States, and Canada Text, Signed November 30, 2018; Canada-United States Free Trade Agreement, https://www.international.gc.ca/tradecommerce/trade-commerce/assets/pdfs/agreements-accords/cusfta-e.pdf; USDA GAIN Report CA0125, 2000, https://apps.fas.usda.gov/gainfiles/200008/30677853.pdf. Poultry over-quota tariff rates are as stated under Canada’ Canada's WTO tariff schedule, WT/TPR/S/112 - WTO Documents Online. Notes: The TRQs for turkey meat and for broiler hatching eggs and chicks are USMCA minimum global commitment level of anticipated current year’'s production or the WTO commitment volume, whichever is greater. MT denotes metric tons. Congressional Research Service 6 Agricultural Provisions of the U.S.-Mexico-Canada Agreement metric tons on the agreement’ metric tons. Under USMCA, Canada has proposed to replace its NAFTA commitments for poultry and eggs with new TRQs. Under USMCA, the duty-free quota for chicken meat would start at 47,000 metric tons on the agreement's entry into force and would expand to 57,000 metric tons in year six. It would then continue to increase by 1% per year for the next 10 years (Table 2). The United States would also have access to Canada’'s WTO chicken quota available to imports from all origins of 39,844 metric tons.20 20 Under USMCA, Canada’'s TRQ for imports of U.S. eggs would be phased in over six equal installments, reaching 10 million dozen by year six and then increasing by 1% per year for the next 10 years. The annual TRQ for turkey and broiler hatching eggs and chicks would be set by formulas based on Canadian production (see Table 2). The TRQs for turkey and broiler-hatching eggs and chicks are USMCA minimum global access commitments based on the greater of Canada’ Canada's anticipated current year production or its WTO commitment volume. Improved Agricultural Trading Regime Under USMCA, several key provisions would further expand the Canadian and Mexican market access to U.S. agricultural producers.2121 With the exception of the wheat grading provision between Canada and Mexico, the following provisions, which aim to improve the trading regime, apply to all three countries:   Wheat.Wheat. Canada and the United States have agreed that they shall accord “ "treatment no less favorable than it accords to likelike wheat of domestic origin with respect to the assignment of quality grades.”22"²² Currently, U.S. wheat exports to Canada are graded as feed wheat, which generally commands a lower price. Under USMCA, U.S. wheat exports to Canada would receive the same treatment and price as equivalent Canadian wheat if there is a predetermination that the U.S. wheat variety is similar to a Canadian variety. Canada maintains a list of registered wheat varieties, but the United States does not have a similar list. U.S. wheat exporters would first need to have U.S. varieties approved and registered in Canada before they would be able to benefit from this equivalency provision. According to some stakeholders, this process can be onerous and take several years.23 Cotton.23 Cotton. The addition of a specific textile and apparel chapter to the proposed USMCA may support U.S. cotton production. The chapter promotes greater use of North American–origin textile products such as sewing thread, pocketing, narrow elastics, and coated fabrics for certain end items.  Spirits, wine, beer, and other alcoholic beverages.. Each country must treat the distribution of another USMCA country’'s spirits, wine, beer, and other alcoholic beverages as it would its own products. The agreement also establishes new rules governing the listing requirements for a product to be sold in a given country with specific limits on cost markups of alcoholic beverages imported from USMCA countries.  SPS provisions. USMCA’ SPS provisions. USMCA's SPS chapter calls for greater transparency in SPS rules and regulatory alignment among the three countries. It would establish a 20 Agreement between the United States of America, the United Mexican States, and Canada Text, Signed November 30, 2018, https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreementbetween. 21 Agreement between the United States of America, the United Mexican States, and Canada Text. 22 Agreement between the United States of America, the United Mexican States, and Canada Text. 23 William W Wilson, “Canada-U.S. Wheat and Barley Trade,” Agriculture and Agri-food Canada, March 30, 2012. Congressional Research Service 7 Agricultural Provisions of the U.S.-Mexico-Canada Agreement    new mechanism for technical consultations to resolve SPS issues. SPS provisions provide for increasing transparency in the development and implementation of SPS measures; advancing science-based decision makingdecisionmaking; improving processes for certification, regionalization and equivalency determinations; conducting systems-based audits; improving transparency for import checks; and promoting greater cooperation to enhance compatibility of regulatory measures. Geographical indications (GIs). Geographical indications (GIs). The United States, Canada, and Mexico agreed to provide procedural safeguards for recognition of new GIs, which are place names used to identify products that come from certain regions or locations. USMCA would protect the GIs for food products that Canada and Mexico have already agreed to in trade negotiations with the EU and would lay out transparency and notification requirements for any new GIs that a country proposes to recognize. The agreement also details a process for determining whether a food name is common or is eligible to be protected as a GI. In a side letter accompanying the agreement, Mexico confirmed a list of 33 terms for cheese that would remain available as common names for U.S. cheese producers to use in exporting cheeses to Mexico. The list includes some terms that are protected as GIs by the EU, such as Edam, Gouda, and Brie. USMCA provisions would protect certain U.S., Canadian, and Mexican spirits as distinctive products. Under the proposed agreement, products labeled as Bourbon Whiskey and Tennessee Whiskey must originate in the United States. Similar protections would exist for Canadian Whiskey, while Tequila and Mezcal would have to be produced in Mexico. In a side letter accompanying the agreement, the United States and Mexico further agree to protect American Rye Whiskey, Charanda, Sotol, and Bacanora. Protections for proprietary food formulas.. USMCA signatories agree to protect the confidentiality of proprietary formula information in the same manner for domestic and imported products. The agreement would also limit such information requirements to what is necessary to achieve legitimate objectives. Biotechnology. Biotechnology. The agricultural chapter of USMCA lays out provisions for trade in products created using agricultural biotechnology, an issue that was not covered under NAFTA. USMCA provisions for biotechnology cover crops produced with all biotechnology methods, including recombinant DNA and gene editing. USMCA would establish a Working Group for Cooperation on Agricultural Biotechnology to facilitate information exchange on policy and trade-related matters associated with the products of agricultural biotechnology. The agreement also outlines procedures to improve transparency in approving and bringing to market agricultural biotech products. It further outlines procedures for handling shipments containing a low-level presence of unapproved products. While USMCA addresses a number of issues that restrict U.S. agricultural exports to Mexico and Canada, it does not include all of the changes sought by U.S. agricultural groups. For instance, the agreement does not include changes to trade remedy laws to address imports of seasonal produce as requested by Southeastern U.S. produce growers. It also does not address non-tariff nontariff barriers to market access for U.S. fresh potatoes in Mexico24Mexico²⁴ and Canada. Canada’s Standard 24 For more information see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Congressional Research Service 8 Agricultural Provisions of the U.S.-Mexico-Canada Agreement 's Standard Container Law (part of the Fresh Fruits and Vegetable Regulations of the Canadian Agricultural Products Act) prohibits the importation of U.S. fresh potatoes to Canada in bulk quantities (over 50 kilograms).2525 Finally, the agreement does not address the removal of retaliatory tariffs on U.S. agricultural exports imposed by Canada and Mexico in response to U.S. Section 232 tariffs on steel and aluminum. Some U.S. agriculture stakeholders have expressed concern that the potential benefits of implementing USMCA would be outweighed by the retaliatory tariffs imposed on U.S. agricultural exports by Canada and Mexico.26 US26 U.S. Agricultural Trade with Canada and Mexico Since 2002, Canada and Mexico have been two of the top three export markets for U.S. agricultural products (competing with Japan until 2009, when China moved into the top three). In recent years, the two countries have jointly accounted for about 40% of the total value of U.S. agricultural exports. Intraregional trade in North America has increased substantially since the implementation of CUSTA and NAFTA and in the wake of Mexico’'s market-oriented agricultural reforms, which started in the 1980s (Figure 1). The value of total U.S. agricultural product exports to Canada and Mexico rose from under $7 billion at the start of CUSTA in FY1990 to almost $10 billion at the start of NAFTA in FY1994 and peaked at $41 billion in FY2014. The lower level of exports since FY2014 is partly due to a drought-related decline in livestock production in parts of the United States; increased Canadian production of corn, rapeseed, and soybeans; increased use of U.S. corn as ethanol feedstock; growth in U.S. export markets outside of NAFTA; and increased competition from outside of NAFTA.2727 Since mid-2018, U.S. exports of certain products have been adversely affected by the imposition of retaliatory tariffs by Canada and Mexico in response to the Trump Administration’'s application of a 25% tariff on all U.S. steel imports and a 10% tariff on all U.S. aluminum imports under Section 232 of the Trade Expansion Act of 1962.28 28 Similar to the growth in U.S. agricultural exports, U.S. imports of agriculture and related products from Canada and Mexico grew from about $6 billion in FY1990 to $8 billion in FY1994, and U.S. agricultural exports continued to increase after NAFTA came into force on January 1, 1994, reaching $48 billion in FY2018. For FY2019, USDA projects that total U.S. agricultural exports to Canada and Mexico will to decline to $41.2 billion, while U.S. imports from those countries are projected at $49.6 billion.29 Agriculture, by Renée Johnson. 25 National Potato Council, “2019 National Trade Estimate Report on Foreign Trade Barriers,” https://spudman.com/ wp-content/uploads/2018/10/National_Potato_Council_-_2019_National_Trade_Estimate_Report_-_FINAL.pdf. 26 Food Business News, “Ag and Business Groups Urge Tying Loose Ends in Trade,” February 5, 2019, https://www.foodbusinessnews.net/articles/13264-ag-and-business-groups-urge-tying-loose-ends-in-trade. 27 Zahniser et al., NAFTA at 20. 28 For more information see CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress, coordinated by Rachel F. Fefer; and CRS Report R45448, Profiles and Effects of Retaliatory Tariffs on U.S. Agricultural Exports, by Jenny Hopkinson. 29 USDA, FAS GATS data, accessed March 5, 2019. Congressional Research Service 9 Agricultural Provisions of the U.S.-Mexico-Canada Agreement are projected at $49.6 billion.²⁹

