TRADE UPDATE

Food & Agriculture
May 3, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

• USMCA: USTR announced Ambassador Tai will travel to Ottawa to visit Canadian Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng. The unresolved dispute on Canadian dairy TRQ application under the USMCA will likely be discussed.
• U.S. – China: China announced an extension until November 30, 2022, for the Section 301 retaliatory tariff exclusions on 11 agricultural products. Meanwhile, the country continues to buy large sums of U.S. corn with its most recent purchase of 1.088 million metric tons.
• Indo-Pacific Economic Framework: Agriculture industry stakeholders met with Secretary Vilsack and Ambassador Tai, where the two officials reemphasized that IPEF will not include market access. The Biden Administration will work to secure non-tariff barrier wins instead.
• U.S – U.K.: U.K. Secretary of State for Environment, Food, and Rural Affairs George Eustice visited the U.S. to press American leadership about the possibility of a U.S. – U.K. trade agreement, while Ambassador Tai travelled to Scotland to discuss the future of the two countries’ economic relationship with U.K. Secretary of State for International Trade Anne-Marie Trevelyan.
• WTO: MC12 is officially confirmed for June 12th-15th in Geneva. Among the several contentious issues to be discussed at the 12th ministerial, the U.S. hopes to make progress on dispute settlement reform.

“During the past few years, the facts have proved that a tariff war cannot solve the U.S. trade issues. It will only drive up the inflation and increase the cost of living for ordinary American consumers and families.”

— Chinese Embassy Spokesperson Liu Pengyu

USMCA

Ambassador Tai to visit Canada

• USTR revealed Ambassador Katherine Tai will travel to Canada this week to discuss USMCA and U.S. – Canada trade relations. While in Canada, the Ambassador will meet with Canadian Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng and stakeholders. Several critical issues remain on the table for the two trade representatives to work on. Most notably, the U.S. and Canada have yet to fully resolve their USMCA dairy TRQ dispute.

China Trade

Chinese officials want to ease trade tensions

• A Chinese Embassy official claimed China wants to reengage with the U.S. to resolve the trade conflict between the two countries. “So far it seems to us there is no official strategy with respect to how to deal with China economically and also in terms of trade on the part of the U.S.,” said the official. “China stands ready … to work out those issues, disputes with the U.S. side at any time, but it seems to us that the U.S. has yet to formulate a clear plan for dealing with China on the economic and trade front. So, we are ready to have discussions with our counterparts with respect to that.” The Embassy representative went on to express their concern regarding the U.S. and China’s deteriorating trade and political relations. “On top of that, trade disputes are kind of weaponized, politicized. And the trade which has been going on for a very long time between our two countries … has now been used to jeopardize relations between our two sides in other areas as well. This is a very saddening development,” said the official.

China extends tariff exclusion on certain agriculture products

• China’s State Council Tariff Commission (SCTC) announced another extension until November 30, 2022 for the Section 301 retaliatory tariff exclusions on 11 specific agricultural products, including shrimp for cultivation, whey for feed, fishmeal for feed, alfalfa, and six hardwood products. The 11 agricultural tariff lines are part of a list of 81 commodities that received previous tariff exclusions through April 16, 2022. More details and the list of products are available in the USDA’s report.

China buys more U.S. corn

• China has made its fourth consecutive large purchase of U.S. corn, buying 1,088,000 metric tons announced on April 28^th. Of China’s most recent corn purchase, 476,000 metric tons is to be delivered during the 2021/2022 marketing year and 612,000 tons slated for delivery during the 2022/2023 marketing year. Prior to USDA’s April 28^th announcement, the Department of Agriculture recorded three other major corn purchases by China in April: 1,347,000 metric tons on April 22^nd, 1,020,000 metric tons on April 11^th, and 1,084,000 metric tons on April 4^th.
  • Several analysts noted the conflict in Ukraine is compelling China to secure corn from other producers. “It’s evidence that China is getting concerned about the global supply of corn,” Arlan Suderman, a chief commodity expert at StoneX Group, said Monday. “Ukraine is no longer available for them – at least as long as this war continues, and as long as Ukrainian ports are blocked.” Mr. Suderman noted China’s preferred supplier of corn is the Ukraine, but the country’s exports are all but shut down because of the Russian invasion, leading Chinese buyers to replace that lost supply with U.S. corn.
  • Experts speculate that China was relying on Ukraine for roughly 6 million metric tons of corn prior to the Russian invasion, which has blocked grain export from the Black Sea region. Since April, China has bought over 4 million tons of old crop and new crop corn from the U.S.

