TRADE UPDATE

Food & Agriculture
March 8, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

• USMCA: The U.S. dairy sector rejected Canada’s proposal to resolve the USMCA dairy dispute and asked the Biden administration “to demand that Canada go back to the drawing board,” to comply with a USMCA panel decision.
• U.S. – China: USTR released The President’s 2022 Trade Policy Agenda and 2021 Annual Report, outlining how the Biden administration is “Realigning the U.S. – China Trade Relationship,” including deploying a “new, holistic, and pragmatic approach” to trade with China, arranged around “worker-centered trade policy.”
• U.S. – Russia: Support is growing in the Congress for repealing “permanent normal trade relations” (PNTR) with Russia to punish the country for its invasion of Ukraine. Senators Wyden (D-OR), Portman (R-OH) and Cardin (D-MD) have voiced their support to move swiftly on the action. On the House side, Rep. Earl Blumenauer (D-OR) and Rep. Lloyd Doggett (D-TX) introduced legislation to end PNTR with Russia.
• Indo-Pacific Economic Framework: USTR’s 2022 Trade Policy Agenda briefly highlighted components and ambitions for IPEF and USTR stated more IPEF details are expected in the “near future.”
• WTO : Members of the WTO’s Developed Countries Coordinating Group agreed to suspend Russia from their assembly in response to the country’s invasion of Ukraine. The action follows a request from Ukraine’s WTO ambassador to take formal actions curtailing Russia’s participation in the WTO.

“I look forward to continuing to lead this office and working with my colleagues across the administration to deliver on President Biden’s vision for trade that is equitable, fair, and lasting.”

— Ambassador Katherine Tai’s comment following the release of the 2022 President’s Trade Policy Agenda and 2021 Annual Report

USMCA

Canadian Trade Minister Ng travels to D.C.

• Canada’s Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng flew to Washington D.C. to discuss U.S.-Canada trade, USMCA, and the importance of international cooperation on trade priorities. While in the United States, Minister Ng met with Ambassador Tai and Sen. Chuck Grassley (R-IA), where she touched on a number of topics, reiterating “Canada’s steadfast support for Ukraine,” her commitment to the “rules-based international order,” along with Canada’s focus on “defending the interests of Canadian workers and industry.” Minister Ng also participated in a virtual event hosted by the Brookings Institution and gave a speech at The Wilson Center.
• In her speech, Minister Ng noted the success of the U.S. and Canada’s trade partnership in 2021. According to a Government of Canada News release on Ng’s trip, last year “the United States remained Canada’s top merchandise trading partner in both goods and services. This includes the fact that Canada’s exports to the United States surpassed $450 billion dollars for the first time ever.” 

U.S. dairy rejects Canada’s proposed dairy TRQ changes

• Canada released its proposed policy changes in response to a USMCA panel ruling in favor of the U.S. complaint that Canada is breaching its USMCA commitments by reserving most of the in-quota quantity in its dairy tariff-rate quotas (TRQs) for the exclusive use of Canadian processors. The changes, which propose to allocate shares of TRQs to “processors and distributors on a market share basis” instead of just “processors on a market share basis,” are currently available for public comment.
• The U.S. dairy industry rejected the Canadian proposal and has asked the administration press Canada for a revamped solution. The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) rejected the Canadian Government’s proposal. “We urge the administration to demand that Canada go back to the drawing board until it can genuinely deliver on providing the U.S. dairy industry the full benefit of USMCA,” said Jim Mulhern, president and CEO of National Milk Producers Federation  (NMPF). Krysta Harden, president & CEO of U.S. Dairy Export Council (USDEC), also expressed her disappointment in the proposed changes, “U.S. dairy farmers and manufacturers have only limited access to the Canadian market under USMCA. That makes it essential that Canada abide by its original commitments under that agreement. Canada’s recent dairy TRQ proposal will not lead to that result.”

