TRADE UPDATE

Food & Agriculture
April 4, 2023

By Michael Anderson, Vice President of Trade and Industry Affairs

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HIGHLIGHTS

  • USMCA: USDA Secretary Vilsack said the U.S. is prepared to take appropriate measures to reverse Mexico’s current GM corn ban. Testifying before the House Agriculture Committee Vilsack confirmed USMCA technical consultations with Mexico have commenced on the prohibition and U.S. corn exports to Mexico continue uninterrupted.
  • U.S. – Japan: The U.S. announced an agreement with Japan on critical minerals to reduce both countries’ dependence on suppliers like China. However, several leading lawmakers from both sides of the political aisle, including Senate Finance Committee Chair Ron Wyden (D-OR), derided the Administration’s approach to concluding the bilateral trade agreement without Congressional input.
  • U.S. – Japan: USTR announced Japan issued a new biofuels policy that “will allow the United States to capture up to 100 percent of Japan’s on-road ethanol market.” U.S. officials and stakeholders lauded the new policy which followed deep engagement by USTR, USDA, the U.S. embassy in Japan, and Japanese officials.
  • CPTPP: The U.K. announced the completion of a deal to join the 11-country Comprehensive Progressive Trans-Pacific Partnership (CPTPP) trade pact, becoming the first new member since the U.S. withdrew in 2016 from the pact (then TPP) under then-President Donald Trump.
  • Trade Policy: USTR released the 2023 National Trade Estimate Report on Foreign Trade Barriers (NTE Report), cataloging major foreign barriers to U.S. exports of goods and services, U.S. foreign direct investment, and U.S. electronic commerce in major export markets. Ambassador Tai said, “The 2023 NTE Report identifies a range of important challenges and priorities to guide the Biden Administration’s effort to craft trade policy that reflects our country’s values and builds a better America.”
  • WTO: WTO Director-General Ngozi Okonjo-Iweala encouraged major trading nations to diversify their supply chains to business-friendly developing countries, thus far largely excluded from the benefits of global trade, rather than focusing on reshoring. She urged countries to avoid protectionist and insular policies that would adversely impact global trade facilitation.

“Without a trade agenda that puts workers and jobs first, the United States is falling behind China and other competitors. China is forging ahead with an aggressive trade agenda that cheats America, shapes the global playing field in its favor, and threatens key American supply chains and the livelihoods of American farmers and workers.”

–Representative Jason Smith (R-MO), Way and Means Chairman, Opening Statement: Hearing on the Biden Administration’s 2023 Trade Agenda

USMCA

Vilsack, U.S. prepared to pursue all tools to counter Mexico’s GM corn ban

Tom Vilsack, U.S. Secretary of Agriculture
Tom Vilsack, Secretary of Agriculture
  • Testifying before the House Agriculture Committee, USDA Secretary Vilsack said the U.S. is prepared to take appropriate measures to reverse Mexico’s current GM corn ban. In questioning by Representatives Mary Miller (R-IL) and Donald Bacon (R-NE) regarding progress of the USMCA technical consultation and timing, Vilsack confirmed consultations were underway with Mexico. He stopped short of providing details but emphasized that Mexico continues to purchase U.S. corn and that U.S. officials will continue to emphasize the importance of a science-based trading system under the USMCA in talks with Mexico.
  • Recall that on March 6, The Office of the USTR announced requesting formal technical consultations with the Government of Mexico under the Sanitary and Phytosanitary Measures (SPS) Chapter of the USMCA. The consultations focus on Mexico’s policies and measures surrounding agricultural biotechnology products, including the recently revised Decree to ban certain GM corn imports. In announcing the action, Ambassador Katherine Tai said, “The United States has repeatedly conveyed our serious concerns with Mexico’s biotechnology policies and the importance of adopting a science-based approach that complies with its USMCA commitments,” Ambassador Tai continued, “Mexico’s policies threaten to disrupt billions of dollars in agricultural trade and they will stifle the innovation that is necessary to tackle the climate crisis and food security challenges if left unaddressed. We hope these consultations will be productive as we continue to work with Mexico to address these issues.”

China

Commerce imposes trade restrictions on additional Chinese firms

  • Last week the Biden Administration added five Chinese companies to the list of companies subject to trade restrictions for allegedly aiding in the repression of the Uyghur Muslim minority, but China rejected the accusations. The companies “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention and high-technology surveillance against the Uyghur people and members of other Muslim minority groups,” in the Xinjiang region, the Commerce Department said in a posting in the Federal Register. Commerce noted the companies “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention and high-technology surveillance against the Uyghur people and members of other Muslim minority groups in the Xinjiang Uyghur Autonomous Region (XUAR).”

