Cattle industry, Congresswoman Noem weigh in on USTR objectives for renegotiating NAFTA
Rules of Origin
- Update and strengthen the rules of origin, as necessary, to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America.
- Ensure the rules of origin incentivize the sourc ing of goods and materials from the United States and North America.
- Establish origin procedures that streamline the certif ication and verification of rules of origin and that promote strong enforcement, including with respect to textiles.
- Promote cooperation with NAFTA countries to ensure that goods that meet the rules of origin receive NAFTA benefits, prevent duty evasion, and combat customs offences.
-Through an appropriate mechanism, ensure that the NAFTA countries avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage.
President Trump’s campaign promise to withdraw from or renegotiate the North American Free Trade Agreement is taking another step toward reality with the objectives that the U.S. Trade Representative released last week.
There aren’t specific changes suggested in the 18-page “Summary of Objectives for the NAFTA Renegotiation,” but rather the administration puts forward concepts it hopes to achieve.
The summary itself says, in part:
“The America that existed when NAFTA was signed is not the America that we see today. Some Americans have benefited from new market access provided by the Agreement. It contributed to the linking of the continent through trade, while at the same time NAFTA provided much needed market access for American farmers and ranchers.
“But NAFTA also created new problems for many American workers. Since the deal came into force in 1994, trade deficits have exploded, thousands of factories have closed, and millions of Americans have found themselves stranded, no longer able to utilize the skills for which they had been trained. For years, politicians promising to renegotiate the deal gave American workers hope that they would stop the bleeding. But none followed up,” says USTR in the introduction of their objectives.
South Dakota Representative Kristi Noem, a farmer who sits on the Ways and Means Committee, takes particular interest in agricultural product treatment in trade agreements because of her vocation. The Republican lawmaker who has announced her intent to run for governor of her state said she has weighed in heavily with the administration regarding NAFTA.
“We’ve been a part of the discussion. My number one thing has been ‘do no harm.’” She said she has encouraged the president to be cautious not to do anything that could cause the United States to lose its position in the market. “If we lose market share, another country comes in and takes that opportunity and we don’t get it back,” she said.
Noem said that livestock is a priority in the USTR renegotiation objectives. One idea is to eliminate tariffs or ensure that they are fair and unbiased. Noem said that she believes the USTR wants to cut tariffs that add expense to livestock exports. “I think we’ve given more access than we’ve received,” she said about livestock under NAFTA. Low cattle prices in recent years could be helped by trade agreements, Noem believes, and while she recognizes that the U.S. currently imports more cattle and beef from Canada and Mexico than it exports – in both dollars and pounds – she hopes that the renegotiation of NAFTA is an opportunity to restore profitability to the cattle industry.
Within hours of the USTR’s release of its objectives, the National Cattlemen’s Beef Association came out in support. The concepts “are beneficial to the U.S. beef industry because they encourage the continuation of terms that have benefitted the industry for decades – specifically duty-free access and science-based sanitary and phytosanitary standards,” the group said.
While country of origin labeling for beef wasn’t specifically mentioned, Noem said she doesn’t think it’s “off the table,” either.
“It can still be discussed. We’re still discussing it on capitol hill,” she said.
NCBA calling itself an “outspoken supporter of NAFTA,” said in a news release that it supports the USTR renegotiation objectives and that it will continue to advise the President not to “repeat mistakes of the past” by implementing mandatory COOL.
“As we learned from history, MCOOL failed to deliver higher values for producers or a safer food supply,” NCBA President Craig Uden said. “It did, however, result in further consolidation in the U.S. beef industry and the potential for $1 billion in retaliatory tariffs from Canada and Mexico. We must learn from the mistakes of the past, not repeat them,” said Uden in the release.
Leo McDonnell, Director Emeritus for USCA said COOL needs to be added into the new NAFTA language. He believes the objectives open the door for just that.
The irony in the fact that the NAFTA objectives were released the same day as the White House’s “Made in America showcase” was not lost on McDonnell.
“President Trump is promoting made in the USA goods, plus he specifically mentioned agricultural goods and beef in a press conference with Sonny Perdue today (July 19).”
COOL needs to be added into the new NAFTA language, McDonnell said, and he believes the objectives open the door for just that.