New inspections stalling potato exports

• The U.S. potato industry is voicing concerns that Mexico is introducing another regulatory measure to stall expanded market access for U.S. potatoes.  According to reports, Mexico is changing the plan to adhere to a Supreme Court ruling lifting potato imports restrictions by requiring Mexican agriculture officials to conduct additional site visits to U.S. potato processing and shipping facilities. Mexico is “now requiring additional site visits during the growing season prior to granting access. But they have not stated how many or where,” according to Kam Quarles, President of the National Potato Council.  Quarles noted that while Mexico’s work plan contains a provision for “auditing” the process with site visits, “Mexican negotiators are reinterpreting that provision to be a precursor to shipments rather than an audit to determine compliance with a program in operation.”
  • The implementation plan stems from a Mexican Supreme Court ruling last year overturning prior legal challenges that have lasted a decade or more to block expanded importation of U.S. potatoes over concerns with disease and pests. Mexico currently only allows U.S. potatoes to be sold within 26 kilometers of the U.S.-Mexico border. The National Potato Council estimates that a fully opened Mexico market could provide an additional $150 million of U.S. exports annually compared to current levels of $50 million annually.

China Trade

A “new approach” to trade with China

• “Realigning the U.S. – China Trade Relationship” is one of the Biden Administration’s nine key trade agenda items for 2022. The President’s 2022 Trade Policy Agenda and 2021 Annual Report lays out the basics of the Administration’s thinking on the major issue areas of the current U.S. – China trade relationship. The largest trade-related threats identified by the report include China’s:
  • Use of “unfair, distortive measures that provide substantial support to Chinese industries,”
  • Failure “to provide its people with the most basic of labor rights,” and
  • Impact on the environment due to “weak environmental regulation and enforcement; subsidies that contribute to overfishing, illegal fishing practices; decimation of the infrastructure of recyclable commodities through a vast web of import bans; and overproduction of industrial goods.”
• In response to these issue areas, the Biden Administration plans to take a “new, holistic, and pragmatic approach” to trade with China, centered around “worker-centered trade policy.” The 2022 Trade Policy Agenda pinpoints President Biden’s proposed Build Back Better legislation as a crucial element in strengthening U.S. competitiveness in the face of China. The Administration will also focus its attention on renewed “engagement with our partners and allies” in an effort to build a united front against China’s unfair trade practices. Moreover, the U.S. will continue to implement and enforce the Uyghur Forced Labor Prevention Act and hold China responsible for its use of forced labor.

Phase One Agreement

House republicans want USTR to enforce Phase One

• In a letter addressed to Ambassador Tai, House Ways and Means republicans appealed to the Biden Administration to construct an action plan, targeting China’s predatory trade practices and enforce the Phase One Agreement. “If the Biden Administration is committed to enforcing the Phase One Agreement on its terms, then it must be willing to invoke the Phase One Agreement’s enforcement mechanism,” they wrote, “We fear that if this mechanism is not utilized, the value of any future trade agreement with China will be seriously compromised.”  Led by Ways and Means Republican Leader Kevin Brady (R-TX) and Ways and Means Subcommittee on Trade Republican Leader Adrian Smith (R-NE), the lawmakers lamented the lack of detailed analysis on China’s performance, leaving “Congress with insufficient data to fulfill its Constitutional mandate to regulate commerce with China.”  The letter follows the release of 2021 trade data, confirming China failed to follow through with its Phase One commitments. The House republicans called on USTR to:
  • First, USTR should provide a detailed analysis of China’s performance of its obligations under the Phase One Agreement. 
  • Second, USTR should develop an action plan to address China’s shortcomings under the Phase One Agreement. 
  • Third, USTR should lead an ambitious, forward-looking strategy to advance free and fair trade and combat unfair industrial policies and trade practices in China and throughout the Indo-Pacific. 
  • Furthermore, the lawmakers called on the Biden Administration to “set a clear, action-oriented plan to confront China’s predatory trade practices and trade aggression throughout the world,” noting that this month marks the second anniversary of the entry into force of the Phase One Agreement.