U.S. – Japan

U.S. and Japan sign critical minerals deal

  • The U.S. announced a trade agreement with Japan on critical minerals (e.g., lithium, cobalt and nickel) used in the production of electric vehicle batteries. The agreement aims to reduce the U.S.’s and Japan’s dependence on countries like China for critical minerals, according to U.S. officials. According to a USTR announcement on the deal, “The Agreement builds on the 2019 U.S.-Japan Trade Agreement and will strengthen and diversify critical minerals supply chains and promote the adoption of electric vehicle battery technologies.”
  • The agreement, signed by Ambassador Katherine Tai and Japan’s Ambassador to the United States, Tomita Koji, “memorializes the shared commitment of the United States and Japan with respect to the critical minerals sector to facilitate trade, promote fair competition and market-oriented conditions for trade in critical minerals, advance robust labor and environmental standards, and cooperate in efforts to ensure secure, transparent, sustainable, and equitable critical minerals supply chains,” according to USTR.
  • Key areas of cooperation between U.S. and Japan under the agreement include:
    • Non-imposition of export duties on critical minerals;
    • Domestic measures to address non-market policies and practices of other countries affecting trade in critical minerals;
    • Best practices regarding review of investments within their territories in the critical minerals sector by foreign entities;
    • Measures that promote more resource efficient and circular economy approaches to reduce the demand for, and environmental impact of, virgin material extraction and related processes;
    • Engagement, information-sharing, and enforcement actions related to labor rights in critical minerals extraction and processing;
    • Remedying violations of labor rights at entities connected to critical minerals supply chains; and
    • Promoting employer neutrality in union organizing and operations.
  • The U.S. is also negotiating a similar agreement with the EU and South Korea following concerns regarding the tax credit for electric vehicles included in the Biden Administration’s Inflation Reduction Act, that the EU, Japan, and South Korea contend would discriminate against their domestic EV production.

Lawmakers decry exclusion of Congress in trade deal with Japan

  • Several leading lawmakers derided the Administration’s approach to concluding a trade agreement with Japan on critical minerals used in electric vehicle batteries without Congressional input. Senate Finance Committee Chair Ron Wyden (D-OR) and Ways and Means Committee Ranking Member Richard E. Neal (D-MA) sharply criticized USTR for skirting Congress’ role in the negotiations. “It’s clear this agreement is one of convenience. As we warned Ambassador Tai last week, the Administration does not have the authority to unilaterally enter into free trade agreements. Human rights, environmental rights, and economic opportunity are all closely interwoven, and had the Administration wanted to include meaningful labor or environmental protections in this agreement, they would’ve engaged Congress,” the lawmakers said in a joint statement. The statement continued, “Agreements should be developed transparently and made available to the public for meaningful review well before signing,” they added, “not after the ink is already dry.” Wyden and Neal cited USMCA as example of necessary collaboration between Congress and the Administration, emphasizing, “as the Democratic leaders on trade, we stand ready to deliver.”
    • Representative Jason Smith (R-MO), Chairman of the Ways and Means Committee blasted the Administration’s action to exclude Congress stating, “The Administration has not been transparent with the American people and has ignored major concerns raised by Congress, including failing to provide an analysis of the effects this agreement would have on American workers.” Rep. Smith continued, “Rather than rushing to complete legally dubious agreements at the behest of lobbying campaigns by foreign governments, the Biden Administration should work with Congress to develop meaningful trade policies that improve the lives and livelihoods of America’s working families.”
    • Representative Earl Blumenauer (D-OR), Ways and Means trade subcommittee ranking Member also criticized the deal stating, “Today, the Biden Administration set the stage to ignore congressional intent and unilaterally circumvent Congress’ constitutional role on international trade. The lesson of trade policy in recent years is clear: when Congress exercises its authority over trade, the United States and our international trading partners benefit with a more complete and durable trading system.”

Japan agrees to increase U.S. ethanol imports

Rahm Emanuel, U.S. Ambassador to Japan
  • Last week the Office of USTR announced Japan issued a new biofuels policy that “will allow the United States to capture up to 100 percent of Japan’s on-road ethanol market. According to the agency, “The new biofuels policy Japan announced today is the result of close collaboration between our two countries and it will further allow U.S. producers to meet Japan’s demand for more diverse energy sources.” Japan’s new biofuels policy will permit an additional 80 million gallons of ethanol imports annually, valued at an estimated $150 – 200 million. The new policy in Japan follows “extensive engagement” by the USTR, USDA, and the U.S. Embassy in Tokyo.
    • Ambassador Katherine Tai lauded the new policy stating, “The new biofuels policy Japan announced today is the result of close collaboration between our two countries and it will further allow U.S. producers to meet Japan’s demand for more diverse energy sources.” Tai added, “Ambassador Emanuel and the staff across the U.S. government deserve huge credit for working through the technical details that led to this outcome, which is just the latest sign of a strengthened partnership between our two countries.”USDA Secretary Tom Vilsack added, “We applaud Japan for publishing its new biofuels policy, which will help promote a cleaner, more sustainable energy future. This new policy is also a big win for American farmers and our rural economy, as it will expand U.S. biofuel producers’ access to the Japanese market.” Vilsack continued, “We look forward to continuing to engage with the Japanese government as it implements this standard and to furthering our nations’ deep economic relationship.”
    • In a joint statement the U.S. Grains Council, Growth Energy and Renewable Fuels Association praised Japan’s decision and noted the environmental benefits of ethanol. “The U.S. ethanol community applauds the Japanese government for joining other countries in recognizing the role ethanol can play in the global effort to address climate change at the same time it takes steps to decarbonize its transportation sector.” The organizations continued, “Countries around the world are recognizing that biofuels like ethanol are a simple, inexpensive and effective solution they can deploy today to help them lower their carbon emissions and meet their climate goals.”

