New North American Trade Agreement should have an effect on Minnesota business

President Trump: “The most important trade deal we've ever made — by far"

The WCCO Morning News with Dave Lee
October 03, 2018 - 9:20 am

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President Donald Trump announced his new North American trade deal this week. It was, he said, “the most important trade deal we've ever made — by far!” According to the president, it would replace what he described as “the worst trade deal ever ... the job-killing disaster known as NAFTA." 

The new agreement with our two North American neighbors supposedly provides many new advantages for US firms and farmers. The emerging agreement is more 1700 pages, so we don't have all of the details at hand yet.  A few highlights bear mentioning, according to Professor Paul Vaaler of the University of Minnesota's Carlson School.   

For farmers, the big new provision seems to be the partial opening of the Canadian dairy market to more US exports of (ultra-filtered) milk.  The Great White North's dairy market is estimated at about $16 billion.  "US exporters will now be able to compete for around $350 million of that total --something but in the grand scheme, it's not much", according to Vaaler.  

The big winners here are not likely to be Minnesota farmers.  Prior to NAFTA, much of that market was served by Wisconsin and New York state dairy farmers.  They produce more milk (Wisconsin) more proximately (New York) to major Canadian consumer markets.  But it can't hurt Minnesota dairy farmers who have seen a steady decline in milk prices reflecting changes in consumer preferences for dairy milk substittutes (e.g., almond-based milk).

Auto manufacturers and workers are also taking note of provisions in the USMCA.  This also hits home as local manufacturers like Toro and Polaris also produce vehicles likely to be affected.  One provision raises the minimum local content, within the three countries, requirements from 62% to 75%.  

Vaaler, on the Morning News with Dave Lee said, "Think of that as a grab for jobs by all three countries against Europe and Asia. There's also a provision requiring that 40% of autos produced come from factories offering an average wage of at least $16/hour. That's a grab by the US and Canada against Mexico.  We'll see how Polaris finesses that new provision at, say, its vehicle manufacturing plant in Monterrey, Mexico." 

Many other "modernizing" provisions are essentially provisions that all three countries would have implemented as part of the new defunct Trans-Pacific Partnership (TPP) agreement:  labor and environmental protections, for example.  Canada did get the US to continue adhering to a separate dispute resolution system that let's individuals seek redress for harm outside of domestic courts.

Vaaler told WCCO, "Under NAFTA, US companies could seek arbitration in the US where they had legal disputes with, say, Mexican or Canadian governments. Similar independent dispute resolution protections for US, Mexican, and Canadian firms and individuals will continue under USMCA.  So I guess I don't have to change my course syllabus that much."