Figure 1. U.S. Agriculture Exports to Canada and Mexico Billions U.S. dollars Source: U.S. Census Bureau Trade Data, BICO-HS10, from fas.usda.gov/gats, accessed March 5, 2019. Notes: Net trade = U.S. exports of agricultural products to Canada and Mexico minus U.S. imports of agricultural products from those countries. Data are not adjusted for inflation. U.S. Agricultural Exports to Canada and Mexico Table 3 presents U.S. agricultural exports to Canada for selected years since 1990, the year after the implementation of CUSTA. The other years in the table include 1995 (the year following the start of NAFTA), 2009 (the year following the full implementation of NAFTA), and the last three years with complete fiscal year data: 2016, 2017, and 2018. U.S. agricultural exports to Canada averaged over $20 billion between FY2016 and FY2018 period (Table 3) and accounted for 14% of the total value of U.S. agriculture exports in FY2018. While the overall value of U.S. agricultural exports to Canada has increased under NAFTA, U.S. exports of consumer-ready food products registered the greatest increase, accounting for almost 80% of the value of all U.S. agricultural exports to Canada in FY2018. Canada accounted for 24% of the value of total U.S. consumer-ready food product exports to all destinations in FY2018. In FY2018, Canada accounted for 72% of the total value of U.S. fresh vegetable exports to all destinations, 54% of non-alcoholicnonalcoholic beverage exports to all destinations, 51% of snack food exports to all destinations, 33% of total exports of fresh fruit, 33% of live animal exports, and 26% of total U.S. wine and beer exports to all destinations. Canada is also an important market for bulk agricultural commodities, and Canadian imports of U.S. corn, soybeans, rice, pulses, and wheat have increased since the implementation of NAFTA. Congressional Research Service 10 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Table 3. Major U.S. Agriculture Exports to Canada Millions U.S. dollars, selected October 1-September 30 fiscal years 1990 1995 2009 2016 2017 2018 % Share of Total U.S. Ag Exports, FY2018a Total agriculture 3,730 5,895 15,541 20,392 20,442 20,569 14 Total consumer oriented 2,565 4,361 11,835 16,374 16,291 16,127 24 Prepared food 126 487 1,355 1,904 1,891 1,876 31 Fresh vegetables 463 755 1,472 1,868 1,850 1,834 72 Fresh fruit 520 578 1,353 1,639 1,594 1,555 33 Snack foods 147 337 1,042 1,333 1,346 1,360 51 Tree nuts 59 82 256 596 639 674 8 Pork and pork products 26 49 521 782 797 763 12 Dairy products 29 67 329 589 672 627 11 Beef and beef products 270 379 629 765 789 768 9 Poultry meat and products 111 165 433 527 468 428 10 Eggs and products 26 32 70 119 92 120 20 Wine and beer 47 79 334 589 593 588 26 Non-alcoholic beverages 74 197 757 1,178 1,093 1,078 54 Corn 69 115 300 153 107 263 2 Soybeans 63 17 121 99 134 163 1 Rice 45 62 177 149 148 165 10 Wheat 0 0 12 15 19 20 0 Pulses 8 6 41 70 139 79 13 Live animals 73 128 92 114 176 280 33 Sugar and sweeteners 126 129 252 418 412 389 27 1 2 117 95 109 121 5 Distillers grains Source: US Census Bureau Trade Data, BICO-HS10, accessed from fas.usda.gov/gats March 5, 2019. Notes: Data are not adjusted for inflation. As defined by USDA, consumer-oriented products includes meats, fruit, vegetables, processed food products, beverages, and pet food. a. “% share” reflect the Canadian market share of total global U.S. exports in each category. Table 4 provides a summary of key U.S. agricultural exports to Mexico for selected years since FY1990. Total U.S. agricultural exports to Mexico grew from $2.7 billion in FY1990 to $3.7 billion in FY1995 after NAFTA came into force, reaching $18.8 billion in FY2018. Grains and meats account for the largest share of exports, but growth has been strong among most products including dairy, prepared food, fruit, tree nuts, sugars and sweeteners, wine and beer, and distillers dry grains. Between FY2016 and FY2018, U.S. agricultural exports to Mexico averaged over $18 billion, accounting for 13% of the total value of U.S. agricultural exports to all destinations in FY2018 (Table 4). Consumer-ready products as a group account for a significant share of U.S. exports to Congressional Research Service 11 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Mexico at 13% of the total value of U.S. agricultural exports in FY2018. Mexico is also a major U.S. export market for a number of bulk agricultural commodities, meat, and dairy products. In FY2018, Mexico accounted for 25% of the total value of U.S. corn exports to all destinations, 24% of the total value of U.S. dairy exports, 22% each of the total value of U.S. pork and poultry exports, 12% of the total value of U.S. wheat exports, and 8% of the total value of U.S. soybeans exports to all destinations. Table 4. Major U.S. Agriculture Exports to Mexico Millions U.S. dollars, selected October 1-September 30 fiscal years 1990 1995 2009 2016 2017 2018 % Share of Total US Ag Exports, FY2018a 2,671 3,720 13,325 17,618 18,608 18,845 13 Total consumer oriented 553 1,156 5,135 8,073 8,326 8,590 13 Fresh vegetables 11 30 145 111 110 148 6 Fresh fruit 31 89 361 510 543 616 13 Snack foods 27 40 181 293 292 306 12 Tree nuts 10 20 144 265 251 358 4 Pork and pork products 71 104 719 1,283 1,521 1,421 22 Dairy products 75 130 657 1,186 1,350 1,346 24 Beef and beef products 102 164 933 1,021 969 1,036 13 Poultry meat and products 50 183 574 948 923 950 22 Eggs and products 8 15 30 173 172 169 28 Wine and beer 10 17 100 185 186 189 8 Non-alcoholic beverages 6 40 77 131 127 123 6 Corn 528 355 1,586 2,541 2,588 2,835 25 Soybeans 217 413 1,362 1,366 1,607 1,667 8 Wheat 46 116 595 528 923 619 12 Cotton 39 186 390 334 401 372 6 Rice 62 73 346 258 289 261 16 Live animals 85 66 77 113 135 119 14 Sugar and sweeteners 92 58 301 614 623 697 48 Distillers grains 0 3 252 357 361 422 18 Agricultural products Source: U.S. Census Bureau Trade Data, BICO-HS10, accessed from fas.usda.gov/gats 5 March 2019. Notes: Data are not adjusted for inflation. As defined by USDA, consumer-oriented products includes meats, fruit, vegetables, processed food products, beverages, and pet food. a. “% Share” reflect the Mexican market share of total global U.S. exports in each category. Congressional Research Service 12 Agricultural Provisions of the U.S.-Mexico-Canada Agreement U.S. Imports from Canada and Mexico U.S. agricultural imports from Canada and Mexico have increased in value from $26 billion in FY2009—the first full year since the complete market liberalization under NAFTA in 2008—to  

