Economic Outlook
ECONOMIC FORECAST USMCA, China, Farm Bill Things to Watch Heading Into 2019 BY GARY LATTA
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n the final hours of Sept. 30, it was announced that the U.S. and Canada had reached an agreement on trade. The new trilateral pact would replace the North American Free Trade Agreement with the new U.S.-Mexico-Canada Agreement, referred to as the USMCA. The USMCA includes important dairy trade provisions, particularly with Canada. In late August, the U.S. had reached a trade agreement with Mexico and craftily played it against Canada to parlay a deal there, as well. Canada did not want to be left out of any North American agreement and so was under intense final-hour pressure to accept changes to its existing dairy program. Mexico 10 • Northeast Dairy Foods Association, Inc.
and Canada are the two biggest export destinations for U.S. dairy products. China was the third largest. The agreement with Mexico included several provisions important to agriculture, such as biotechnology research exchange, increased transparency, limiting trade-distorting policies and more uniform product grading. The U.S. and Mexico also agreed to refrain from using geographic indicators, which restrict the marketing of cheese with common names like Swiss, provolone, ricotta and others. The European Union has been actively working to restrict the use of many such names. The final piece of the USMCA contract was securing concessions from
Canada regarding its import restrictions and eliminating its relatively new Class 7 pricing mechanism. Canada had created the new lower-priced Class 7 in early 2017 primarily to restrict U.S. competition for dairy protein concentrates, whole milk powder and skim milk powder used to make cheese, yogurt, infant formula and other products. Canada had used this lower price to not only restrict U.S. imports but to increase sales into the international market. Under the terms of the new agreement, these Canadian products will be priced at the U.S. price. Following a Congressional review process and formal signings by all three countries, the new USMCA will likely be in place