How USMCA Misses the Mark for U.S. Farmers and Ranchers

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The Organization for Competitive Markets (OCM) is gravely disappointed that the economic viability of America’s farmers and ranchers has once again been left out of the U.S., Mexico, and Canada trilateral agreement.

History shows that major multinational trade agreements like the U.S.-Mexico-Canada Agreement (USMCA) are only renegotiated once in a generation. USMCA’s predecessor, the North American Free Trade Agreement (NAFTA), was executed 27 years ago, in 1992. USMCA is a 16-year agreement with an option for an additional 16-year term. For today’s farmers and ranchers, this was the Administration’s and Congress’ chance to balance the benefit of trade with our neighbors, and they failed. Given the dire straits of today’s farm economy, it may have been the last shot.

USMCA makes some advances by improving labor standard provisions, eliminating the Investor State Dispute Settlement (ISDS) arbitration procedures and thereby stripping foreign investors and corporations from the right to bring legal action against U.S. health, environmental and other public welfare laws and regulations, and amending the original version to address concerning issues within the pharmaceutical industry. However, the fact remains that like its predecessor, NAFTA, USMCA fuels the consolidation and monopolization of food and agriculture, and is harmful to the survivability of America’s independent farmers and ranchers.

The Trump Administration touts the increase in dairy exports into Canada as a victory for America’s dairy farmers. OCM disagrees. While USMCA increases U.S. dairy exports into Canada from 1% to 3.6%, this is no windfall for U.S. dairy farmers. Any benefit that the increase in exports represents will be realized by international dairy processors.

Similar to the U.S. dairy market, the Canadian market is on the decline. Since 2004, the Canadian per capita dairy consumption has dropped by 25% to a new low of 65.9 liters per capita. USMCA will disrupt Canada’s effective dairy management policy, driving Canadian dairy farmers out of business. U.S. dairy policies have allowed for the overproduction of milk, while lax antitrust laws and enforcement have paved the way for a heavily concentrated market. Vertical integration of the dairy industry by global retail giants like WalMart has put additional pressure on the dairy market. Recently, WalMart’s decision to produce and process its own milk was cited as a contributing factor in the bankruptcy of Dean Foods, one of the largest U.S. dairy processors. Because the USMCA fails to address the real issues facing North American dairy farmers – consolidation, overproduction, and a lack of supply management – U.S. dairy farmers will only experience more of the same and Canadian dairy farmers will join in their pain

Not unlike other trade agreements the U.S. has entered into, USMCA reduces U.S. sovereignty by turning decision-making authority over to a group of foreign representatives at the World Trade Organization (WTO). The WTO is led by a Brazilian career diplomat, Director-General Roberto Azevedo. 

In its effort to advance globalization and extend greater global market control to a handful of multinational corporations, the Clinton Administration was the prime advocate for the formation of the WTO. Cattle and hog producers know better than anyone in farm country how economically devastating giving up U.S. sovereignty in a trade agreement can be. Using the terms of NAFTA, the National Cattlemen’s Beef Association and other global agriculture trade and lobbying organizations joined Mexico and Canada in appealing to the WTO to force an end to the U.S. mandatory Country of Origin Labeling (COOL) on both beef and pork. In 2015 they were successful, and Congress bowed to the demands of WTO by repealing COOL on both beef and pork. This one instance of the U.S. forfeiting its sovereignty in a trade agreement cost U.S. cattle producers millions of dollars. OCM’s pricing research demonstrates that the 2016 fall of almost 50% in the price U.S. cattle producers received for their calves can be tied to the abandonment of COOL.

Even in light of the Trump Administration’s effort to weaken the WTO, USMCA continues the forfeiture of U.S. sovereignty. Article 3, Section 3 requires the U.S. to work at the WTO with Mexico and Canada “with the objective of substantial progressive reductions in support and protection resulting in fundamental reform.” With the U.S. experiencing one of the worst economic farm crises in over 30 years, the Administration and Congress should not be turning over farm policy decisions to a group of WTO representatives who very well may not have U.S. farmers’ interest at heart. 

What is most alarming is not what is in the USMCA, but what is not. It does not fix the economic disparity farmers and ranchers experienced under the terms of NAFTA. NAFTA failed to require adequate U.S.-based environmental, labor, and fair market standards. This omission, in conjunction with the removal of the power of the U.S. to set tariffs on lower standard products, allowed multinational corporations to take their production, processing, and manufacturing business to the lowest-cost country.  U.S. manufacturers and processors streamed across the border to Mexico and a steady stream of lower standard products flowed back across the border into U.S. markets. 

While global agriculture interests point to increased exports of grains like corn from the U.S. to Mexico, U.S. corn growers did not see any of this increased market opportunity show up in their bank accounts as increased profit on their farms. Today U.S. grain farmers continue to receive a price for their grain far below the production cost. This is in spite of exports to Mexico increasing by as much as five times. The USMCA at best only guarantees more of the same for America’s grain farmers

The most egregious USMCA omission is the lack of COOL authority. The best opportunity the Administration had to remedy the repeal of COOL on behalf of cattle and hog producers was the USMCA. In negotiating this agreement, the Trump Administration had at the table the very countries which had filed WTO action against the U.S. labeling policy, the very countries that cost U.S. producers millions of dollars. The Administration could have–and should have–made COOL authority a top priority in its trade negotiations, but it did not.

OCM opposes the ratification of the USMCA. Our concern is not so much for what USMCA does, but rather what it fails to do. NAFTA provided windfall profits for global corporations at the expense of America’s independent farmers and ranchers. USMCA does not tilt the scales of justice back to the farmer and rancher. It does not address excessive agriculture and food market concentration, the overproduction of milk, the disparity in grain pricing, nor does it provide the U.S. with mandatory Country of Origin Labeling authority.

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