COVID-19

Global food prices reach a new record high

• Global food prices hit an all-time high in February, led by sharp increases in vegetable oil and dairy prices as well as higher costs for grains, according to the UN Food and Agriculture Organization (FAO). FAO’s food price index averaged 140.7 points in the last month, up 5.3 points (3.9%), surging past the previous record set in February 2011. In the past year the index has climbed 207 points or 24.1%.
  • Rising food production input costs are “significant drivers of rising food prices, particularly the energy, fertilizer and feed sectors,” said FAO economist Upali Galketi Aratchilage. “All these factors tend to squeeze profit margins of food producers, discouraging them from investing and expanding production.”

U.S. trade deficit continues to widen

• January’s international trade deficit in goods increased to $107.6 billion or 7.1% from $100.5 billion in December as exports decreased and imports increased. The latest monthly trade deficit reached an all-time high and reveals import demand remains strong in early 2022 as the U.S. economy rebounds from the global pandemic.

Trade Policy

2022 Trade Policy Agenda and 2021 Annual Report

• USTR released the President’s 2022 Trade Policy Agenda and 2021 Annual Report, which underlines the Administration’s 2021 trade-related accomplishments, “including USTR’s work to promote sustainable environmental practices in trade policy, enforce existing agreements, improve the resilience of global supply chains, and combat the COVID-19 pandemic,” in addition to sharing how President Biden plans to move his trade goals forward in 2022.
• A factsheet on the Trade Agenda lays out the key elements of the President’s 2022 trade policy will include:
  • Standing up for Workers’ Rights
  • Accelerating Decarbonization and Promoting Sustainable Environmental Practices
  • Supporting U.S. Agriculture
  • Bolstering Supply Chain Resiliency
  • Combatting the COVID-19 Pandemic
  • Re-Aligning the U.S.-China Trade Relationship
  • Engaging with Key Trading Partners and Multilateral Institutions
  • Promoting Confidence in Trade Policy Through Enforcement
  • Broad Engagement with Stakeholders to Facilitate Inclusive, Durable Trade Policy and Promote Equity
• Regarding agriculture, the Biden Administration will seek to create new opportunities for farmers and industry actors, using existing Free Trade Agreements (FTAs) and Trade and Investment Framework Agreements (TIFAs).
  • “In 2021, U.S. agricultural domestic exports reached $177 billion and created an estimated $202 billion in additional U.S. economic activity, for a total U.S. economic output of $379 billion,” according to the report. Despite challenges posed by the COVID-19 pandemic, agriculture producers “maintained high levels of efficiency and productivity.”
  • USTR plans to further advance American agriculture by continuing to open export markets, promoting trade through bilateral and regional activities, and enforcing trade agreements for agriculture, among other methods.
• Agriculture is a major facet of President Biden’s worker-centered trade policy. For this reason, the Administration has pledged to continue to push for more open trade in the agricultural sector in 2022. USTR’s efforts in 2022 will mirror and build upon the Administration’s efforts in 2021. In making this point, President Biden’s Trade Agenda highlighted its major agricultural trade successes of 2021, which include:
  • “Conclud[ing] negotiations with the United Kingdom (UK) and European Union on tariff rate quota (TRQ) commitments;”
  • The Government of India “allow[ing] imports of U.S. pork;”
  • “The Government of Vietnam announc[ing] reductions in the tariff rates for frozen pork, corn, and all classes of wheat;”
  • “The Philippines lower[ing] its tariff rates on imported fresh, chilled, and frozen pork and increased quota volumes for imports of such products, and lower[ing] its tariffs on certain chicken and turkey products;”
  • “Clarify[ing] Colombia’s certificates of origin accompanying U.S. corn exports to Colombia;” and
  • Colombia finding its “implementation of a safeguard [on the import of U.S. milk powder] was not justified.”

