The United States and Mexico have reach an agreement in principle on the renegotiation to update the 24-year-old North American Free Trade Agreement. The agreement is to encourage more manufacturing in the United States. President Trump is expected to inform Congress today of his intent to sign the agreement which gives Congress 90 days to review the agreement before he can sign it.
Key items in the agreement include:
Agriculture: The agreement maintains tariffs at zero for agricultural products traded between the two countries. This was the main goal of U.S. agriculture to do no harm in the renegotiations by raising tariffs.
The United States and Mexico agreed to strengthen disciplines for science-based sanitary and phytosanitary measures. This includes increased transparency; advancing science-based decision-making; and expedited consultations to resolve SPS issues between the two countries.
The agreement addresses agricultural biotechnology, including new technologies such as gene editing. The two countries have agreed to enhance information exchange and cooperation on agricultural biotechnology trade-related issues.
Autos: Requires 75% of an automobile’s content (parts and amenities) must be produced in the United States or Mexico for a zero tariff. This is an increase from the current 62.5% minimum of North American content.
Auto wages: Requires 40-45% of an automobile’s content must be produced by workers making more than $16 per hour. U.S. autoworker’s average hourly wage is $22 per hour compared to $3 per hour for Mexico, according to the Department of Labor.
The agreement avoids some of the most controversial issues proposed by the administration including seasonality and sunset. The seasonality proposal could have created a risk of retaliation. Instead of a five-year sunset clause, the agreement includes a 16-year agreement that will be subject to a review in six years.
At this time, the administration’s tariffs on Mexican steel and aluminum imports continue. Thus, the Mexican tariffs on U.S. products including meat remain in effect.
Canada and the United States are now in intense negotiations trying to reach an agreement today. Trump has threatened to move forward with only a bilateral agreement with Mexico.
Farmers to receive $4.7 billion in payments for tariff relief
USDA announced the details on its farm aid package to help offset the damage producers have felt as a result of the tariffs major trading partners (Canada, China Mexico, European Union and Japan) have imposed in retaliation to the steel and aluminum tariffs imposed by President Trump.
The package will include an estimated $4.7 billion in direct payments to producers of pork, soybeans, corn, cotton, dairy, sorghum and wheat.
USDA will purchase up to $1.2 billion in products targeted for retaliation that will be distributed through nutrition assistance programs. Also, $200 million will be used to develop foreign markets for U.S. agricultural products.
The aid package has three components.
Market Facilitation Program: MFP will provide direct payments of an estimated $4.7 billion to hog, corn, cotton, dairy, sorghum, soybean and wheat producers starting Sept. 4.
Pork producers will receive a payment of $8 per head based on 50% of the number of live hogs owned on Aug. 1, 2018. Pork producers with an average adjusted gross income for tax years 2014, 2015 and 2016 of less than $900,000 are eligible for MFP payments. Payments are capped per person or legal entity at a combined $125,000 for hogs.
The payment rates will be: soybeans, $1.65 per bushel; corn, 1 cent per bushel; wheat, 14 cents per bushel; sorghum, 86 cents per bushel; and cotton, 6 cents per pound. The initial MFP payment will be based on 50% of a producer’s total 2018 actual production. Applicants must have an ownership interest in the commodity, be actively engaged in farming, and have an average AGI for tax years 2014, 2015 and 2016 of less than $900,000.
MFP will be administered by the Farm Service Agency and applications will be available online beginning Sept. 4.
USDA will determine if further MFP payments are warranted in the coming months.
Food Purchase and Distribution Program: The Food Purchase and Distribution Program will purchase up to $1.2 billion in commodities unfairly targeted by unjustified retaliation. These commodities will be distributed through USDA nutrition assistance programs such as The Emergency Food Assistance Program and child nutrition programs. USDA estimates $558.8 million of pork and $14.8 million of beef will be purchased for this program.
The program will be administered by USDA’s Agricultural Marketing Service.
Trade Promotion Program: The Agricultural Trade Promotion Program administered by the Foreign Agricultural Service will make $200 million available to U.S. organization to develop foreign markets for U.S. agricultural products. The program will help U.S. agricultural exporters identify and access new markets and help mitigate the adverse effects of other countries’ restrictions.
The Federal Motor Carrier Safety Administration is considering revisions to four specific areas of its hours-of-service regulations that limit the operating hours of commercial truck drivers.
The four areas under consideration for revisions are:
• Expanding the current 100 air-mile “short-haul” exemption from 12 hours on-duty to 14 hours on-duty, in order to be consistent with the rules for long-haul truck drivers;
• Extending the current 14-hour on-duty limitation by up to two hours when a truck driver encounters adverse driving conditions;
• Revising the current mandatory 30-minute break for truck drivers after eight hours of continuous driving; and
• Reinstating the option for splitting up the required 10-hour off-duty rest break for drivers operating trucks that are equipped with a sleeper-berth compartment.
The FMCSA is also asking for public comments on two separate petitions requesting regulatory relief from HOS rules pertaining to the 14-hour on-duty limitation and the 10-hour off-duty requirement.
Public comments are due on or before Sept. 24.