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.’ directive, a BIS official said during an interview with U.S. Inside 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

U.S. economy contracts

• A recent report from The Economist shows an unexpected contraction of the U.S. economy in the first quarter of this year. The data shows a “fall in output of 1.4% in annualised terms,” which is “down from growth of nearly 7% at the end of last year.” Despite the trend in the data, The Economist claims this information is misleading “because it is more a reflection of strong imports and shifting inventory levels than of a sudden slowdown. Underlying demand is strong—personal consumption rose by 2.7% in the first three months of 2022—and most analysts are predicting growth for the full year.” Additionally, the report highlights another trend of the U.S. economy: that of great variance on a state-to-state level. States such as Alaska and Hawaii have seen reductions in economic output, while states such as Washington and Utah have seen boons.

Goods trade deficit surges in March

• The international trade deficit was $125.3 billion or +17.8% in March, up $19.0 billion from $106.3 billion in February according to the Census Bureau. U.S. Exports of goods for March were $169.3 billion, $11.4 billion more than February exports. Imports of goods for March were $294.6 billion, $30.3 billion more than February imports. Full data on the trade balance (i.e., goods and services) is scheduled for release on May 4^th.

Food Security

Biden Administration announces food aid

• USAID and USDA will provide $670 million in food assistance to help combat historic levels of food insecurity caused by the current compounding crises. According to a USDA news release, “USAID will use the Bill Emerson Humanitarian Trust’s (BEHT) $282 million to procure U.S. food commodities to bolster existing emergency food operations in six countries facing severe food insecurity: Ethiopia, Kenya, Somalia, Sudan, South Sudan, and Yemen. USDA will provide $388 million in additional funding through the Commodity Credit Corporation (CCC) to cover ocean freight transportation, inland transport, internal transport, shipping and handling, and other associated costs.” Russia’s invasion of Ukraine has exacerbated the global food crisis and created an unprecedent need for assistance. The U.S. will use BEHT funding for the first time since 2014 to work toward alleviating the stress caused by food inflation.

Supply Chains

China’s port activity falling to early pandemic slowdowns

• Chinese port activity plummeted below levels seen during the early stages of the coronavirus pandemic in 2020, according to satellite data reported by SpaceKnow. Vessel flows at Chinese ports are falling rapidly as Shanghai and Beijing imposed new lockdowns to arrest a new wave of COVID cases.

Addressing railway supply chain issues

• During the Surface Transportation Board’s hearing on recent rail service concerns, Secretary of Transportation Pete Buttigieg appeared before the Board to testify on railway-related supply chain issues. “The fact that the Secretary is here this morning indicates the seriousness of the problems which instigated this hearing,” said STB Chair Martin Oberman. In his testimonial, Secretary Buttigieg highlighted staffing shortages at freight railroads as one of the central problems, causing nationwide railway delays.