1990

1995

2009

2016

2017

2018

% Share of Total U.S. Ag Exports, FY2018^a

Total agriculture

3,730

5,895

15,541

20,392

20,442

20,569

14

Total consumer oriented

2,565

4,361

11,835

16,374

16,291

16,127

24

Prepared food

126

487

1,355

1,904

1,891

1,876

31

Fresh vegetables

463

755

1,472

1,868

1,850

1,834

72

Fresh fruit

520

578

1,353

1,639

1,594

1,555

33

Snack foods

147

337

1,042

1,333

1,346

1,360

51

Tree nuts

59

82

256

596

639

674

8

Pork and pork products

26

49

521

782

797

763

12

Dairy products

29

67

329

589

672

627

11

Beef and beef products

270

379

629

765

789

768

9

Poultry meat and products

111

165

433

527

468

428

10

Eggs and products

26

32

70

119

92

120

20

Wine and beer

47

79

334

589

593

588

26

Nonalcoholic beverages

74

197

757

1,178

1,093

1,078

54

Corn

69

115

300

153

107

263

2

Soybeans

63

17

121

99

134

163

1

Rice

45

62

177

149

148

165

10

Wheat

0

0

12

15

19

20

0

Pulses

8

6

41

70

139

79

13

Live animals

73

128

92

114

176

280

33

Sugar and sweeteners

126

129

252

418

412

389

27

Distillers grains

1

2

117

95

109

121

5

Source: U.S. Census Bureau Trade Data, BICO-HS10, accessed from fas.usda.gov/gats March 5, 2019.

Notes: Data are not adjusted for inflation. As defined by USDA, consumer-oriented products includes meats, fruit, vegetables, processed food products, beverages, and pet food.

a. "% share" reflect the Canadian market share of total global U.S. exports in each category. Table 4 provides a summary of key U.S. agricultural exports to Mexico for selected years since FY1990. Total U.S. agricultural exports to Mexico grew from $2.7 billion in FY1990 to $3.7 billion in FY1995 after NAFTA came into force, reaching $18.8 billion in FY2018. Grains and meats account for the largest share of exports, but growth has been strong among most products including dairy, prepared food, fruit, tree nuts, sugars and sweeteners, wine and beer, and distillers dry grains. Between FY2016 and FY2018, U.S. agricultural exports to Mexico averaged over $18 billion, accounting for 13% of the total value of U.S. agricultural exports to all destinations in FY2018 (Table 4). Consumer-ready products as a group account for a significant share of U.S. exports to Mexico at 13% of the total value of U.S. agricultural exports in FY2018. Mexico is also a major U.S. export market for a number of bulk agricultural commodities, meat, and dairy products. In FY2018, Mexico accounted for 25% of the total value of U.S. corn exports to all destinations, 24% of the total value of U.S. dairy exports, 22% each of the total value of U.S. pork and poultry exports, 12% of the total value of U.S. wheat exports, and 8% of the total value of U.S. soybeans exports to all destinations. Table 4. Major U.S. Agriculture Exports to Mexico

Millions U.S. dollars, selected October 1-September 30 fiscal years

 

1990

1995

2009

2016

2017

2018

% Share of Total U.S. Ag Exports, FY2018^a

Agricultural products

2,671

3,720

13,325

17,618

18,608

18,845

13

Total consumer oriented

553

1,156

5,135

8,073

8,326

8,590

13

Fresh vegetables

11

30

145

111

110

148

6

Fresh fruit

31

89

361

510

543

616

13

Snack foods

27

40

181

293

292

306

12

Tree nuts

10

20

144

265

251

358

4

Pork and pork products

71

104

719

1,283

1,521

1,421

22

Dairy products

75

130

657

1,186

1,350

1,346

24

Beef and beef products

102

164

933

1,021

969

1,036

13

Poultry meat and products

50

183

574

948

923

950

22

Eggs and products

8

15

30

173

172

169

28

Wine and beer

10

17

100

185

186

189

8

Nonalcoholic beverages

6

40

77

131

127

123

6

Corn

528

355

1,586

2,541

2,588

2,835

25

Soybeans

217

413

1,362

1,366

1,607

1,667

8

Wheat

46

116

595

528

923

619

12

Cotton

39

186

390

334

401

372

6

Rice

62

73

346

258

289

261

16

Live animals

85

66

77

113

135

119

14

Sugar and sweeteners

92

58

301

614

623

697

48

Distillers grains

0

3

252

357

361

422

18

Source: U.S. Census Bureau Trade Data, BICO-HS10, accessed from fas.usda.gov/gats 5 March 2019.

