TRADE UPDATE

Food & Agriculture
January 24, 2023

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

• U.S. – Indo-Pacific: India will host a special round of IPEF talks, Feb. 8-11, according to a press release from the U.S. Department of Commerce. The meetings will focus on three of the four pillars: Pillar II (Supply Chains), Pillar III (Clean Energy), and Pillar IV (Anti-Corruption and Tax). India opted out of Pillar I (Trade).
• USMCA: USDA Under Secretary for Trade Alexis Taylor and USTR’s Chief Agricultural Negotiator Ambassador Doug McKalip are in Mexico to discuss biotech and Mexico’s GM corn import ban, according to Politico. Several sources speculate that Mexico’s recent proposed modification to the GM corn ban will fall short of U.S. officials’ expectations for full USMCA compliance.
• USMCA: Mexico announced a temporary 50% tariff on white corn exports to ensure sufficient supplies and price stability, according to reports. The tariff, announced last week, was effective immediately and runs through June 30.
• U.S.- EU: U.S. and EU officials announced an agreement that ensures U.S. existing access to the EU markets for a wide array of agricultural products (e.g. rice, almonds, wheat and corn, among others). The subject products will receive favorable tariff rate quota (TRQ) levels following the departure of the United Kingdom from the EU.
• WTO: WTO Director-General Okonjo-Iweala called on member countries to facilitate farmers’ ability in developing countries to meet global trade standards and underscored the need to enable farmers to meet sanitary and phyto-sanitary (SPS) requirements.
• WTO: In conjunction with the World Economic forum, WTO Director-General Okonjo-Iweala called on countries to make progress on several WTO initiatives, including negotiations provided for in the Fisheries Subsidies Agreement; a decision on extending the TRIPS waiver compromise beyond COVID-19 vaccines to cover therapeutics and diagnostics; food security and agriculture reform; and WTO and dispute settlement reform.
• Trade Policy: Today is the 75th anniversary of USTR. USTR was created through the Trade Expansion Act of 1962, in which Congress called for President Kennedy to appoint a Special Representative for Trade Negotiations to conduct U.S. trade negotiations.

“Today we have trade deals with 20 countries, and it has been 10 years since we’ve added a single new partner to that list. Meanwhile, other countries have inked 100 new trade deals without us. I’ve said it before, and I’ll say it again: If you are standing still, you are falling behind.”

–Suzanne Clark, President and CEO, U.S. Chamber of Commerce, speech on the State of American business

U.S. – Indo- Pacific

IPEF negotiations scheduled for India

• India will host a special round of IPEF talks, Feb. 8-11, according to a press release from the U.S. Department of Commerce. The meetings will focus on three of the four pillars: Pillar II (Supply Chains), Pillar III (Clean Energy), and Pillar IV (Anti-Corruption and Tax). India opted out of Pillar I (Trade). The Department of Commerce last week released additional details on activities surrounding the talks.
  • In preparation for the round in New Delhi, the Commerce Department is holding a virtual stakeholder listening session on February 1. India will be holding stakeholder sessions during the special round in New Delhi. Commerce’s virtual session is on February 1. The registration deadline for participation in the session is January 31. Registration must be sent to [email protected] with the subject line “Department of Commerce IPEF Listening Session.”
  • The Indian government plans to hold a stakeholder listening session on February 9, followed by a stakeholder reception Interested participants also should email [email protected] to receive the registration information package.
• Last May the U.S. launched Indo-Pacific Economic Framework with Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam.  The Commerce Department noted that “The IPEF will advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for our economies. The 14 IPEF partners represent 40 percent of global GDP and 28 percent of global goods and services trade.”
  • “The IPEF features four pillars: (I) Trade; (II) Supply Chains; (III) Clean Economy; and (IV) Fair Economy.  On September 9, 2022, the United States and IPEF partners issued ministerial statements outlining the scope of future negotiations for the Pillars of the IPEF.”

USMCA

USDA and USTR official in Mexico to discuss GM corn ban

• USDA Under Secretary for Trade, Alexis Taylor and USTR’s Chief Agricultural Negotiator, Ambassador Doug McKalip, traveled to Mexico over the weekend to discuss biotech and the planned GM corn import ban, according to Politico. U.S. and Mexican officials are expected to convene discussions on “Mexico’s approach to agricultural biotech products.” In December, a delegation of Mexico officials visited Washington, DC to outline proposed modifications to the Presidential Decree banning glyphosate and GM corn imports in 2024. Several U.S. stakeholders are expecting U.S. officials to stand firm on only accepting a proposal from Mexico that allows for uninterrupted exports of GM corn regardless of use or final application. Mexico originally had indicated the GM corn ban would exclude corn for animal feed but apply to corn used for human consumption.
  • Earlier USDA Secretary Tom Vilsack said regarding Mexico’s proposed revisions to the Decree to ban glyphosate and GM corn, “There is no reason to compromise” and that the U.S. expects Mexico to fully comply with its USMCA obligations. “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.

