The past week marked three major breakthroughs for the Trump administration — and for the U.S. farmers who depend on trade relationships with Pacific Rim nations.
First, the U.S., Mexico and Canada announced they had come to terms on a rewrite of the North American Free Trade Agreement. Now called the United States-Mexico-Canada Agreement, or USMCA, it addresses the shortcomings of NAFTA. President Donald Trump on Monday said the new deal “solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our farmers and manufacturers, reduces trade barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world.”
Though much of the new agreement mirrors NAFTA, it includes a section that allows more U.S. dairy exports to Canada — 3.6 percent of that nation’s market. It also requires Canada to scuttle its Class 7 pricing that kept U.S. dairy products out of that market.
Canada will also allow more access to U.S. poultry and eggs, and British Columbia will sell U.S. wine at its government-owned liquor stores. At the same time, Mexico is opening the door to more U.S. cheese.
Second, the administration announced the signing of a revised trade agreement with South Korea. Called KORUS, the deal mainly focuses on the importation of automobiles between the two nations. But an important point to note is the sections related to U.S. agricultural exports to South Korea were not lost in the discussion. They remained intact.
That in itself is crucial for U.S. farmers and ranchers, who last year sold $1.2 billion in beef, $705 million in corn, $490 million in fruit, $475 million in pork and $328 million in wheat to South Korean customers.
Third, and as importantly, President Donald Trump and Japanese Prime Minister Shinzo Abe announced the beginning of talks aimed at a new bilateral trade agreement between their nations. Trump was following through on the promise he made when he scuttled U.S. participation in the Trans-Pacific Partnership trade agreement. Both Trump and his Democratic challenger, Hillary Clinton, had promised to toss that agreement on the trash heap.
The remaining 11 members of the TPP adopted the agreement without the U.S. That worried many U.S. farm groups, because Japan is a large customer of such commodities as corn, wheat and beef.
It’s been 20 months since Trump took the U.S. out of the TPP, and the delay made farmers nervous, as they saw TPP participants such as Canada and Australia preparing to enjoy low- and no-tariff access to Japanese customers. Not having any sort of trade deal with Japan, the fourth-largest foreign customer for U.S. farmers, would be costly. The top-selling U.S. ag goods in Japan last year were corn, at $2.1 billion; beef and beef products, at $1.9 billion; pork and pork products, at $1.6 billion; soybeans, at $947 million; and wheat, at $713 million.
Trade deals cannot be negotiated overnight. A new agreement with Japan is likely to require a lot of give-and-take, as both nations are important customers of the other.
Having a trade agreement between the U.S. and Japan is critical. We assume the deal will be far better than the TPP was for the U.S. Listening to Trump, it couldn’t be worse.
In the meantime, the U.S. should be courting a lot of other nations and trade blocs. Our hope is last week was just the beginning of a lot of new announcements on trade talks and agreements.