USDA Secretary, Mexican, Canadian Diplomats Share Views on Progress of NAFTA Talks
Agriculture Secretary Sonny Perdue said he thinks negotiators "are very close to getting agreement with Mexico and Canada" on NAFTA. Perdue, who spoke July 17 at an event hosted in Washington by Axios. "As you know, Canada has finally acknowledged their Class 7 milk [policy], keeping our dairy products out of Canada, is not a free trade effort like NAFTA," he said. But a few hours later, Canada's Deputy Ambassador to the U.S. Kirsten Hillman denied Canada prevents sales of U.S. milk in her country.
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Hillman, who was speaking at a Politico event, said, "There’s a misconception out there that Canada has in place tariffs in the dairy sector that do not allow for trade in the dairy market." She noted that Canada is the second-largest export market for American dairy producers, after Mexico, and the dairy products sold into Canada are duty free. "As to the discussion in the NAFTA, at this point in time the request on the table: we get rid of supply management, which is a domestic system… . And that’s unacceptable to us, we won’t do that."
Perdue had said during a June trip to Canada that the U.S. does not want to dictate to Canada how it should compensate its dairy producers in its supply management system. The Class 7 program is a more recent addition to the long-standing supply management system, and it addresses the surplus of the part of milk that's left after you make butter. Until 2017, American producers processed that milk byproduct and sold it to Canadian cheese producers. At that time, it was not considered part of the quota system for milk imports. But Class 7 adds skim milk, milk powders and this butter byproduct to its supply management system.
Asked if a new NAFTA deal could be reached without changes to Canadian dairy policies, Hillman said, on agricultural trade, it's "always very tricky and there's always a way through. We’ll have to get somewhere we can both accept. I can’t predict what will happen." Both Hillman and Mexican Ambassador to the U.S. Geronimo Gutierrez Fernandez said it is too early to talk about what their countries would do if the U.S. increases tariffs on imported autos and auto parts. Gutierrez said that Trump is "naturally concerned about more and better jobs in the U.S.," but that Mexico disagrees that its growth in auto manufacturing is destructive to the U.S. sector.
While Mexico is aware that the way the U.S. trade representative is seeking to change the auto rules of origin is designed to move production out of Mexico and into Canada and the U.S., Gutierrez said, "Mexico could certainly not accept something that harms our own industries and our own jobs." But he said he believes there's sufficient common ground where all three countries' interests converge that a new NAFTA can be achieved. "We’re in better shape, in my view, than we were a year and a half ago. In a better shape to try to get this done," Gutierrez said. He said Congress, governors and private-sector interests have reacted strongly to Trump's threats to pull out of NAFTA, and said: "Be careful. This is important to us."