TRADE UPDATE

Food & Agriculture
April 26, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

• USMCA: The Mexican labor union SNITIS is accusing a Panasonic subsidiary facility of labor violations and has subsequently submitted a USMCA complaint, calling for the use of USMCA’s rapid-response mechanism to remedy the situation.
• U.S. – China: According to BIS officials, Chinese companies are complying with U.S. export controls against Russia, despite the large amount of criticism they have expressed about the new rules.
• Indo-Pacific Economic Framework: Ambassador Tai continues to make her rounds, discussing IPEF with several Indo-Pacific ministers. Most recently, the U.S. Trade Representative held talks on the framework with Singaporean Minister Wong and Indonesian Minister Luhut.
• U.S – Russia: In a new effort to further isolate Russia, the U.S. banned Russian ships from entering American ports.
• WTO: Countries are gearing up for MC12 even as the ministerial’ s fate remains on shaky grounds, following member countries condemnation of Russia’s invasion of Ukraine. Last week, USTR’s Ambassador Tai met with EC Executive Vice President Dombrovskis and this week DG Okonjo-Iweala will visit DC.

“To avoid an economic calamity, we need more cooperation and trade, not less. We must avoid panic buying, hoarding of food supplies, and export restrictions.”

— WTO Deputy Director-General Angela Ellard speaking at the 7^th Annual AGOA Spring Conference

USMCA

Mexican union calls out Panasonic facility for labor violations

• Mexican labor union Sindicato Nacional Independiente de Trabajadores de Industrias y Servicios (SNITIS) along with U.S. advocacy group Rethink Trade of the American Liberties Project jointly filed a USMCA complaint against a subsidiary of Panasonic in Mexico. The complaint alleges the Panasonic facility violated employees’ labor rights and fired workers who attempted to align themselves with SNTIS. SNTIS and Rethink Trade responded by calling on the Biden Administration to utilize USMCA’s rapid-response mechanism to hold the facility accountable and push for labor reform.
• “Bold action from the U.S. government using the Rapid Response Mechanism led to two independent unions winning elections at GM Silago and Tridonex. We are confident that the Biden administration will act accordingly in this case and work with the Mexican government to address this troubling state of affairs at Panasonic,” said Daniel Ranger, an attorney with Rethink Trade. “Since November 2021, the authority to register collective contracts lies exclusively with Mexican federal institutions. The fact that the Tamaulipas government acceded to register this fraudulent contract shows the lengths local elites are willing to go to obstruct workers’ ability to unionize independently and demand better wages and working conditions.”
• Now that the complaint has been submitted, the Panasonic facility case will be reviewed by the Interagency of Labor Committee. The committee with determine if there is enough evidence to pursue the case and decide to move forward with the rapid-response mechanism, accordingly.

China Trade

Chinese compliance with U.S. export controls

• Chinese companies are generally complying with the U.S.’ export controls on Russia and Belarus, including the novel foreign-direct product rule that aims to ban the export of foreign-made goods made with American inputs and/or technology. Despite sharing amble criticism of the rule, Chinese companies are largely abiding by the U.S.’s directive, a BIS official said during an interview with Inside U.S. Trade. “I think at this point there’s been pretty broad reporting on at least the initial compliance by Chinese companies with our rules,” noted the official. “The Chinese also haven’t imposed any of those extraterritorial controls that they could impose to date. So, I think from our perspective, while yes, [the companies] have the right to choose, I think that at this point that choice is being made through at least a broad pattern of compliance to date.”

COVID-19

IMF forecasts sharply lower economic growth

• The IMF forecasted that global economic growth will slow to 3.6% in 2022, down from a forecast of 4.4% in January before the invasion of Ukraine, according to the latest World Economic Outlook. In addition to the war, the IMF noted, “The latest lockdowns in China could cause new bottlenecks in global supply chains.”  The revised April forecast compares with 6.1% growth in 2021. The IMF also lowered its economic grow projection for 2023 to 3.6% from a prior 3.8%.
  • The IMF further noted inflationary pressures from the military conflict in Ukraine stating, “War-induced commodity price increases and broadening price pressures have led to 2022 inflation projections of 5.7 percent in advanced economies and 8.7 percent in emerging market and developing economies—1.8 and 2.8 percentage points higher than projected last January.”

Food Security

Yellen warns on food in security

• Treasury Secretary Janet Yellen last week in virtual meetings with finance ministers representing the G20 and G7 warned of the implications of global food security posed by the war in Ukraine and surging commodity prices. “Food insecurity has serious implications for economic well-being, social and political stability,” Secretary Yellen said. She pledged the Biden Administration’s assistance in trying to offset the impact of the food crisis.
• Separately, the IMF revised predictions for global food costs, identifying an increase globally of 14% this year and rising prices into 2023. The IMF and World Bank have warned the impact of higher food costs will be acutely felt by poorer countries citizens who spend a substantial part of their income on food.

