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

Changes from April 8, 2019 to November 20, 2020

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~~Agricultural Provisions of the U.S.-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), addAgricultural Provisions of the November 20, 2020 U.S.-Mexico-Canada Agreement Anita Regmi The United States-Mexico-Canada Agreement (USMCA), a comprehensive trade agreement Specialist in Agricultural among the three countries, entered into force on July 1, 2020. USMCA replaced the North Policy American Free Trade Agreement (NAFTA), which had been in effect since 1994. NAFTA contributed to notable increases in trade in agricultural products within North America. Under NAFTA, Mexico eliminated all tariffs and quotas that formerly governed agricultural imports from the United States over a period of 14 years beginning in 1994. Canada and the United States granted each other’s agricultural exports full market access, save for specific exceptions. The agricultural exceptions under NAFTA included Canadian imports of U.S. dairy products, poultry, eggs, and margarine a nd U.S. imports of Canadian dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products. Under NAFTA, Canada has been the United States’ top agricultural export market since 2002, and Mexico has in most years ranked second. USMCA provides for no further market access changes for bilateral agricultural trade between the United States and Mexico. USMCA expands market access for U.S. exports of dairy, most poultry products, and eggs to Canada. It is likely to lead to lower U.S. access for chicken meat relative to projected access under NAFTA provisions. Likewise, USMCA expands access for Canadian dairy, peanuts, peanut butter, cotton, sugar, and sugar-containing exports to the United States. USMCA includes new provisions to govern trade in agricultural biotechnology products; limits the use of Geographical Indications (GIs) to block exports of products labeled in certain ways; adds confidentiality protection for proprietary food formulas, and ~~require~~requires USMCA countries to apply the same regulatory treatment to imported alcoholic beverages and wheat as those that govern their domestic products. Some of these provisions could serve as models for U.S. proposals in other future trade negotiations. Canada and Mexico, the leading suppliers of and destinations for U.S. agricultural products, jointly accounted for 29% of all U.S. agricultural exports and 40% of total imports in 2019. Consumer-oriented foods, such as meats, dairy, fruit, vegetables, and prepared and packaged foods, have increasingly gained share of trade in the region. Since the implementation of NAFTA, U.S. bilateral trade with Canada and Mexico has substantially increased, and according to several estimates, will likely grow under USMCA. Studies indicate modest gains in regional trade under USMCA, with the greatest potential for gains from provisions to modernize and integrate customs procedures to reduce trade costs and border inefficiencies. A study indicates gains to be greater for Canada than for the other two countries, while another indicates possible losses for small fruit and vegetable producers in the State of Georgia. As it oversees the implementation of USMCA, Congress may monitor Canada’s actions to expand market access for U.S. dairy, poultry meat, and eggs. Congress may also examine progress in implementing the various nontariff provisions that the three countries agreed to under the USMCA, particularly efforts to harmonize sanitary and phytosanitary rules and to establish a regulatory framework to govern trade in products created with agricultural biotechnology. USMCA has expanded access to the U.S. market for Canadian dairy, sugar, and products containing sugar, and Congress may examine how this improved access to the U.S. market affects these sectors and the U.S. rural economy. It may also evaluate the effects of supply-chain disruptions due to the Coronavirus Disease 2019 (COVID-19) pandemic and any impacts on efforts toward greater integration of the North American market for agricultural products. Congressional Research Service link to page 4 link to page 4 link to page 6 link to page 6 link to page 6 link to page 10 link to page 12 link to page 14 link to page 15 link to page 18 link to page 21 link to page 22 link to page 9 link to page 15 link to page 17 link to page 20 link to page 5 link to page 8 link to page 11 link to page 16 link to page 18 link to page 19 link to page 21 link to page 23 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Contents Introduction ................................................................................................................... 1 Agricultural Trade Liberalization in North America .............................................................. 1 Provisions of USMCA ..................................................................................................... 3 Expansion of Market Access Provisions ........................................................................ 3 Expanded Access for U.S. Imports to Canada ........................................................... 3 Expanded Access for Canadian Imports to the United States ....................................... 7 Modifications to Agricultural Trading Regime ............................................................... 9 U.S. Agricultural Trade with Canada and Mexico ............................................................... 11 U.S. Agricultural Exports to Canada and Mexico .......................................................... 12 U.S. Imports from Canada and Mexico ....................................................................... 15 USMCA’s Potential Trade Effects Beyond NAFTA ............................................................ 18 Issues for Congress ....................................................................................................... 19 Figures Figure 1. U.S. Chicken Meat Access To Canada Under NAFTA, USMCA and CPTPP............... 6 Figure 2. U.S. Agricultural Trade With Canada and Mexico ................................................. 12 Figure 3. U.S. Dairy and Poultry Product Exports To Canada ............................................... 14 Figure 4. U.S. Imports of Canadian Dairy, Sugar, and Sugar-Containing Products ................... 17 Tables Table 1. Chronology of North American Agricultural Market Liberalization ............................. 2 Table 2. Canadian Market Access for U.S. Agricultural Imports Under USMCA ....................... 5 Table 3. U.S. Market Access for Canadian Agricultural Products Under USMCA...................... 8 Table 4. Major U.S. Agricultural Exports to Canada ........................................................... 13 Table 5. Major U.S. Agricultural Exports to Mexico ........................................................... 15 Table 6. Major U.S. Agricultural Imports from Canada ....................................................... 16 Table 7. Major U.S. Agricultural Imports from Mexico ....................................................... 18 Contacts Author Information ....................................................................................................... 20 Congressional Research Service link to page 5 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Introduction The United States-Mexico-Canada Agreement (USMCA), a comprehensive trade agreement among the three countries, entered into force on July 1, 2020.1 USMCA replaced the North American Free Trade Agreement (NAFTA), which had been in effect since 1994 (P.L. 103-182). USMCA continues the liberalization of agricultural trade within North America, which has been under way for more than three decades. It also addresses a number of trade-related issues that NAFTA did not consider. This report provides a brief history of agricultural trade agreements within North America, explores the changes made in the USMCA, and considers how the new agreement is likely to affect the flow of trade in agricultural commodities and food products. Agricultural Trade Liberalization in North America The Canada-U.S. Free Trade Agreement (CUSTA), which went into effect on January 1, 1989, began the process of agricultural trade liberalization within North America. The agreement provided for the elimination of almost al tariffs on agricultural products traded between the two countries over a 10-year period, although each country retained the right to impose temporary duties on certain fresh fruits and vegetables to protect against import surges from the other country. The agreement also exempted full liberalization of meat trade between the two countries, and did not include provisions to prevent Canada from using discriminatory marketing and pricing measures for U.S. wine and distil ed spirits. It barred the United States from imposing import restrictions on Canadian products containing less than 10% sugar by weight and provided for the elimination of certain Canadian grain transportation subsidies. Most U.S. and Canadian nontariff barriers and agricultural support policies were unchanged by the agreement.2 NAFTA was structured as three separate agreements, one between Canada and the United States, one between the United States and Mexico, and the third between Mexico and Canada. The U.S.-Canada portion of NAFTA incorporated the agricultural provisions of CUSTA. NAFTA continued to exempt certain products from market liberalization, including~~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 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

~~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 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’s imports of these products were limited by tariff-rate quotas (TRQs), which provided for a volume of imports to enter with no tariff but assessed high tariffs on imports beyond the quota amount. 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 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 2008.3 Table 1 provides a chronology of measures to liberalize agricultural trade within North America. 1 For more information, see CRS Report R44981, The United States-Mexico-Canada Agreement (USMCA), by M. Angeles Villarreal and Ian F. Fergusson. 2 CRS Report 88-506, The Effect of the Canada-U.S. Free Trade Agreement on U.S. Industries, by Arlene Wilson and Carl E. Behrens, July 22, 1988. T his document is available to congressional clients upon request. 3 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 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 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, 1995.⁵ 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.

