One of the most significant aspects of NAFTA was the elimination of almost all quotas and tariffs on agricultural trade between the United States and Mexico, as well as the elimination of most restrictions on agricultural trade between the United States and Canada. As a result, Canada and Mexico became, respectively, the first and third largest export markets for United States’ food and agricultural products, comprising 64% of total food and agricultural exports in 2018. As a result of NAFTA, Mexico and Canada also export substantial amounts of agricultural products to the United States.
II. EXECUTIVE SUMMARY.
Chapter 3 of the USMCA addresses agriculture. The USMCA maintains all the NAFTA’s existing duty-free treatment but also includes several significant changes.
It is estimated that full implementation of Chapter 3 will result in increased trilateral trade exceeding several billion U.S. Dollars. While the most relevant changes relate to Canada granting new access to dairy products from United States producers, the USMCA also includes a separate chapter with modernized Sanitary and Phytosanitary (SPS) Measures and rules to ensure that such SPS measures are science-based and are developed and implemented in a non-discriminatory manner.
This chapter also contains new rules and mechanisms on increased trilateral transparency and cooperation on agricultural biotechnology. Significantly, for the first time in a trade agreement signed by the United States, the USMCA addresses all biotechnologies, including new biotechnologies such as genetic editing.
III. LEGAL DISCUSSION.
Section A: General Provisions.
Section A of Chapter 3 contains various general provisions governing trade in agriculture. Important provisions include commitments to improving auditing procedures and for certifications of agricultural products, including increased transparency and new disciplines as to market access, domestic support and export competition to promote substantial progressive reductions in support and protection to domestic industries. Article 3.4 contains restrictions on the use of export subsidies for agricultural goods destined for the sale within the territory of a USMCA Party. Under Article 3.6, any domestic support measure must be implemented in a manner that produces no, or minimal, trade distorting effects or effects on production.
In a major development, Article 3.7 creates a new trilateral Committee on Agricultural Trade, with various functions, including the promotion of trade in agricultural goods, monitoring and promoting cooperation, establishing a forum for the Parties to consult on and address trade issues and coordinate with other committees and working groups, and foster cooperation in areas of mutual concern. Such areas include rural development, technology, research and development, capacity building and creating joint programs, as mutually agreed between and among the domestic federal agricultural agencies of each USMCA Party.
Article 3.10 also includes special provisions on transparency and consultations requiring the Parties to exchange information on measures that impact trade in agricultural goods. Covered measures include those taken at the regional governmental level, which may have a significant effect on trade between the Parties.
Section B: Agricultural Biotechnology.
Section B of Chapter 3 addresses agricultural technology. Most notably, the scope is expanded to include all agricultural technologies, including modern biotechnology used for the deliberate manipulation of organisms to introduce, remove or modify heritable characteristics of products used in agriculture or aquaculture and which are not used in traditional breeding selection processes.
The USMCA Parties’ alignment on a shared commitment to support modern biotechnology to promote production and trade in agricultural goods could have vast potential implications. For example, in Article 3.14, the Parties “confirm the importance of encouraging agricultural innovation and facilitating trade in products of agricultural biotechnology, while fulfilling legitimate objectives…” In addition, Section B provides rules for dealing with a potential LLP Occurrence, or low levels of DNA inadvertently present in importations of food or feed, where the relevant recombinant DNA has not been determined (Article 3.15).
Finally, a Working Group for Cooperation on Agricultural Biotechnology is established in Article 3.16 to foster information exchange and cooperation on policy and trade-related matters associated with products of agricultural biotechnology.
Annex 3-B: Agricultural Trade Between Mexico and the United States.
Annex 3-B of Chapter 3 addresses agricultural trade between Mexico and the United States. It provides specific rules for tariff rate quotas (TRQs) and establishes a technical binational working group to meet annually and review agriculture policy issues. Such issues include agricultural grade and quality standards, technical specifications and other standards and their application and implementation as they affect agricultural trade between Mexico and the United States. The working group shall consider joint mechanisms designed to facilitate trade, such as training programs and work plans for quality inspections at the point of origin. Based on all these new provisions, increased bilateral cooperation should follow.
Chapter 3 of the USMCA maintains all duty-free treatment on agricultural trade, as agreed in NAFTA, but it also includes several new provisions and mechanisms aimed at expanding trade in agricultural goods among the Parties. Further cooperation, joint determinations of standards, and more transparency in development and application of standards will hopefully result. Also, the USMCA Parties commit themselves to pursue further technological developments in agriculture, including in areas such as modern biotechnology. In the coming months and years, modernized SPS measures and rules will be developed, which means it will be important for all interested parties to monitor their implementation. The potential impacts on the environment, biodiversity and the health and safety of persons and animals will certainly require further analysis and continued development of standards.
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