Trade Agenda

Understanding worker-centered trade policy

• As part of the U.S. International Trade Commission’s (USITC) investigation on the effects of trade on American workers and underserved communities, the commission held a hearing to gauge the stance of industry and labor on U.S. trade policy. During the hearing, a common concern expressed by witnesses was that “U.S. trade policy, including regional agreements such as the North American Free Trade Agreement, historically has failed to place the interests of workers at its heart, and underserved communities have borne the brunt of impacts of offshoring while benefitting the least from export opportunities created by opening new markets.” According to reports, the witnesses also touched on Section 301 tariffs, American social infrastructure, and inflation, among other issue areas, in relation to workers in the U.S.

Supply Chains

Enhanced Texas-Mexico border inspections halted

• In response to the outcry of complaints from industry actors, Texas Governor Gregg Abbott met with Mexican officials to resolve the supply chain crisis that was created by republican governor’s newly instated trucking inspection regulations. Governor Abbott signed Memoranda of Understanding with Tamaulipas Governor Cabeza de Vaca, Chihuahua Governor Campos, and Caohuila Governor Riquelme, putting an end to the enhanced inspections that were put in place on April 6^th.  “As we are speaking this moment, all these bridges are opened back up to normal trafficking. All the goods that used to go from one country to the other at a very rapid pace – they are moving at that rapid pace as we speak right now,” Governor Abbott said about the new resolution.
• Earlier this month Abbott instated new inspection regulations on all trucks crossing the border from Mexico to Texas, including commodity-carrying vehicles that haven already been inspected by U.S. Customs and Border Patrol. The governor received criticism from industry groups, which claimed the new inspections were causing supply chain issues for their products. North American Meat Institute (NAMI) President and CEO Julie Anna Potts released a statement on the situation, “It’s unacceptable for trucks carrying food and other important commodities to wait hours at the U.S.-Mexico border. It can present food safety challenges and it’s not fair to the drivers who are instrumental in keeping food on our plates.”

Addressing railway supply chain issues

• The Surface Transportation Board will hold a public hearing this week on “recent rail service problems and recovery efforts involving several Class I carriers.” According to a federal register notice, the hearing will aim to address a variety of challenges posed by recent railway supply chain problems including “tight car supply and unfilled car orders, delays in transportation for carload and bulk traffic, increased origin dwell time for released unit trains, missed switches, and ineffective customer assistance.” Due to the current issues, the Surface Transportation Board “has received several recent reports, from the Secretary of Agriculture, Senator Shelley Moore Capito, and other stakeholders, about the serious impact of these service trends on rail users, particularly with respect to shippers of agricultural and energy products.”
• In a recent letter to the Surface Transportation Board, several food and ag groups urged the Board to “expeditiously conclude its work in Docket No. EP 711 (Sub – No. 1) for the purpose of establishing reciprocal switching rules that enable the creation of rail-to-rail competition at qualifying interchanges between carriers,” implement “additional data reporting,” and require “all the Class I railroads to develop annual rail service assurance plans, which will provide a basis for the Board and industry stakeholders to conduct annual assessments of intended service versus actual service, and to identify and address potential issues that otherwise may result in future service deficiencies.” By making these changes, the agriculture groups argue, the Board will drastically improve freight and rail services for their users.

Reduction in LA port delays reverses

• After improvements in historically high container shipping delays, congestion at the ports of Los Angeles and Long Beach in March have ticked up. The latest data ends a string of three straight months of improvement. The share of shipping containers held at the ports for more than five days rose last month to 38.7% from 34.3% in February, according to data from the Pacific Merchant Shipping Association. The figures also showed the dwell time for rail-bound containers rose to 7.7 days from 5.2 days in February.

Ukraine

Ukraine’s green future

• Ukrainian politicians are considering their country’s plan to rebuild following Russia’s continued invasion and destruction of infrastructure. Some of these leaders are pushing for a green future for Ukraine as they contemplate the reconstruction of energy, manufacturing, and other industry sites. According to a report from Politico, People’s Deputy of Ukraine Lesia Vasylenko is a supporter of this idea. “We’re essentially going to be starting from scratch with the amount of destroyed industrial sites, energy sites. We can be the breeding ground for new technology for pilot projects, for renewables projects,” she said. “It’s essentially an appeal to the EU, to all of the donors that are going to be giving this money to Ukraine, for the renewal and rebuilding so that they don’t go cheap on us that they actually invest in the greening of the planet.”
• Meanwhile, Ukrainian President Volodymyr Zelensky is working on a “Marshall Plan for Ukraine” to rebuild post-war. Little details about this plan have been released, but what is known is that it’ll come with a steep price tag. Ukrainian Minister of Infrastructure Oleksandr Kubrakov said Russia has destroyed up to 30% of the Ukraine’s infrastructure, totaling at approximately $100 billion in damages, according to a report from Reuters.

