G20: USMCA Gets Signed, Hither The Soybean File

I’ve written about free trade with the United States and Canada for over 30 years now. In fact, when I first started writing about free trade with the United States it was in the 1980s, and I didn’t really believe it would ever happen. Here we are 30 years later and Friday morning in Argentina, Canadian officials once again will be signing the latest iteration of free trade with the United States. It was announced late today that Prime Minister Justin Trudeau, US President Donald Trump and Mexican President Enrique Pena Nieto would be signing the new agreement Friday morning at the G20.

As I’ve said many times, free trade agreements with United States are always about what the Americans deem it to be. It only stands to reason that the country with the biggest economy generally dictates the terms. This was true in 1988 and it certainly is true in 2018 as a Trump administration played hardball with Canadian negotiators, especially after the imposition of steel and aluminum tariffs on Canada. Doing it on “national security” grounds was insulting, but at the end of the day none of it matters. The new USMCA is making Canadian agriculture much poorer. However, it is the price we paid to get the greater agreement.

The price Canadian agriculture paid was greater access to our supply managed agricultural markets. There was little gain and on other facet of our agricultural trade with United States. The erosion of our Canadian supply managed market sector means Ontario and Quebec agriculture will be poorer, which makes the rest of us the same way. With the signing taking place Friday morning in Argentina, many dairy organizations in Canada are disappointed. Many have made last second requests for Canada not to sign.

Dairy producers have much to worry about with this agreement, but something called the “USMCA annex on agricultural trade” is particularly troubling. It is part of the agreement where Canada agrees to notify the Americans in case we change our tariff schedule. Clearly, it is far more complicated than that, but dairy organizations are saying this clause grants the Americans “oversight” into the administration of our Canadian dairy system.

We will be signing this agreement with tariffs on steel and aluminum still in effect. That doesn’t seem to add up from a Canadian perspective, but the Americans have dug in. Regrettably, sovereignty is something we as Canadians gave up in this agreement. Being stuck between a rock and a hard place is never a good place to be.

It is one thing to get the USMCA signed at the G 20, but that’s not really something the agricultural world is watching. Everybody wants the China US soybean trade problem solved. Soybean exports from the United States are down 40% from a year ago. According to Rabobank, China has bought just 339,000 Metric tonnes of US soybeans in this new market year, which represents just 2.5% of the 13.3 million metric tonnes China bought from the US in the same period last year. I think by now we all know the story. Chinese tariffs on US soybeans have been a disaster for American farmers. Putting this to bed at the G 20 would put a bit of zip back into our step.

With $200 billion of tariffs already slapped on Chinese goods into the United States, which will be a tall order. President Trump is also threatened to impose another $267 billion worth of tariffs on Chinese goods in January. At the same time, the American president has tweeted out that he was hoping for some type of trade deal with China, making it so difficult to know what is really happening.

At the same time there was some major economic news last week with General Motors closing several plants across United States and in Oshawa Ontario. Then we had the little dustup between Russia and Ukraine near the sea of Azov, which is a major thoroughfare for Russian grain to get to market. Western countries have condemned the Russian move and Ukraine has declared martial law. None of that was good and it is certainly something that the G20 leaders will be talking about this weekend.

There is much too and fro with these global economic challenges as well as some of these geopolitical strategic interests. Tariffs certainly affected General Motors decisions, and the problems in Russia and the Ukraine certainly could affect the grain trade. Having Putin, Trump and Jinping in the same meeting at least provides the provocateurs a forum to come to some solutions.

Of course, there are some big egos there too. Needless to say, we’ll get the USMCA done. I hope the soybean file gets done too.