NAFTA 2.0: What Trump’s new US, Mexico and Canada free trade agreement means for Australian farmers – ABC Rural


The new US-Mexico-Canada free trade agreement (USMCA) could have ramifications for Australian farmers, a Chicago futures expert says, though to what extent depends on its final terms at ratification.

key points usmca

Key points:

  • If the deal falls through it could present an opportunity for Australian rice to expand into Japan
  • Canada might put more canola onto the world market if the USMCA stalls, which could hurt Australian producers
  • A deal makes it easier for the US dairy industry to sell into the Canadian market, harming Australian exports

A major policy spruiked and ultimately imposed by US President Donald Trump, the wholesale revision of the former North American Free Trade Agreement (NAFTA) sets new conditions on how member countries trade with each other.

If ratified, it includes opening up Canada to more US dairy products and gives tariff-free status to cars when 75 per cent of their contents are made in North America.

Chicago-based PRICE Futures Group vice-president Jack Scoville said Australian farmers could see a change in the prices they get as well.

However, what changes Australian farmers could see depends on whether the deal is put in place or if it falls apart, according to Mr Scoville.

The USMCA still needs to be ratified by all three countries.

It also needs to be passed by the US Congress, but it is possible Republicans might lose control of the Congress in the midterm elections in November.

Mr Scoville thinks its likely the deal will be ratified, but said either way there could be flow on effects to Australian producers.

What if it falls apart?

Australian canola farmers could lose out in this scenario because of the reaction from Canada as it seeks new markets.

It currently exports 90 per cent of its canola production at an export value sale last year of about $12 billion.

However, Mr Scoville said if the USMCA deal fell apart it was possible the US may find it hard to take as much Canadian canola.

Mr Scoville said the proposed USMCA deal was already opening doors for the three nations to new trade agreements with Europe, China and Japan.

In the case of Japan, he said the commodity for Australians to watch would be rice.

If bilateral talks between the US and Japan fell through, Mr Scoville said it could present an opportunity for the Australian rice market to expand into Japan.

With corn, Mr Scoville said US producers would be the ones the lose out if the USMCA deal fell through.

“I would think that would be bad news, primarily for US agriculture, because we [the US] would lose our biggest corn customer [in Mexico],” he said.

What if it gets through?

The Australian dairy industry might notice more competition internationally, depending on how the Canadian industry reacts.

The deal would make it easier for the American dairy industry to sell into the Canadian market, which Mr Scoville described as “a very closed and controlled market”.

He said it was unclear how the Canadian industry would respond to more competition from the US but one way could be for them to export more product, which could make it harder for the Australian dairy industry.

“[The USMCA deal] could [affect international dairy markets] if they decide to export more into the world market,” he said.

“It could cause some displacement of some demand. It’s my understanding that this involves whole milk powder, so the demand for that may change a little bit.”

Mr Scoville said it was unlikely that Australian producers would notice any radical changes due to the deal going through.

However, he said the USMCA could pave the way for more trade deals in the future.

“I think you have to keep in mind this is an important agreement,” he said.

“I think you’re going to see a lot more interest in getting things done with the Europeans and with the Chinese, and [the US is] starting off new trade talks with the Japanese.”



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