Indo- Pacific Economic Framework

Ambassador Tai speaks with Indo-Pacific ministers

• USTR’s Ambassador Katherine Tai convened yet another meeting with a Singaporean official after already discussing IPEF with three other ministers from Singapore earlier this month. This time, Ambassador Tai met Singapore’s Minister of Finance Lawrence Wong. Together, Ambassador Tai and Minister Wong “discussed the importance and strength of the bilateral trade relationship, which is underpinned by the U.S.-Singapore Free Trade Agreement (FTA).” The Ambassador’s continued dialogue with Singapore indicates the country may be a major player in the Biden Administration’s Indo-Pacific Economic Framework.
• Following her talks Minister Wong, Ambassador Tai later met with Indonesian Minister of Maritime Affairs and Investment Luhut Pandjaitan. The Ambassador continued to speak on the Biden Administration’s plan for the Indo-Pacific Economic Framework, specifically noting the importance of the trade and investment relationship between the United States and Indonesia.

Bipartisan support for market access to be included in IPEF

• As noted earlier, eleven members of congress, from both sides of the aisle, advocated for deeper trade ties between the U.S. and Indo-Pacific in a letter addressed to USTR’s Ambassador Katherine Tai. The lawmakers encouraged Ambassador Tai to put market access back on the table during her IPEF negotiations, citing the reduction of tariffs barriers as the best approach to increase American competitiveness in the Indo-Pacific region. “America’s limited participation in agreements or frameworks involving Indo-Pacific nations means that the next generation of commercial rules and standards governing trade with Asia are increasingly being written without American input,” wrote the lawmakers. To reverse this trend, the policy makers contend, USTR and the DOC must “work to secure enhanced market access for American exporters in ASEAN Member States.”

U.S.-ASEAN Summit underpins Indo-Pacific strategy

• The White House announced that President Biden will host the leaders of the Association of Southeast Asian Nations (ASEAN) for a two-day special summit aimed at strengthening U.S. ties with the region. The summit, scheduled to start on May 12^th, is part of the Administration’s Indo-Pacific strategy to counter China’s growing influence in the region. “It is a top priority for the Biden-Harris Administration to serve as a strong, reliable partner in Southeast Asia,” White House spokesperson Jen Psaki said in a statement. “Our shared aspirations for the region will continue to underpin our common commitment to advance an Indo-Pacific that is free and open, secure, connected and resilient.”

U.S. – Russia

U.S. bans Russian ships

• The White House released a new proclamation, announcing President Biden’s decision to “prohibit Russian-affiliated vessels from entering into United States ports.” The proclamation will be effective starting April 28^th. “This is yet another critical step we are taking in concert with our partners in the European Union, United Kingdom and Canada in further to deny Russia the benefits of the international economic system that they so enjoyed in the past,” the President said. According to Politico, the prohibition of Russian vessels is largely a symbolic action as “Russian-flagged ships account for less than 1 percent of cargo that arrives at American ports.”

U.S. – Panama

Agriculture industry groups support the U.S. – Panama TPA

• In a letter addressed to Ambassador Tai and Secretary Vilsack, several agricultural trade groups, including the Corn Refiners Association, American Farm Bureau Federation, and more, urged the Biden Administration to refuse the Panamanian government’s request to revise the agricultural tariff elimination terms of the two countries’ Trade Promotion Agreement (TPA). Instead, the industry groups call on the administration to uphold the U.S. and Panama’s original agreement, arguing that “Ensuring the TPA is fully implemented as originally negotiated supports the need to diversify export markets for U.S. food and agricultural products, which is an important element of the Administration’s work to prevent harmful supply chain disruptions.” Furthermore, the letter signers contend that the TPA was designed to be implemented over several years “with gradual annual tariff reductions and small growth in tariff rate quotas (TRQs)” in order to provide “sufficient time for the local industries to prepare and adapt.” By adhering to the original terms of the TPA, both Panamanian consumers and American farmers and manufacturers will reap the benefits of trade, according to the letter.