~~Table 1. Chronology of North American Agricultural Market Liberalization~~

January 1989	Canada-United States Trade Agreement implemented.
January 1994	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 ~~most tree nuts.~~
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 ~~nondurum~~non-durum wheat, soy oil, cotton, and oranges. ~~cotton, and oranges.~~
	Among others, Mexican tariffs eliminated on imports of U.S. pears, plums, apricots, and cotton. January 2003 NAFTA~~cotton.~~
January 2003	~~Completion of~~ nine-year transition period ~~under NAFTA~~ between Mexico and the United States.
	completed. Among others, U.S. tariffs eliminated on imports of Mexican durum wheat, rice, dairy, winter vegetables, frozen strawberries, and fresh tomatoes. ~~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 ~~and fresh tomatoes.~~
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 ~~NAFTA.~~
August 2017	Renegotiation talks begin.
September 30, 2018	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 ~~NAFTA.~~
November 30, 2018	President Trump and presidents of Canada and Mexico sign the proposed USMCA. ~~proposed USMCA.~~
April ~~2019~~	2019 U.S. International Trade Commission submits 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~~ . January 29, 2020 USMCA implementing legislation becomes law (P.L. 116-113). July 1, 2020 USMCA enters into force. Source: Steven Zahniser and John Link, Effects of North American Free Trade Agreement on Agriculture and the Rural Economy, WRS-02-1, U.S. Department of Agriculture (USDA), Economic Research Service (ERS), July 2002; Henrich Brunke and Daniel A. Sumner, “~~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.~~ Review,” AIC Issues Brief, no. 21, University of California, February 2003; Steven Zahniser and Zachary Crago, NAFTA at 15: Building on Free Trade, ~~USDA Report WRS-09-03~~WRS-09-03, USDA, ERS, March 2009; and CRS Report R44981, ~~NAFTA Renegotiation and the Proposed~~The United States-Mexico-Canada ~~Agreement~~ Agreement (USMCA), by M. Angeles ~~Villarreal~~ Vil arreal and Ian F. Fergusson. revised in June 2017. See CRS In Focus IF10693, Am ended Sugar Agreem ents Recast U.S.-Mexico Trade, by Mark A. McMinimy. Congressional Research Service 2 link to page 8 Agricultural Provisions of the U.S.-Mexico-Canada Agreement In addition to directly improving market access, NAFTA addressed other issues related to the integration of the North American agricultural market. These included provisions on rules of origin to exclude products original y shipped from other countries from benefiting from NAFTA preferential treatment; the development, adoption, and enforcement of sanitary and phytosanitary (SPS) regulations in the region; and a commitment by the United States and Mexico that when either country applies marketing, grade, or quality standards to a domestic product destined for processing, it wil provide no less favorable treatment for like products imported for processing. 4 Provisions of USMCA USMCA expands upon the agricultural provisions of NAFTA by further reducing market access barriers and strengthening provisions to facilitate trade in North America. Expansion of Market Access Provisions Al food and agricultural products that had zero tariffs under NAFTA remain at zero under USMCA. Regarding U.S.-Mexico trade in agricultural products, under NAFTA, the two countries eliminated al the tariffs and quotas that formerly governed agricultural imports, and USMCA provides for no further market access changes for agricultural trade between the two countries. Regarding trade between the United States and Canada, the two countries are providing greater access to most products that faced restrictions under NAFTA. This includes Canada expanding its access to imports of U.S. dairy products, poultry, eggs, and margarine and the United States granting access to imports of Canadian dairy products, peanuts, peanut butter, cotton, sugar, and sugar-containing products. Expanded Access for U.S. Imports to Canada Canada has historical y employed a supply management regime that included TRQs on imports of dairy and poultry. Canada’s TRQs under NAFTA appear to have restricted imports of some dairy, poultry, and egg products, as the imported volumes for some of these products regularly equaled or exceeded their set quota limits.5 Under USMCA, Canada is changing its TRQs to expand access for U.S. products. Table 2 summarizes the changes in the market access regime for U.S. agricultural exports to Canada. U.S. Dairy Market Access Under USMCA Canada’s import restrictions on U.S. dairy products were 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. For one, Canada has agreed to make changes to its milk pricing system, which has been accused of setting low prices for Canadian skim milk solids and thereby undercutting U.S. exports. Effective January 1, 2021, Canada has agreed to eliminate its 4 For more information, see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson. 5 Richard Barichello, “A Review of T ariff Rate Quota Administration in Canadian Agriculture,” Agricultural and Resource Econom ics Review, vol. 29, no. 1 (April 2000), pp. 103 -114; personal communication with Richard Barichello, March 18, 2019; World T rade Organization (WT O), T ariff-Rate Quota notification by Canada, G/AG/N/CAN/128, March 7, 2019; Anastasie Hacault, “T he Impact of Market Access Reforms on the Canadian Dairy Industry,” thesis submitted to the University of Manitoba, 2011, at http://www.cdc-ccl.gc.ca/CDC/userfiles/file/Hacault%20T hesis.pdf. Congressional Research Service 3 link to page 8 link to page 8 link to page 8 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Class 7 milk price (which includes skim milk solids and is designated as Class 6 in Ontario) and wil henceforth set its price for skim milk solids based on a formula that takes into account the U.S. nonfat dry milk price.6 In the future, the United States and Canada have agreed to notify each other if either introduces a new milk class price or changes an existing price for a class of milk products. Canada has also converted its dairy TRQs under NAFTA, which were available to al World Trade Organization (WTO) members, to U.S.-specific quotas. Under USMCA, Canada has agreed to maintain its dairy supply management system, but the TRQs are to be increased each year for U.S. exports of milk, cheese, cream, skim milk powder, condensed milk, yogurt, and several other dairy categories (see Table 2). U.S. dairy exports to Canada is to continue to face zero in-quota tariffs, as under NAFTA. Exports over set quota limits are to continue to face tariffs as high as 200% to 300%.7 While WTO TRQs are to remain available to U.S. dairy product exporters, the 16F new TRQs under USMCA are to provide additional access to U.S. dairy products into Canada. USMCA includes provisions on transparency for the implementation of TRQs. These include requirements to provide advance notice of changes to the quotas and to make public the details of quota utilization rates so that exporters are able to monitor the extent to which the quotas are fil ed. USMCA also 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. U.S. Poultry Market Access Under USMCA Canada replaced its NAFTA market access commitments for U.S. poultry and eggs with new USMCA TRQs. Imports of U.S. poultry products over set quota limits may face tariffs as high as almost 400%.8 Under USMCA, Canada’s TRQ for imports of U.S. eggs is to be phased over six F equal instal ments, reaching 10 mil ion dozen by 2025 and then increasing by 1% per year for the following 10 years. The annual TRQs for turkey and broiler hatching eggs and chicks are set by formulas based on Canadian production (see Table 2). For chicken meat, the duty-free quota under USMCA starts at 47,000 metric tons per year and expands to 57,000 metric tons in 2025. It then is to continue to increase by 1% per year for the next 10 years (Table 2). The United States also has access to Canada’s WTO chicken meat quota of 39,844 metric tons that is available to imports from al origins. 9 17F 6 U.S. exports are for nonfat dry milk, defined by U.S. standards and regulations, while skim milk powder is defined by the Codex Alim entarius, an international agreement on food standards. Nonfat dry milk has protein content requirements and does not include food additives. T he Codex standard allows skim milk powder to have a lower protein content than that required by the U.S. standard and can contain food additives. All U.S. nonfat dry milk meet the Codex skim milk powder requirement but all skim milk powder may not meet the U.S. nonfat dry milk standard. See Phil T ong, “Nonfat Dried Milk and Skim Milk Powder –All T he Same or Different?” ADPI Intelligence, vol. 5, issue 1, American Dairy Products Institute, 2017. 7 WT O, “Canada T rade Policy Review: Report by T he Secretariat,” T able 3.5, WT /T PR/S/314/Rev.1, September 30, 2015, at https://docsonline.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT /T PR/S314R1.pdf&Open=True; and USDA, FAS, “Canada: Dairy and Products,” Annual GAIN Report Number: CA18057 , October 25, 2018. 8 For poultry over-quota tariff rates, see WT O, “Canada T rade Policy Review: Report by T he Secretariat,” T able 3.6, WT /T PR/S/314/Rev.1, September 30, 2015, at https://docsonline.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT /T PR/S314R1.pdf&Open=True. 9 Office of the U.S. T rade Representative (UST R), Agreement Between the United States of America, the United Mexican States, and Canada T ext, Signed November 30, 2018 , https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between. Congressional Research Service 4 link to page 9 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Table 2. Canadian Market Access for U.S. Agricultural Imports Under USMCA Tariff Rate Quotas (TRQs) Tariff Rate, % NAFTA commitments continue: Tariffs eliminated for 0 almost al agricultural products under NAFTA NAFTA liberalization exemption: Dairy and poultry TRQs opened under 0 in-quota; WTO imports into Canada WTO commitments MFN over-quota Dairy, U.S.