What opportunities and challenges does this “new NAFTA” present for businesses in all three countries? How can they change and adapt for success, particularly during the current economic recession? We turned to Evan Mangino, Agricultural Attaché at the United States Embassy in Ottawa, for his informed point-of-view.
What are the greatest opportunities the trade agreement presents for the agribusiness sector?
CUSMA sustains the unprecedented market access and trade opportunities secured over 30 years ago by the Canada-United States Trade Agreement and reinforced under NAFTA. The United States and Canada are each other’s largest agricultural trade partners – especially for value-added products like consumer packaged goods, fruits, and vegetables – and they will continue to be under CUSMA.
With virtually all agricultural products already entering these countries duty free, the new opportunities under CUSMA will be most visible for supply managed products, like specialty cheese, ice cream, and chicken wings. CUSMA will bring new trade opportunities for dairy, eggs, and poultry products from the U.S., with duty-free trade volumes expanding very year through 2039.
In addition, U.S. grain varieties approved under Canada’s variety registration system will, for the first time, receive an appropriate grade and a fair market price from Canadian grain buyers.
Lastly, with our unrivaled level of regulatory cooperation, U.S. and Canadian businesses can continue to engage one another with confidence, deepening the integration of our North American food and agricultural supply chain.
What are the challenges?
The agreement shouldn’t create challenges for the agribusiness sector, but that doesn’t mean that there aren’t challenges for producers and processors on both sides of the border these days.
COVID-19 obviously has had wide-ranging impacts on many aspects of North American production, processing, distribution, and sales. However, I would be remiss if I didn’t call attention to the notable resilience of the food supply chain during the COVID-19 pandemic, with due gratitude to the hundreds of thousands of workers across North America who have kept food and agricultural products moving so effectively.
And I should also note that even with CUSMA, U.S. agricultural exporters face a more competitive landscape in Canada as the Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have brought new sellers into the Canadian market.
How do the opportunities and challenges differ for Canadian versus U.S. agribusinesses?
Where Canadian and U.S. agribusinesses look similar (e.g. meat, grain, food processing), our companies see many of the same opportunities and challenges, within North America and around the world. However, the United States has more climatic diversity that allows farmers to raise crops unavailable to Canadian agriculture. For California walnut growers, Arkansas rice farmers, and Florida citrus growers, the Canadian market presents an opportunity to sell products without local Canadian competition. And even where we do grow the same crops (e.g. cherries, blueberries, peaches, apples, pears), our differing climes allow U.S. growers to provide Canada with fresh produce when local Canadian options aren’t available. Through long stretches of the year, U.S. fruits and vegetables are the most ‘local’ option for Canadian consumers.
What are the biggest changes for which agribusinesses need to prepare? Does this vary by sector, and if so, how?
Any time a new agreement is implemented, there are bound to be unforeseen developments. Even before the agreement entered into force, we saw an unintended consequence of the elimination of the NAFTA certificate of origin, which has been replaced by a certification statement from a CUSMA producer, importer, or exporter. By giving industry more flexibility in certifying to eligibility for preferential treatment, CUSMA eliminated one government form only to see a profusion of private forms crop up. To avoid confusion and ensure eligible products receive preferential market access under CUSMA, we have advised our exporters to engage their Canadian trading partners in open conversation about who will make the certification and how, in order to prevent any missteps in the early stages of CUSMA implementation.
How can agribusinesses best leverage this new agreement?
Now is the time to capitalize on new market access created by the agreement. We hope that Canadian consumers have a chance to experience the amazing quality and diverse range of U.S. dairy products that include the World’s Best Cheese, a blue cheese from Oregon that beat more than 3,800 other cheeses from 42 countries at the World Cheese Awards in late 2019. And, even if your products already have duty-free access to Canada, the start of a new agreement is always a great chance to explore new opportunities. Even during COVID-19, businesses can reach out to prospective brokers, distributors, and buyers to start building the connections that lead to export sales.
Do you have any further advice to share with U.S. or Canadian agribusiness companies in regard to this new agreement?
Be patient. Be persistent. Build strong relationships. Build a team to support your export sales. North America is a great place to produce food and a great market to sell it.
Argyle’s Agribusiness and International Trade team has a deep, unique specialty in the food, agriculture and grocery retail businesses.