Notes: Data are not adjusted for inflation. As defined by USDA, consumer-oriented products includes meats, fruit, vegetables, processed food products, beverages, and pet food.

a. "% Share" reflect the Mexican market share of total global U.S. exports in each category. U.S. Imports from Canada and Mexico U.S. agricultural imports from Canada and Mexico have increased in value from $26 billion in FY2009—the first full year since the complete market liberalization under NAFTA in 2008—to over $48 billion in FY2018 (Table 5). ). Table 5. Major U.S. Agriculture Imports from Canada and Mexico Millions U.S. dollars, selected October 1-September 30 fiscal years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 15,359 15,691 17,953 19,995 21,566 22,859 22,400 21,433 21,983 22,985 Snack foods 2,314 2,634 2,841 3,029 3,134 3,381 3,675 3,909 4,133 4,396 Red meats 1,481 1,740 1,780 1,840 1,723 2,207 2,373 2,212 2,281 2,288 Processed fruit and vegetables 1,111 1,069 1,183 1,309 1,417 1,383 1,412 1,433 1,491 1,581 869 970 1,067 1,021 1,160 1,225 1,182 1,306 1,364 1,503 Live animals 1,428 1,490 1,281 1,388 1,707 2,008 2,177 1,536 1,303 1,225 Other vegetable oils 1,100 1,053 1,887 2,019 1,755 1,687 1,602 1,679 1,970 1,874 Wheat 724 501 500 757 996 1,078 745 459 577 458 Coarse grains 571 401 546 700 968 725 586 556 480 454 Roasted, instant coffee 159 233 361 417 396 394 410 476 517 392 Nursery products 253 277 285 288 289 314 333 347 367 344 Feeds and fodders 202 207 252 328 379 359 331 320 297 303 Planting seeds 186 146 183 247 306 292 219 250 253 274 Total agriculture 11,259 13,003 15,439 16,283 17,223 18,884 20,687 22,515 24,079 25,668 Other fresh fruit 1,892 2,235 2,322 2,679 2,965 3,615 4,134 4,771 5,818 5,862 Fresh vegetables 2,786 3,507 3,904 4,063 4,448 4,565 4,773 5,617 5,253 5,804 Wine and beer 1,572 1,581 1,679 1,834 1,826 2,385 2,629 3,047 3,264 3,562 Snack foods 994 1,218 1,384 1,489 1,547 1,540 1,657 1,924 2,113 2,156 Processed fruit and veg 809 890 1,054 1,144 1,193 1,257 1,428 1,493 1,532 1,700 Red meats 114 201 322 485 586 749 1,064 1,063 1,085 1,199 Other consumer oriented 741 850 979 954 999 1,026 1,037 1,052 1,055 1,144 Live animals 352 464 626 739 508 645 973 632 653 807 Tree nuts 157 220 284 336 268 333 426 513 671 705 Fruit and vegetable juices 166 189 227 189 239 261 296 318 475 431 Bananas and plantains 46 61 63 87 120 117 132 127 160 195 Roasted, instant coffee 100 135 144 135 168 149 155 128 124 131 From Canada Total agriculture Fresh vegetables From Mexico Source: U.S. Census Bureau Trade Data accessed from fas.usda.gov/gats March 5, 2019. Notes: Data are not adjusted for inflation. Congressional Research Service 13 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Major U.S. imports from Canada include snack foods, meats, and processed fruit and vegetable products. U.S. purchases of hogs and cattle from Canada had increased since NAFTA began, but these imports have declined since FY2016. North American market dynamics and the prevailing hog cycle dynamics in the NAFTA countries have affected live animal trade patterns in recent years. Similarly, U.S. coarse grain imports from Canada have also declined in recent years, likely the result of larger U.S. feed grain supplies. U.S. imports from Mexico mostly consist of fresh fruit and vegetables, alcoholic beverages, snack foods, and processed fruit and vegetable products. Economic Effects of NAFTA versus USMCA Many studies have assessed the effects of NAFTA on agriculture and the possible effects if NAFTA were to be terminated. It is difficult to isolate the effects of NAFTA from the market liberalization begun under CUSTA and from Mexico’s unilateral trade liberalization measures in the 1980s and early 1990s, which included joining the General Agreement on Tariffs and Trade in 1986.30 Nevertheless, NAFTA is credited with facilitating trade in North America by reducing tariffs and other market access barriers and by providing a stable and improved trading environment in the region.31 Studies conducted by USDA indicate that U.S. agricultural exports to Canada and Mexico have been higher than they would have been in the absence of NAFTA. One such study concluded that NAFTA particularly expanded trade in those commodities that underwent the most significant reductions in tariff and non-tariff barriers, including U.S. exports to Canada of wheat products, beef and veal, and cotton and U.S. exports to Mexico of rice, cattle and calves, nonfat dry milk, cotton, processed potatoes, apples, and pears.32 An October 2018 study commissioned by the Farm Foundation examines the potential economic benefits associated with (1) USMCA compared with the provisions provided under NAFTA, (2) USMCA in an environment with prevailing retaliatory tariffs on U.S. agricultural products in response to U.S. tariff increases on imports of steel and aluminum, and (3) the effect of a complete U.S. withdrawal from USMCA/NAFTA.33 The methodology used by the study assumes that each of the three trade policy scenarios would need to remain in place for at least three to five years or until the market equilibrium stabilizes following the initial policy shock. Thus, the estimated effects from the study can be considered as the long-run impacts. The study considers only proposed changes under USMCA to market access for U.S. agricultural exports to Canada, such as changes in TRQs and tariff rates. It does not consider other changes proposed for agriculture or for other sectors such as manufacturing and automobiles. The study’s conclusions under these three scenarios follow. 1. Comparing USMCA to NAFTA, the study estimates that USMCA would generate a net increase in annual U.S. agricultural exports to Canada of $450 million—about 1% of current U.S. exports under NAFTA. This estimated increase would reflect increases in exports of dairy products (+$280 million) and 30 For more information see CRS Report R42965, The North American Free Trade Agreement (NAFTA), by M. Angeles Villarreal and Ian F. Fergusson. 31 For more information see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson. 32 Zahniser et al., NAFTA at 20. 33 Maksym Chepelie et al., “How Differing Trade Policies May Impact U.S. Agriculture: The Potential Economic Impacts of TPP, USMCA, and NAFTA,” GTAP Working Paper No. 84, commissioned by the Farm Foundation, October 2018, https://www.gtap.agecon.purdue.edu/resources/working_papers.asp. Congressional Research Service 14 Agricultural Provisions of the U.S.-Mexico-Canada Agreement meat (+$210 million), which would be partially offset by a decline in exports of other agricultural products (-$40 million). 2. Under the scenario where USMCA would enter into force but the retaliatory tariffs imposed by Canada and Mexico on U.S. agricultural exports would remain in place, the study projects U.S. agricultural export losses from the retaliatory tariffs of $1.8 billion annually, which would more than offset the projected gains of $450 million from USMCA ratification. 3. Under the scenario of a U.S. withdrawal from NAFTA without USMCA ratification, tariffs on U.S. exports to Canada and Mexico would be expected to return to the higher WTO most-favored-nation (MFN) rates, the highest level of applied tariffs rates under WTO commitments. In this circumstance, the study finds that U.S. agricultural and food exports to Canada and Mexico would decline by about $12 billion, or 30% of the value of U.S. agricultural exports to these markets in FY2018. This loss is expected to be partially offset by an increase of $2.6 billion in U.S. exports to other countries for a net loss in export revenues of $9.4 billion. A loss of this order would represent a decline of 24% compared with the total value of U.S. agricultural exports to these countries in FY2018. To date, similar studies assessing the effect of USMCA on U.S. agriculture as a whole are not available. U.S. Agricultural Stakeholders on USMCA Individual commodity groups have stated that they expect to benefit from market access gains. For example, the National Turkey Federation stated that USMCA would expand market access resulting in a 29% increase in U.S. turkey exports to Canada.34 A broad coalition of U.S. agricultural stakeholders is advocating for USMCA’s approval,35 contending that the proposed agreement would further expand market access for U.S. agriculture. Most leading agriculture commodity groups have expressed their support for USMCA.36 The U.S. wheat industry states that although challenges remain in further opening commerce for U.S. wheat farmers near the border with Canada, USMCA retains tariff-free access to imported U.S wheat for long-time flour milling customers in Mexico.37 The American Farm Bureau Federation expressed satisfaction that the USMCA not only locks in market opportunities previously developed but also builds on those trade relationships in several key areas.38 On the other hand, other farm sector stakeholders, such as the National Farmers Union and the