-specific USMCA TRQs, in addition to TRQs under WTO Fluid milk TRQ begins at 8,333 MT and increases by 1% each 50,000 MT by August 0 in-quota; WTO year for 13 years after year 6 2024, 56,905 MT by MFN over-quota August 2036 Skim milk powder TRQ begins at 1,250 MT and increases by 7,500 MT by August 0 in-quota; WTO 1% each year for 13 years after year 6 2024 MFN over-quota Cheese TRQ (50% is for industrial use) begins at 2,084 MT 12,500 MT by January 0 in-quota; WTO and increases by 1% each year for 13 years after year 6 2025 MFN over-quota Cream TRQ begins at 1,750 MT and increases by 1% each 10,500 MT by August 0 in-quota; WTO year for 13 years after year 6 2024 MFN over-quota Whey TRQ begins at 689 MT and increases by 1% each year 4,135 MT by August 0 after year August after year 6, until year 10 2024 2028 Other dairy products (butter and cream powder, 15,365 MT by August 0 in-quota; WTO concentrated and condensed milk, yogurt and buttermilk, 2024 for butter and MFN over quota powdered buttermilk, ice cream, natural milk constituents, cream powder, and Margarine, 0 starting other dairy and margarine) begins at 2,561 MT and increases January 2025 for the rest January 2025 by 1% each year for 13 years after year 6 Poultry products, new USMCA TRQs Chicken meat, to increase by 1% each year for 10 years after 47,000 MT in year one, 0 in-quota; WTO year 6 reaching 57,000 MT by MFN over-quota January 2025 Turkey meat, after 2029, Canada may restrict TRQ size if it ≥ 3.5% of Canada’s 0 in-quota; WTO exceeds 3.5% of that year’s production level by 1,000 MT previous year’s domestic MFN over-quota production Eggs and products (eggs and egg-equivalent), to increase by 1.67 mil ion dozen in year 0 in-quota; WTO 1% for 10 years after year 6 one, reaching 10 mil ion MFN over-quota dozen by January 2025 Broiler hatching eggs and chick products ≥ 21.1% of Canada’s 0 in-quota, WTO domestic production for MFN over-quota that year Source: Office of the U.S. Trade Representative (USTR), “Agreement Between the United States of America, the United Mexican States, and Canada 7/1/20 Text,” accessed November 2020, at https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between; and USDA GAIN Report Number:CA0125, 2000, at https://apps.fas.usda.gov/gainfiles/200008/30677853.pdf. Notes: The TRQs for turkey meat and broiler hatching eggs and chicks are based on anticipated current-year production or World Trade Organization (WTO) commitment volume, whichever is greater. MT = metric tons, MFN = Most Favored Nation. MFN tariffs are levied in a nondiscriminatory manner by WTO member countries on al imports excepting imports from countries with a preferential trade agreement when a lower rate of tariff may be applied. The sum of the USMCA and WTO quotas is lower than the total quota that was available to U.S. chicken meat under NAFTA (Figure 1), which was set at 7.5% of Canada’s estimated production Congressional Research Service 5 Agricultural Provisions of the U.S.-Mexico-Canada Agreement level in the previous year. For example, the USMCA full-year quota for 2020 would have been 88,300 metric tons10 compared with an estimated quota of 99,630 metric tons under NAFTA. 11 18F T The Coronavirus Disease 2019 (COVID-19) pandemic has led to a reduction in Canada’s production of chicken meat in 2020. This would have led to a reduction in the NAFTA quota for 2021 (estimated at 96,750 metric tons), but it does not affect the USMCA quota of 88,800 metric tons.12 Figure 1. U.S. Chicken Meat Access To Canada Under NAFTA, USMCA and CPTPP After Ful Implementation (Sixth Year) of USMCA in 2025 Thousand Metric Tons Estimated U.S. Access under 140 NAFTA provisions 120 CPTPP-global TRQ 24.0 26.5 U.S. not a CPTPP member 100 80 USMCA 57.0 63.0 U.S.-specific 60 U.S. accessunder USMCA 40 WTO-global 20 39.8 0 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Source: Canada’s Commitments under World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). NAFTA’s estimated quota is CRS calculation as a 7.5% of Canada’s previous year’s chicken meat production, which was projected with an equation estimated using Canada’s chicken meat production from 2007 to 2019 from USDA’s Production, Supply, and Demand database, at https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery. Note: TRQ = Tariff-rate quota. Canada has also al ocated a global TRQ for chicken meat under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which entered into force for Canada on December 30, 2018.13 Given the geographic disadvantage of most CPTPP member countries,14 10 Note that from January-June 2020, Canada’s NAFT A T RQ was effective and USMCA T RQs became effective only for July-December 2020. Given the two different import regimes, total T RQ available for U.S. chicken meat exports to Canada in 2020 was 91,900 metric tons—less than the 99,630 metric tons estimated for NAFT A. See, USDA, FAS, “Canada: Poultry and Products Annual,” GAIN Report Number: CA2020-0078, August 26, 2020. 11 T he 2020 quota is calculated as 7.5% of the 1,328,900 metric tons of chicken meat Canada produced in 2019. USDA, FAS, “Canada: Poultry and Products Annual,” GAIN Report Number: CA2020-0078, August 26, 2020. 12 Ibid. 13 Government of Canada, “ About the Comprehensive and Progressive Agreement for T rans-Pacific Partnership,” accessed October 2020, at https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/backgrounder-document_information.aspx?lang=eng#:~:text=T he%20CPT PP%20entered%20into%20force,Vietnam%20on%20January%2014%2C%202019. 14 As of October 2020, the Comprehensive and Progressive Agreement for T rans-Pacific Partnership (CPTPP) has been ratified by Australia, Canada, Japan, Mexico, New Zealand, and Vietnam. Other signatories to the CPT PP include Brunei, Chile, Malaysia, Peru, and Singapore. Mexico and Peru are net importers of poultry products. Congressional Research Service 6 link to page 9 link to page 11 link to page 11 link to page 11 link to page 11 Agricultural Provisions of the U.S.-Mexico-Canada Agreement these countries are unlikely to fil Canada’s CPTPP quota for chicken meat. The U.S. Department of Agriculture (USDA) attaché in Canada reports that Chile could ship chicken meat to Canada under the CPTPP TRQ, but Chile has not yet ratified the agreement and no trade has occurred under this TRQ.15 If the CPTPP TRQ is added to the USMCA TRQ, market access for U.S. chicken meat into Canada could possibly exceed the volume that would have been permitted under NAFTA (Figure 1.) Expanded Access for Canadian Imports to the United States The United States, in turn, agreed to improve access for Canadian dairy products, sugar, peanuts, peanut butter, and cotton. The United States agreed to increase TRQs for Canadian dairy, sugar, and sugar-containing products (Table 3). The United States is phasing out the tariffs on cotton, peanut, and peanut butter imports from Canada, and agreed to eliminate these tariffs on January 1, 2025.16 Canadian Dairy Product Access Under USMCA Under USMCA, the United States is providing Canada-specific TRQs for dairy products (Table 3). In addition to these quotas, Canada may also have access to other existing dairy quotas that the United States provides to al foreign suppliers under its WTO commitments.17 Canada- specific access includes a set volume of imports that increase up to 2025, and then increase 1% each year for 13 more years. The United States has expanded access for Canadian ice cream, other creams, milk beverages, skim milk powder, butter, cream powder, cheese, whole milk powder, dried yogurt, whey, other milk components, concentrated milk, and various other dairy products (Table 3). Imports of Canadian dairy products within the quotas face zero duties, while imports over the set quota volumes are to be levied duties that can exceed 100% for some products.18 Canadian Sugar and Sugar-Containing Product Market Access Under USMCA Under USMCA, the United States is providing access each year to 9,600 MT of refined sugar processed wholly from Canadian sugar beets under a new Canada-specific TRQ. If the Secretary of Agriculture makes a determination to increase the refined sugar TRQ under U.S. WTO commitments, 20% of the additional WTO quota volume wil be reserved for Canadian sugar.19 The in-quota tariff for al sugar imports is zero, and the over-quota tariff can be close to 90% for some products.20 15 USDA, FAS, “Canada: Poultry and Products Annual,” GAIN Report Number: CA2020-0078, August 26, 2020. 16 UST R, Agreement Between the United States of America, the United Mexican States, and Canada 7/1/20 T ext , National T reatment and Market Access For Goods, T ariff Schedule of the United States, General Notes, Chapter 2, Annex 2-B-6, accessed October 2020, at https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement -between. 17 Ibid., Appendix 2, T ariff Schedule of the United States – T ariff Rate Quotas. 18 World Integrated T rade Solution (WIT S), T RAINS Ad Valorem Equivalent data for 2018, accessed November 2020. 19 UST R, Agreement Between the United States of America, the United Mexican States, and Canada 7/1/20 T ext , Chapter 2, National T reatment and Market Access For Goods, T ariff Schedule of the United States, T ariff Rate Quotas, T RQ-US9: Sugar, accessed October 2020, at https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement -between. 20 WIT S, T RAINS Ad Valorem Equivalent data for 2018, accessed November 2020. Congressional Research Service 7 link to page 11 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Table 3. U.S. Market Access for Canadian~~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 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 2008.⁶ 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.⁷ 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