Agriculture Exports

Ag trade sees the impacts of the Russia – Ukraine conflict

• Anxieties within the agricultural community heighten as Russia continues its invasion of the Ukraine. Economists have reported major disruptions to trade throughout the Black Sea. In an interview with Agri-Pulse, chief commodities economist for StoneX Group Inc, Arlan Suderman, said ships are not “willing to pay the insurance costs or the risks” to go into the Black Sea region, which is “reducing wheat that’s moving out of Romania, Kazakhstan and other countries that export out of the Black Sea. Basically, a third of the world’s wheat exports are off limits.”
• The conflict may also stifle U.S. poultry exporters’ ability to reach markets in Central Asia. “The U.S. exports more than $130 million worth of poultry and poultry products annually to Central Asian nations and other nearby countries like Armenia and Georgia,” through Black Sea ports, according to an Agri-Pulse report. Port blockages in the Black Sea are adding to potential export disruptions for the poultry industry, and the trade of numerous other agricultural products.

Supply Chains

President Biden announces crackdown on ocean carriers

• During his State of the Union address, President Biden called ocean carriers a major culprit in exacerbating supply chain issues and food inflation in America.  “During the pandemic, these foreign-owned companies raised prices by as much as 1,000% and made record profits,” he said, referencing the ocean carrier companies accused of price gouging. “Tonight, I’m announcing a crackdown on these companies overcharging American businesses and consumers.”
• Prior to President Biden’s State of the Union address, the White House released a joint initiative between the Justice Department and Federal Maritime Commission to promote fair competition in the shipping industry. “The Justice Department will provide the FMC with the support of attorneys and economists from the Antitrust Division for enforcement of violations of the Shipping Act and related laws. The FMC will provide the Antitrust Division with support and maritime industry expertise for Sherman Act and Clayton Act enforcement actions,” according to a news release on the initiative.

U.S. – Russia

Senators support canceling PNTR for Russia

• Senate Finance Committee Chair Ron Wyden (D-OR) expressed his support for repealing “permanent normal trade relations” (PNTR) with Russia to punish the country for its invasion of the Ukraine. “We need to make sure tariff treatment of Russia reflects its pariah status,” Wyden (D-Ore.) said in a statement on action he plans to pursue in the Finance Committee. He continued, “Removing normal trade relations will raise tariffs on Russian goods and send a message that unprovoked invasions of a foreign nation will not be tolerated in any arena.” Removing PNTR for Russia would allow the U.S. to raise tariffs on Russian goods beyond levels provided to other trade partners under most favored nation status.  Congress approved PNTR with Russia in 2012, just before Moscow formally joined the WTO.
• Like Congressman Wyden, Senators Rob Portman (R-OH) and Ben Cardin (D-MD) also spoke in favor of revoking PNTR with Russia and announced their No Trading with Invaders Act, which “would allow the president to revoke Permanent Normal Trading Relations (PNTR) for any Communist, or formerly Communist, country that commits an act of aggression against another member of the World Trade Organization (WTO).” Senator Portman noted, “Free trade with the United States is a privilege not a right. Countries who wantonly invade others—and democracies no less—do not deserve the benefits of unlimited access to our economy.” 

House legislation to expel Russia from WTO

• Earlier, House Ways and Means Trade Subcommittee Chairman Earl Blumenauer (D-OR) and Rep. Lloyd Doggett (D-TX) introduced legislation to end permanent normal trade relations (PNTR) with Russia and to begin the process of expelling Russia from the World Trade Organization (WTO).  The U.S. must invoke “every tool at our disposal, short of armed conflict, to protect Ukraine’s independence,” Rep. Blumenauer said. “Putin’s unprovoked and unprecedented actions warrant a proportional response that includes terminating Permanent Normal Trading Relations and denying it WTO membership.” Mr. Blumenauer said he intends to use his position as chair of the trade subcommittee to move the legislation forward.  The two lawmakers emphasized that Russia should not benefit from the global trading system while invading Ukraine.

