Steel quotas — not tariffs — enough for Canada, Mexico: U.S. agriculture chief

U.S. Agriculture Secretary Sonny Perdue said on Thursday he is working hard to persuade U.S. President Donald Trump that the U.S. steel industry can be adequately protected by tariff rate quotas, rather than plain tariffs, on imports from Canada and Mexico.

The three North American countries on Nov. 30 signed the United States-Mexico-Canada Agreement (USMCA) pact to replace the North American Free Trade Agreement (NAFTA), which governs more than $1.2 trillion in trade.

U.S. farmers — hardest hit by Trump's trade wars with China, a key buyer of American agricultural products, as well as Mexico and Canada — have long complained that with tariffs remaining in place, they will not be able to benefit fully from the new trade deal.

The USMCA must be approved by the U.S. Congress and Canadian and Mexican legislators before becoming law.

When asked at a U.S. Senate Agriculture Committee hearing about removal of the "Section 232" steel and aluminum tariffs — and retaliatory tariffs on U.S. farm products — Perdue said: "The president, we're working hard to persuade him that the steel industry here, which is concerned, can be protected through a TRQ program here rather than tariffs and release the retaliatory tariffs."

Tariff rate quotas can allow a specified amount of product to enter the United States duty free, while applying a tariff on quantities above that quota level. South Korea has agreed to a quota equal to about 70 per cent of its steel exports to the United States in 2017.

The expectation was that the agreement would be signed and the tariffs would come off and that hasn't happened.-Sonny Perdue, U.S. 

Perdue said he has been advocating for the removal of tariffs since the signing of the USMCA.

"The expectation was that the agreement would be signed and the tariffs would come off and that hasn't happened but its in the best interest of all three countries to do the that," he said.

Perdue's comments come on the heels of a comment on the matter by U.S. Trade Rep Robert Lighthizer Wednesday.

"On Canada and Mexico, in the context of maintaining the integrity of the steel and aluminum program, we want very much to work out an agreement with Canada and Mexico and we're in the process of doing that," Lighthizer said in response to a question from Republican Congressman Adrian Smith of Nebraska on Capitol Hill.

"Whether we'll succeed or not I don't know, but it's certainly my hope that we'll do that." 

Chairman of Senate Finance Committee Senator Chuck Grassley has repeatedly called for the removal of tariffs before Congress takes up the USMCA.

A Trump campaign promise

Trump had vowed to revamp NAFTA during his 2016 presidential campaign. At times during the USMCA negotiations, he threatened to tear up NAFTA and withdraw the United States from the pact completely, which would have left trade among the three neighbours in disarray.

The U.S. Chamber of Commerce in 2017 said that exiting NAFTA without a new deal could devastate American agriculture, cost hundreds of thousands of jobs and "be an economic, political and national-security disaster."