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 At various times, President Trump has stated that he intends to withdraw from NAFTA.¹⁰ 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

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 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.¹² 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.¹³ 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.¹⁴ Canada's chicken meat NAFTA TRQ was 90,100 metric tons in 2018, and the estimate is 95,000 metric tons for 2019.¹⁵

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.¹⁶ 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

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

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 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.

T ~~able 2. Proposed Canadian Market Access for U.S. Agricultural Products Under USMCA~~

	Tariff Rate Quotas (TRQs)	Tariff Rate, %
Agricultural Products Under 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	TRQs opened under WTO commitments	0 in-quota; WTO MFN over-quota tariffs
Dairy, U.S.-specific TRQs, in addition to TRQs under WTO, proposed by Canada
~~Fluid milk TRQ begins at 8,333 MT and increases~~ for 0 almost al agricultural products under NAFTA NAFTA liberalization exemption: Dairy, peanut, peanut TRQs opened under 0 in-quota; WTO butter, cotton, sugar and sugar-containing products into the WTO commitments MFN over-quota United States Peanut, Peanut Butter, and Cotton under USMCA: 6 0, starting January annual tariff reductions 2025 Dairy, Canada-specific USMCA TRQs, in addition to TRQs under WTO Cream, ice cream, and milk beverages, TRQ begins at 1,750 10,500 liters by January 0 in-quota; WTO liters and increases by 1% each year for 13 years after year 6 2025 MFN over-quota Skim milk powder, TRQ begins at 1,250 MT and increases by 7,500 MT by January 0 in-quota; WTO 1% each year for 13 years after year 6 2025 MFN over-quota Butter, cream, and cream powder TRQ begins at 750 MT and 4,500 MT by January 0 in-quota; WTO increases by 1% each year for 13 years after year 6 2025 MFN over-quota Cheese TRQ begins at 2,083 MT and increases by 1% each 12,500 MT by January 0 in-quota; WTO year for 13 years after year 6 2025 MFN over-quota Whole milk powder TRQ begins at 115 MT and increases by 690 MT by January 0 in-quota; WTO 1% each year for 13 years after year 6 2025 MFN over-quota Dried yogurt, sour cream, whey and other milk constituents 11,030 MT by January 0 in-quota; WTO TRQ begins at 1,838 MT and increases by 1% each year for 13 2025 MFN over-quota years after year 6 Concentrated milk TRQ begins at 230 MT and increases by 1% 1,380 MT by January 0 in-quota; WTO each year for 13 years after year 6 2025 MFN over-quota Other dairy products TRQ begins at 317 MT and increases by 1,900 MT by year 0 in-quota; WTO 1% each year for 13~~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
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 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	years after year 6 January 2025 MFN over-quota Sugar and sugar-containing product TRQs under USMCA Refined sugar TRQ, Canada-specific, new under USMCA 9,600 MT 0 in-quota, WTO MFN over-quota. Refined sugar TRQ, al ocation of WTO quota At least 10,300 MT 0 in-quota; WTO ~~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	MFN over-quota Sugar-containing product TRQ, al ocation of WTO quota At least 59,250 MT 0 in-quota; WTO ~~0 in-quota; WTO MFN over-quota >163%~~
Broiler hatching eggs and chick products	≥ 21.1% of Canada's domestic production for that year	0 in-quota, >200% over quota

~~Source:~~ ~~Agreement~~ MFN over-quota Source: Office of the U.S. Trade Representative (USTR), “Agreement between the United States of America, the United Mexican States, and Canada 7/1/20 Text,” accessed October 2020, at https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between. Notes: MT = metric tons, WTO = World Trade Organization, MFN = Most Favored Nation. MFN tariffs are levied in a nondiscriminatory manner by WTO member countries on al imports excepting imports from countries with a preferential trade agreement when a lower rate of tariff may be applied. The United States is further guaranteeing market access to Canadian sugar and sugar-containing products by al ocating Canada-specific quotas within the TRQs the United States established per its WTO commitments (see Table 3). The country-specific quotas thus al ocated to Canada are Congressional Research Service 8 Agricultural Provisions of the U.S.-Mexico-Canada Agreement 10,300 MT of refined sugar and 59,250 MT of sugar-containing products.21 Canada is to continue to have access to the U.S. market beyond the set quota levels for sugar and products containing sugar, as applicable under the WTO rights and commitments of the two countries. If in a given year the U.S. WTO sugar quota is unfil ed, the Secretary of Agriculture may al ow additional sugar from Canada to enter duty-free. Canadian sugar and sugar-containing product imports over the set quota volume wil be levied the higher tariff rates paid by other WTO members. Modifications to~~the United Mexican States, and Canada Text, Signed November 30, 2018; Canada-United States Free Trade Agreement,~~ ~~https://www.international.gc.ca/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'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.

