Food & Agriculture Quarterly January 2019 | Page 17

FOOD & AGRICULTURE QUARTERLY | JANUARY 2019
First, if USMCA is terminated, the worst case would
result in Mexican imports of U.S. soybeans only
being partially affected by a tariff increase and
Canadian imports not being affected at all. Mexico’s
Most Favored Nation (MFN) tariff is zero for imports
of soybeans during the period January through
September (subheading 1201.9001. Harmonized
Tariff Schedule (HTS)) and 15 percent for the
remainder of the year (subheading 1201.9002, HTS).
Because Mexico divides its tariff lines for soybeans
on a seasonal basis, from January to September and
from October to December 2017, Mexico imported
soybeans valued at $1.3 billion (1201.9001, HTS) and
$0.5 billion (1201.9002, HTS), respectively. Of the
$1.3 billion in soybeans that entered Mexico at a zero
tariff under subheading 1201.9001, HTS, 88 percent
originated in the United States, nine percent in Brazil,
and five percent originated in Paraguay. Of the $0.5
billion in soybeans that should have entered Mexico
under subheading 1201.9002, HTS, at a 15 percent
MFN tariff, 100 percent of the U.S.-origin soybeans
entered at a zero tariff pursuant to NAFTA. Canada’s
MFN tariff is zero for imports of soybeans. In 2017,
Canada imported soybeans valued at $0.3 billion. Of
that amount, the United States accounted for 71.8
percent and India accounted for 23 percent.
Second, if USMCA is terminated, U.S. soybeans
would likely remain in the Mexican and Canadian
markets at or close to the levels achieved when
NAFTA and the USMCA were in effect. The United
States, in addition to being the world’s largest source
of soybeans (2017), followed by Brazil and Argentina,
is also Mexico’s and Canada’s largest source of
soybeans. Nonetheless, the past NAFTA/USMCA
negotiations had some in Mexico considering a
“Plan B,” in which Mexico accelerates trade deals
and establishes new buyer-seller relationships with
countries like Brazil and Argentina. In 2017, the
value of Mexican soybean imports from Brazil and
Argentina was $0.1 billion and $0, respectively.
Putting politics aside, the only advantage countries
like Brazil or Argentina could hope to achieve is the
elimination of the 15 percent MFN tariff applicable to
entries during October through December. Given the
MFN tariff levels and the statistics set forth above,
most would question whether disrupting established
supply chains would be worth the effort.
Third, if USMCA was terminated, the price of
soybeans imported from Canada or Mexico would
not increase because the U.S. MFN tariff on soybeans
is zero. As an aside, in 2017, the United States
imported soybeans from Canada and Mexico valued
at $.07 billion and $0.0002 billion, respectively.
Section 232 and Soybeans
On May 31, 2018, President Donald Trump signed
two presidential proclamations that imposed a 25
percent and a 10 percent duty on imports of certain
steel and aluminum, respectively, from all countries
pursuant to section 232 of the Trade Expansion Act
of 1962 (section 232 duties). While few things are
farther from soybeans than steel and aluminum,
some of the affected countries may not necessarily
agree. The president’s basis for imposing these
tariffs was that imports of certain steel and aluminum
threatened to impair the national security of the
United States. Certain countries and groups of
countries, including Canada, Mexico, the European
Union and China, disagreed with the president’s
legal basis. Because countries may change both
the product subject to retaliatory tariffs and the
rate of such tariffs, pursuant to the World Trade
Organization’s Safeguard Agreement, they imposed
retaliatory tariffs, some of which pertained to
agricultural products, as the examples in the below
table demonstrates.
Country/
Union Agricultural Products
Used for Retaliation Rate
Canada Maple sugar, strawberry jam,
cucumbers and coffee 10%
Mexico Pork, cheese apples, potatoes
and cranberry juice 20-25%
Euro-
pean
Union Sweetcorn, kidney beans, corn,
rice, orange juice, cranberry juice
and tobacco 25%
China Variety of fresh fruits, dried fruits
and nuts 15%
Regarding the section 232 duties and various
countries’ retaliatory responses, the United States
replaced some countries’ steel and aluminum duties
with quotas or tariff rate quotas, i.e., Argentina,
Australia, Brazil and South Korea. Unlike the
foregoing countries, the United States did not
“settle” with Mexico, Canada, the EU or China.
Mexico and Canada’s wish that some type of
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