Millions U.S. dollars, selected October 1-September 30 fiscal years

 

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

From Canada

Total agriculture

15,359

15,691

17,953

19,995

21,566

22,859

22,400

21,433

21,983

22,985

Snack foods

2,314

2,634

2,841

3,029

3,134

3,381

3,675

3,909

4,133

4,396

Red meats

1,481

1,740

1,780

1,840

1,723

2,207

2,373

2,212

2,281

2,288

Processed fruit and vegetables

1,111

1,069

1,183

1,309

1,417

1,383

1,412

1,433

1,491

1,581

Fresh vegetables

869

970

1,067

1,021

1,160

1,225

1,182

1,306

1,364

1,503

Live animals

1,428

1,490

1,281

1,388

1,707

2,008

2,177

1,536

1,303

1,225

Other vegetable oils

1,100

1,053

1,887

2,019

1,755

1,687

1,602

1,679

1,970

1,874

Wheat

724

501

500

757

996

1,078

745

459

577

458

Coarse grains

571

401

546

700

968

725

586

556

480

454

Roasted, instant coffee

159

233

361

417

396

394

410

476

517

392

Nursery products

253

277

285

288

289

314

333

347

367

344

Feeds and fodders

202

207

252

328

379

359

331

320

297

303

Planting seeds

186

146

183

247

306

292

219

250

253

274

From Mexico

Total agriculture

11,259

13,003

15,439

16,283

17,223

18,884

20,687

22,515

24,079

25,668

Other fresh fruit

1,892

2,235

2,322

2,679

2,965

3,615

4,134

4,771

5,818

5,862

Fresh vegetables

2,786

3,507

3,904

4,063

4,448

4,565

4,773

5,617

5,253

5,804

Wine and beer

1,572

1,581

1,679

1,834

1,826

2,385

2,629

3,047

3,264

3,562

Snack foods

994

1,218

1,384

1,489

1,547

1,540

1,657

1,924

2,113

2,156

Processed fruit and veg

809

890

1,054

1,144

1,193

1,257

1,428

1,493

1,532

1,700

Red meats

114

201

322

485

586

749

1,064

1,063

1,085

1,199

Other consumer oriented

741

850

979

954

999

1,026

1,037

1,052

1,055

1,144

Live animals

352

464

626

739

508

645

973

632

653

807

Tree nuts

157

220

284

336

268

333

426

513

671

705

Fruit and vegetable juices

166

189

227

189

239

261

296

318

475

431

Bananas and plantains

46

61

63

87

120

117

132

127

160

195

Roasted, instant coffee

100

135

144

135

168

149

155

128

124

131

Source: U.S. Census Bureau Trade Data accessed from fas.usda.gov/gats March 5, 2019.

Notes: Data are not adjusted for inflation.

Major U.S. imports from Canada include snack foods, meats, and processed fruit and vegetable products. U.S. purchases of hogs and cattle from Canada had increased since NAFTA began, but these imports have declined since FY2016. North American market dynamics and the prevailing hog cycle dynamics in the NAFTA countries have affected live animal trade patterns in recent years. Similarly, U.S. coarse grain imports from Canada have also declined in recent years, likely the result of larger U.S. feed grain supplies. U.S. imports from Mexico mostly consist of fresh fruit and vegetables, alcoholic beverages, snack foods, and processed fruit and vegetable products.

Economic Effects of NAFTA versus USMCA

Many studies have assessed the effects of NAFTA on agriculture and the possible effects if NAFTA were to be terminated. It is difficult to isolate the effects of NAFTA from the market liberalization begun under CUSTA and from Mexico's unilateral trade liberalization measures in the 1980s and early 1990s, which included joining the General Agreement on Tariffs and Trade in 1986.³⁰ Nevertheless, NAFTA is credited with facilitating trade in North America by reducing tariffs and other market access barriers and by providing a stable and improved trading environment in the region.³¹ Studies conducted by USDA indicate that U.S. agricultural exports to Canada and Mexico have been higher than they would have been in the absence of NAFTA. One such study concluded that NAFTA particularly expanded trade in those commodities that underwent the most significant reductions in tariff and nontariff barriers, including U.S. exports to Canada of wheat products, beef and veal, and cotton and U.S. exports to Mexico of rice, cattle and calves, nonfat dry milk, cotton, processed potatoes, apples, and pears.³²

An October 2018 study commissioned by the Farm Foundation examines the potential economic benefits associated with (1) USMCA compared with the provisions provided under NAFTA, (2) USMCA in an environment with prevailing retaliatory tariffs on U.S. agricultural products in response to U.S. tariff increases on imports of steel and aluminum, and (3) the effect of a complete U.S. withdrawal from USMCA/NAFTA.³³ The methodology used by the study assumes that each of the three trade policy scenarios would need to remain in place for at least three to five years or until the market equilibrium stabilizes following the initial policy shock. Thus, the estimated effects from the study can be considered as the long-run impacts. The study considers only proposed changes under USMCA to market access for U.S. agricultural exports to Canada, such as changes in TRQs and tariff rates. It does not consider other changes proposed for agriculture or for other sectors such as manufacturing and automobiles. The study's conclusions under these three scenarios follow.