Mexico imposes corn export tariff

• Last week Mexico announced imposition of a 50% tariff on white corn exports to ensure sufficient supplies and price stability, according to reports. “The supply and production of white corn in our country are important factors in determining its price and, therefore, of the various consumer products made from it,” a government decree stated announcing the export tariff. “In order to guarantee a sufficient supply, it is necessary to maintain national production in our country and ensure market conditions that allow stabilization of its price,” the decree read according to an unofficial English translation.
  • The measure is effective immediately and will remain in force until June 30. White corn makes up 89% of Mexico’s grain production, with 332 kilograms per capita consumed annually in the country. While Mexico is a net producer of white corn, the vast majority of the grain is consumed domestically. In 2022, Mexico produced over 22 million tons of white corn, of which only 238,000 tons were exported between January and October, while 614,000 tons were imported.

China

China approves multiple GM imports

• China’s agriculture ministry recently approved imports of eight genetically modified (GM) crops, including GM alfalfa for the first time. U.S. official and industry stakeholders welcomed the decision after Beijing’s delayed approvals disrupted grain exports. China is one of the world’s largest agriculture markets. The approvals are “a positive step towards resolving the longstanding challenges biotechnology developers face in obtaining import approvals in China,” said the Biotechnology Innovation Organization.
  • According to reports, approvals include five new GM cotton events, one new GM rapeseed event, two new GM sugarcane events; and two new GM alfalfa events. The GM alfalfa approval was submitted nearly 10 years earlier, and the first acceptance by China for the product.
  • The announcement further encompassed renewals for 32 biosafety certificates for domestic cultivation/production, “including 29 GM cotton events and three animal vaccines, and six new approvals for cultivation/production, including two GM corn events, one GM soybean event, and three animal vaccines,” according to the International Service for the Acquisition of Agri-biotech Applications (ISAAA).  The renewal period lasts five years for biosafety certificates.

Trade Policy

USTR 75^th Anniversary

• The 75^th Anniversary of the Office of the U.S. Trade Representative (USTR) is Tuesday, January 24. The Office of the USTR was created through the Trade Expansion Act of 1962, in which Congress called for President Kennedy to appoint a Special Representative for Trade Negotiations to conduct U.S. trade negotiations. In 2012, the 50^th anniversary of USTR was recognized in a Presidential Proclamation by then President Barrack Obama.

U.S. – EU

U.S. and EU ink agriculture TRQ agreement

• Last week U.S. and EU officials announced an agreement that ensures U.S. existing access to the EU markets for a wide array of agricultural products. Under the agreement, several U.S. agricultural products, including rice, almonds, wheat and corn, among others will receive favorable tariff rate quota (TRQ) levels following the departure of the United Kingdom from the EU.
  • The U.S. – EU TRQ agreement was signed USTR Katherine Tai, Sweden’s Permanent Representative to the European Union, Ambassador Mikael Lindvall and European Commission Deputy Director General for Agriculture and Rural Development Michael Scannell. The new TRQ allocations are based on the historic pattern of agricultural exports to the 27 EU member states, according to USTR. In the first eleven months of 2022, the United States exported $11.1 billion worth of agricultural goods to the EU.

U.S. – Taiwan

U.S. and Taiwan advance trade pact

• During the first in-person negotiating round bilateral Initiative of 21st Century Trade the U.S. and Taiwan, trade officials “reached consensus in a number of areas,” according to the U.S. Trade Representative’s Office. During the four-day negotiating endeavor conducted in Taipei, the two trade partners “exchanged views on proposed texts covering trade facilitation, anticorruption, small and medium-sized enterprises, good regulatory practices, and services domestic regulation,” according to a USTR readout. USTR further noted the trade officials pledged to “to maintain an ambitious negotiating schedule in the months ahead to continue this momentum,” USTR said.
• By way of background, On June 1, 2022, U.S. and Taiwanese officials met virtually under the auspices of AIT and TECRO to launch the U.S.-Taiwan Initiative on 21st-Century Trade, which is “intended to develop concrete ways to deepen the economic and trade relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth for our workers and businesses, including through new trade agreements,” according to USTR.
  • According to USTR, the scope of negotiations include trade facilitation, good regulatory practices, strong anti-corruption standards, enhancing trade between our small and medium enterprises, deepening agriculture trade, removing discriminatory barriers to trade, digital trade, robust labor and environmental standards, as well as ways to address distortive practices of state-owned enterprises and non-market policies and practices. Tariff reductions are not contemplated.
  • Officials in both countries have signaled an eagerness to reach an agreement as quickly as possible and are open to “early harvest” of components of the initiative before finalizing the entire agreement, according to reports.