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~~

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's anticipated current year production or its WTO commitment volume.

Improved Agricultural Trading Regime

Agricultural Trading Regime Under USMCA, several key provisions ~~would~~ wil further expand ~~the~~ Canadian and Mexican market access to U.S. agricultural producers.²¹22 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:~~

agreed 19F between Canada and the United States, the following provisions apply to al three countries:  Wheat. Canada and the United States have agreed that they shall accord "treatment no less favorable than it accords to likeagreed to accord the same treatment to “like wheat of domestic origin with respect to the assignment of quality grades.~~"²²~~”23 Currently, U.S. wheat exports to Canada are graded as feed wheat, which ~~generally~~general y commands a lower price. Under USMCA, U.S. wheat exports to Canada ~~would~~ wil 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

24  Cotton. The addition of a specific textile and apparel chapter to the proposed ~~USMCA~~ 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~~ wil 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's SPS chapter calls~~USMCA countries.  SPS provisions. USMCA’s SPS chapter cal s for greater transparency in SPS rules and regulatory alignment among the three countries. It ~~would~~is to establish a 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 ~~decisionmaking~~decision-making; improving processes for certification, regionalization and equivalency determinations; conducting 21 Ibid, Agreement on Agriculture, Chapter 3, Annex 3-A, Agricultural T rade Between Canada and the United States, Article 3.A.5. Sugar and Sugar Containing Products. 22 UST R, Agreement Between the United States of America, the United Mexican States, and Canada 7/1/20 T ext , accessed October 2020, at https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement -between. 23 Ibid. 24 William W. Wilson, “Canada-U.S. Wheat and Barley T rade,” Agriculture and Agri-food Canada, March 30, 2012. Congressional Research Service 9 Agricultural Provisions of the U.S.-Mexico-Canada Agreement ~~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 ~~indicatio~~nsindications (GIs)..25 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~~provisions include guidelines to determine whether a term is a common name or a protected GI, grounds for opposition and cancel ation of a GI, and treatment of GIs under third-party agreements. USMCA protects GIs for food products that Canada and Mexico have already agreed to in trade negotiations with the EU ~~and would lay~~ and lays 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~~is to 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~~ USMCA provisions are to 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~~ protections are to exist in the United States and Mexico for Canadian Whiskey, while Tequila and Mezcal ~~would~~ wil 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~~agreed to to protect the confidentiality of proprietary formula information in the same manner for domestic and imported products. The agreement ~~would also~~also is to limit such information requirements to what is necessary to achieve legitimate objectives.

 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~~ al biotechnology methods, including recombinant DNA and gene editing. USMCA ~~would~~ is to 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~~ al of the changes sought by U.S. agricultural groups. For ~~instance, the agreement~~ example, it 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 nontariff barriers to market access for U.S. fresh potatoes in ~~Mexico²⁴~~Mexico26 and Canada. Canada'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).²⁵ 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

’s Standard Container Law 22F 25 UST R, “Agreement Between the United States of America, the United Mexican States, and Canada” Legal T ext, Intellectual Property Rights, Chapter 20, accessed October 2020, at ttps://ustr.gov/sites/default/files/files/agreements/FT A/USMCA/T ext/20%20Intellectual%20Property%20Rights.pdf. 26 For more information, see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson. Congressional Research Service 10 link to page 15 link to page 15 Agricultural Provisions of the U.S.-Mexico-Canada Agreement (part of the Fresh Fruits and Vegetable Regulations of the Canadian Agricultural Products Act) prohibits the imports of U.S. fresh potatoes in quantities over 50 kilograms.27 USMCA also does 23F not include provisions concerning trade in organic foods.28 U.S. Agricultural Trade with Canada and Mexico Agricultural trade within North America has increased substantial y since the implementation of CUSTA and NAFTA and in the wake of Mexico’s market-oriented agricultural reforms, which started in the 1980s (Figure 2). U.S. imports from Canada and Mexico jointly increased in nominal values from $6 bil ion at the start of CUSTA in 1990 to $8 bil ion at the start of NAFTA in 1994, reaching $52 bil ion in 2019. Likewise, the nominal value of total U.S. agricultural exports to Canada and Mexico rose from $7 bil ion at the start of CUSTA in 1990 to $10 bil ion at the start of NAFTA in 1994. ItU.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 bil ion in 2014 and was $40 bil ion in 2019~~$41 billion in FY2014~~. The lower ~~level~~value of exports since ~~FY2014~~2014 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 countries outside of NAFTA.29 From July 2018 to May 2019, U.S. exports of certain products to Canada and Mexico declined due to retaliatory tariffs imposed by these countries~~outside of NAFTA.²⁷~~ ~~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 ’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~~

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

~~Figure 1. U.S. Agriculture Exports to~~U.S. aluminum imports.30 To facilitate the ratification of USMCA, the United States removed its tariffs on steel and aluminum imports from Canada and Mexico in May 2019, and these countries removed their retaliatory tariffs on imports of U.S. agricultural products. U.S. agricultural trade with Canada and Mexico, which typical y showed a smal surplus prior to 2014, has moved into deficit since then, even as the United States maintains a surplus in overal agricultural trade. In 2019, the United States posted a $12 bil ion deficit in agricultural trade with the other USMCA countries (Figure 2). Since 2002, Canada has been the United States’ top agricultural export market, accounting for about 15% of the total value of U.S. agricultural exports since 2015.31 Mexico was the second-largest export market until 2010, when China displaced Mexico in that ranking. U.S. exports to China were lower in 2018 and 2019 than in 2017, as a result of the imposition of retaliatory tariffs on U.S. agricultural imports by China in response to U.S. tariff increases on certain Chinese imports.32 In those years Mexico resumed its position as the second-largest importer of U.S. agricultural products. 27 National Potato Council, “2019 National T rade Estimate Report on Foreign T rade Barriers,” https://spudman.com/wp-content/uploads/2018/10/National_Potato_Council_-_2019_National_Trade_Estimate_Report_-_FINAL.pdf. 28 CPT PP, Chapter 8, T echnical Barriers to T rade, Annex 8-G Organic Products, https://www.mfat.govt.nz/assets/T ransPacific-Partnership/Text/8.-Technical-Barriers-to-Trade-Chapter.pdf. 29 Steven Zahniser et al., NAFTA at 20: North America’s Free-Trade Area and Its Impact on Agriculture, USDA, ERS, WRS-15-01, February 2015. 30 See CRS Report R46242, Major Agricultural Trade Issues in 2020, coordinated by Anita Regmi. 31 Ibid. 32 See CRS Report R45929, China’s Retaliatory Tariffs on U.S. Agriculture: In Brief, by Anita Regmi. Congressional Research Service 11 link to page 16 link to page 16 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Figure 2. U.S. Agricultural Trade With Canada and Mexico In Bil ions of U.S. Dol ars, 1990-2019 U.S. Imports in Billions of Dollars Canada Mexico 2018 Total Net Trade USMCA $60 signed $50 2008 $40 NAFTA completed 1994 $30 NAFTA implemented 1990 $20 CUSTA implemented $10 $0 1990 1994 1998 2002 2006 2010 2014 2018 U.S. Exports in Billions of Dollars 2018 USMCA $50 2008 signed NAFTA $40 completed 1994 NAFTA $30 implemented 1990 $20 CUSTA implemented $10 $0 1990 1994 1998 2002 2006 2010 2014 2018 -$10 USMCA in force -$20 July 1, 2020 Source: U.S. Census Bureau Trade Data, BICO-HS10, accessed October 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. ~~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 Geographic proximity provides the United States with a competitive advantage in supplying fresh fruit, vegetables, and prepared food to Canada. Consumer-oriented food products, such as meats, dairy, fruit, vegetables and ready-to-eat products, therefore make up about 80% of al U.S. agricultural exports to Canada (Table 4). Although U.S. exports to Canada have not grown in total value over the 2015-2019 period, Canada remains the United States’ largest export market for many agricultural products (Table 4). Canada accounted for 24% of the value of total U.S. consumer-oriented food exports to al destinations in 2019.33 The same year, Canada accounted for 74% of the total value of U.S. fresh 33 CRS calculation based on U.S. Census T rade Statistics, accessed November 2020, at https://apps.fas.usda.gov/gats/default.aspx. Congressional Research Service 12 link to page 16 link to page 16 link to page 17 Agricultural Provisions of the U.S.-Mexico-Canada Agreement vegetable exports to al destinations, 51% of snack foods, and 34% of fresh fruit exports to al 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 nonalcoholic 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.~~