Section 232 Investigations

Ambassador Tai discusses the Global Arrangement with German Minister Habeck

• Following the pair’s meeting in Germany last week, USTR’s Ambassador Tai and Germany’s Federal Minister for Economic Affairs and Climate Action Robert Habeck reconvened in Washington D.C. to continue their discussion on protecting “workers, businesses, and the environment from the harmful effects of non-market policies and practices.” Their conversation then transitioned to steel and aluminum and the two officials “exchanged views on the initiative by the United States and the European Union to re-establish historic transatlantic trade flows in steel and aluminum and develop a global arrangement to address carbon intensity and global non-market excess capacity,” according to a USTR readout on the meeting. USTR did not share further details on the content of Ambassador Tai and Minister Habeck’s conversation.
  • In October of 2021, the U.S. and EU issued a joint statement announcing the U.S. would ease 232 duties on European steel and aluminum and the two entities’ would move forward by working together to create larger global agreement on sustainable steel and aluminum that “reflects a joint commitment to use trade policy to confront the threats of climate change and global market distortions.” The ambitious agreement has since been dubbed “The Global Arrangement” by politicians.

U.S. – U.K. tariff talks continue

• No significant update on U.S. – U.K talks on resolving the Section 232 tariff disputes. Secretary of Commerce Raimondo, Ambassador Tai, and U.K. Secretary of State for International Trade Trevelyan have met virtually, discussing U.S. Section 232 tariffs on U.K. imports and U.K. retaliatory tariffs on U.S. exports to the U.K. “They agreed that, as the United States and the United Kingdom are close and long-standing partners, sharing similar national security interests as democratic market economies, they can partner to promote high standards, address shared concerns and hold countries that practice harmful market-distorting policies to account,” according to a U.S. – U.K joint statement on the issue.

Section 301 Investigations

Canada’s DTS actionable under Section 301

• USTR shared its concerns with the Canadian government regarding Canada’s intent to implement a Digital Services Tax (DST) in 2024. USTR claims the tax would “single out American firms for taxation while effectively excluding national firms engaged in similar lines of business,” which would be actionable under Section 301 of the Trade Act of 1974. If Canada follows through with a DST, Section 301 would allow the U.S. government to retaliate as it has done with similar DST cases in the past.
  • Canada’s proposed legislation would “implement a three-percent DST on revenue from certain digital services. The tax would apply to businesses with gross revenues of at least EUR 750 million (at least USD 850 million) and at least CAD 20 million (more than USD 15 million) of certain in-scope Canadian revenues.”

Biden Transition

Pagán Senate Vote expected soon

• The Senate could vote as early as this week to confirm Maria Pagán as Deputy U.S. Trade Representative and U.S. ambassador to the WTO. Senate Democratic Leader Chuck Schumer (D-NY) reportedly filed cloture on the nomination, a procedure that limits debate, but requires a 60-vote super majority. Should the 60 votes materialize, Pagán’s nomination is expected to clear the Senate.
  • Pagán, the deputy general counsel in the Office of the U.S. Trade Representative, was approved by the Senate Finance Committee last November, with only one Republican opposing her. Since then, her nomination – as well as that of Assistant USTR Christopher Wilson, President Biden’s pick to serve as the first-ever chief innovation and intellectual property negotiator – has been blocked by Senator Mike Lee (R-UT) over the U.S. position on a waiver of certain WTO intellectual property protections related to COVID-19 vaccination access and distribution.
  • The WTO ambassador position has remained vacant at USTR since Biden took office.  If confirmed in the next week or two, Pagán would move into the Geneva-based position with only two months before the 12^th WTO ministerial, which will be held the week of June 13^th.  A timeline for voting on Wilson’s nomination remains unclear.

Under Secretary for Trade and Foreign Agricultural Affairs nomination stalled for ethics reasons

• Addressing the National Farmers Union, Secretary Vilsack spoke to the Administration’s difficulty in filling USDA’s Under Secretary for Trade and Foreign Agricultural Affairs position. “It’s a great job and you would think it would be easy to find somebody,” he said, “but I think as a result and a reaction to the previous administration and issues related to ethics we are making people who are thinking about these jobs go through an incredible gauntlet and we are imposing on them conditions that I appreciate the ethical aspect of … but it can be a bit much.”
  • Secretary Vilsack previously confirmed the Administration was unable to move forward with the nomination of two potential candidates for the position due to issues with meeting the ethics requirements for the role. Agricultural industry actors and lawmakers alike continue to push President Biden to fill the Under Secretary for Trade Foreign Agricultural Affairs opening.

