After campaigning to improve various U.S. trade agreements way back in 2016 and withdrawing the United States from the Trans Pacific Partnership (TPP) as one of his first actions after being sworn in as president, it was not surprising to the industry when President Trump indicated his intentions to renegotiate NAFTA more than one year ago. While the dairy industry generally welcomed the renegotiation process — while stipulating that access to Mexico must be preserved and export access to Canada is ultimately desired — the renegotiation was still a nerve-wracking process that felt like it could derail at any moment. Finally, during the late hours of Sept. 30, Mexico, Canada, and the United States announced terms of a new trade agreement to be named the United States-Mexico-Canada-Agreement, or USMCA for short.
While not an acronym that rolls off the tongue, the industry was initially comforted by several provisions within the text of the new agreement that appear positive for U.S. dairy. Primarily, the increased dairy market access to Canada was welcome news that the industry has sought for years. While all food and agricultural products that had access to Canada under NAFTA will continue to have zero tariffs, Canada provided new tariff rate quotas specifically to the United States in a wide variety of dairy products, including fluid milk, cheese, butter, skim milk powder (SMP) and whey. The access increases steadily into year six and then grows at 1 percent per year for another 13 years. The access granted to Canada was greater than what the United States would have gained under the proposed TPP agreement.
In addition to market access, a key benefit not only for the United States but for all key global dairy exporting regions is Canada’s commitment to eliminate the Class 6/7 milk price system that valued Canadian SMP exports at among the lowest globally. Six months after the enactment of the agreement, Canada will price skim solids on a value no lower than U.S. nonfat dry milk values, according to the USTR.