TRADE UPDATE

Food & Agriculture
January 31, 2023

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

  • USMCA: U.S. officials recently indicated that Mexico’s efforts to address U.S. concerns over Mexico’s policies on biotech corn and other products are insufficient. In a statement, U.S. officials said the “changes are not sufficient and Mexico’s proposed approach, which is not grounded in science, still threatens to disrupt billions of dollars in bilateral agricultural trade, cause serious economic harm to U.S. farmers and Mexican livestock producers, and stifle important innovations needed to help producers respond to pressing climate and food security challenges.”
  • USMCA: Senate Finance Committee leadership, Chair Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID), transmitted a letter to USTR Katherine Tai urging the agency to pursue full enforcement of USMCA with Canada and Mexico on multiple trade challenges, including agricultural issues.
  • APEP: Last week, the U.S. and 11 other countries in North and South America, launched the Americas Partnership for Economic Prosperity (APEP). U.S. Secretary of State Antony Blinken and USTR Katherine Tai hosted the virtual ministerial event on Friday, Jan. 27.
  • WTO: The U.S. appealed the WTO’s dispute panel ruling regarding the use of the national security provisions of section 232, essentially sending the case into a legal void in the absence of a functioning WTO appellate body.
  • WTO: U.S. talks on WTO reform are entering a third phase with ambitions to restore the dispute settlement to full function by the end of 2024, according to a Reuters report. “Our goal is a fully functioning (dispute settlement system) by 2024,” and that the U.S. is “very committed” to reforms, said Deputy U.S. Trade Representative Maria Pagan.
  • U.S.- Indo-Pacific: A State Department official confirmed the Biden Administration plans to conclude IPEF this year, along with the Americas Partnership for Economic Prosperity (APEP). The next round of IPEF negotiations are scheduled for Feb. 8-11, in India, according to the U.S. Department of Commerce.

“We made it clear today that if this issue is not resolved, we will consider all options, including taking formal steps to enforce our rights under the U.S.-Mexico-Canada Agreement.”

–Joint USDA and USTR statement following visit by Under Secretary Alexis Taylor and USTR Chief Agricultural Negotiator Doug McKalip to Mexico City regarding Mexico’s Decree to phase out GM corn imports and other products

U.S. – Indo- Pacific

Biden administration plans IPEF conclusion in 2023

  • Last week, Under Secretary of State for Economic Growth, Energy and the Environment Jose Fernandez confirmed the Biden administration plans to conclude IPEF this year, along with the Americas Partnership for Economic Prosperity (APEP), though the former is much further behind schedule.  Secretary Fernandez will reportedly play a large role in APEP negotiations, while the Commerce Department and Office of USTR are leading IPEF work.
  • As noted earlier, the first IPEF round was held in Australia last December. 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

Senators call on USTR to pursue full USMCA enforcement

  • Senate Finance Committee leadership transmitted a letter to USTR Katherine Tai urging the agency to pursue full enforcement of USMCA with Canada and Mexico on multiple trade challenges, including agriculture issues. The letter, signed by Senate Finance Chair Ron Wyden (D-OR.) and Sen. Mike Crapo (R-ID), called on Tai to resolve several existing and new enforcement issues to “realize the full potential of USMCA.” The Senators noted that more than two years into the USMCA, “it is disappointing that Canada and Mexico have failed to come into full compliance with the agreement — and in some cases have flouted their obligations.” Regarding agriculture trade issues, the letter specifically raised Mexico biotech policies banning GM corn and Canada’s dairy TRQ administration. Regarding biotech corn the Senators called on USTR to resolve the issue “as soon as possible.” The Senators wrote:

Agriculture

“Biotechnology: Not only has Mexico failed to ensure biotechnology products are subject to a timely, transparent, and science-based approval process—the government has actually been backsliding on these commitments. Of particular concern is a Presidential Decree banning biotech corn for human consumption by 2024. Such a ban would deprive American farmers of access to the large Mexican market and undermine access to innovative crops that will be key to supporting growing populations and weathering climate change. More recently, Mexico imposed an export tariff on white corn, further undermining trade in agricultural products. Mexico’s actions raise serious concerns under USMCA, and USTR must address these issues as soon as possible.”

“Dairy: We commend USTR for its successful challenge to Canada’s dairy TRQs, which had reserved portions of the quota for domestic producers and shut many American producers out of the market. Concerningly, however, Canada’s efforts at compliance fell notably short, leading USTR to bring a follow-up dispute settlement action. We strongly support USTR’s efforts to resolve this issue once and for all, and we encourage the agency to closely monitor implementation of panel findings in this case. Further, it is critical that USTR continue to insist on Canada’s and Mexico’s full and timely compliance on other issues important to U.S. dairy farmers, including Canada’s milk pricing and export surcharges and Mexico’s recognition of certain common cheese names and new conformity assessment requirements for imported dairy products. We ask that USTR continue to consult with industry and other stakeholders to ensure these issues are addressed in a timely manner.”