Indo- Pacific Economic Framework

Agriculture stakeholders discuss IPEF

• USTR’s Katherine Tai and USDA’s Tom Vilsack met with key agriculture industry representatives to discuss IPEF at USDA headquarters. During the meetings, the Administration officials reiterated that market access will not be part of the framework, despite the agriculture industry’s persistence on including tariff reductions in IPEF. Ambassador Tai and Secretary Vilsack, instead, noted they would be working to address critical non-tariff barriers as they craft their broad and wide-sweeping framework. Previously, industry groups submitted comments to identify which of these barriers pose the largest obstacles for their respective products.
  • “Across the Asia-Pacific region, U.S. red meat exports face a litany of non-science-based barriers to trade that prevent the U.S. industry from reaching its full export potential. Korea, Japan, Taiwan, Singapore and Australia still maintain outdated barriers to U.S. beef exports related to the 2003 Bovine Spongiform Encephalopathy (BSE) case in the U.S.,” said the U.S. Meat Export Federation in their IPEF comments to USTR.
  • The U.S. Grains Council wrote in its comments, “Unfortunately, regulatory uncertainty continues to stymie the free flow of biotech grain into certain countries in the Indo-Pacific Region. There are currently numerous impediments for biotech crops including: asynchronous approvals that create backlogs of unapproved traits, evaluation procedures not based on international scientific standards, unnecessary testing, labeling (and) traceability requirements, and even outright bans on genetically modified products.”
  • Similar comments were provided by other food and agriculture organizations. Despite the lack of market access in IPEF, USTR appears to have plenty of work to do to reduce non-tariff barriers for U.S agriculture exporters. The industry awaits more details on the content of IPEF and hope for strong enforcement measures to ensure Indo-Pacific countries uphold their end of the bargain.

U.S. still open to Taiwan joining IPEF

• While uncertainty remains on which countries the U.S. will engage on IPEF, the Biden Administration has not ruled out Taiwan. Secretary of State Antony Blinken told lawmakers last week that U.S. officials are not “closing the door” on Taiwan’s participation nor are they avoiding request for engagement with Taiwan on one or more of the four IPEF pillars. Secretary of State Anthony Blinken remarked on the issue following recent expressions by several lawmakers for the Administration to include Taiwan in IPEF. 
• During a House Foreign Affairs Committee hearing on Thursday about the 2022 State Department budget request, Rep. Ann Wagner (R-MO) reiterated this call, saying she was “particularly concerned that Taiwan is being shut out” of the IPEF.  “Even though the administration may try to kind of hide this by never formally closing the door, so to speak, to participation, Taiwan’s offer to become a full member is not being accepted,” she argued. “When our country’s top trade negotiators met last week, this was Taiwan’s number one and top request. But the Biden administration did not allow Taiwan to join the framework. This policy is self-defeating and dangerous, frankly.”
  • The Biden Administration intends launch the IPEF in the next several weeks according to Commerce and USTR officials. Insights on which countries will be party to the IPEF may be clearer in the near future. Up to this point, U.S. officials have pursued informal meetings with officials from Australia, New Zealand, Japan, Korea, Singapore, India, and several other countries. Taiwan’s participation could raise significant issues as China does not recognize Taiwan as an independent, sovereign nation.

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. – Korea

U.S. – Korea Labor Affairs Council meeting

• USTR and the U.S. Department of Labor met with South Korean representatives to discuss labor rights as agreed upon as part of the United States – Korea Free Trade Agreement (KORUS). “We remain committed to our strong trade and labor relationship with South Korea, which is bolstered through engagement like this,” said Assistant USTR for Labor Joshua Kagan in a USTR press release. “This Labor Affairs Council meeting under KORUS, including the public session, demonstrates our partnership with South Korea to achieve shared goals in protecting workers globally and advancing labor rights under the agreement.” According to USTR, the participating parties conversed on:
  • “Steps to strengthen workers’ rights domestically.
  • Exploration of a trilateral cooperation project with the International Labor Organization.
  • Advances and challenges in the elimination of forced labor from shared supply chains.
  • Areas of future cooperation and technical capacity building.”
• Deputy Undersecretary for International Affairs at the Department of Labor Thea Lee also commented on the success of the meeting, “Today – after a decade of working together under the United States-Korea Free Trade Agreement – we begin a new chapter of deeper collaboration to strengthen and protect labor rights in our two nations, and across our shared supply chains. The Labor Affairs Council is an important vehicle for productive discussions and continued collaboration.”

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 went into effect on 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. – Cuba

Encouraging ag trade between the U.S. and Cuba

• The United States Agriculture Coalition for Cuba (USACC) Chair Paul Johnson said the group is pursuing more efforts to bolster U.S. – Cuba agricultural trade. According to John, several U.S. agriculture industry representatives flew to Havana last month to attend a trade conference organized by USACC. At that conference, Cuban government officials and importers promised to increase their purchasing of U.S. ag products this year. Cuban Minister of Foreign Trade and Foreign Investment Rodrigo Malmierca Díaz announced his country would buy between $400-$500 million worth of U.S. agricultural products this year, up significantly from $295 million last year. Mr. Johnson emphasize that at the Cuban conference “We wanted to meet with various ministries to understand reforms that are taking place within Cuban law that relate to both foreign direct investment and to agricultural cooperatives.” Moving forward, USACC hopes to further normalize trade with Cuba, although some U.S. actors believe this will be a near impossible feat due to Cuba’s historical lack of reliability in such deals.