Section 232 Tariffs

Beverage industry urges repeal of Section 232 tariffs to fight inflation

• The U.S. beverage industry is calling for removal of steel and aluminum tariffs, citing that the industry has paid over $1.4 billion in tariffs since Section 232 tariffs on aluminum were imposed nearly four years ago, according to research commissioned by the Beer Institute. “With the cost of gas and groceries at record highs, American families and businesses are feeling the strain under the high costs of living. This new research shows the tariffs on aluminum continue to push up prices on American consumers and businesses,” said Jim McGreevy, president and CEO of the Beer Institute. “The fastest way to alleviate these high prices on American businesses and families is to repeal the tariffs.”
• The research, conducted by HARBOR Aluminum, found that between the implementation of Section 232 aluminum tariffs on March 23, 2018 and Feb 28, 2022, “the U.S. beverage industry paid $1.416 billion in Section 232 tariffs on 7.1 million metric tons of aluminum. Of that amount, only $111 million (8 percent) went to the U.S. Treasury. HARBOR Aluminum estimates U.S. rolling mills, U.S. smelters and Canadian smelters received $1.305 billion (92 percent) of the total by charging end-users – such as U.S. brewers – a tariff-burdened price regardless of whether the metal was meant to be tariffed based on its content or origin.”

Section 301 Investigations

U.S. -Vietnam Timber Working Group meeting

• In October of 2021, the U.S. and Vietnam reached an agreement concerning Vietnam Timber Section 301 investigations. The first of its kind to address environmental concerns, “The Agreement secures commitments that will help keep illegally harvested or traded timber out of the supply chain and protect the environment and natural resources.” According to USTR, “The Agreement contains multiple commitments by Vietnam on issues related to illegal timber, including commitments to improve its Timber Legality Assurance System; keep confiscated timber (i.e., timber seized for violating domestic or international law) out of the commercial supply chain; verify the legality of domestically harvested timber regardless of export destination; and work with high-risk source countries to improve customs enforcement at the border and law enforcement collaboration.”
• Following up on the Timber Agreement, the U.S. and Vietnam convened the first meeting of the Timber Working Group that was established as part of the two countries’ deal. USTR noted, “Discussions focused on Vietnam’s progress to date to implement its commitments under the agreement, as well as current and potential future technical assistance and capacity building activities.”

Potential Section 301 tariff changes

• The Biden Administration is mulling over the prospect of eliminating Section 301 tariffs on a wide range of imports from China. According to press sources, Deputy National Security Adviser Daleep Singh said last week that the U.S. has an opportunity to recalibrate the Section 301 tariffs so that they can advance “real strategic priorities,” potentially opening the door to tariff revisions on goods connected to foundational technologies, national security, or critical supply chains. Singh said, “For product categories that are not implicated by those objectives, there’s really not much of a case for those tariffs being in place.” “Why do we have tariffs on bicycles or apparel or underwear? There are a whole host of goods – think of Lists 3 or 4A – where it’s not obvious to me at least what strategic purpose they’re serving,” he added. Singh’s comments were delivered as the White House is reviewing existing Section 301 tariffs, which are currently scheduled to expire in stages starting later this year.
• Treasury Secretary Janet Yellen also acknowledged the tariff review during a recent interview with Bloomberg. “We’re re-examining carefully our trade strategy with respect to China,” said the Secretary. “I think it’s worth considering. We certainly want to do what we can to address inflation, and there would be some desirable effects. It’s something we’re looking at,” she said, referring to the possibility of lifting select Trump-era tariffs on China.
  • Notably, Ambassador Katherine Tai posited a different view in her testimony before the House Ways and Means Committee last month, suggesting removing the Section 301 tariffs now would cost the U.S. leverage at the negotiating table with China and would not do much to combat inflation. “No negotiator walks away from leverage, right?,” she said at during the annual testimony on the President’s trade policy agenda.

Biden Transition

Vilsack confident in progress for USDA trade leader position

• According to Agri-Pulse, USDA Secretary Vilsack assured a group of U.S. agriculture stakeholders the Administration is working hard to put forth a nominee for the Undersecretary for Trade and Foreign Agricultural Affairs at USDA. Vilsack acknowledged the process has taken longer than expected.

U.S. – U.K.

U.S. states pursue trade deals with the U.K.

• Free trade talks between the U.S. and the U.K. have been on pause since the Trump Administration, but that fact has not stopped individual U.S. states from pursuing economic deals with the British. The U.K.’s Minister of State for Trade Penny Mordaunt told the Times of London the U.K. is currently discussing economic deals with 20 U.S. states. According to Minister Mordaunt, four such deals will be announced “in the next couple of months” and then she predicts for progress on the agreements to “really pick up after that.” The content of these economic deals remains largely unknown at this time although Minister Mordaunt noted the outcome of the agreements will be “immediate and practical.” 
• Texas is one of the U.S. states that is currently deliberating a bilateral economic agreement with the U.K. Next month, Texas Secretary of State John Scott will visit London to further discuss a potential deal. According to Secretary Scott’s spokesperson, the Secretary “looks forward to strengthening existing relationships with foreign corporations operating in the state and attracting new Foreign Direct Investment” on his upcoming mission.