CPTPP

UK to join CPTPP, first new member

  • The United Kingdom (UK) announced last week completing a deal to join an 11-country Comprehensive Progressive Trans-Pacific Partnership (CPTPP) pact, becoming the first new member since the U.S. withdrew in 2016 from the pact (then TPP), under former President Donald Trump. UK Prime Minister Rishi Sunak said Britain had agreed to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in a move his office said was the biggest trade deal since Brexit. Minister Sunak and UK Secretary of State for International Trade, Kemi Badenoch highlighted the benefits of UK membership in the CPTPP in the following video. The UK officials noted that CPTPP will provide great market access for UK producers and industries, including agriculture, autos, aerospace, and others, to one of the fastest growing regions of the world.
    • Concluded in 2018 and one of the largest Free Trade Agreements, the CPTPP is an 11-country pact which includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. More details on the CPTPP agreement and members available here.

U.S. – Tanzania

U.S. plans to boost trade and investment with Tanzania

  • During her visit to Tanzania last week, Vice President Kamala Harris announced plans to increase trade and investment between the U.S. and Tanzania. As part of these efforts, the countries will sign the U.S. EXIM-Tanzania Memorandum of Understanding (MOU), which will facilitate up to $500 million in U.S. export financing to Tanzania. The partnership extends beyond trade expansion. According to a fact sheet released by the White House, the U.S. and Tanzania will “advance cooperation on commercial engagement, digital connectivity, investing in women and youth, fostering democratic values, food security, marine conservation, and health.”

U.S. – Indo-Pacific

USTR releases IPEF negotiation texts

  • As reported earlier, the Office of USTR recently released summaries of the tabled negotiating texts from the most recent IPEF round on Pillar I (Trade). The released text coincided with bipartisan frustrations expressed during the recent Congressional hearing on the President’s 2023 trade agenda. The agriculture summary from Pillar I on Trade is proved below.
    • Pillar I (Trade) – Agriculture: The United States tabled proposed text on Agriculture that includes a broad set of provisions designed to open or expand opportunities for agricultural producers to access markets throughout the IPEF region, advance food security, and promote sustainable agricultural production. In particular, the text is aimed at increasing transparency and regulatory certainty for agricultural exporters and importers, as well as encouraging collaboration and innovation in areas such as sustainability and food security.
    • The text breaks new ground in including elements relating to sustainable agriculture as well as elements relating to innovation and technology, tabled for the first time in U.S. trade negotiations. The text acknowledges that there is no one-size-fits-all solution to sustainable agriculture and promotes collaborative work to share best practices and explore science- and evidence-based solutions tailored to the conditions of IPEF partners. The text also includes cooperative efforts to promote innovation, fair trade, and individualized approaches to advance environmental goals.
    • The text also includes several provisions regarding food safety, plant health and animal health protection, and other provisions of importance for agricultural trade, preserving the role of regulatory authorities to ensure the safety of their domestic food supplies, while also facilitating trade in agricultural goods. These provisions are intended to: improve transparency of regulatory processes and procedures; advance science-based decision-making to protect human, plant, and animal life and health; improve processes and promote cooperation regarding regulatory and administrative requirements; and facilitate agricultural trade across the IPEF region. The text also includes provisions related to transparency in import licensing procedures for agricultural products, certification requirements, and equivalency to ensure that any requirements for importation are clearly communicated to regional agricultural producers.
    • The agriculture text also contains provisions intended to promote food security in the region, such as disciplines regarding the imposition of export restrictions, an area of particular interest to net food importing countries in the region.

