United States-Mexico-Canada Agreement (USMCA) Approaches the Starting Block, Offers Growth Opportunities for Agriculture

The United States-Mexico-Canada Agreement (USMCA) is a new economic and trade agreement that modifies the terms of the free-trade area originally established in 1994 by the North American Free Trade Agreement (NAFTA). As of March 13, 2020, all three member countries had ratified the USMCA, and the new agreement will take effect on July 1, 2020. Agriculture is one of the major sectors that will be affected by the USMCA.

USMCA builds on some features of NAFTA, which progressively eliminated almost all tariff and quota barriers governing intraregional trade among the three member countries during a 14-year transition period (1994–2008). NAFTA, like USMCA, also required that sanitary and phytosanitary standards for trade be scientifically based and expanded cooperation on environmental and labor issues. USMCA adds new provisions for digital trade, the protection of intellectual property, higher thresholds for the tax-free treatment of shipments to Canada and Mexico, and financial services. It also includes commitments by Mexico to specific legislative actions concerning collective bargaining, and the creation of a mechanism for the monitoring and expedited enforcement of labor rights in Mexico.

All agricultural products that had zero tariffs under NAFTA will continue to have zero tariffs under USMCA. The new agreement also adds provisions on biotechnology, geographical indicators, and sanitary and phytosanitary measures and provides broader market opportunities for U.S. exports to Canada of dairy, poultry, and egg products. These new provisions, coupled with the continuation of intraregional free trade in almost all agricultural products, build the foundation for further agricultural trade growth among the United States, Mexico, and Canada.

Agriculture has a large stake in interregional trade and the North American free-trade area (United States, Canada, and Mexico) created by NAFTA and sustained by USMCA. In 2019, the total value of intraregional agricultural trade (exports and imports) among all three NAFTA countries reached about $95.3 billion, compared with $16.6 billion in 1993 (the year before NAFTA’s implementation). When the effects of inflation are taken into account, this expansion in intraregional agricultural trade corresponds to an increase of 252 percent between 1993 and 2019.