“Our farmers have been waiting in uncertainty for more than a year for USMCA to get done,” said Brody Stapel, president of Edge Dairy Farmer Cooperative and a dairy farmer in eastern Wisconsin. “So it’s certainly good news to see the deal take this significant step forward. There are more steps to be taken, however, so we are not breathing a full sigh of relief. We call upon House leadership to swiftly bring USMCA to the floor and for representatives to pass it. There is too much at stake to wait any longer.”
Approval by Christmas appears cloudy at best, according to Denise Bode, partner in Michael Best Strategies, a business consulting firm specializing in state and federal policy issues. U.S., Mexico and Canada trade leaders met in Mexico on Dec. 10 to sign the revised pact, but it still requires ratification by all three countries.
In the U.S., the House Ways and Means Committee is expected to waive its time on mock-ups to send the deal straight to the floor for a vote, Bode said. House Ways and Means Chairman Richard Neal (D-Massachusetts) said it's likely the deal will be voted on the House floor during the week of Dec. 16. The House recently extended its work calendar until Dec. 20 before breaking for the holidays and will return on Jan. 7, 2020.
However, Bode said, Senate Majority Leader Mitch McConnell (R-Kentucky) told reporters the Senate will not take up the trade deal in December. He said consideration of USMCA will “happen in all likelihood right after” an impeachment trial for President Donald Trump.
Outside the U.S., Mexico ratified the original 2018 version of USMCA, but the changes announced in early December 2019 will need to be ratified. Mexico is expected to do so in the coming days given that its Senate leaders have already offered support for the revised pact, Bode said.
A bill to pass USMCA is unlikely to be introduced in Canada's Parliament until late January because its House of Commons will break for the holidays on Dec. 13, according a Canadian government official. The body is scheduled to return on Jan. 27, 2020.
Dairy’s impact weighed
Canada and Mexico are the two largest export markets for U.S. food and agricultural products, totaling more than $39.7 billion food and agricultural exports in 2018. According to information from the International Dairy Foods Association (IDFA), U.S. dairy exports to Mexico and Canada totaled more than $2.1 billion in 2018, or roughly 40% of total U.S. dairy exports.
In general, USMCA preserves the U.S. dairy market in Mexico and increases market access to the Canadian dairy market. When the USMCA agreement was first announced in October 2018, the U.S. dairy industry was seen as a big winner, even though some of the dairy provisions were scheduled to be phased in over more than a decade. For example, the agreement phases in Canadian market access for U.S. dairy products, in most cases in 1%-per-year increments, over periods of six to 13 years. (Read: Trade deal seen as victory for U.S. dairy and Market Access and Dairy Outcomes of the USMC Agreement.)
Of more immediate requirements, Canada must eliminate milk price Classes 6 and 7 within six months after the trade agreement is implemented. Creation of Class 7 in 2017 resulted in the loss of markets for U.S.-produced ultrafiltered milk and ultimately forced termination of milk contracts for some U.S. dairy farmers. (Read: Milk with no home: Producers, processor face challenging times and Dairy fight with Canada escalates as U.S. farmers face loss of milk market access on May 1.)
Canada must ensure the price for skim milk solids used to produce nonfat dry milk, milk protein concentrates and infant formula will be set no lower than a level based on the U.S. price for nonfat dry milk. Canada has also committed to adopt measures designed to limit the impact of any surplus skim milk production on external markets.
As originally approved, the U.S. and Canada agreed to review the agreement after five years and every two years thereafter to assist with monitoring implementation of Canada’s new program.
Final hurdles
While many of the USMCA provisions have been in place for more than 13 months, the latest revisions addressed labor, environment and prescription drug provisions, among others, and makes it easier to enforce standards and litigate disputes, according to a fact sheet distributed by House Democrats.
The latest revisions are also seen as strengthening dairy interests.
“The enhanced dispute settlement process will improve dairy provisions enforcement capabilities with Canada and provide security with long-time trading partner Mexico, including supporting common cheese names, maintaining the use of generic terms such as parmesan and feta,” said Jeff Lyon, FarmFirst Dairy Cooperative general manager.
“Newly announced improvements to USMCA will also ensure that if our trading partners flout their dairy obligations under the trade deal, the U.S. has the tools it needs to vigorously enforce our rights,” said Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF). “An already good deal for U.S. dairy farmers is even better now, thanks to these changes.”
“Washington has worked hard to make USMCA an even better deal for America’s dairy farmers and exporters; now we are counting on Congress to move expeditiously to pass USMCA and usher in its significant improvements to trade rules,” said Tom Vilsack, president and CEO of the U.S. Dairy Export Council. “Finalizing USMCA will bolster international confidence in the U.S. as a serious negotiating partner and build momentum for other trade agreements in key markets abroad. Without this crucial trade agreement, made-in-America dairy and agriculture products could be left behind in the new year.”
A long wait
“The agriculture industry has been eagerly awaiting the passage of the USMCA, especially dairy,” said John Rettler, dairy farmer from Neosho, Wisconsin, and president of FarmFirst Dairy Cooperative. He cited research from Purdue University economist Maksy Chepeliev, who estimated U.S. dairy exports could increase by over $280 million, or approximately 5% of total dairy U.S. exports, under the USMCA.
IDFA President and CEO Michael Dykes anticipates the USMCA will provide a brighter future for U.S. dairy companies.
“Once ratified, the new USMCA deal also delivers peace of mind for our businesses, removing the handcuffs of uncertainty that have constrained business decisions over the past two years as the deal was negotiated. Make no mistake about it, for the U.S. dairy industry – farmers, processors and suppliers – the USMCA deal is a major win that levels the playing field with our largest trading partners.”
“Passing USMCA would be boon to America’s dairy farmers,” said NMPF’s Mulhern. “USMCA will expand trade opportunities with our most valuable partners and secure immediate benefits for our rural communities, adding an estimated $548 million to dairy farm revenues in its first six years after implementation.” 
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Dave Natzke
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