Leading role for dairy in new NAFTA agreement

The United States (US) and Canada have signed a new NAFTA agreement. One of the conditions that the US has been able to enforce is that the dairy sector will have better access to Canada.

During his presidential election campaign, it became clear that US President Donald Trump was not in favor of NAFTA: the free trade agreement between the US, Canada and Mexico. Canada and Mexico would benefit more from the treaty than the US. Trump therefore called NAFTA a terrible trade deal.

In recent months, Trump has repeatedly threatened to from the treaty action if no adjustments were made. Intensive negotiations have taken place in recent days and both countries have reached an agreement just before the deadline. The penultimate version of the treaty dates back to 1994.

More dairy, fewer cars
The latest version is called: United States-Mexico-Canada Agreement (USMCA). In this, the US has forced the dairy sector to have better market access to Canada. On the other hand, cars produced in Canada are less likely to cross the US border. Further final details are not yet known.

Although at first sight the adjustments have a negative effect on Canada, the Canadian government is satisfied with the treaty. Canadian Prime Minister Justin Trudeau spoke of a good day for his country.

High import duties
Canada is an important market for the American dairy sector. After Mexico, Canada is the most important buyer. For example, in 2017 the country imported $690 worth of American dairy and in recent years there has been a slightly increasing trend. Nevertheless, some dairy products were subject to high import duties.

Canada, for example, applied a levy of no less than 247,5 % on yogurt if the volumes set quota exceeded. This to great Trump's annoyance† Quotas and tariffs may be relaxed in the new treaty.

In the month of August, the US already made similar adjustments with Mexico. This included measures to protect the American auto industry from the low wages in Mexico.

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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