The fifth round of negotiations to rewrite the North American Free Trade Agreement wrapped up yesterday in Mexico City, and poultry was one of the newest agricultural issues up for debate over the past seven days of talks, thanks to new U.S. proposals.
Like dairy, Canada strictly manages its supply of chicken, turkey and eggs and the U.S. wants to end that.
The U.S. and Canada are not done squaring off over Canada’s dairy price supports and tariffs, but now negotiators for both countries are also dealing with U.S. demands that Canada buy more chicken and eggs from its southern neighbor, according to four U.S. industry officials who spoke to Agri-Pulse.
The new U.S. proposals add even more tension between the U.S. and Canada, but the potential for a larger share of Canada’s lucrative poultry market is welcome, said industry officials who asked not to be named because they aren’t authorized to discuss the issues publicly.
The new U.S. proposals come as no surprise after U.S. Trade Representative Robert Lighthizer released a new 17-page “Summary of Objectives for the NAFTA Renegotiation” last week. The unprecedented release of a revised set of goals introduced only a couple of new factors for agriculture, but it was lauded by the U.S. chicken, turkey and egg producers and exporters.
On the third page of the document, the USTR listed an updated goal, saying: “Expand competitive market opportunities for U.S. agricultural goods in NAFTA countries, substantially equivalent to the competitive opportunities afforded foreign exports into the U.S. market, including by eliminating remaining Canadian tariffs on imports of U.S. dairy, poultry, and egg products.”
The words “poultry and egg products” were not included when the USTR released the first list of NAFTA objectives on July 17.
No details were provided in the summary, but U.S. industry sources said the proposal put forward by USTR demands that Canada completely open its market to U.S. exports of chicken, turkey and eggs, something Canadian industry officials say they are vehemently opposed to.
Despite the complex tariff rate quota (TRQ) system that restricts access to the Canadian market, Canada is an especially attractive market because the country maintains artificially high prices to support domestic farmers. Those high prices are very sought after by U.S. exporters.
Canada sets the TRQs for U.S. chicken, turkey and eggs by taking a percentage of the previous year’s domestic production and applying that to imports. Anything that comes in above the TRQ will be hit with tariffs of more than 250 percent.
If Canada were to lift its trade barriers, those prices would likely come down, said one representative of the U.S. poultry industry, but the increased access would be worth it.
“We are aware that (USTR) is pushing for increased access for U.S. poultry and eggs,” said another U.S. industry representative. “We know they have been addressing this with the Canadians and we are very pleased.”
Right now, the Canadian TRQ for all U.S. chicken is about 86,000 metric tons, according to an analysis by USDA’s Foreign Agricultural Service. That would have increased under the Trans-Pacific Partnership, but that deal disappeared when President Donald Trump pulled the U.S. out of the pact with Canada and 10 other countries in January.
Canadian industry representatives scoff at the U.S. requests for more access, because, in reality, the U.S. exports a lot more poultry than the TRQs allow because of programs that allow in U.S. product tariff-free if is incorporated into a food product like canned stew and then exported out of Canada.
Thanks to the re-export programs, the U.S. can ship quite a bit more poultry into Canada than the TRQs allow. For broiler meat alone, the U.S. exported about 163,000 tons to Canada in 2016.
“We have asked that we get better access to Canada,” another U.S. industry official said. “We were pleased that TPP was a step in the right direction and we have asked that we get the same access that we get with Mexico – completely free and open access.”
It’s going to be a tough negotiation. The USTR proposed a similar retraction of Canada’s tariffs on dairy imports and so far the country has not budged.
“This update is an important next step in ensuring that the American people continue to know what the Trump Administration is seeking to achieve in a renegotiated NAFTA,” said Ambassador Lighthizer. “If we are able to achieve these objectives, we will both modernize and rebalance NAFTA to better serve the interests of our workers, farmers, ranchers and businesses.”
For poultry, it will be particularly difficult. When Mike Brown, president of the National Chicken Council, testified last year before the U.S. International Trade Commission, he stressed that the U.S. had originally believed that Canada would open its market to U.S. poultry as part of the original free trade agreement with Canada in 1988 (It later transformed into NAFTA when Mexico joined in 1994).
“At the time NAFTA was concluded, the U.S. poultry industry, like its friends in the U.S. dairy industry, was led to believe that the agreement would require Canada to open its market to U.S. imports,” Brown said.
They were wrong, though. The U.S. filed a complaint, but Canada fought back hard and a NAFTA dispute panel ruled in favor of the Canadians.
Now, the U.S. poultry industry is glad to hear that the USTR is willing to fight again and is hoping this time, it wins.
One source in the turkey sector said farmers and exporters have been lobbying USTR for months to get the access to Canada's market that they say they should have gotten years ago. So far, there haven't been many U.S. demands that Canada or Mexico have agreed to in five rounds of negotiations, and Lighthizer offered a grim assessment Tuesday.
"While we have made progress on some of our efforts to modernize NAFTA, I remain concerned about the lack of headway, he said in a statement. "Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result."
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