The fate of the United States-Canada-Mexico free trade agreement is in the hands of politicians, says the past-president of the National Cattlemen’s Beef Association.
Kevin Kester is confident the U.S. will not ratify the agreement before congress takes its summer recess but it will be signed probably before the Christmas break.
“Keep in mind whether it is Canada or the U.S., politicians at the end of the day are always going to rule what happens,” he said at the international livestock identification conference held at Spruce Meadows, Alta., July 15-17.
Kester, a fifth-generation rancher from California, is also a member of the U.S. agriculture policy advisory committee on trade with agriculture secretary Sonny Perdue and trade ambassador Robert Lighthizer.
The North American Free Trade Agreement was a good deal for the beef industry because it maintained the status quo of no tariffs or quotas imposed on the members, said Kester.
Recently, 27 rookie Democrats wanted to insert mandatory country of origin labelling into the agreement.
“It was a political stunt but it did attract some media attention,” he said.
There are factions that want it back but the NCBA wants to avoid another trade war with its two best trading partners. If it went back in it would violate World Trade Organization rules and the U.S. could face tariff retaliation.
Trade is a major interest for the NCBA because exports add more than $300 per head in value. The most recent figures from the U.S. Meat Export Federation showed a steady year-over-year volume increase in beef exports. For January through May, exports were down three percent from the record levels of 2018. So far, more than 530,000 tonnes with a value of $3.3 billion have been exported.
The top destination for U.S. beef has been Japan but after U.S. President Donald Trump pulled out of negotiations for the Trans-Pacific Partnership, U.S. producers were placed at a disadvantage when the other countries involved put together their own deal.
Canada, Australia and New Zealand have a widening tariff advantage while the U.S. still pays a 38.5 percent duty for beef products entering Japan. The meat federation reported Japan’s imports of Canadian and Mexican beef increased by 76 percent and 39 percent, respectively, through May.
It is important to finish a bilateral agreement with Japan and Kester hopes next year a more favourable deal can be established.
A renewed agreement with South Korea was a windfall for the U.S. beef sector with record high sales and trade up 50 percent.
Dealing with China has been difficult as a trade war escalates. U.S. beef trade is down 40 percent in value for the first five months of this year.
“The Chinese tariff-trade war with the U.S. is affecting this market,” Kester said. However the NCBA and other agriculture groups support the president in his actions with China.
“President Trump is going to come out on top of this and we fully support his efforts to come up with what is best for the American producer in relation to trade with China,” he said.
The Chinese economy is also suffering from U.S. tariffs, so Kester is confident a good deal will result after tough negotiations.
“If we open up beef without restriction we currently have into China, beef will have better parameters to trade under than we currently have with China,” he said.
The USMEF predicts there could be $4 billion worth of beef trade a year with China five years from now. It is assumed the younger generation with money are willing to spend more on North American beef.
There have been some other stumbles along the way.
Negotiating a trade deal with the European Union has yielded a promise of 35,000 quota for U.S. beef although Kester has taken a wait-and-see approach. U.S. officials and beef representatives are also scoping out trade potential with United Kingdom once it leaves the EU in October.
Trade with Brazil has been suspended after U.S. inspectors rejected too many fresh meat shipments. Normally, less than one percent of beef shipments are rejected, but Brazil had 11 percent turned back.
The U.S. government will send an audit team there to assess the Brazilian system. There are also lingering concerns about the potential to bring in foot-and-mouth disease from Brazil. The U.S. Department of Agriculture analysts said it would cost the $50 billion if the disease occurred in the U.S.