Indo- Pacific Economic Framework

Will Taiwan be included in the IPEF?

• Experts have expressed conflicting views on allowing Taiwan to join the IPEF. At a House Foreign Affairs Committee meeting on the framework, Rep. Gerry Connolly (D-VA) testified on Taiwan’s behalf. “I think we ought to be aggressive in including Taiwan … I think we ought to ensure they’re in and we ought to pursue that in other international bodies as well,” he said to his fellow congressmen.
• Other politicians and organizations are not so keen on writing Taiwan into the agreement. The Vice President of the Asia Society Policy Institute, Wendy Cutler, commented on the debate, “If Taiwan is included, they may find that some of these potential candidates are not interested…. [The] ultimate key to success [will be to] attract members from all corners of the region, particularly Southeast Asia, where China’s economic gravitational pull is strengthening. Will it somehow be asking [countries] to choose between the United States and China, a choice that most are reluctant to make given their extensive and growing economic ties with their large neighbor?”

USTR to release IPEF details in the “near future”

• The Biden Administration’s 2022 Trade Policy Agenda briefly touched on the highly anticipated IPEF. In the report, the Administration clarified, “USTR will lead efforts to craft a trade arrangement with parties that includes provisions on high-standard labor commitments; environmental sustainability; cooperation in the digital economy; sustainable food systems and science based agricultural regulation; transparency and good regulatory practices; competition policy; and, trade facilitation.” The Trade Policy Agenda went on to confirm the trade arrangement portion of the IPEF will be developed collaboratively by Congress, relevant trading partners, and a broad base of stakeholders. In a USTR press release, pertaining to 2022’s Trade Policy Agenda, the agency revealed it would release further details on the IPEF in the “near future.”

Industry groups advocate for broad trade provisions

• As noted earlier, a broad cross-section of industry groups urged the Biden Administration to negotiate a wide-ranging deal that includes enforceable technology and agriculture standards and new market access opportunities. In a letter signed by the Chamber of Commerce, American Farm Bureau, Business Roundtable and National Association of Manufacturers, among others, the groups wrote, “A successful trade module of the IPEF should include commitments across the manufacturing, agriculture, and services sectors.” “These should include trade facilitation, good regulatory practices, sanitary and phyto-sanitary rules, technical barriers to trade, intellectual property rights protection, and anti-corruption, among other state-of-the-art provisions from recent agreements,” the letter continued.  The groups said a “successful IPEF should broadly:
  • Include binding and enforceable legal commitments.
  • Create market access opportunities for U.S. businesses, farmers, and workers.
  • Set high standards in each module and ensure that participating countries agree to all commitments.
  • Secure commitments this year for each of the modules.
  • Include specific work plans to regularly add commitments and participating countries to each module, which would deepen and broaden the IPEF’s benefits over time.
  • Establish an ongoing consultative mechanism for the private sector to share feedback on the priorities for each module and to maximize benefits and outcomes.”
• The groups’ outlined IPEF outcomes extend beyond the Biden Administration’s stated scope to date, as administration officials have maintained that the IPEF is “not a free trade deal” and “will not include new market access commitments.”  However, more details and specifics on the IPEF are expected from the administration soon.

U.S. – Japan

U.S. – Japan Partnership on Trade holds meeting

• Assistant U.S. Trade Representative for Japan, Korea, and APEC Affairs, Michael Beeman led the U.S. delegation in its discussions with Japanese officials, aiming to spur progress on U.S.-Japan bilateral trade collaboration. Japan’s Ono Keiichi, Director General of Economic Affairs at the Ministry of Foreign Affairs and Matsuo Takehiko, Director General of Trade Policy at the Ministry of Economy, Trade, and Industry led the Japanese side of the conversation. Together, the officials found many areas of agreement, including points of shared critical interest in labor, the digital economy, the environment, trade facilitation, third-country issues, and multilateral cooperation. AUSTR Beeman, DG Keiichi, and DG Takehiko “concurred to work towards robust agendas for the United States’ APEC host year and Japan’s G7 host year, both in 2023” and agreed to follow up on the issues of forced labor and supply chains. The U.S. and Japan will also continue to exchange views on “emerging and innovative digital trade rules” and ways to “promot[e] zero-to-low carbon goods and technologies.” The next U.S. – Japan Partnership on Trade meeting will be held this upcoming summer.

