CUSMA/USMCA Effect on Canada's Food Economy Essay Example

Introduction

When the Trump administration took office in 2016, top on their agenda was a trade. Long-standing trade agreements were reviewed and renegotiated. Among the agreements that really faced stiff opposition from the new American regime was the North Atlantic Free Trade Agreement (NAFTA). The NAFTA deal had ease tariffs for commodities between Canada, the United States and Mexico (Nevitte, 2017). Over the years, it became apparent that the United States was developing a significant balance of trade. Americans in the United States were importing more from the rest of the trade partners than was the case with the other countries. The United States, under the leadership of the Trump regime, sought to renegotiate the NAFTA trade deal. As a result, the Canada, US, Mexico Agreement (CUSMA) deal was introduced in 2018 (Harrison, 2018). Although the deal was signed by all states, it was not ratified. This essay explores the weaknesses of CUSMA, with regard to its detrimental effect of Canada's food economy.

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Control of Free Trade

The first effort intended by the CUSMA agreement was to balance trade. Unfortunately, trade between the countries has existed for centuries. NAFTA, which was the previous agreement, had existed for about five decades. The plan to promote fair trade between the countries meant that tariffs had to be increased on some commodities. The planned trade agreement was drafted by the United at the behest of the rest of the North American countries (Otero, 2018). Trade relations between the countries had hit a snag after the United States withdrew from the NAFTA agreement only weeks into Trump's administration. America (the United States) sought to minimize the trade gap with Canada especially, and the major concern was agricultural produce. The United States was worried that while billions in dollars were imported in terms of agricultural exports, very little from other industries would be exported to Canada and Mexico. Mexico and Canada would have to source additional markets as trade embargos would mean fewer exports to the United States (Harrison, 2018).

The NAFTA trade deal sought to encourage unlimited trade based on demand and supply. Trade control and tariffs proposed in the CUSMA trade deal would minimize what the United States considered unfair or unbalanced trade commodities, and introduce custom checks and tariffs on these commodities. Unfortunately, the United States market had got to the place where Canadian produce was preferred at the expense of US farmers. This control of trade would ensure that over time, Americans would opt of local produce (Harrison, 2018). The Canadian food market has significantly suffered the new tariffs proposed by the CUSMA deal. While it is not Canada's fault that the demand for food commodities works in their favor, it is also a significant reality that the United States has a larger market and similarly, a greater purchasing power, making the CUSMA deal quite unfavorable.

Rate Hikes

The most significant effect of the CUSMA deal was that it proposed rate hikes on commodities that had base rates. Exports between the countries would now cost more than they used to. For the United States, it would come as a favorable deal, given that the United States would get more access to the Canadian dairy market (Otero, 2018). Online trade between the countries would see tariff increases from $20 to $150 to curb Canadian imports from the United States that would often bypass border control and other custom checks (Otero, 2018). Food markets in Canada would suffer a significant revenue decrease in the deal. There would also be more restrictions on commodities, to involve aspects such as environmental regulations and labor regulations as well. In essence, the deal would totally affect the Canadian cost of production for agricultural produce. The aftermath of the new deal was that it would effectively increase the cost of agricultural produce.Canadian exports to the United States was majorly based on the fact that many Canadian products were slightly cheaper compared to the United States. Mexico also sold corn and cereals cheaper than they were sold in the local market. Although the CUSMA deal is not yet ratified, prices have increased, making many Canadian farmers unable to market their commodities within the North Atlantic region (Harrison, 2018). The opening up of markets in the CUSMA agreement would require that there be many controls to deal with the production of commodities. American imports from Canada may have increased in the dairy sector, but other sectors such as cereals and grain have significantly reduced in terms of demand due to the increase in price necessitated by the new trade agreement (Nevitte, 2017). The increased tariffs make trading food commodities with the United States very difficult for Canadian farmers. Similarly, they act as a control measure for American farmers.

Discussion

The trade agreement between Canada, Mexico, and the United States has greatly affected the production of Canadian food commodities. Many Canadian farmers have been unable to develop the right products to fit the market, given the tariffs. Production has also been inhibited by the cost of machinery. Food processing in Canada has become difficult, given the high reliance on American machinery for food production. As a result, many Canadian farmers have opted for different markets where tariffs are lower, and trade is easier. The CUSMA agreement is, however, a recent deal, only signed in October 2018. The reason it has not been ratified is that there is still a lot of negotiations necessary to fully realize the intended fairness and better trade between the countries. At the moment nonetheless, Canadian farmers cannot fully gain the intended benefits of the deal. America may be gaining from the less agricultural imports, but as time goes on, this deal may ruin the trade relationship between the American countries (Otero, 2018).

Conclusion

The North Atlantic Free Trade Agreement (NAFTA) may have been unfair to Americans at some point, but only because American demand for produce from the other countries led to the imbalance in trade. Trade control is at best a fallacy that many nations have attempted in vain (Nevitte, 2017). America's aggressive control policy continues to affect the North Atlantic nations, with the CUSMA deal being a contentious treaty that was if anything signed in poor faith. There is a need for countries in the region to develop better trade agreements and make a trade as free as possible. Imposing tariffs on goods and introducing new control measures does little to make the trade better. If American farmers are not benefiting from the local market, the government should find a way to offer subsidies to farmers as opposed to blocking imports. The United States has really disadvantaged the Canadian food market with the new trade deal. At some point, there may be a need for a renegotiation of the CUSMA agreement.

References

Harrison, L. E. (2018). The Pan-American dream: do Latin America's cultural values discourage true partnership with the United States and Canada? Routledge. https://www.taylorfrancis.com/books/9780429964589

Nevitte, N. (2017). The North American Trajectory: Cultural, Economic, and Political Ties among the United States, Canada, and Mexico. Routledge. https://www.taylorfrancis.com/books/9781351478304

Otero, G. (2018). Neoliberal reform and politics in Mexico: An overview. In Neoliberalism Revisited (pp. 1-25). Routledge. https://s3.amazonaws.com/academia.edu.documents/5923936/NeoLiberalism_Revisited.pdf?AWSAccessKeyId=AKIAIWOWYYGZ2Y53UL3A&Expires=1551870410&Signature=QdOaTbPySoCpYC6nnhqm8k%2BO6hg%3D&response-content-disposition=inline%3B%20filename%3DNeoliberalism_revisited_Economic_restruc.pdf#page=11