U.S. – EU

Ambassador Tai meets with Dutch minister

• Discussing “WTO reform and the challenges both the United States and Europe face from non-market economy practices,” USTR’s Ambassador Katherine Tai met with the Netherlands’ Minister for Foreign Trade and Development Cooperation Liesje Schreinemacher. Together, the two officials also noted the importance of U.S. – Netherlands trade and “the strong transatlantic coordination that is underway in the U.S.-EU Trade and Technology Council.” 

Next TTC meeting to focus on supply chains

• As reported earlier, EU officials confirmed the next Trade and Technology Council (TTC) meeting is set to take place near Paris on May 15-16, will focus on the topics of misinformation and supply chains. “One of the things where we would like to increase our ambitions would be on misinformation [and] disinformation to see how to make sure that we are prepared for that side of the war and the Russian aggression – to learn from it and to be better prepared in the future,” Executive Vice President of the European Commission Margrethe Vestager said. And a “Second example of an increased focus could be on supply chains,” the Executive Vice President added. “To try to align our analysis and to figure out how to help each other out – not only on a rainy day but also in a crisis situation like the one we’re in right now. Because some of the supplies, for instance, of raw materials they risk being seriously disturbed.” Ms. Vestager’s comment come as little surprise after the U.S. Department of Commerce’s recent request for public comments on supply chain resiliency for the TTC’s Secure Supply Chains Working Group.

WTO

DDG Ellard discusses the “three Cs that have upended our lives”

• COVID, climate, and conflict have drastically reshaped the economic landscape of the world and “upended our lives,” WTO Deputy Director-General Angela Ellard proclaimed during her opening remarks at the 7^th Annual AGOA Spring Conference. “Indeed, to solve the triple crises I’ve just outlined, we need more cooperation, more trade, and stronger institutions. And that’s why the WTO supports Africa’s integration through the African Continental Free Trade Agreement,” she said. During her remarks, Ms. Ellard also reiterated the WTO’s position on several issues relating to the current “polycrisis” at hand, urging the world to “avoid panic buying, hoarding of food supplies, and export restrictions,” importers to “adapt their sourcing patterns and adjust production technologies,” suppliers to “ramp up production,” and transportation companies to “adjust routes to ensure that increased production can reach consumers.”

U.S. and EU gear up for MC12

• Last week, USTR Katherine Tai and EC Executive Vice President Valdis Dombrovskis discussed shared goals for the WTO’s upcoming 12th ministerial meetings (MC12) in June, according to reports. A primary U.S. goal shared by the EU, Canada, and Japan for WTO reform is the creation of more transparency when it comes to export restrictions, market access, price supports and other subsidies. Dombrovskis said, while visiting Washington, DC, that MC12 will provide a key opportunity for nations to ensure the relevance and importance of the WTO.

DG Okonjo-Iweala will fly to DC to discuss MC12

• WTO Director General Ngozi Okonjo-Iweala is visiting Washington DC this week to converse with the Biden Administration on the topic of MC12 as uncertainty grows regarding the viability and productiveness of the ministerial conference in light of recent geopolitical events. According to the WTO, the DG will meet with USTR’s Ambassador Katherine Tai and speak at a National Foreign Trade Council dinner event.

Russia and Ukraine spar at the WTO

• At a WTO goods council meeting last week Russia expressed deep frustrations with the parade of sanctions being imposed on the country’s trade in oil, gas, aluminum, fertilizer, seafood and many other products by other WTO member countries. The U.S., EU, Japan and other WTO member nations were unmoved by the Russia’s complaints, according to a WTO trade official. Several countries imposing Russia sanctions said that Russia could relieve the burden of the sanctions by ceasing the invasion and withdrawing military forces from Ukraine.
• A Ukrainian WTO official was permitted to comment at the meeting, following Russia’s remarks and expressed gratitude to the U.S. and other WTO members for the sanctions. The official emphasized more action was needed and though immensely helpful, the actions are severely insufficient to compensate for the destruction and human suffering inflicted by Russia’s invasion. The official further noted that the Russian invasion and blockade of its Black Sea ports is preventing Ukraine from exporting millions of tons of corn and wheat, and farmers are losing $1.5 billion worth of export revenue per month.