~~Table 3. Major U.S. Agriculture~~increased significantly over the 2015- 2019 period (Table 4). Table 4. Major U.S. Agricultural Exports to Canada In Mil ions of U.S. Dol ars, 2015-2019 2015-2019 2015 2016 2017 2018 2019 change Total agriculture 20,989 20,307 20,608 20,867 20,886 0% Total consumer-oriented 16,865 16,222 16,370 16,216 16,300 -3% Prepared food 1,909 1,889 1,908 1,931 2,048 7% Fresh vegetables 1,871 1,807 1,878 1,884 1,986 6% Fresh fruit 1,649 1,633 1,608 1,533 1,485 -10% Snack foods 1,332 1,315 1,355 1,407 1,393 5% Pork & products 778 798 793 765 802 3% Pet food 602 597 640 645 751 25% Chocolate & cocoa products 725 749 748 713 713 -2% Tree nuts 686 598 643 696 697 2% Dairy products 554 630 637 641 667 20% Beef & products 900 758 791 745 654 -27% Poultry meat, excluding eggs 594 510 459 406 354 -40% Eggs & products 184 98 102 121 99 -46% Live animals 118 126 251 263 315 167% Corn 212 146 131 309 349 65% Rice 160 148 148 175 194 21% Soybeans 80 106 145 269 181 126% Pulses 54 101 130 62 105 94% Wheat 14 18 17 21 37 164% Source: U.S. Census Bureau Trade Data, BICO-10 groupings, accessed via FAS. USDA, October 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. 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. Selected groupings presented; entries do not sum to total. U.S. dairy exports to Canada increased 20% from 2015 to 2019, but the exports of U.S. poultry meat and eggs declined over 40% during this period (Table 4). In the first calendar quarter after USMCA entered into force in July 2020, U.S. poultry meat exports to Canada were 8% higher than during the same quarter of 2019 and 3% higher than the same quarter of 2018 (Figure 3). U.S. dairy exports to Canada in the third quarter of 2020 were 10% higher than in the year-earlier quarter and 9% above the corresponding quarter of 2018. Although USMCA has expanded access for U.S. eggs and egg products, U.S. exports of these products to Canada have not increased compared to the previous two years. Congressional Research Service 13 link to page 18 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Figure 3. U.S. Dairy and Poultry Product Exports To Canada In Mil ions of Dol ars, First 3 Quarters Of 2018-2020 180 160 20182019 140 2020 120 100 80 60 40 20 0 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 1 Qtr. 2 Qtr. 3 Dairy products Poultry meat Eggs and products Source: U.S. Census Bureau Trade Data, BICO-10 groupings, accessed via FAS. USDA, November 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. Note: Qtr. = quarter. Mexico has accounted for about 13%-14% of the total value of U.S. agricultural exports since 2015. Geographic proximity, growing population, and an expanding economy have increased Mexico’s import demand for consumer-oriented food products like dairy, meats, prepared foods, fruit, vegetables, and other ready-to-eat food products as wel as for pet food. An expanding domestic livestock sector has also increased Mexico’s import demand for U.S. feed grains, soybeans, and other feed and fodders. U.S. agricultural exports to Mexico have thus increased during 2015-2019 period for both bulk commodities and for consumer-oriented high-value products (Table 5.) Consumer-oriented products as a group account for a significant share of U.S. exports to Mexico, and 13% of the total value of exports of this category to al destinations in 2019. This includes 26% of dairy exports, 25% of poultry exports, and 18% of pork exports to al foreign markets.34 During the first three quarters of 2020 (January-August), U.S. exports to Mexico were down 8% in value ($12.96 bil ion), year-on-year, compared to 2019 ($14.08 bil ion). A market analysis report points out that Mexico faced difficulties in transportation and logistics with the outbreak of COVID-19, particularly with regard to a shortage of refrigerated containers,35 which would have affected trade in perishable consumer-oriented food products. 34 Ibid. 35 T ridge, COVID-19 Market Report: Impact of the Coronavirus on Global Agricultural Trade, March 31, 2020, at https://cdn.tridge.com/reports/covid19-market-report-v2.pdf. Congressional Research Service 14 link to page 19 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Table 5. Major U.S. Agricultural Exports to Mexico In Mil ions of U.S. Dol ars, 2015-2019 2015-2019 2015 2016 2017 2018 2019 change Total agriculture 17,695 17,827 18,598 19,090 19,179 8% Total consumer-oriented 8,378 8,051 8,341 8,590 8,962 7% Dairy products 1,280 1,218 1,312 1,398 1,546 21% Pork & products 1,268 1,360 1,514 1,311 1,278 1% Beef & products 1,092 977 979 1,058 1,107 1% Poultry meat, excluding eggs 1,029 931 933 956 1,077 5% Prepared food 705 710 678 743 777 10% Fresh fruit 560 501 570 619 610 9% Tree nuts 269 253 256 371 343 28% Condiments & sauces 218 221 214 215 243 11% Snack foods 293 296 283 320 342 17% Fresh vegetables 123 101 134 141 193 57% Processed fruit 119 112 120 126 135 13% Nonalcoholic beverages 137 116 139 123 149 9% Pet food 67 77 85 90 103 54% Corn 2,302 2,550 2,645 3,061 2,730 19% Soybeans 1,432 1,462 1,574 1,818 1,878 31% Wheat 651 612 852 662 812 25% Feeds & fodders 146 154 158 184 229 57% Coarse grains, excluding corn 78 132 79 39 132 69% Source: U.S. Census Bureau Trade Data, BICO-10 groupings, accessed via FAS. USDA, October 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. 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. Selected groupings presented; entries do not sum to total. U.S. Imports from Canada and Mexico Canada and Mexico are the top two sources of U.S. agricultural imports, and jointly provided 40% of the $131 bil ion of U.S. agricultural imports from al sources in 2019.36 U.S. Imports from Canada Since 2016, Canada has been the second-largest supplier of agricultural products to the United States, accounting for around 18% of the total value of U.S. imports of these products. About two-thirds of al agricultural imports from Canada are consumer-oriented products (Table 6). 36 U.S. Census Bureau T rade Data, BICO-6 groupings, accessed via FAS. USDA, October 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. Congressional Research Service 15 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Table 6. Major U.S. Agricultural Imports from Canada In Mil ions of U.S. Dol ars, 2015-2019 2015-2019 2015 2016 2017 2018 2019 change Total agriculture 21,821 21,526 22,309 23,035 23,612 8% Total consumer-oriented 13,023 13,390 14,115 14,881 15,669 20% Snack foods 3,733 4,015 4,192 4,541 4,815 29% Red meats, fresh/frozen/chilled 2,253 2,217 2,273 2,301 2,444 8% Processed fruit & vegetables 1,421 1,444 1,496 1,611 1,629 15% Fresh vegetables 1,207 1,311 1,414 1,520 1,620 34% Wine and beer 201 184 190 209 246 22% Other dairy products 124 141 184 186 216 74% Other fresh fruit 241 225 224 238 203 -16% Red meats, prepared 124 144 156 173 188 52% Tree nuts 88 82 97 99 96 9% Cheese 29 31 32 36 36 24% Other vegetable oils 1,563 1,812 1,984 1,771 1,790 15% Nursery products 332 352 374 409 462 39% Feeds & fodders 326 312 308 347 355 9% Sugars & sweeteners 367 365 266 279 309 -16% Live animals 1,799 1,482 1,298 1,199 1,366 -24% Wheat 689 412 685 782 416 -40% Teas 90 92 97 86 98 9% Essential oils 78 89 113 88 74 -5% Source: U.S. Census Bureau Trade Data, BICO-6 groupings, accessed via FAS. USDA, October 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. 