Section 301 Investigations

Chinese officials comment on 301 tariffs

• “During the past few years, the facts have proved that a tariff war cannot solve the U.S. trade issues. It will only drive up the inflation and increase the cost of living for ordinary American consumers and families,” Chinese Embassy Spokesperson Liu Pengyu said about the Trump-era Section 301 tariffs placed on a wide array of Chinese goods. The Chinese Embassy, which rarely shares public statements, highlighted China’s perspective on the tariffs amid growing conversation regarding their review. Another representative from the Embassy Lyu Jiang called the tariffs “an act of protectionism.” “To our regret, it seems to me that the strategic trust between our two sides is waning, and we have to re-build and fix this strategic trust between our two sides,” Lyu said. “One of the main reasons that this trust is weakened or lost is because the current and the previous administrations of the U.S. has defined China as U.S.’s strategic competitor and even a rival.”

 Special 301 Report on Intellectual Property Protection and Enforcement

• USTR released its annual Special 301 Report aimed at analyzing the status of intellectual property (IP) rights of the U.S.’ trading partners. Commenting on the release of the report, Ambassador Tai noted the importance of strong IP rights globally, “Intellectual property-intensive industries support more than 60 million jobs – from the independent inventor just starting out to the documentary filmmaker studying critical social issues.  We need robust protection and enforcement in foreign countries to protect these individuals, their livelihoods, and ensure they can fairly compete in the global marketplaces” According to USTR, key elements of the report include:
  • Suspension of Ukraine’s 301 review,
  • Instatement of an Out-of-Cycle Review of Bulgaria,
  • Confirmation that the U.S. will continue to support a waiver of IP protections for COVID-19 vaccines under the WTO TRIPS Agreement,
  • Record that “United States is closely monitoring China’s progress in implementing its commitments under the United States-China Economic and Trade Agreement,”
  • A status update on the advancement of IP protection by several U.S. trading partners, and
  • Concern with “the European Union’s aggressive promotion of its exclusionary geographical indications (GI) policies.”

U.S. – U.K.

Hope for a U.S. – U.K. trade deal

• During his trip to the United States, U.K. Secretary of State for Environment, Food, and Rural Affairs George Eustice met with U.S. Secretary of Agriculture Tom Vilsack. Straying from the usual cautiousness surrounding discussion of a U.S. – U.K. trade agreement, Secretary Eustice kept an optimistic view for the future of the two countries’ trade relationship. “The long and short of it is (British Prime Minister Boris Johnson) and the UK government are still very keen to progress a UK-U.S. trade agreement,” he noted. Secretary Eustice said that during his trip he raised the “longer-term objective to have a UK-U.S. free trade agreement, according to a video message released by his office,”
  • Despite the Biden Administration’s persistence that a trans-Atlantic trade deal is not a priority at this point in time, the U.K. continues to press for eventual formal negotiations. U.S. Stakeholders remain hopeful that the U.K.’s resolve will lead to a trade deal later down the road.

Dialogue on the Future of Atlantic Trade

• In Aberdeen, Scotland U.K. Secretary of State for International Trade Anne-Marie Trevelyan and U.S. Trade Representative Katherine Tai convened their second “Dialogue on the Future of Atlantic Trade.” According to a joint statement, the two officials “agreed to collaborate further on: delivering practical support for SMEs, digitizing U.S.-UK trade in the modern economy, building resilience in critical supply chains, addressing the global trade impacts of Russia’s invasion of Ukraine, promoting environmental protection and the transition to net zero, supporting high labor and environmental standards, and promoting innovation and inclusive economic growth for workers and businesses on both sides of the Atlantic.” Ambassador Tai and Secretary Trevelyan’s respective teams will work to create a roadmap to progress the U.K. and U.S.’ shared goals over the next several weeks.