U.S. – Middle East

Bahraini Minister talks trade with USTR Tai

• Ambassador Tai met with Bahrain’s Minister of Industry, Commerce and Tourism Zayed Al-Zayani to consider opportunities and action plans to strengthen the U.S. and Bahrain’s economic relationship. Although little information on the meeting has been released, USTR did provide a readout on the two officials’ conversation, which covered topics such as global steel and aluminum excess capacity and labor. During their discussion Ambassador Tai also “outlined her desire to work together to address labor-related issues in Bahrain by completing the Free Trade Agreement (FTA) Labor Chapter Consultations.” By the end of their conversation, the Bahraini Minister and American Ambassador agreed to work collaboratively on the trade-related issues they deliberated during their meeting.

U.S. – EU

Decarbonization to be a pillar of U.S. – EU partnership

• At a Center for Strategic and International Studies virtual event, Dutch member of the European Parliament Mohammed Chahim discussed potential steps forward for the U.S. and EU in advancing global climate action. “We should work together to create an international carbon accounting standard,” said Chahim. According to the European Parliament member, the worldwide standard should rely on “scientific analysis” and could be prompted via U.S. – EU – Canada cooperation. Chahim’s comments highlight a pattern seen in U.S. – EU policy conversations, characterized by repeated mention of sweeping, ambitious climate action proposals.  Future trade partnerships between the U.S. and EU are likely to feature a strong green element. 

Next TTC meeting confirmed for May

• The U.S. and EU will hold their next Trade and Technology Council (TTC) meeting on May 15-16 in France. Upon its creation, the Council laid out its primary objective: “to promote U.S. and EU competitiveness and prosperity and the spread of democratic, market-oriented values by increasing transatlantic trade and investment in products and services of emerging technology, strengthening our technological and industrial leadership, boosting innovation, and protecting and promoting critical and emerging technologies and infrastructure.”
  • The TTC last met in September of 2021 in Pittsburgh, PA, where officials discussed investment screening, export controls, artificial intelligence, semiconductors, and global trade challenges, among other issues. During the TTC’s next assembly, officials will revisit the council’s 10 working groups that were established during the Council’s last meeting. 

U.S. – U.K. Trade

U.S.-U.K. trade talks still “on pause”

• No significant updates since on U.S. – U.K. trade talks since Ambassador Katherine Tai stated the bilateral trade negotiations, that commenced under the Trump Administration, are still “on pause.”
  • Ambassador Tai did, however, affirm USTR is very keen on “enhancing our trade relationships and our collaboration with our partners in the U.K. and Kenya.” How the U.S. plans on going about trade-related conversations with the U.K. and Kenya remains unclear.
  • Ambassador Tai went on to say, “in terms of what form [British and Kenyan collaboration] will take and whether it conforms to exercises and vehicles that are familiar to us, I’m going to leave that open, but our focus really is on how to be most effective and being good partners in advancing ourselves into a really strong economic recovery by working together.”
• Meanwhile U.K. officials are posturing for trade negotiations with the Biden Administration to commence after the U.S. midterm elections later this year. “We hope that may be after the midterms, when they want to pick up and talk about those federal-level bits of an FTA, we stand ready to carry on those conversations,” Secretary of State for International Trade Anne-Marie Trevelyan said recently. In the interim, U.K. officials are focusing on state-level negotiations, laying the regulatory groundwork for a future bilateral trade agreement. The U.K. has already secured new trade agreements with New Zealand and Australia, launched negotiations with India, and requested entry into the CPTPP.