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. Selected groupings presented; entries do not sum to total. Major consumer-oriented U.S. imports from Canada include snack foods, meats, processed fruit and vegetables, and various dairy products. The United States imports feeder cattle (less than one year old) from Mexico and Canada, which are finished and slaughtered in the United States. A drought-related decline in livestock production in the United States and increased production of corn, rapeseed, and soybeans in Canada, along with prevailing hog cycle dynamics in the three countries, have affected live animal trade patterns, contributing to a decline in U.S. imports of Canadian livestock. Under USMCA, the United States is phasing out tariffs on peanuts, peanut butter, and cotton from Canada. The United States has general y not imported notable volumes of peanuts or cotton from Canada. Imports of peanut butter from Canada were higher for both the second and the third quarters of 2020 compared to the same period during the previous two years. The total value of U.S. peanut butter imports for the January-September period was $51.67 mil ion in 2020 compared to $45.84 mil ion during the same period of 2019 and $43.28 mil ion in 2018. Congressional Research Service 16 link to page 20 link to page 21 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Under USMCA, the United States has also expanded TRQ access for Canadian dairy, sugar, and sugar-containing products. The value of U.S. imports of chocolates and cocoa products did not increase during the third quarter of 2020 compared year-on-year to the value of imports during the previous two years (Figure 4).37 In the first quarter after USMCA took effect, U.S. imports of sugar and sweeteners, at $89.69 mil ion, were 9% higher than during the same quarter of 2019 and 12% above the compared quarter of 2018. Compared year-on-year for the same period, U.S. imports of dairy products from Canada, at $45.60 mil ion, increased 24% ($38.24 mil ion) from 2019 and 51% ($30.3 mil ion) from 2018. Figure 4. U.S. Imports of Canadian Dairy, Sugar, and Sugar-Containing Products In Mil ions of Dol ars, First 3 Quarters Of 2018-2020 400 350 2018 300 20192020 250 200 150 100 50 0 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 1 Qtr. 2 Qtr. 3 Chocolates & cocoa products Sugars & sweeteners Dairy products Source: U.S. Census Bureau Trade Data, BICO-10 groupings, accessed via FAS. USDA, November 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. Note: Qtr. = quarter. U.S. Imports from Mexico Since 2016, Mexico has been the largest supplier of agricultural products to the United States, accounting for a fifth of the total value of U.S. agricultural imports.38 About 90% of al Mexican imports to the United States are consumer-oriented food products, such as fresh fruit and vegetables, processed fruit and vegetables, meats, dairy products, and wine and beer (Table 7). With the exception of live animals, sugar, and unroasted coffee, the import value of al other major food categories increased notably from 2015 to 2019. While USMCA does not change market access for imports from Mexico, the trend of increased imports from Mexico is likely to continue as a consequence of harmonization of nontariff measures. 37 T he chocolates and cocoa product category may include products beyond those covered by the USMCA tariff-rate quota. Under NAFT A, the United States did not have any quota restrictions on Canadian imports containing less than 10% sugar by weight . 38 U.S. Census Bureau T rade Data, BICO-6 groupings, accessed via FAS. USDA, October 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. Congressional Research Service 17 Agricultural Provisions of the U.S.-Mexico-Canada Agreement Table 7. Major U.S. Agricultural Imports from Mexico In Mil ions of U.S. Dol ars, 2015-2019 2015-2019 2015 2016 2017 2018 2019 change Total agriculture 21,034 22,944 24,568 25,941 28,301 35% Total consumer-oriented 18,415 20,788 22,261 23,429 25,866 40% Other fresh fruit 4,280 4,939 5,962 5,824 6,933 62% Fresh vegetables 4,838 5,598 5,472 5,871 6,288 30% Wine and beer 2,727 3,098 3,321 3,601 3,953 45% Snack foods 1,716 2,010 2,109 2,196 2,346 37% Processed fruit & vegetables 1,455 1,526 1,546 1,715 1,842 27% Red meats, fresh/frozen/chilled 1,071 1,089 1,110 1,200 1,373 28% Tree nuts 454 608 599 764 730 61% Fruit & vegetable Juices 302 335 484 445 419 39% Bananas and plantains 134 127 168 205 215 60% Other dairy products 97 109 100 123 159 64% Prepared red meats 18 18 18 21 26 44% Spices 82 83 86 102 110 34% Nursery products 50 50 55 58 63 26% Live animals 888 589 726 841 886 0% Other vegetable oils 119 136 143 187 193 62% Feeds & fodders 20 15 15 20 24 20% Raw beet & cane sugar 405 344 347 445 398 -2% Coffee, unroasted 200 144 183 192 156 -22% Source: U.S. Census Bureau Trade Data, BICO-6 groupings, accessed via FAS. USDA, November 2020, at https://apps.fas.usda.gov/gats/ExpressQuery1.aspx. 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. Selected groupings presented; entries do not sum to total. USMCA’s Potential Trade Effects Beyond NAFTA Many stakeholders have credited NAFTA with facilitating agricultural trade in North America by reducing tariffs and other market access barriers and by providing a stable and improved trading environment in the region.39 Studies conducted to estimate the incremental effect of USMCA indicate modest increases to regional trade in North America. For example, a study commissioned by the Farm Foundation estimated that USMCA would generate a net increase in annual U.S. agricultural exports to Canada of $450 mil ion—about 1% of U.S. agricultural exports under 39 For more information see CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson. Congressional Research Service 18 Agricultural Provisions of the U.S.-Mexico-Canada Agreement NAFTA in 2017.40 Similarly, the U.S. International Trade Commission (USITC) assessed that U.S. agricultural exports would likely increase 1.1% in year six of USMCA implementation compared to its 2017 baseline export levels.41 Another study, conducted by the International Monetary Fund, estimated smal gains in regional trade from USMCA compared with NAFTA; with respect to agriculture, it found modest gains to the region, primarily benefiting Canada.42 A study by economists at the University of Georgia says that USMCA may lead to losses for Georgia’s smal fruit and vegetable producers because of subsidized imports from Mexico.43 The study was limited in scope and did not examine the broader impact of USMCA on other agricultural and nonagricultural sectors, other states, or the effects at the national level for the three USMCA signatories. Issues for Congress Congress has an interest in the implementation of USMCA because of its constitutional authority over foreign commerce and its long-standing involvement in U.S. farm policy. Regarding market access, Congress may monitor Canada’s implementation of its commitments regarding U.S. dairy products, poultry products, and eggs. Some Members of Congress have raised concerns that Canada’s dairy TRQ al ocation may not be consistent with its commitments under USMCA.44 Congress may also monitor the implementation of the various nontariff provisions that the three countries agreed to under USMCA, such as assurances by Canada and Mexico that they wil provide the same treatment to U.S. proprietary food formula and alcoholic beverages as they provide to their domestic products.45 Some Members of Congress have raised concerns that Mexico has not taken actions to fulfil its commitments regarding improving access for U.S. 40 Maksym Chepelie et al., “How Differing T rade Policies May Impact U.S. Agriculture: T he Potential Economic Impacts of T PP, USMCA, and NAFT A,” GT AP Working Paper, no. 84, commissioned by the Farm Foundation, October 2018, at https://www.gtap.agecon.purdue.edu/resources/working_papers.asp. T his study uses the Global T rade Analysis (GT AP) model. For more on the GT AP global consortium, model, data, and publications, see https://www.gtap.agecon.purdue.edu/. 