U.S. – EU

Macron secures French presidency

• During his campaign for president, incumbent Emmanuel Macron promised a more open approach to trade in an effort to win the votes of French farmers. In doing so, President Marcon backed new trade deals with Latin American, Australia, or New Zealand, according to reports. Now that Macron has secured his position as President for another term, both France and the EU may see a boost in trade deal activity. France currently leads the Council of the EU and, as such, plays a major role in hashing out new EU trade deals. Leaders of pro-free trade countries in the EU (i.e. Sweden and the Czech Republic) are eager to see what the French president has in store. “We need strong bilateral and regional trade deals,” Swedish Trade Minister Anna Hallberg told Politico. “We can do so much more to strengthen the EU economically and geopolitically if we make better use of our potential to shape the global trade agenda.”

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.”

U.S. – Kenya

USTR to lead broad-based delegation to Kenya

• USTR announced plans for a U.S. delegation to “meet with Kenyan government officials to explore opportunities for enhanced trade and investment engagement across a wide range of topics,” said an agency spokesperson.  The “broad-based” delegation will include officials from USTR as well as the State, Commerce, Labor, and Agriculture departments. USTR said the goal is to improve the relationship “in a manner that benefits workers, attracts investment, and promotes regional economic integration. The U.S. team will seek to collaborate with their counterparts on ways to generate inclusive economic growth in pursuit of those shared objectives.” The plans follow on recent discussions by USTR Katherine Tai and her Kenyan counterpart, Cabinet Secretary Betty Maina, during which they agreed to “pursue deepening the United States-Kenya trade relationship.”

WTO

WTO DG Okonjo-Iweala meets with Ambassador Tai

• Director-General (DG) of the WTO Ngozi Okonjo-Iweala along with Deputy Directory-General Angela Ellard visited the United States to discuss trade policy and MC12 with several U.S. officials. During her many engagements, “the Director-General stressed the importance of reforming the WTO and reinforcing the multilateral trading system to better meet 21st century challenges like climate change, battling the COVID-19 pandemic and warding off a food crisis brought about by the war in Ukraine.” According to a readout of the trip, DG Okonjo-Iweala’s discussion with U.S. Trade Representative Tai “revolved around the U.S. objectives for the 12th Ministerial Conference (MC12)” and there was “discussion on efforts to gain agreement on the WTO’s response to the COVID-19 pandemic including intellectual property, on disciplines to curb harmful fisheries subsidies and efforts to reform the organization.” “We have a challenging few weeks ahead of us and if we are to make progress, US leadership will be essential. Amb. Tai and I had an excellent discussion on the prospects for MC12 and what the United States would like to see in terms of inclusive outcomes that deliver for all,” the Director-General said about the meeting.

U.S. seeks dispute settlement reform

• At last week’s Dispute Settlement Body meeting, U.S. Ambassador to the WTO María Pagán, for the first time in her new role, spoke on the issue of dispute settlement reform. “A true reform discussion should aim to ensure that WTO dispute settlement reflects the real interests of Members, and not prejudge what a reformed system would look like,” said the Ambassador. A WTO news item further broke down the content of the meeting. Regarding Appellate Body appointments, the news item stated “The United States said that its longstanding concerns with WTO dispute settlement remain unaddressed, and that it does not support the proposed decision to commence the appointment of Appellate Body members.  Many members share US concerns with the functioning of the system and its negative impact on the WTO’s negotiating and monitoring functions.” The U.S. has blocked Appellate Body appointments since 2017 due to concerns with the Body overstepping its mandate. Moving forward, the U.S. will seek to further engage with members on the issue of dispute settlement reform, according to reports.

MC12 dates confirmed

• A communication forwarded by Director-General Ngozi Okonjo-Iweala, Chair of the 12th Ministerial Conference Mr Timur Suleimenov of Kazakhstan, and General Council Chair Ambassador Didier Chambovey of Switzerland confirmed the WTO’s 12^th ministerial will take place June 12^th-15^th in Geneva.  The event will be co-hosted by Kazakhstan.