WTO

Russia suspended from Developed Countries Coordinating Group

• Members of the WTO’s Developed Countries Coordinating Group agreed to suspend Russia from their assembly in response to the country’s invasion of Ukraine. In a letter addressed to the WTO’s General Council Chair Didier Chambovey, the chargés d’affaires of the U.S. and EU missions to the WTO announced Russia’s removal from the group. “Following the unprovoked and unjustified military aggression against Ukraine by Russian forces last week, members of the Developed Countries Coordinating Group believe that is no longer appropriate for Russia to partake in the deliberations of our group. Russia’s participation in the Group is therefore suspended,” they said. The move marks first major WTO-related action in reprimanding Russia for its attack on Ukraine.
• Inu Manak, a senior fellow at the Council on Foreign Relations, called Russia’s removal from the Developed Countries Coordinating Group, which participates in the selection of WTO committee leaders, a “fairly big signal.” The next step for the WTO in pressuring Russia to end its assault would be to take away the country’s most-favored nation (MFN) status, according to Manak. So far, Canada has already declared it would do just that, while officials across the U.S. and Europe have proposed similar legislation to remove Russia’s MFN treatment.

WTO comments on Russia-Ukraine conflict

• Director-General Ngozi Okonjo-Iweala released a statement on Russia’s invasion of the Ukraine on behalf of the WTO. “At the WTO, we have watched this tragedy in Ukraine unfold with disbelief and the hope that it would have been peacefully resolved. However, this is now the 7th day and we are deeply saddened by the continued suffering and loss of life. We pray that there will be a peaceful and quick resolution. We are also concerned about the trade implications of the conflict, especially trade in agriculture and food products and the rise in energy prices and their effects on the impacted populations,” she said.
• DG Okonjo-Iweala is one of several officials who have expressed concerns about the effects of the Russian invasion on world agricultural trade. Russia and Ukraine are two of the largest exporters of wheat in the world and major producers of numerous other agricultural products such as corn, barley, soybeans and vegetable oil, and sunflower oil.

Ukraine calls for Russia’s removal from WTO

• Ukraine is urging WTO members to “consider further steps with the view to suspending the Russian Federation’s participation in the WTO for its violation of the purpose and principles of this organization.” In a letter sent to General Council Chair Ambassador Didier Chambovey from Switzerland, Ukrainian trade envoy to the WTO Ambassador Yevheniia Filipenko requested the WTO act against Russia, citing the human atrocities  including dead children and severe damages to Ukraine’s infrastructure and economy resulting from the Russian invasion. Ukraine further requested the letter be shared with  the Council for Trade in Goods, the Council for Trade in Services, the TRIPS Council and all WTO members.
  • The letter emphasizes that Ukraine severed diplomatic ties, imposed a complete embargo, and will no longer apply WTO agreements to Russia, following Moscow’s special military operation. Ukraine contends these actions against Russia are consistent with its national security rights under Article XXI of the GATT 1994 (national security exceptions), Article XIV bis of the General Agreement on Trade in Services, and Article 73 of the TRIPS agreement.

MC12 scheduled for week of June 13

• WTO members have agreed to reconvene the 12^th ministerial the week of June 13th. At a meeting of the General Council, countries settled on the later date, over an earlier proposal for June 2-4. More details on the agenda and structure are expected soon.
• Much uncertainty about the productiveness of the MC12 remains among WTO members as a number of contentious issues have yet to be resolved and less than 4 months until the ministerial remain. Conversations on pandemic response measures, WTO reform, and the TRIPS waiver continue to spark debate.

Ag Economy Barometer

The Ag Economy Barometer retreats on rising input costs and supply chain disruptions

• The Ag Economy Barometer rose 6 points in February to 125. A more optimistic view of future conditions pushed the sentiment measure higher than December’s increase.  The 6-point improvement in the barometer was driven principally by stronger optimism toward commodity prices and overall farming conditions.  Conversely, rising input costs weigh heavily on farmers’ views of future conditions. Specifically, over one-third of respondents indicated they expect input prices to rise by 30% or more in 2022. Supply chain issues also weighed heavily on famer sentiment as over 25% of producers reported experiencing difficulty in obtaining farming inputs such as herbicides, insecticides, fertilizer, and farm machinery parts.