• 1. Comparing USMCA to NAFTA, the study estimates that USMCA would generate a net increase in annual U.S. agricultural exports to Canada of $450 million—about 1% of current U.S. exports under NAFTA. This estimated increase would reflect increases in exports of dairy products (+$280 million) and meat (+$210 million), which would be partially offset by a decline in exports of other agricultural products (-$40 million).
• 2. Under the scenario where USMCA would enter into force but the retaliatory tariffs imposed by Canada and Mexico on U.S. agricultural exports would remain in place, the study projects U.S. agricultural export losses from the retaliatory tariffs of $1.8 billion annually, which would more than offset the projected gains of $450 million from USMCA ratification.
• 3. Under the scenario of a U.S. withdrawal from NAFTA without USMCA ratification, tariffs on U.S. exports to Canada and Mexico would be expected to return to the higher WTO most-favored-nation (MFN) rates, the highest level of applied tariffs rates under WTO commitments. In this circumstance, the study finds that U.S. agricultural and food exports to Canada and Mexico would decline by about $12 billion, or 30% of the value of U.S. agricultural exports to these markets in FY2018. This loss is expected to be partially offset by an increase of $2.6 billion in U.S. exports to other countries for a net loss in export revenues of $9.4 billion. A loss of this order would represent a decline of 24% compared with the total value of U.S. agricultural exports to these countries in FY2018.

To date, similar studies assessing the effect of USMCA on U.S. agriculture as a whole are not available.

U.S. Agricultural Stakeholders on USMCA

Individual commodity groups have stated that they expect to benefit from market access gains. For example, the National Turkey Federation stated that USMCA would expand market access resulting in a 29% increase in U.S. turkey exports to Canada.³⁴ A broad coalition of U.S. agricultural stakeholders is advocating for USMCA's approval,³⁵ contending that the proposed agreement would further expand market access for U.S. agriculture. Most leading agriculture commodity groups have expressed their support for USMCA.³⁶ The U.S. wheat industry states that although challenges remain in further opening commerce for U.S. wheat farmers near the border with Canada, USMCA retains tariff-free access to imported U.S. wheat for long-time flour milling customers in Mexico.³⁷ The American Farm Bureau Federation expressed satisfaction that the USMCA not only locks in market opportunities previously developed but also builds on those trade relationships in several key areas.³⁸

On the other hand, other farm sector stakeholders, such as the National Farmers Union and the Institute for Agriculture and Trade Policy, have expressed concern that the proposed agreement does not go far enough to institute a fair trade framework that benefits family farmers and ranchers.³⁹

Some agricultural market observers question whether the benefits to U.S. agriculture of USMCA over NAFTA will be more than incremental.⁴⁰ Critics also point out that most U.S. agricultural exports currently enjoy zero tariffs under NAFTA and that the main market access gain under USMCA is through limited quota increases. A researcher for the International Food Policy Research Institute recently concluded that farm production costs would be expected to increase because of domestic content provisions in the agreement in tandem with the new U.S. tariffs on steel and aluminum imports.⁴¹

Upon signing of the USMCA on November 30, 2018, President Trump stated, "This new deal will be the most modern, up-to-date, and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed."⁴² Regarding agriculture, Secretary Perdue echoed the sentiments expressed by most of the agricultural commodity groups: "The new USMCA makes important specific changes that are beneficial to our agricultural producers. We have secured greater access to the Mexican and Canadian markets and lowered barriers for many of our products. The deal eliminates Canada's unfair Class 6 and Class 7 milk pricing schemes, opens additional access to U.S. dairy into Canada, and imposes new disciplines on Canada's supply management system. The agreement also preserves and expands critical access for U.S. poultry and egg producers and addresses Canada's discriminatory wheat grading process to help U.S. wheat growers along the border become more competitive."⁴³

Outlook for Proposed USMCA The proposed USMCA would have to be approved by Congress and ratified by Mexico and Canada before entering into force.⁴⁴ On August 31, 2018, pursuant to TPA, President Trump provided Congress a 90-day notification of his intent to sign a free trade agreement with Canada and Mexico. On January 29, 2019—60 days after an agreement was signed, and as required by TPA—U.S. Trade Representative Robert Lighthizer submitted to Congress changes to existing U.S. laws that would be needed to bring the United States into compliance with the proposed USMCA. A report by the USITC on the possible economic impact of TPA is not expected to be completed until April 20, 2019, due to the 35-day government shutdown. The report has been cited by some Members of Congress as key to their decisions on whether to support the agreement.⁴⁵

Some policymakers have stated that the path to ratifying USMCA by Congress is uncertain partially because the three countries have yet to resolve disputes over tariffs on U.S. imports of steel and aluminum, as well as retaliatory tariffs that Canada and Mexico have imposed on U.S. agricultural products.⁴⁶ The conclusion of the proposed USMCA did not resolve these tariff disputes.

On January 30, 2019, Senator Chuck Grassley called on the Trump Administration to lift tariffs on steel and aluminum imports from Canada and Mexico before Congress begins considering legislation to implement the USMCA.⁴⁷ Representatives of the U.S. business community, agriculture interest groups, other congressional leaders, and Canadian and Mexican government officials have also stated that these tariff issues must be resolved before the USMCA enters into force.⁴⁸

Other Members of Congress have raised issues regarding labor and environmental provisions of USMCA. Speaker Pelosi has stated that she wants "stronger enforcement language" and that the USMCA talks should be reopened to tighten enforcement provisions for labor and environmental protections.⁴⁹

Some trade observers believe that delays in congressional action on USMCA could make it harder for Canada to consider USMCA approval this year because of upcoming parliamentary elections in October 2019.⁵⁰

Author Contact Information

Anita Regmi, Analyst in Agricultural Policy ([email address scrubbed], [phone number scrubbed])

Footnotes

1.

USDA, Economic Research Service (ERS), Effects of Trade on the U.S. Economy, 2017 Data Overview.

2.

S. Zahniser and J. Link, Effects of North American Free Trade Agreement on Agriculture and the Rural Economy, ERS, WRS-02-1, July 2002.

3.

For more information on NAFTA and the proposed USMCA, see CRS In Focus IF10047, North American Free Trade Agreement (NAFTA), by M. Angeles Villarreal; and CRS In Focus IF10997, Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement, by Ian F. Fergusson and M. Angeles Villarreal.

4.

S. Zahniser et al., NAFTA at 20: North America's Free-Trade Area and Its Impact on Agriculture, ERS, WRS-15-01, February 2015.

5.

The URAA established the World Trade Organization (WTO) on January 1, 1995. For a discussion of U.S. agricultural commitments under the WTO, see CRS Report RL32916, Agriculture in the WTO: Policy Commitments Made Under the Agreement on Agriculture, by Randy Schnepf.

6.

Sugar trade between the United States and Mexico is governed by antidumping duty and countervailing duty suspension agreements that imposed several limitations on this trade beginning in December 2014 and subsequently revised in June 2017. See CRS In Focus IF10693, Amended Sugar Agreements Recast U.S.-Mexico Trade, by Mark A. McMinimy.

