USMCA: Update on the status and importance of USMCA and the TPA process

Jul 16, 2019

By Hanna Abou-El-Seoud • From Summer 2019 American Soybean Magazine

After almost a year of negotiations to update the North American Free Trade Agreement (NAFTA), the U.S., Mexico and Canada signed the United States-Mexico-Canada Agreement (USMCA) on Nov. 30, 2018. USMCA is a trilateral agreement that will return market certainty to these export markets for soybean growers.

Trade is the most important issue for soybean farmers. Soybeans and soy products are America’s leading agricultural export with an export value of over $28 billion last year (2018). We export more than 60% of our soybean crop. Therefore, it is critical to maintain existing global markets for soybeans, as well as to expand markets through finalizing and reaching new free trade agreements.

NAFTA created one of the world’s largest free trade zones, laying the foundation for strong economic growth and rising prosperity in the United States, Canada and Mexico. Since the enactment of NAFTA, soy exports to Mexico quadrupled. Mexico is the number two buyer of U.S. soybean meal ($579 million), the number two buyer of U.S. soybean oil ($202 million), and the number two market for U.S. whole beans ($1.5 billion). In addition, the enactment of NAFTA saw soy exports to Canada double. Canada is the number four buyer of U.S. soybean meal ($317 million) and the number seven buyer of U.S. soybean oil ($26 million). Overall, Canada and Mexico represent the top two export destinations for almost all U.S. agriculture products, totaling roughly $39 billion in U.S. agriculture exports every year.

Passing USMCA would not only ensure the gains already achieved through NAFTA, but also it would modernize our trading relationship by ensuring farmers access to a robust and vital marketplace, providing countless jobs, and boosting the national and rural economy. The USMCA maintains zero tariffs on U.S. soybeans and soy products and provides the highest enforceable sanitary and phytosanitary standards of any trade agreement to date. It will also be the first trade agreement to include an enforceable agricultural biotechnology chapter to support 21st century innovations in agriculture. Lastly, USMCA will improve transparency and foster consultations on matters affecting trade among these countries, as well as create a rapid-response mechanism to address trade challenges.

The USMCA will need to be ratified by Congress using the Trade Promotion Authority (TPA) timeline and process. Now that the agreement has been signed and the International Trade Commission (ITC) has issued its report, the Administration is free to send the draft text of USMCA to Congress. Once it sends the draft text, the Administration will have 30 days to send the final text to Congress. After the final USMCA text arrives in Congress, the House and Senate will have a roughly 90-day window to go through a series of Committee hearings culminating in an up or down vote on USMCA.

Support for USMCA in Congress is growing, and the resolution to the Section 232 steel and aluminum tariffs on Canada and Mexico cleared one of the big hurdles to passage of USMCA. However, many Members of Congress are still looking for a solution to outstanding concerns on labor, the environment, and biologics.