An early take on North American treaty: The Produce News

An early take on North American treaty: The Produce News
October 3, 2018 No Comments Blog Chantal Tremblay

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Details on the new free trade treaty between North American countries are still pending, but a couple of knowledgeable industry leaders like the United States-Mexico-Canada Agreement, which unofficially replaced NAFTA Sept. 20.

“I think it’s a good thing that they concluded the talks,” said Dante Galeazzi, president and chief executive officer of the Texas International produce Association. “Business now is able to resume.” With doubt surrounding the future of a North American free trade agreement produce companies trading across North American borders “did very little forward planning or investing. Now fear and anxiety are out of the way.”

Galeazzi noted on Oct. 1, “We still need to see the text” with the details of the agreement, “but the conversation is done. They can all move forward. Once we have the opportunity to dissect (the details) we’ll be in a better position as an industry to comment.”

Galeazzi noted that those parties trading with China remain in a flux over disagreements. “But it’s good to have one agreement put away and be able to focus” on building for the future.

Expressing very similar sentiments was John Nakaoka, a U.S. produce industry consultant with a broad international trade background.

Nakaoka, who has worked for years in Guanajuato, Mexico, said Oct. 1 that the agreement “lifts a cloud for us businesspeople. Especially for those in farming. Nothing happens overnight; and it takes a lot of planning” to make long-term business plans and investments.

Nakaoka said the agreement “is pretty much what had been reached in August” between Mexico and the United States. With important concessions from Canada coming at the last hour of a Sept. 30 deadline, going forward “it will be a matter of tweaking (the details) in the future — the details will be forthcoming. The implementation still has a long way to go.”

Nakaoka said that for the North American fresh produce industry the agreement is a win for all three agreement nations.

Nakaoka said he is somewhat disappointed that USMCA comes with the establishment of a six-year review.

“United Fresh is encouraged by the news that a revised tri-lateral agreement has been reached between the United States, Mexico and Canada,” said Tom Stenzel, president and chief executive officer of the United Fresh Produce Association. “The strong relationships our members have established between these three countries have helped enable the growth of the fresh produce industry over the last quarter century. Coming on the heels of United Fresh’s annual Washington Conference and the inaugural Global Trade Forum in which this issue was front, and center and where attendees heard directly from key U.S. negotiators, the announcement of this revised agreement highlights the importance of our continued engagement on key policy issues by those in the produce industry. United Fresh looks forward to working with Congress to achieve the swift approval of this new agreement.”

“The members of the Produce Marketing Association are pleased that negotiators have concluded discussions on an updated United States-Mexico-Canada Agreement (USMCA) on trade,” said Richard Owen, the vice president of global membership and engagement of the Produce Marketing Association. “A single agreement is the best way to address the extensive relationships and investments in produce and floral production and sales that have developed in North America. This agreement is consistent with our overarching goals of free and fair trade and we hope that the new agreement will be quickly ratified by all three countries.

Business Insider on Oct. 1 confirmed that the USMCA “includes a 16-year expiration date and a provision that requires a review of the deal every six years, when it can be extended. It’s less severe than the U.S.’s original demand for a sunset clause, which would have forced each side to recertify the deal every five years to keep it in effect.”

“We are encouraged by the certainty that this new agreement provides to companies doing business in North America,” Owen said. “The six-year review and 16-year duration of the agreement gives confidence for future investment to further build and expand trade among the countries as our members work to supply consumers’ expectations of a vast range of fresh produce and floral products year-round. Some of our members sought provisions on seasonal products not included in the final agreement, and we appreciate commitments from negotiators to continue to examine opportunities to address their concerns.”

Nakaoka noted that, at least growers have as long as a six-year period in which to plan.

Nakaoka observes that the six-year review will coincide with presidential election years in both Mexico and the United States.

This potentially could politicize a 2024 review of the treaty, but Nakaoka said, “Let’s hope this is weighted on its merits. Let’s hope it works so well that everyone wants to keep it going.”

Business Insider also indicated that the “dispute settlement — NAFTA’s dispute-settlement system, which allows member countries to bring grievances against other members over allegations of unfair trading practices — will remain the same, a key win for the Canadians.” Nakaoka said the Canadians insisted on this Chapter 19 inclusion to help protect Canada’s lumber industry. He thought the dispute-settlement provision might leave the door open to disrupting the fresh produce business.

Media reports indicate that the U.S.-Mexico-Canada Agreement is expected to be signed by the leaders of the three member countries in November. The deal must also be approved by each country’s legislature before it can come into force.

Mexico’s new president, Andrés Manuel López, is to take office Dec. 1. Nakaoka believes “it is very significant that the new president is not saddled with controversies” that may be tied to USMCA. “That will be important to Trump’s relationship with the new president.”

According to the U.S. Department of Commerce, the North American Free Trade Agreement established a free-trade zone in North America. It was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994.

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