7.

For more information, see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson.

8.

Office of the U.S. Trade Representative, "United States-Mexico-Canada Trade Fact Sheet: Strengthening North American Trade in Agriculture," October 2018, https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/october/united-states%E2%80%93mexico%E2%80%93canada-trade-fa-2.

9.

See CRS Report R43491, Trade Promotion Authority (TPA): Frequently Asked Questions, by Ian F. Fergusson and Christopher M. Davis; and CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy, by Ian F. Fergusson.

10.

For example, Andrew Restuccia et al., "Trump Says He Will Withdraw from NAFTA, Pressuring Congress to Approve New Trade Deal," Politico, December 2, 2018.

11.

World Trade Online, "Analysts Flag Shutdown, Election, 232 Concerns as Possible Roadblocks to USMCA Approval," February 20, 2019.

12.

Canada-United States Free Trade Agreement, Article 706, http://www.worldtradelaw.net/nafta/Cusfta.pdf.download.

13.

Agriculture and Agri-Food Canada, "Canada's Poultry Import Regime," http://www.agr.gc.ca/eng/industry-markets-and-trade/canadian-agri-food-sector-intelligence/poultry-and-eggs/poultry-and-egg-market-information/imports-and-exports/canada-s-poultry-import-regime/?id=1384971854404.

14.

Canada-United States Free Trade Agreement, Article 706; Agriculture and Agri-Food Canada, "Canada's Poultry Import Regime."

15.

USDA, "Canada, Poultry and Products," Annual GAIN Report CA18050, August 15, 2018.

16.

WTO, "Tariff Analysis Online," http://tao.wto.org/report/TariffQuotas.aspx.

17.

Richard Barichello, "A Review of Tariff Rate Quota Administration in Canadian Agriculture," Agricultural and Resource Economics Review, vol. 29, no. 1 (April 2000), pp. 103-114; personal communication with R. Barichello, March 18, 2019; WTO, "Notification-Canada-Tariff Quotas," G/AG/N/CAN/128; Anastasie Hacault, "The Impact of Market Access Reforms on the Canadian Dairy Industry," thesis submitted to the University of Manitoba, 2011, http://www.cdc-ccl.gc.ca/CDC/userfiles/file/Hacault%20Thesis.pdf.

18.

USDA, "Canada, Poultry and Products."

19.

USDA, "Canada: Dairy and Products," Annual GAIN Report CA18057, October 25, 2018.

20.

Agreement between the United States of America, the United Mexican States, and Canada Text, Signed November 30, 2018, https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between.

21.

Agreement between the United States of America, the United Mexican States, and Canada Text.

22.

Agreement between the United States of America, the United Mexican States, and Canada Text.

23.

William W Wilson, "Canada-U.S. Wheat and Barley Trade," Agriculture and Agri-food Canada, March 30, 2012.

24.

For more information see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson.

25.

National Potato Council, "2019 National Trade Estimate Report on Foreign Trade Barriers," https://spudman.com/wp-content/uploads/2018/10/National_Potato_Council_-_2019_National_Trade_Estimate_Report_-_FINAL.pdf.

26.

Food Business News, "Ag and Business Groups Urge Tying Loose Ends in Trade," February 5, 2019, https://www.foodbusinessnews.net/articles/13264-ag-and-business-groups-urge-tying-loose-ends-in-trade.

27.

Zahniser et al., NAFTA at 20.

28.

For more information see CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress, coordinated by Rachel F. Fefer; and CRS Report R45448, Profiles and Effects of Retaliatory Tariffs on U.S. Agricultural Exports, by Jenny Hopkinson.

29.

USDA, FAS GATS data, accessed March 5, 2019.

30.

For more information see CRS Report R42965, The North American Free Trade Agreement (NAFTA), by M. Angeles Villarreal and Ian F. Fergusson.

31.

For more information see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson.

32.

Zahniser et al., NAFTA at 20.

33.

Maksym Chepelie et al., "How Differing Trade Policies May Impact U.S. Agriculture: The Potential Economic Impacts of TPP, USMCA, and NAFTA," GTAP Working Paper No. 84, commissioned by the Farm Foundation, October 2018, https://www.gtap.agecon.purdue.edu/resources/working_papers.asp.

34. Meat Import Council of America, "What USMCA Trade Pact Means to U.S./Canada Poultry Trade," October 3, 2018, http://www.micausa.org/usmca-trade-pact-means-u-s-canada-poultry-trade/. 35.

Inside U.S. Trade, "More Than 200 Companies, Associations Form the 'USMCA Coalition' to Push the Deal's Passage," February 26, 2019.

