TRADE UPDATE

Food & Agriculture
January 17, 2023

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

• U.S. – Indo-Pacific: President Biden and Japanese Prime Minister Fumio Kishida, meeting in Washington, D.C. last week, issued a joint statement stating, “We will build resilience in our societies and supply chains among like-minded partners” and reaffirm the two nations’ “economic leadership”. The statement noted that “The Indo-Pacific Economic Framework (IPEF) is at the center of achieving these goals.”
• USMCA: Remarking on Mexico’s proposal to modify its planned ban of GM corn and glyphosate, USDA Secretary Vilsack said, “There is no reason to compromise” and that the U.S. expects Mexico to fully comply with its USMCA obligations. Vilsack said the U.S. will likely respond to Mexico’s proposed modifications to the Decree by Jan. 15, but no public update was available at the time of this writing.
• USMCA: A USMCA panel rejected the U.S. interpretation of the auto rules of origin under the USMCA, siding with Canada and Mexico who filed the dispute. The Office of the U.S. Trade Representative conveyed disappoint with the panel’s finding but did not comment on whether it will appeal. “We are reviewing the report and considering the next steps,” Adam Hodge, spokesman for the U.S. Trade Representative’s Office said in a statement.
• U.S.- India: During the 13th ministerial-level meeting of the Trade Policy Forum (TPF), the U.S. and India discussed areas of trade cooperation, including “targeted tariff reductions,” restoring India’s participation in the General System of Preferences (GSP), and increasing agriculture trade discussions, according to a USTR readout.
• Trade Policy: Representative Jason Smith (R-MO) was selected as the next Chairman of the House Ways and Means Committee. Following the selection by the Republican Steering Committee, Rep. Smith said in a statement, “We will examine using both trade policy and our tax code to re-shore and strengthen our supply chains, where products and services vital to our national security are made here at home using American labor, as well as craft policies that help America achieve food and medical security rather than dependence on nations like China.”

“We need to prioritize partnerships in the Western Hemisphere to improve trade, bring manufacturing back to our shores, and compete with China. This discussion draft is about leveling the playing field between freedom-loving democracies and those who exploit the rules.”

–Senator Bill Cassidy, M.D. (R-LA), in a press release about a discussion draft of the Americas Trade and Investment Act (Americas Act)

U.S. – Indo- Pacific

U.S. and Japan commit to close IPEF cooperation

• Following a meeting between President Biden and Japan’s Prime Minister Fumio Kishida, the two leaders issued a joint statement noting the two countries “reaffirm our economic leadership.” The statement continued, “We will build resilience in our societies and supply chains among like-minded partners against threats such as economic coercion, non-market policies and practices and natural disasters, accelerate global efforts to tackle the climate crisis, and advance data free flow with trust. The Indo-Pacific Economic Framework (IPEF) is at the center of achieving these goals.” The statement also noted, “As the two largest democratic economies in the world, we look forward to advancing domestic and global prosperity and upholding a free, fair and rules-based economic order through Japan’s Presidency of the G7 and the United States’ hosting of the Asia-Pacific Economic Cooperation (APEC).”

IPEF negotiations scheduled for India

• India will host talks in February to continue discussions about the Indo-Pacific Economic Framework (IPEF), according to a press release from the U.S. Department of Commerce. The meetings are scheduled to take place from Feb. 8-11, with a focus on three of the four pillars: Pillar II (Supply Chains), Pillar III (Clean Energy), and Pillar IV (Anti-Corruption and Tax). Details for further negotiations on Pillar I (Trade) have yet to be announced.
  • “The ministers had productive discussions on the economic benefits of IPEF membership and reaffirmed their collective commitment to pursue an inclusive high-standard economic agreement that will enhance the economic competitiveness of all of the IPEF partners’ economies,” the Commerce Department stated.