  • The letter further pressed USTR to address trade concerns under USMCA with Canada and Mexico in the areas of environment, digital and online services, energy and labor reforms.

U.S. trade officials – Mexico decree modification insufficient

  • Last week, U.S. Department of Agriculture Under Secretary for Trade and Foreign Agricultural Affairs, Alexis Taylor and Office of the U.S. Trade Representative Chief Agricultural Negotiator, Doug McKalip met with Mexican government officials to respond to Mexico’s proposed revision to the decree to ban GM corn imports and other products. In a joint statement by USTR and USDA, Under Secretary Taylor and Ambassador McKalip acknowledged Mexico’s efforts to address U.S. concerns, yet said, the “changes are not sufficient and Mexico’s proposed approach, which is not grounded in science, still threatens to disrupt billions of dollars in bilateral agricultural trade, cause serious economic harm to U.S. farmers and Mexican livestock producers, and stifle important innovations needed to help producers respond to pressing climate and food security challenges.”
    • The two U.S. trade officials continued, “We appreciate our Mexican counterparts’ time and dedication in trying to hammer out a solution. We made it clear today that if this issue is not resolved, we will consider all options, including taking formal steps to enforce our rights under the U.S.-Mexico-Canada Agreement.”
    • Multiple industry groups lauded the USDA and USTR efforts and statement. “This is significant development and good news for corn growers. Secretary Vilsack and USTR Ambassador Tai are making it crystal clear that they are going to make the Mexican government abide by what it agreed to under USMCA,” said National Corn Growers Association President Tom Haag. He continued, “These leaders understand that banning biotech corn would deliver a blow to American farmers and exacerbate current food insecurity in Mexico by drastically raising prices for corn, basic foods and other critical products derived from corn in the Mexican economy.”

USMCA Deputies meeting – U.S. cites Mexico’s biotech and energy policies

  • Separately Deputy USTR Jayme White traveled to San Diego, CA for the USMCA Deputies Meeting raising concerns with Mexico’s biotech policies, among other trade issues. In meeting with Mexico’s Under Secretary of Economy for Foreign Trade Alejandro Encinas, Deputy USTR White “urged Mexico to return to a science- and risk-based regulatory approval process for all agricultural biotechnology products in Mexico,” according to a USTR readout of the meeting. The two trade officials also discussed other USMCA issues, including, Mexico’s energy measures, enforcement of fisheries law, and tackling forced labor in import supply chains, among other topics.
    • Following the meeting, Deputy USTR White, Canada’s Deputy Minister for International Trade, Rob Stewart and Under Secretary Encinas released a joint statement stating, “On the heels of a successful North American Leaders’ (NALS) Summit in Mexico City, the United States, Canada and Mexico today held the second meeting of Deputies under the USMCA/CUSMA/T-MEC at the Institute of the Americas in San Diego, California. We received updates from 11 committees and working groups of the Agreement that have convened since the second Free Trade Commission meeting last July. This work demonstrates that continued implementation of the USMCA/CUSMA/T-MEC is an important priority for all three Parties and that the Agreement remains the foundation for continued North American economic integration and enhanced regional competitiveness.”

Americas Partnership for Economic Prosperity

U.S. convenes first APEP ministerial

  • Last week the U.S., along with 11 other countries in North and South America, launched the Americas Partnership for Economic Prosperity (APEP) via a virtual ministerial meeting hosted by USTR Katherine Tai and Secretary of State Antony Blinken. The APEP “will be a tool to bring more voices to the table, to ensure that people who have been traditionally left out – like women entrepreneurs, indigenous peoples, and other underrepresented groups – can help shape this new chapter in our story on trade,” said Tai in opening remarks. The APEP “is a part of our pursuit of a worker-centered trade policy,” Ms. Tai continued, “It will be a new type of economic arrangement, anchored on cooperation to build our economies from the bottom up and the middle out. That includes empowering workers and eradicating forced labor; strengthening our supply chains to be more resilient against unexpected shocks; fostering innovation in both the public and private sectors; and tackling the climate crisis by growing climate-related industries and creating good-paying jobs throughout our region.” To date, USTR has not released APEP negotiating priorities.
    • The APEP countries include: Barbados, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, the U.S. and Uruguay, and represent 90 percent of the region’s GDP, according to the Administration. Brazil and Argentina, significant trade nations in the region are presently not included in APEP. Earlier President Biden signaled APEP could see future expansion with the inclusion of other countries.
    • The objectives of the partnership are outlined in a fact sheet released by the White House, with priorities including regional competitiveness, resilience, shared prosperity, and inclusive and sustainable investment.

