New trade agreement just the 'tip of the iceberg,' exporters say
Since North American leaders announced they had reached a new trade agreement to replace NAFTA, North Dakota industries say there's still much the pact has left to address.
The new deal, referred to as the United States-Mexico-Canada Agreement, will directly benefit U.S. dairy farmers, automobile and wheat producers, the latter by changing a wheat grading system in Canada accused of downgrading U.S. grains to a lower quality.
Still, some of those same wheat growers, in conjunction with fresh potato growers and steel companies, say the deal isn't enough. Wahpeton manufacturer WCCO Belting owner Tom Shorma said Thursday issues the new deal addresses are only the "tip of the iceberg."
"There's a lot more you don't see under the water that needs to be fixed," Shorma said.
The U.S. Department of Commerce reported North Dakota steel and iron companies exported approximately $14.3 million to Canada each year between 2015 and 2017. Over the same time, the state exported between $948,000 and $1.74 million in wheat.
"Our largest foreign market is Canada," Shorma said. "Not just for us, but for a lot of companies in North Dakota.
That's why he said he has spent the last 10 years writing to state representatives and trade offices about NAFTA's language regarding "duty drawbacks." When Shorma's company buys fabric for its machinery from a country outside the continent, Shorma said he pays a duty.
"Then we turn around and process that fabric and then re-export those belts to a place outside of North America, and we can use what's called duty drawback, where we actually get reimbursed for the duty," Shorma said.
Under the existing agreement, Shorma isn't reimbursed for products he re-exports to Canada.
"What NAFTA and the language does is it forces me to charge our U.S. customers and our Canadian customers significantly more than what I charge customers in Russia, Brazil, Australia and other places," he said. "And I don't think that's what the whole NAFTA plan was."
Although Shorma said he was disappointed the new deal doesn't address duty drawbacks, he called the deal a step forward toward "leveling the playing field" and modernizing trade North American trade.
"Unfortunately, what's happened is our presidential leadership and their cabinets have continued to kick this can down the road for 25 years since NAFTA got put into place, and they haven't wanted to deal with it," Shorma said. "We finally have a president that's trying to deal with it, and has gotten some things done. It's just going to take longer to get the rest of it fixed."
North Dakota wheat producers were pleased to see the new pact address Canadian standards for grading their crop, said North Dakota Wheat Commission Administrator Neal Fisher. For more than 20 years, Fisher said Canadians have downgraded the U.S. wheat they receive to "feed," a cheaper grade of lower quality.
"Which is to our producers, of course, insulting," Fisher said.
As North American leaders work toward actually signing an agreement, Fisher said there's still another hurdle he hopes they will address.
"In Canada, they have a very strict variety registration system," Fisher said. "Only a handful of U.S. varieties are actually approved for production, or for sale or marketing in Canada."
Fisher estimated a majority of U.S. wheat varieties haven't made the cut.
"It still will be a restriction on a producer from Jamestown, N.D., or Bottineau, N.D., if his or her variety isn't on that list," he said.
In upcoming discussions, fresh potato growers are asking negotiators to address "ministerial exemptions" that forbid Canadian provinces from buying U.S. potatoes until they consume all their own.
"Canada's a net exporter, so they grow and produce more potatoes than they can consume domestically," Northern Plains Potato Growers Association President Donovan Johnson said.
According to Johnson, the growers he represents don't even export fresh potatoes to Canada.
"The issue isn't trade of U.S. potatoes going into Canada, the issue is the excess amount of Canadian potatoes coming into the U.S. marketplace," he said, competing with local product. "It's a one-way street, essentially."
Unlike others industry representatives, Johnson said he wasn't surprised to find the new deal didn't address his group's concerns.
"We realize we were bringing the issue up at a late date," he said. "It's always been a problem, but I don't know if anyone made it an issue to our U.S. Trade Office representatives and say 'we would like to discuss this issue as being part of the negotiation.' "
Going forward, Johnson said he hopes to conduct more impact research.