USMCA

Vilsack says no compromise on Mexico’s USMCA compliance

• Regarding Mexico’s recent proposal to modify the 2020 Presidential Decree to ban glyphosate and GM corn, USDA Secretary Vilsack said, “There is no reason to compromise” and that the U.S. expects Mexico to fully comply with its USMCA obligations. Speaking to the media during the American Farm Bureau Federation’s annual meeting, Vilsack acknowledged President López Obrador’s “concern about the heritage and culture of white corn in Mexico,” yet the U.S. expects Mexico to fulfill its USMCA trade obligations and adhere to science-based policy. “We understand and appreciate some of the challenges that [Obrador] has outlined …. But at the end of the day, the agreement we reached with Mexico and Canada is in support of a science-based system,” Vilsack said.
  • National Corn Growers Association (NCGA) lauded the strong U.S. government position regarding no compromise on Mexico’s plan to ban genetically modified corn. “We appreciate Secretary Vilsack for taking a firm stand on this issue,” NCGA President Tom Haag said. “We would encourage the Biden administration to keep this issue front and center and push for a quick resolution, as farmers have already made their purchasing decisions for the 2023 crop year.”
  • Vilsack said the U.S. will likely respond to Mexico’s proposed modifications to the Decree by Jan. 15. Last month, Mexico dispatched a delegation of Ministers to meet with Secretary Vilsack and USTR Katherine Tai outlining a proposal to modify the Presidential Decree to ban glyphosate and GM corn imports. According to reports from several sources, Mexico proposed the exemption of GM corn for animal feed and certain other uses with the possibility of a delay for the ban until 2025. Mexican officials also offered to re-evaluate rejections of GM corn traits, another deep concern for U.S. agriculture stakeholders and policy officials.

Biden in Mexico for North American Leaders Summit

• During President Biden’s meeting last week with President López Obrador the two leaders primarily discussed border issues, immigration, and climate change, but also trade. According to a White House statement, Biden and López Obrador reaffirmed their commitment to the U.S.-Mexico-Canada Agreement as the foundation for North American competitiveness and the basis for economic prosperity and social development. They discussed their shared vision for greater economic integration to increase productive capacity and promote inclusive growth, including incentives under the CHIPS and Science Act to promote investment in semiconductor clusters along the border.
  • As part of the North American Leaders Summit in Mexico City, President Biden also met with Canadian Prime Minister Justin Trudeau, prior to a trilateral meeting of all three heads of state.

USMCA Panel Rejects U.S. Autos Rule interpretation

• In a long-anticipated ruling, a tri-national panel found the U.S. interpretation of the rules “inconsistent” with the USMCA. Hence, Canada and Mexico prevailed in a challenge to the U.S. application and interpretation of USMCA’s auto rules of origin. The Office of the U.S. Trade Representative conveyed disappoint with the panel’s finding but did not comment whether it will appeal. “We are reviewing the report and considering the next steps,” Adam Hodge, spokesman for the U.S. Trade Representative’s Office said in a statement. “We will engage Mexico and Canada on a possible resolution to the dispute, including the implication of the panel’s findings for investment in the region.”

• Under the USMCA’s auto content rules, 75% of a vehicle’s components must originate in North America in order to receive duty-free status. Mexico and Canada contended that the U.S. interpretation assessing the regional percentage is too strict and would result in autos from Mexico and Canada being subject to tariffs. U.S. officials argued that interpretation of the rules will keep components from non-USMCA countries – particularly China – from receiving duty-free treatment.
• Canadian International Trade Minister Mary Ng praised the ruling, saying that it reaffirms Ottawa’s “understanding of the negotiated outcome on the rules of origin for automotive products.” The U.S. Chamber of Commerce also supported the ruling, commenting in a statement that it will provide more certainty for automakers in all three countries. But United Steelworkers (USW) International President Tom Conway blasted the panel’s decision, calling it “a significant victory for Chinese and other foreign producers.”

Trade Policy

Jason Smith new chair of Ways and Means

• Representative Jason Smith (R-MO) vaulted into the chairmanship of the House Ways and Means Committee. Following the selection by the Republican Steering Committee, Smith said in statement, “We will examine using both trade policy and our tax code to re-shore and strengthen our supply chains, where products and services vital to our national security are made here at home using American labor, as well as craft policies that help America achieve food and medical security rather than dependence on nations like China. We must also look at ways to encourage domestic energy production and achieve energy independence through the tax code instead of using it as a tool to punish energy producers as President Biden has suggested.”
  • According to reports, Rep. Jason Smith was selected over leading contenders on the committee, specifically, Reps. Vern Buchanan (R-FL), and Adrian Smith (R-NE). Rep. Adrian Smith was the Ranking Republican on the Ways and Means Subcommittee on Trade in the 117^th Congress.
  • In previous statements, the new Ways and Means Chairman indicated that he aims to focus on reducing U.S. reliance on imports from China and on fighting China’s unfair trade practices. The committee will also “examine whether it is in the best interests of the American people to continue showering tax benefits on corporations that have shed their American identity in favor of a relationship with China,” Rep. Smith noted.