U.S. good trade deficit expands on increased imports

  • The U.S. trade deficit in goods increased for the third consecutive month, propelled by increasing imports in December. The monthly advanced goods trade deficit increased 8.8%, from $82.9 billion to $90.3 billion in December as exports shrank and imports increased, according to the U.S. Census Bureau. Exports of goods for December were $166.8 billion, $2.6 billion less than November exports. Imports of goods for December were $257.1 billion, $4.7 billion more than November imports.

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.”

WTO

U.S. appeals WTO ruling on national security defense

  • Last week the U.S. appealed the WTO’s dispute panel ruling regarding the use of the national security provisions of section 232 to impose steel and aluminum tariffs. In lodging the appeal, the U.S. noted, “adjudicating questions of national security in the WTO is not only incompatible with the purpose of the WTO, a trade organization, but will not advance WTO members’ shared interests in the WTO as a forum for discussion and negotiation.” With a non-operational WTO dispute settlement appellate body, the appeal is suspended indefinitely or what experts characterize as “appealing into the void.”
    • As a reminder, the WTO recently rejected the U.S.’s claims to national defense in navigating its trade agenda, stating that the United States had breached international trade rules when employing additional steel import tariffs under then President Trump, utilizing section 232 tariff authority and on the bases that surging steel imports were a threat to national security. The WTO panel ruled that the U.S. had not shown such imports were threatening national security.
    • Following the WTO ruling, U.S. Trade Representative Katherine Tai noted that the WTO was on “very, very thin ice” with the U.S. Along this line, USTR spokesperson Adam Hodge declared that “The United States has held the clear and unequivocal position, for over 70 years, that issues of national security cannot be reviewed in WTO dispute settlement, and the WTO has no authority to second-guess the ability of a WTO Member to respond to what it considers a threat to its security.”

U.S. led reform talks progressing

Maria Pagan, Deputy United States Trade Representative and Chief of Mission, Geneva
Maria Pagan, Deputy United States Trade Representative and Chief of Mission, Geneva
  • U.S. talks on WTO reform are entering a third phase with ambitions to restore the dispute settlement to full functioning by end 2024, according to a Reuters report. In an interview with Reuters, Deputy United States Trade Representative Maria Pagan said, “Our goal is a fully functioning (dispute system) by 2024,” and that the U.S. is “very committed” to reforms. Regarding timing of resurrecting the defunct appellate body, Pagan said, “I think it needs a lot of revamping.” Going back to the Bush administration the U.S. has complained of a host of appellate actions, including judicial overreach, not originally envisioned in the construction of the dispute settlement system.
    • For many years the U.S. blocked appointment of new appellate body members, most recently during the Trump administration when the appellate body lost its final adjudicators and became non-operational. Attempts by other WTO members to devise an alternative interim appeals system have gained limited traction and the Biden administration continues to resist requests to resurrect the nomination process while focusing on reforming the current system.

New WTO Agriculture Chair

Alparslan Acarsoy, Turkey's Ambassador to the WTO
Alparslan Acarsoy, Turkey’s Ambassador to the WTO
  • In a special session last week, WTO members finalized the appointments of Alparslan Acarsoy of Turkey as chair of the Committee on Agriculture and Einar Gunnarsson of Iceland as new chair of the Negotiating Group on Rules (NGR). Ambassador Acarsoy will steer the process to build momentum on agriculture negotiations, while Ambassador Gunnarsson will chair the work on fisheries subsidies negotiations, stemming from an agreement reached at the WTO’s 12th Ministerial Conference in June 2022.
    • Regarding the agreement on fisheries subsidies, WTO Director-General Ngozi Okonjo-Iweala noted the slow progress on the agreement in the absence of an NGR Chair. She also emphasized the importance of resuming agriculture talks as expeditiously as possible since this critically important issue has been stalled without a Chair since last summer.
    • Ambassador Acarsoy acknowledged the challenges ahead in advancing negotiation on agriculture. “MC13 is just a year from now and we are today at a crucial crossroad,” he said. “Let us be clear, we were not able to deliver in the agricultural negotiations in the previous two Ministerial Conferences and reaching a successful outcome at MC13 is therefore more critical than ever. We have no time to waste, and we must immediately engage with the right approach in order to overcome entrenched differences that have stymied progress so far.” WTO members failed to reach an agreement on agriculture subsidies at the 12th Ministerial last June.