View from the U.S.: analysts discuss trade deal

(Reuters) — The United States and Canada forged a last-gasp deal on Sunday to salvage NAFTA as a trilateral pact with Mexico, rescuing a three-country, $1.2 trillion open-trade zone that had been about to collapse after nearly a quarter century. Here’s what analysts think of the new deal:

John Bode, president & CEO, U.S. Corn Refiners Association:

“This is a milestone. Mexican and Canadian markets are very important to American farmers, ranchers, and agribusiness. We commend President Trump for his efforts to conclude this trilateral agreement. We look forward to reviewing the agreement text released today.”

Randy Gordon, CEO, National Grain & Feed Association, and Gary Martin, CEO, North American Export Grain Assoc.:

“Given the integrated nature of the North American economy, including within the food and agricultural sector, it was extremely important to reach a trade agreement that included all three countries.

“Our industry is encouraged about reports that the final agreement takes steps to modify some existing impediments to agricultural trade, including dairy, and will preserve some form of the trilateral Chapter 19 tariff dispute-settlement mechanism contained in the North American Free Trade Agreement.”

Matthew Shay, president & CEO, National Retail Federation:

“We are pleased a deal has been reached that preserves NAFTA’s trilateral framework, which is critical to protecting North American supply chains that support millions of American jobs. The administration, as well as officials from Canada and Mexico, should be applauded for months of hard work aimed at modernizing NAFTA for the 21st century — a goal retailers have shared from the start.”

Geoff Freeman, president & CEO, Grocery Manufacturers Assoc.:

“U.S. consumers rely on the high-quality ingredients and affordable products made possible through trade with our closest neighbors. This trade has quadrupled since NAFTA went into effect more than two decades ago, totaling nearly $18 billion in 2017. Canada and Mexico buy about half of all U.S. processed product exports, and this agreement will expand that success.”

Michael Dykes, president & CEO, International Dairy Foods Assoc.:

“Having this agreement be trilateral is very important. We are pleased to see the negotiators preserved access with our number one customer, Mexico. For Canada, our priorities included increased market access and my understanding is we did get that.

“We are pleased with the negotiators and are pleased with the priority they placed on the dairy industry.”

Chief Edward R. Hamberger, Assoc. Of American Railroads:

“The free flow of goods across North America without burdensome tariffs is a net positive for U.S. workers, bedrock industries and the economy.”

Eric Meyer, president, Highground Dairy (Chicago):

“Nothing but good news here for the U.S. dairy industry. Class 7 milk pricing in Canada caused problems for U.S. manufacturers in two different ways. First, it stopped the flow of ultra-filtered milk, a concentrated skim solids ingredient that was used to boost protein content in cheese and yogurt made in Canada.

“Second, the pricing system allowed for Canada to be competitive to export their excess skim milk powder, taking away market share from the U.S.. Eliminating the Canadian Class 7 pricing system could open these markets back up to U.S. processors. Lastly, any further opening of the Canadian market to general imports is helpful to the U.S. dairy industry. While exact details of the agreement between Canada and the United States have yet to be released, there is nothing at the core of the agreement that looks bearish to the U.S. dairy industry and should lead to a boost in export demand for U.S. dairy products.”

Don Roose, president, U.S. Commodities (Iowa):

“It opens up the trade for a lot of different agricultural products. I don’t know if (the USMCA) was a surprise; it was definitely a positive for all the ag markets, for the psychology of the markets. Pushing forward to the EU and Japan talks – those are probably as dominant (for the market) as NAFTA.”

Shaun Osborne, chief Fx strategist, Scotiabank (Toronto):

“Looking at the price action last week the Canadian dollar outperformed, so there may have been some inkling in the markets that with this sort of self-imposed deadline that we had at the end of September that we could get something or should get something, but we have run into a lot of those soft deadlines before and nothing of consequence has happened. I don’t know that anyone was overly convinced that we would get something necessarily this weekend but I think most people viewed a trade arrangement would be bound at some point.

“The good news is that the risk of bad news has been removed. I don’t think there’s anything here that really changes the medium term outlook for the Canadian dollar or the Canadian economy, it’s just removed an uncertainty.”

David Kelly, chief global strategist, JPMorgan Funds:

“The most significant thing about this new deal is that they changed the name. Reading it, it really is tweaks to NAFTA, but at least some of them in a positive direction from the economic perspective.

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