Supply Chains

House lawmakers to introduce expanded ocean shipping reform legislation

  • Last week Representatives Dusty Johnson (R-SD) and John Garamendi (D-CA) said they plan to introduce the “Ocean Shipping Reform Act 2.0,” which could “undo some of the damage the Senate did” to revise the Ocean Shipping Reform Act (OSRA). The lawmakers intend for the new legislation to enhance the Federal Maritime Commission’s (FMC) authority to directly issue penalties and other orders without approval from the agency’s Administrative Law Judges. The FMC “seems to be the only independent agency in the entire federal government that does not have the authority to implement its decisions about unfair practices,” Johnson said.
  • Johnson and Garamendi introduced the original OSRA in August of 2021. A year later President Biden signed the OSRA into law amidst surging international ocean shipping costs and severe supply chain backlogs. Key provisions included:
    • requiring ocean carriers to certify that late fees —known in maritime parlance as “detention and demurrage” charges—comply with federal regulations or face penalties;
    • shifting burden of proof regarding the reasonableness of “detention or demurrage” charges from the invoiced party to the ocean carrier;
    • prohibiting ocean carriers from unreasonably declining shipping opportunities for U.S. exports, as determined by the FMC in new required rulemaking;
    • requiring ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and 20-foot equivalent units (loaded/empty) per vessel that makes port in the United States;
    • authorizing the FMC to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures, as appropriate; and
    • establishing new authority for the FMC to register shipping exchanges.

Trade Policy

U.S. goods trade deficit expands modestly on decreased exports

  • The U.S. trade deficit in goods increased $0.5 billion, to $91.6 billion in February from $91.1 billion in January as exports decreased more than imports. Exports of goods for February were $167.8 billion, $6.7 billion less than January exports. Imports of goods for February were $259.5 billion, $6.2 billion less than January imports.

USTR releases annual foreign trade barriers report

  • The Office of the U.S. Trade Representative (USTR) has released the 2023 National Trade Estimate Report on Foreign Trade Barriers (NTE Report), cataloging major foreign barriers to U.S. exports of goods and services, U.S. foreign direct investment, and U.S. electronic commerce in major export markets. In a press statement, the agency noted, “USTR is implementing President Biden’s worker-centered trade agenda to grow the economy from the bottom up and the middle out and deliver sustainable, inclusive prosperity for all,” Trade Representative Katherine Tai said in a news release. “The 2023 NTE Report identifies a range of important challenges and priorities to guide the Biden Administration’s effort to craft trade policy that reflects our country’s values and builds a better America.”
    • According to USTR, “The NTE Report covers significant trade barriers in areas, including: (1) import policies; (2) technical barriers to trade; (3) sanitary and phytosanitary measures; (4) government procurement; (5) intellectual property protection; (6) services barriers; (7) barriers to digital trade and electronic commerce; (8) investment barriers; (9) subsidies, especially export subsidies; (10) competition; (11) state-owned enterprises; (12) labor; (13) environment; among others.
  • Specific examples of significant barriers to the U.S. agriculture products noted in the report include:
    • “opaque and burdensome facility registration requirements, such as China’s Decree 248 and 249, and Indonesia’s facility registration requirements for dairy, meat, and rendered products;
    • sanitary and phytosanitary (SPS) measures that are not based on science, are maintained without sufficient scientific evidence, or are applied beyond the extent necessary to address SPS issues, such as India and Turkey’s procedures and requirements for agricultural biotechnology approvals, Mexico’s policies regarding products of agricultural biotechnology, and the EU’s non-science-based policies affecting innovative crop protection technologies;
    • import licensing requirements and non-transparent import licensing administration restricting the flow of U.S. agricultural exports to a number of countries, including Ecuador, Egypt, and Indonesia; and
    • lack of adherence to international science- and risk-based standards and commitments related to trade in poultry products from regions impacted by highly pathogenic avian influenza, including by China. USTR will continue to engage foreign governments on barriers that hamper the ability of U.S. farmers, ranchers and food processors to access markets worldwide.
    • The agency has published the report annually since 1985 covering “significant foreign trade barriers in over 64 markets which together account for 99% of U.S. goods trade and 66% of U.S. services trade,” USTR noted.

WTO

WTO members urged to diversify supply chains, avoid protectionist measures

Dr. Okonjo-Iweala, WTO Director-General
  • WTO Director-General (DG) Ngozi Okonjo-Iweala said rather than focusing on reshoring, WTO members should diversify their supply chains to business-friendly developing countries thus far largely excluded from the benefits of global trade. Speaking at the National Association of Business Economists’ annual economic policy conference, the WTO leader contended that this approach would enhance the global public perception of trade and lessen the need for countries to engage in subsidies to encourage reshoring. She highlighted that countries including Vietnam, India, Indonesia, Morocco and Brazil are examples of potential partners for increased integration in global value chains.
    • “We need to reimagine trade and supply chains,” she said. Okonjo-Iweala further urged countries to avoid protectionist policies in conjunction with promoting domestic production and to consider the advantages of investing in business-friendly developing and least-developed countries.