36. American Soybean Association, "Leading Agriculture Organizations Endorse USMCA," https://soygrowers.com/news-releases/leading-agriculture-organizations-endorse-usmca/, March 1, 2019. 37. National Association of Wheat Growers and U.S. Wheat Associates, "Joint Statement—NAWG and U.S. Wheat Associates Welcome Official Signing of USCMA, Encourage Repeat with Japan," November 30, 2018, https://www.uswheat.org/joint-statement-nawg-and-u-s-wheat-associates-welcome-official-signing-of-uscma-encourage-repeat-with-japan/. 38. American Farm Bureau Federation, "USMCA," https://www.fb.org/issues/trade/usmca/. 39. National Farmers Union, "USMCA Deal Falls Short of Fair Trade Framework for Family Farmers, NFU Says," press , have expressed concern that the proposed agreement Meat Import Council of America, “What USMCA Trade Pact Means to U.S./Canada Poultry Trade,” October 3, 2018, http://www.micausa.org/usmca-trade-pact-means-u-s-canada-poultry-trade/. 35 Inside U.S. Trade, “More Than 200 Companies, Associations Form the ‘USMCA Coalition’ to Push the Deal’s Passage,” February 26, 2019. 36 American Soybean Association, “Leading Agriculture Organizations Endorse USMCA,” https://soygrowers.com/ news-releases/leading-agriculture-organizations-endorse-usmca/, March 1, 2019. 37 National Association of Wheat Growers and U.S. Wheat Associates, “Joint Statement—NAWG and U.S. Wheat Associates Welcome Official Signing of USCMA, Encourage Repeat with Japan,” November 30, 2018, https://www.uswheat.org/joint-statement-nawg-and-u-s-wheat-associates-welcome-official-signing-of-uscmaencourage-repeat-with-japan/. 38 American Farm Bureau Federation, “USMCA,” https://www.fb.org/issues/trade/usmca/. 34 Congressional Research Service 15 Agricultural Provisions of the U.S.-Mexico-Canada Agreement does not go far enough to institute a fair trade framework that benefits family farmers and ranchers.39 Some agricultural market observers question whether the benefits to U.S. agriculture of USMCA over NAFTA will be more than incremental.40 Critics also point out that most U.S. agricultural exports currently enjoy zero tariffs under NAFTA and that the main market access gain under USMCA is through limited quota increases. A researcher for the International Food Policy Research Institute recently concluded that farm production costs would be expected to increase because of domestic content provisions in the agreement in tandem with the new U.S. tariffs on steel and aluminum imports.41 Upon signing of the USMCA on November 30, 2018, President Trump stated, “This new deal will be the most modern, up-to-date, and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed.”42 Regarding agriculture, Secretary Perdue echoed the sentiments expressed by most of the agricultural commodity groups: “The new USMCA makes important specific changes that are beneficial to our agricultural producers. We have secured greater access to the Mexican and Canadian markets and lowered barriers for many of our products. The deal eliminates Canada’s unfair Class 6 and Class 7 milk pricing schemes, opens additional access to U.S. dairy into Canada, and imposes new disciplines on Canada’s supply management system. The agreement also preserves and expands critical access for U.S. poultry and egg producers and addresses Canada’s discriminatory wheat grading process to help U.S. wheat growers along the border become more competitive.”43 Outlook for Proposed USMCA The proposed USMCA would have to be approved by Congress and ratified by Mexico and Canada before entering into force.44 On August 31, 2018, pursuant to TPA, President Trump provided Congress a 90-day notification of his intent to sign a free trade agreement with Canada and Mexico. On January 29, 2019—60 days after an agreement was signed, and as required by TPA—U.S. Trade Representative Robert Lighthizer submitted to Congress changes to existing U.S. laws that would be needed to bring the United States into compliance with the proposed USMCA. A report by the USITC on the possible economic impact of TPA is not expected to be National Farmers Union, “USMCA Deal Falls Short of Fair Trade Framework for Family Farmers, NFU Says,” press release, November 30, 2018, https://nfu.org/2018/11/30/usmca-deal-falls-short-of-fair-trade-framework-for-familyfarmersfamily-farmers-nfu-says/; ; Institute for Agriculture and Trade Policy, ", “Family Farm Organizations from U.S., Canada Oppose Signing of New NAFTA,” ," https://www.iatp.org/documents/family-farm-organizations-us-canada-oppose-signing-newnafta. 40new-nafta. 40. Joseph W. Glauber, The Emperor’'s New NAFTA, FARE Share Newsletter, February 2019; Richard Barichello, The The CUSMA: Impacts on the Dairy Sector, FARE Share Newsletter, February 2019; Roger Noll and Robert E. Litan, “Extra "Extra Milk Exports to Canada Under Trump’'s Rebranded NAFTA Will Be a Drop in the Bucket,”" Brookings Institution, October 8, 2018. 41 41. Glauber, The Emperor’'s New NAFTA; Jeffrey J. Schott, “"For Mexico, Canada, and the United States, a Step Backwards on Trade and Investment,”" Peterson Institute for International Economics, October 2, 2018, https://piie.com/blogs/trade-investment-policy-watch/mexico-canada-and-united-states-step-backwards-trade-and. 42 The White House, “. 42. The White House, "The United States Signs a Stronger Trade Agreement with Mexico and Canada,”" November 30, 2018, https://www.whitehouse.gov/briefings-statements/united-states-signs-stronger-trade-agreement-mexico-canada/. 43 USDA, “. 43. USDA, "Statement of Secretary Perdue on Signing of USMCA,”" press release, November 30, 2018, https://www.usda.gov/media/press-releases/2018/11/30/statement-secretary-perdue-signing-usmca. 44. 44. For more information, see CRS Report R44981, NAFTA Renegotiation and the Proposed United States-MexicoCanadaMexico-Canada Agreement (USMCA), by M. Angeles Villarreal and Ian F. Fergusson. 45.

World Trade Online, "ITC Says Release of USMCA Study to Be Delayed Due to Shutdown," January 29, 2019.

46.

Isabelle Hoagland, "Ways and Means Democrats Question USMCA Timing, Point to 232 Issues," World Trade Online, January 23, 2019; Isabelle Hoagland, "Brady: Congress Not Willing to Consider USMCA Until Steel, Aluminum Issues Resolved," World Trade Online, January 29, 2019; letter from group of 46 industries to The Honorable Wilbur Ross and The Honorable Robert Lighthizer, January 23, 2019.

47.

Reuters, "Senate Finance Chair Says Tariffs on Steel, Aluminum Should Go," January 30, 2019, https://www.reuters.com/article/us-usa-trade-grassley/senate-finance-chair-says-tariffs-on-steel-aluminum-should-go-idUSKCN1PO25X.

48.

World Trade Online, "Analysts Flag Shutdown, Election, 232 Concerns as Possible Roadblocks to USMCA Approval," February 20, 2019.

49.

David J. Lynch, "Pelosi Demands Changes to Trump's Trade Deal with Mexico, Canada," Washington Post, April 2, 2019.

50.

World Trade Online, "Analysts Flag Shutdown."

, by M. Angeles Villarreal and Ian F. Fergusson. 39 Congressional Research Service 16 Agricultural Provisions of the U.S.-Mexico-Canada Agreement completed until April 20, 2019, due to the 35-day government shutdown. The report has been cited by some Members of Congress as key to their decisions on whether to support the agreement.45 Some policymakers have stated that the path to ratifying USMCA by Congress is uncertain partially because the three countries have yet to resolve disputes over tariffs on U.S. imports of steel and aluminum, as well as retaliatory tariffs that Canada and Mexico have imposed on U.S. agricultural products.46 The conclusion of the proposed USMCA did not resolve these tariff disputes. On January 30, 2019, Senator Chuck Grassley called on the Trump Administration to lift tariffs on steel and aluminum imports from Canada and Mexico before Congress begins considering legislation to implement the USMCA.47 Representatives of the U.S. business community, agriculture interest groups, other congressional leaders, and Canadian and Mexican government officials have also stated that these tariff issues must be resolved before the USMCA enters into force.48 Some trade observers believe that delays in congressional action on USMCA could make it harder for Canada to consider USMCA approval this year because of upcoming parliamentary elections in October 2019.49 Author Information Anita Regmi Analyst in Agricultural Policy World Trade Online, “ITC Says Release of USMCA Study to Be Delayed Due to Shutdown,” January 29, 2019. Isabelle Hoagland, “Ways and Means Democrats Question USMCA Timing, Point to 232 Issues,” World Trade Online, January 23, 2019; Isabelle Hoagland, “Brady: Congress Not Willing to Consider USMCA Until Steel, Aluminum Issues Resolved,” World Trade Online, January 29, 2019; letter from group of 46 industries to The Honorable Wilbur Ross and The Honorable Robert Lighthizer, January 23, 2019. 47 Reuters, “Senate Finance Chair Says Tariffs on Steel, Aluminum Should Go,” January 30, 2019, https://www.reuters.com/article/us-usa-trade-grassley/senate-finance-chair-says-tariffs-on-steel-aluminum-should-goidUSKCN1PO25X. 48 World Trade Online, “Analysts Flag Shutdown, Election, 232 Concerns as Possible Roadblocks to USMCA Approval,” February 20, 2019. 49 World Trade Online, “Analysts Flag Shutdown.” 45 46 Congressional Research Service 17 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material. Congressional Research Service R45661 · VERSION 1 · NEW 18