U.S. – U.K.

U.S. and UK talk trade at Davos

•  U.S Trade Chief Katherine Tai and U.K. Secretary of State for International Trade, Kemi Badenoch met on the sidelines of the World Economic Forum last week to discuss “shared commitment to strengthening the bilateral relationship and issues of shared concern, including the challenges posed by non-market economies,” according to a USTR readout. The two trade officials also discussed WTO reform, climate change, and the U.K.’s concern with the EV tax credit provisions in the Inflation Reduction Act. The U.K., EU, South Korea and Japan all contend that the EV tax credit contained in the Inflation Reduction Act puts foreign automakers at a competitive disadvantage and violates World Trade Organization rules.

Supply Chains

Ocean freight trade activity reaches pre-pandemic levels

• Several recent reports suggest a continuing slowdown in U.S. imports and port activity.  According to Descartes Datamyne, “American ports handled 1,929,032 inbound containers in December, measured in 20-foot equivalent units, or TEUs, down 1.3% from November.”  “December marked the lowest level for seaborne imports since June 2020, just before a pandemic-driven rush to restock depleted inventories triggered a surge in imports.”
• Another trade metric estimates January 2023 import volumes will decline 11.5% from last year and February imports will decline 23% to about 1.61 million TEUs. Those estimated declines would push trade volumes below “the pre-pandemic levels and roughly equivalent to imports in early 2020, when COVID-19 lockdowns crashed global shipping volume.”
• Despite the lifting pressure on global supply chains with slowing trade flows, companies remained concerned with reliable supply chains. In a recent survey, nearly 90% of firms responded that unreliable supply chains remain the top risk over the next 18 months, according to Capgemini Research Institute. Raw materials and the energy costs are the next two big concerns according to the survey results released in concert with the Economic Forum in Davos, Switzerland last week.

WTO

WTO leader urges efforts to empower farmers to meet SPS standards

• WTO Director-General, Okonjo-Iweala called on member countries to facilitate farmers’ ability in developing countries to meet global trade standards. “When farmers are empowered to meet these standards, it improves access to global and regional markets, paving the way for increased sales and incomes,” Okonjo-Iweala said in a recent press statement thanking Germany for contributing EUR 2.85 million to the Standards and Trade Development Facility (STDF). The WTO leader further underscored the importance of enabling farmers in developing countries to meet sanitary and phytosanitary (SPS) standards – measures which protect food safety and plant and animal health. “Enhanced SPS capacity also means more sustainable, resilient food systems, which contributes to food security at home and globally,” she added.
  • The STDF is a global partnership aimed at facilitating safe and inclusive trade, which is housed and managed at the WTO. STDF has supported 230 SPS projects, valued at over $65 million, across the developing world, according to the WTO.

DG Okonjo-Iweala calls for MC12 follow up

• On the contours of the World Economic Forum in Davos, Switzerland, WTO Director-General (DG) Ngozi Okonjo-Iweala urged WTO members to make progress on several MC12 issues. The DG mentioned the following topics, “the follow-up negotiations provided for in the Fisheries Subsidies Agreement; a decision on extending the TRIPS waiver compromise beyond COVID-19 vaccines to cover therapeutics and diagnostics; food security and agriculture reform; WTO and dispute settlement reform; development, in particular topics of interest for least developed countries; and e-commerce and a forward-looking agenda covering digital trade and climate change.” Okonjo-Iweala’s comments were part of a WTO trade ministers and senior officials meeting that displayed several divided positions by member countries as the WTO works to set priorities for the 13^th Ministerial.
  • Trade ministers and senior officials attending the meeting included those from: Australia; Brazil; Chile; Cameroon; Costa Rica; the European Union; China; Jamaica on behalf of the Africa, Caribbean and Pacific Group; Japan; South Korea; South Africa; Singapore; India; Indonesia and the United Arab Emirates.