41 USIT C, U.S.-Mexico-Canada T rade Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, Publication Number: 4889, April 2019, https://www.usitc.gov/publications/332/pub4889.pdf. 42 Mary E. Burfisher, Frederic Lambert, and T roy Matheson, “NAFT A to USMCA: What is Gained?,” IMF Working Paper, WP/19/73, March 2019. Note both the Farm Foundation and the IMF study use GT AP Computable-General-Equilibrium (CGE) model. 43 Jeffrey H. Dorfman, Julian M. Worley, and Sharon P. Kane, “T he Impact of the USMCA on Georgia’s Small Fruit and Vegetable Industries,” Policy Brief, April 22, 2019. T he study uses the input -output modeling system, the Impact Analyses and Planning (IMPLAN) model. For more on IMPLAN, see David Mulkey and Alan W. Hodges, “ Using IMPLAN to Assess T he Local Economic Impacts,” accessed October 2020, at https://fred.ifas.ufl.edu/pdf/economic-impact -analysis/using-implan.pdf. 44 29 Group of Senators letter to USDA Secretary Sonny Perdue and UST R Robert Lighthizer regarding enforcing Canada’s dairy commitments and Mexico’s common name commitment, August 25, 2020, at https://www.smith.senate.gov/us-senators-tina-smith-mike-crapo-make-bipartisan-push-enforce-usmca-dairy-provisions; and House Ways and Means Committee, “ Trump Administration USMCA Implementation Rep ort Card,” November 2020, at https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/T rump%20Admin%20USMCA%20Implementation%20Assessment%20.pdf . 45 Some U.S. alcoholic beverages are disadvantaged in retail stores in some Canadian provinces by being assigned less-prominent shelf spaces compared to Canadian products. For more on this issue, see the section on “ Regulatory Requirements Regarding Retail Wine Sales in Canada,” in CRS Report R46242, Major Agricultural Trade Issues in 2020, coordinated by Anita Regmi. Congressional Research Service 19 Agricultural Provisions of the U.S.-Mexico-Canada Agreement cheeses and agricultural biotechnology products46 and that Canada is making insufficient progress toward a protocol to al ow the registration of U.S. wheat varieties in Canada. 47 24F Efforts by the USMCA signatories to establish a coordinated approach for greater harmonization of SPS rules, rules governing trade in products created with agricultural biotechnology, and rules pertaining to geographical indications may also be of interest for congressional oversight. This subject has drawn the attention of some Members of Congress, who have suggested that USTR and USDA use the GI provisions in USMCA as a model for other trade agreements.48 USMCA has also expanded access for Canadian peanut butter, dairy, sugar, and sugar-containing products to the United States. Congress may monitor how this improved access to the U.S. market affects U.S. producers in these sectors and the U.S. rural economy more broadly. Congress may also use its oversight and legislative authority to address the effects of COVID-19 pandemic on greater integration of the North American market. The COVID-19 pandemic has placed unexpected stresses on food supply chains, with bottlenecks in farm labor, processing, transport, and logistics,49 particularly in developing countries such as Mexico.50 According to a report by a market intel igence company, Mexico has faced logistics and transportation difficulties including shortages of shipping containers,51 which could affect Mexico’s ability to trade perishable and packaged food products with the United States. Author Information Anita Regmi Specialist in Agricultural Policy 46 T wenty-nine Senators letter to USDA Secretary Sonny Perdue and UST R Robert Lighthizer regarding enforcing Canada’s dairy commitments and Mexico’s common name commitment, August 25, 2020, at https://www.smith.senate.gov/us-senators-tina-smith-mike-crapo-make-bipartisan-push-enforce-usmca-dairy-provisions; and Senator Ron Wyden Letter to President Donald T rump, October 30, 2020, th at states that Canada’s tariff-rate quota regulations are not consistent with the USMCA text, and that Mexico has not yet translated its obligations to recognize certain common names of cheeses or approve U.S. biotechnology products as agreed under the USMCA. 47 U.S. Senators Kevin Cramer, John Hoeven, T ina Smith, and Steve Daines letter to UST R Chief Agricultural Negotiator Gregg Doud, July 8, 2019, at https://www.cramer.senate.gov/sen-cramer-colleagues-urge-ustr-address-grain-article-concerns-usmca. 48 One hundred eleven Members of Congress Letter to UST R Robert Lighthizer and USDA Secretary Sonny Perdue, Bipartisan Letter to Protect U.S. Food & Wine Exports Using Common T erms, November 2, 2020, at https://www.nmpf.org/wp-content/uploads/2020/11/Letter-House-Common-Food-and-Wine-Terms-Letter-UST R-USDA-11.02.2020.pdf. T he letter states, “ to draw upon the type of precedents and commitments established in the USMCA to further strengthen protections for U.S. producers by negotiating agricultural market access safeguards for products marketed using specific common food terms, traditional terms, or legitimate plant and grape varietals in all future U.S. trade negotiations, particularly those of importance to U.S. cheese, meat, and wine producers.” 49 OECD, “Food Supply Chains and COVID-19: Impacts and Policy Lessons,” June 2, 2020. 50 Piergiuseppe Fortunato, “How COVID-19 Is Changing Global Value Chains,” United Nations Conference on T rade and Development, September 2, 2020. 51 T RIDGE, COVID-19 Market Report: Impact of the Coronavirus on Global Agricultural Trade, March 31, 2020, at https://cdn.tridge.com/reports/covid19-market-report-v2.pdf. Congressional Research Service 20 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 n ot 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 5 · UPDATED 21 ~~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, 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

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

~~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 release, November 30, 2018, https://nfu.org/2018/11/30/usmca-deal-falls-short-of-fair-trade-framework-for-family-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-new-nafta.
40.	Joseph W. Glauber, The Emperor's New NAFTA, FARE Share Newsletter, February 2019; Richard Barichello, The CUSMA: Impacts on the Dairy Sector, FARE Share Newsletter, February 2019; Roger Noll and Robert E. Litan, "Extra Milk Exports to Canada Under Trump's Rebranded NAFTA Will Be a Drop in the Bucket," Brookings Institution, October 8, 2018.
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, "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, "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.	For more information, see CRS Report R44981, NAFTA Renegotiation and the Proposed United States-Mexico-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."