Pathway to USMCA

• Sen. Bill Cassidy (R-LA) and Rep. Maria Elvira Salazar (R-FL) last week released a “discussion draft” of the Americas Trade and Investment Act (Americas Act) that would open the door for countries to join the USMCA. In a statement, Cassidy and Salazar said their legislation is aimed at countering China’s growing influence by deepening economic ties between the United States and the rest of the Americas. “We need to prioritize partnerships in the Western Hemisphere to improve trade, bring manufacturing back to our shores, and compete with China,” Sen. Cassidy said. Rep. Salazar added, “It’s time we unleash the full economic potential of the United States and Latin America. The Americas Act is THE solution to grow our economy and bring stability to the hemisphere. This bill will create new business opportunities at home and abroad, help our allies in the region, build resiliency for American supply chains, and reduce incentives to migrate.” According to the statement, the discussion draft would:
  • Re-shore and near-shore manufacturing to boost American industry and protect crucial supply chains.
  • Encourage American companies to bring manufacturing back from China with competitive tax incentives.
  • Improve energy security by investing in energy development in the hemisphere.
  • Establish de minimis reciprocity to close China’s trade loophole and protect American manufacturers.
  • Create a pathway to US-Mexico-Canada Agreement (USMCA) membership.
  • Create an expanding community of nations focused on improving hemispheric integration and prosperity called the “Americas Partnership”. 
  • Establish an E-Governance System to administer all public and private interactions within the Americas Partnership to combat the “gray economies” and prevent corruption.
  • Establish an “Americans Investment Corporation” to address critical infrastructure needs, spur economic development across Latin America, and address the migration crisis through a supply-side response.
  • Strengthening cultural bonds and integration among populations.

U.S. – India

U.S. and India discuss tariffs and agriculture

• Last week, USTR Katherine Tai and her Indian counterpart, Minister of Commerce and Industry Piyush Goyal, discussed areas of trade cooperation, including “targeted tariff reductions,” restoring India’s participation in the General System of Preferences (GSP), and increasing agriculture trade discussions. The discussions were part of the 13th ministerial-level meeting of the Trade Policy Forum (TPF), convened in Washington, D.C., according to a USTR readout. The trade ministers issued a joint statement reflecting several outcomes and ambitions, including:
  • “The United States and India also exchanged views on potential targeted tariff reductions.”
  • “The Ministers acknowledged the remaining work to be done to finalize access for certain agricultural products of interest to both sides. The Ministers also intend to increase dialogue on food and agricultural trade issues in 2023 and to continue work to address bilateral issues in the relationship through the Agriculture Working Groups, as well as the relevant sub-groups.”
• U.S. and Indian officials emphasized they had “underlined the significance of the TPF in forging robust bilateral trade ties and enhancing the bilateral economic relationship to benefit working people in both countries. They appreciated that bilateral trade in goods and services continued to rise rapidly and reached about $160 billion in 2021.”

Supply Chains

Secretary Vilsack calls on FMC for changes

• Secretary Vilsack joined a chorus of shippers and agriculture voices urging the Federal Maritime Commission (FMC) to implement stricter requirements on ocean carriers. Vilsack noted that over the past few years agriculture exporters were often beholden to ocean carriers’ pursuit of “higher value import cargo.” Secretary Vilsack proposed three critical changes to the FMC proposed rulemaking to define an unreasonable refusal to negotiate or deal with respect to vessel space accommodations. Vilsack acknowledged that the FMC’s rulemaking “is one step toward righting an unfair situation,” but recently sent a letter to several FMC officials, offering the following key changes to improve the proposal: (1) broaden the definition of an unreasonable refusal to negotiate or deal; (2) significantly narrow the guidance on reasonable refusals; (3) and encourage specific actions by carriers to guard against unreasonable refusals.
  • The rulemaking is mandated by OSRA 2022, which Congress passed in response to ocean carriers leaving U.S. ports without exports, only to return with more profitable imports. Roughly a year ago, over 100 vessels were anchored out the ports of Los Angeles and Long Beach at the height of the supply chain crisis and ocean shipping backlog.

Food Security

Increase in U.S. food prices slows in December

• U.S. food prices increased 0.3% in December, the smallest increase since December 2021, which contrasted with the 0.1% decrease in the overall Consumer Price Index (CPI). According to the December Consumer Price Index, prices for food consumed at home increased 0.2% and prices for food consumed away from home increased 0.4%. Three of the six major grocery store food group indexes increased over the month. The index for meats, poultry, fish, and eggs increased 1% in December, as the index for eggs rose 11.1%.
  • According to the Bureau of Labor Statistics (BLS), the food at home index rose 11.8% over the last 12 months. The index for cereals and bakery products rose 16.1% over the year. The remaining major grocery store food groups posted increases ranging from 7.7% (meats, poultry, fish, and eggs) to 15.3% (dairy and related products).