“U.S. ranchers had the greatest market we’ve ever had when we had COOL in effect. When COOL went out, so did the profits,” he said. “USDA’s own numbers prove that there was increased value for U.S. beef with COOL.”
The spread between domestic and imported lean beef product was significant when COOL was in place, he said
“You can’t sit here and tell U.S. ranchers that they need to learn to compete in a global marketplace and then block them from identifying their product. It’s irrational.”
Other countries, including Canada, are utilizing country of origin labeling, even while threatening retaliatory measures toward the U.S. for using it. “When COOL was repealed, Canada was actually doing the same thing that we were doing – they were differentiating their beef from U.S. beef so they could export to China. The same packers that are fighting COOL in this country were differentiating carcasses and applying origin labels in Canada. So when the packers say ‘we can’t do this, it’s too expensive,’ it’s ridiculous. They were doing it already.”
There is discrepancy between the language in the USTR’s NAFTA objectives and President Trump’s true trade goals, McDonnell believes.
“On the rules of origin, they talk about benefiting the U.S. and North America, and sourcing goods from the U.S. and North America. I don’t believe that is what President Trump meant when he said we should ‘Make America great again.’ He meant the United States.”
McDonnell said he’s concerned that special interest groups have convinced some of the Trump administration that a North American beef label would benefit U.S. producers, which is simply not possible, he said.
R-CALF USA also asked the USTR to include COOL and a “born, raised and slaughtered’ definition for it, in NAFTA renegotiations.
The pre-cursor to international trade agreements, GATT or the General Agreement on Tariffs and Trade, allowed each country to maintain sovereignty and control over its own laws, within reason.
McDonnell believes that under more recent trade agreements, including NAFTA, the U.S. has given up its ability to self-govern. “We’ve started adopting some of the trade laws and governances of more socialistic countries,” he said.
Cattle and beef need to be recognized as “perishable” and “cyclical” items in NAFTA, he said, which is something Congress even requires trade agreements to do. “We all know there is a lot more value in fresh beef than frozen beef. And a fat steer – when he’s ready to kill, you’d better be killing him. If you can’t get him sold and you have to hold him two or three weeks, you’ve lost all of your profits.”
McDonnell believes that with the help of Senator Enzi (R-Wyoming) and others on the Senate Finance Committee, the perishable and cyclical provisions will be included in the NAFTA re-write.
Significant changes need to be made to NAFTA to address the trade deficit that has the U.S. importing twice as much beef and cattle from Canada and Mexico as it exports to them, said McDonnell.
The current objectives are just a starting point, McDonnell believes, and he’s hoping for more substantive changes to what he sees as a continuation of the Bush and Clinton-era trade negotiations.
Noem said she hopes the administration looks at regulatory compatibility. “Sometimes you have a good trade agreement that opens up a market but that country will use a regulation that will be so burdensome it adds cost to our beef or other products and keeps it from being affordable.”
Addressing currency manipulation is another objective of the USTR, said Noem. “I don’t think it’s ever been talked about in a trade agreement but it shows that the administration is focused on that,” she said.
One NAFTA objective is to “Eliminate the Chapter 19 dispute settlement mechanism,” which is something McDonnell and USCA support.
“They have undermined our trade remedy laws and need to be eliminated,” he said.
McDonnell said that he helped file lawsuits against Canada in the late 1990s based on anti-dumping laws and countervailing duties. “We saw them both happening,” he said, adding that the lumber industry may have been harmed even worse than the cattle industry in the last 20 years for the same thing.
According to U.S. Customs and Border protection:
“Dumping occurs when foreign manufacturers sell goods in the United States less than fair value, causing injury to the U.S. industry. AD cases are company specific; their duties are calculated to bridge the gap back to a fair market value.
“CVD cases are established when a foreign government provides assistance and subsidies, such as tax breaks to manufacturers that export goods to the U.S., enabling the manufacturers to sale the goods cheaper than domestic manufacturers. CVD cases are country specific, and the duties are calculated to duplicate the value of the subsidy.”
Canada’s subsidization of its dairy industry has had a negative impact on U.S. dairy operations, Noem said. “That is obviously going to be a big focus and something we talk about specifically.”
The president will deal with these issues in the NAFTA talks, McDonnell believes. “The administration has promised they will address it and I believe they will. Trump is a tough businessman,” said McDonnell.