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What is CUSMA?

By Philip Legrand, International Trade Policy Analyst, Regina

January 2019

Truck on highway
The new free trade agreement is a positive
step forward for all Saskatchewan producers.

On November 30, 2018, Canada, the United States and Mexico officially signed the Canada – United States – Mexico Agreement (CUSMA). Also known as USMCA in the United States and T-MEC in Mexico, the agreement was the culmination of several rounds of negotiations over one year. The agreement will go through each country’s domestic ratification process.

Importance for Saskatchewan’s agricultural community

The United States and Mexico are Saskatchewan’s largest and fourth largest agriculture export markets, respectively. In 2017, export shipments to the U.S. were valued at $3.5 billion and exports to Mexico were valued at $746 million.

What has stayed the same

Under the North American Free Trade Agreement (NAFTA) and CUSMA, Canada benefits from reduced tariff rates. These reduced rates give Canadian agri-food exporters an advantage because their exports are cheaper relative to international competitors. All food and agriculture products that had zero tariffs under NAFTA will remain at zero under CUSMA. CUSMA has preserved most of the dispute settlement provisions. Having an impartial dispute settlement is important because it provides a way to fairly resolve trade disputes.

What has changed

There are some new features specific to agriculture included in CUSMA. First, palm oil originating from non-CUSMA countries can be used to produce canola and soybean margarine in a CUSMA country. The end product will be designated as originating from a CUSMA member state. This means margarine will be traded duty free amongst CUSMA members. Another development is U.S. wheat producers can receive a grade from a Canadian elevator for deliveries of wheat varieties registered in Canada that are grown in the U.S.

Canada’s supply-managed sectors (dairy, poultry and eggs) received a lot of media attention during the negotiations. The federal government granted additional access to its domestic market for supply-managed products. Increased access will be phased in over a period of several years to allow Canada’s industry time to adjust. The federal government agreed to eliminate Class Seven pricing on milk protein concentrates, infant formula and skim milk powder and will establish a new pricing system for these products to address U.S. concerns. Working groups have been convened to develop strategies to mitigate the impact of the new policies.

Canada, the U.S. and Mexico have agreed to cooperate further in biotechnology through consultations and information sharing on genetically modified organisms (GMOs) and emerging technologies such as gene editing. The agreement includes commitments to minimize the affect on trade from the detection of low level presence of GMOs not approved in the importing country. This will ensure Canada’s agriculture sector remains competitive and agricultural trade will not be disrupted going forward.

Finally, CUSMA incorporates the Canada-U.S. Consultative Committee on Agriculture, which works to address trade irritants and is staffed by high-ranking officials from both federal governments. CUSMA also includes the committee’s terms of reference, which includes a direct role for provincial agriculture ministers and state agriculture secretaries in identifying irritants and providing input on solutions.

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