Accusing Canada of backsliding on its commitments, the United States requested consultations on Wednesday with its northern neighbor over dairy import quotas that limit American access to the Canadian market. U.S. trade representative Katherine Tai said Canada has expanded its restrictions despite being the loser in a USMCA trade ruling.
In the first decision under the new North America trade pact, a three-judge dispute settlement panel ruled that Canada had manipulated its tariff-rate quotas to limit imports of U.S. dairy products, despite agreeing to greater U.S. access in the 2020 agreement. Agriculture Secretary Tom Vilsack said the ruling was a signal of U.S. resolve against unjustified trade restrictions anywhere.
The Biden administration elevated a long-simmering dispute over Canadian dairy quotas on Tuesday by calling for a three-judge panel to decide the matter under USMCA rules. It was the first time that a dispute settlement panel was invoked under the trade agreement that took effect last July 1.
Trade ministers from Canada, Mexico and the United States are scheduled to confer digitally on Monday and Tuesday in the first meeting of the USMCA's Fair Trade Commission, with dairy expected to be the hot topic. U.S. dairy groups called on Sunday for the Biden administration to escalate an ongoing complaint against Canadian dairy quotas unless this week's meeting produces results.
U.S. farm exports are forecast by the USDA to hit a record $157 billion this year, aided by a weaker dollar against many foreign currencies. Agricultural lender CoBank says the impact will be somewhat uneven, with meat and dairy products benefiting the most.
The Trump administration said it was challenging Canadian quotas on dairy imports as unfair to U.S. milk producers. The challenge, announced on Wednesday, was the first under the United States-Mexico-Canada free trade agreement.
President Trump led a 37-minute celebration of the new NAFTA on Wednesday, signing the United States-Mexico-Canada Agreement on the White House lawn during a ceremony packed with laudatory descriptions of the “very, very special” tri-national free trade agreement.
U.S. farm groups celebrated anew on Monday Japan’s agreement to reduce or eliminate tariffs on $7.2 billion worth of American goods, including beef, pork, poultry, wheat, cheese, wine, and ethanol. President Trump used the ceremonial signing of the pact at the White House to urge congressional approval of the United States-Mexico-Canada Agreement.
To speed approval of the successor to NAFTA, President Trump should remove tariffs on steel imported from Canada and Mexico, said Senate Finance Committee chairman Chuck Grassley on Monday.
Although President Trump declared the United States-Mexico-Canada Agreement a big win for U.S. farmers, a study released on Wednesday says U.S. farm exports will fall by $1.8 billion due to retaliatory tariffs by Mexico and Canada. That would be four times larger than the gains the trade pact would produce.
Wheat and dairy groups were guarded in their assessments of the North American trade pact, while Agriculture Secretary Sonny Perdue asserted on Thursday the agreement "is locking up two of our top three markets for the future." The administration says the agreement, which needs approval by Congress, will enable fairer trade in food and agriculture but has not suggested what additional trade flow to expect.
President Trump veered between predicting easy approval of the new Canada-Mexico-U.S. trade agreement and expressing concerns about opposition to the pact on Monday while declaring that the agreement “is a very, very big deal for our farmers.”
Agriculture Secretary Sonny Perdue described a potential tri-national agreement on a new NAFTA as the start of a domino effect in rewriting U.S. relations with trading partners around world. "I would love to have a deal today with Canada to put NAFTA back together," said Perdue during a C-SPAN interview in which he called for reform of Canada's supply-management system."
Dairy is not the only agricultural dispute between the United States and Canada, but it is the biggest one, according to Agriculture Secretary Sonny Perdue. Senior U.S. officials say the new NAFTA must include greater U.S. dairy access to Canada.
In a video posted Monday on social media, the U.S. cattle industry predicted it would be shut out of the Chinese market and lose an estimated $70 million in beef sales this year due to retaliatory tariffs. Groups representing pork and dairy producers expressed similar concerns.
Agriculture Secretary Sonny Perdue was quick to say he's not a NAFTA negotiator but he repeatedly told reporters during a visit to Prince Edward Island that "it is not our desire to do away with" Canada's supply management system for dairy – if Canada does a better job of managing the supply. "They can't use the supply management system to negatively affect our producers south of the border," said Perdue during a teleconference.
The U.S. dairy industry launched the “Got Jobs?” campaign on Monday to highlight the importance of the dairy sector and build support for dairy exports, which account for about 14 percent of U.S. milk production.
Negotiations for the new NAFTA will resume in late February in Mexico City, with agricultural trade among the undecided issues. Canadian trade groups said there was progress on agricultural biotechnology and on food safety rules during a week of work in Montreal. U.S. trade representative Robert Lighthizer said he hoped for "major breakthroughs" in the interim. "We owe it to our citizens, who are operating in a state of uncertainty, to move much faster."
In a letter to leaders of the NAFTA nations, seven wheat groups that span the continent and represent a range of players, from growers to millers to bakers, said an updated NAFTA that continues duty-free agricultural trade is critical to their success.