TRADE UPDATE

Food & Agriculture
May 9, 2023

By Michael Anderson, Vice President of Trade and Industry Affairs

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HIGHLIGHTS

  • U.S. – China: The Senate is preparing legislation to counter competition with China and the country’s pernicious unfair trade practices. The legislation will focus on five main themes: limiting the flow of advanced technology to the Chinese government; curbing investment to the Chinese government; securing domestic economic investments; underscoring U.S. commitment to economic allies and maintaining partner alignment; and safeguarding our allies’ and partners’ security and maintaining our strategic alliances, according to reports.
  • U.S. – China: Separately, the House of Representatives Committee on Rules announced a hearing on “Examining China’s Coercive Economic Tactics” on May 10, at 2 p.m. EDT.
  • IPEF: The U.S. will hold an IPEF ministerial in Detroit, MI, on May 27, according to a joint statement released by U.S. Secretary of Commerce Gina Raimondo and U.S. Ambassador Katherine Tai. The IPEF ministerial meeting in Detroit follows on the heels of the third round of talks in Singapore held this week (May 8-15).
  • USMCA: In a speech at the Conference of the Americas, Ambassador Tai stated that the “innovative” features of USMCA could be applied to other countries in the Western Hemisphere.
  • Biden Nominees: The Senate Agriculture Committee has scheduled a confirmation hearing on Wednesday, May 10, for Xochitl Torres Small, President Biden’s nominee for the USDA Deputy Secretary position. Torres Small, who has been serving as USDA’s Undersecretary for Rural Development, would succeed Jewel Bronaugh, who left USDA earlier this year.
  • WTO: WTO reform remains a focus in Geneva as India proposed 30 specific incremental reforms of the WTO. Titled the “30 for 30” proposal, a nod to the WTO’s upcoming 30th anniversary of its creation and move from the General Agreement on Tariffs and Trade (GATT), the proposals are aimed at improving the operational effectiveness of the institution and its various committees.

“The era of after-the-fact policy patches and vague promises of redistribution is over. We need a new approach. Simply put: In today’s world, trade policy needs to be about more than tariff reduction, and trade policy needs to be fully integrated into our economic strategy, at home and abroad.”

–Jake Sullivan, National Security Advisor

USMCA

Calls for Expansion of USMCA

  • Several countries have expressed interest in joining the USMCA. Costa Rica’s Foreign Trade Minister Manual Tovar reiterated Costa Rica’s desire to be the first non-North American country to join the agreement. Ecuador has also expressed interest in negotiating a free trade agreement with the U.S. modeled on USMCA.
    • During a panel at the Conference of the Americas, Ambassador Tai stated that the “innovative” features of USMCA could be applied to other countries in the Western hemisphere: “So, if the focus right now is on ensuring that we have more resilience in our economies, more sustainability and more inclusiveness, let’s look at the tools, including and especially the ones that are innovative in USMCA and let’s figure out how we apply them to the partnerships that we should be focusing on in the region.” Tai did not specifically address the possibility of other countries joining USMCA.

USTR continues to evaluate Mexico’s Biotech Decree

  • As reported earlier, U.S. officials continue “assessing” Mexico’s comments under the technical consultations according to a statement by USDA Undersecretary for Trade and Foreign Agricultural Affairs Alexis Taylor, according to Agri-Pulse. Taylor provided no indication on the status of the consultations or potential for requesting a dispute settlement action. She emphasized that the U.S. remains confident in its position in the dispute stating, “science is on our side.”
    • Recall that on March 6 the U.S. requested USMCA technical consultations with Mexico on the decree which bans the importation of GM corn for human consumption in the use of flour and dough for masa and tortillas. In February Mexico issued a new decree that narrowed the 2019 decree to temporarily permit GM corn imports for animal and industrial uses.
    • Over a month has passed since the U.S. requested technical consultation with Mexico and several industry groups and lawmakers have expressed concern that the U.S. should move swiftly to a dispute panel should technical consultations stall or gain little traction. Under USMCA provisions, the U.S. and Mexico have 30 days after receipt of the technical consultations request to meet, “with an aim of resolving the matter cooperatively with 180 days of the request if possible.” USMCA further provides that the complaining party (e.g., U.S.) could “cease technical consultations,” reverting to a dispute settlement procedure “following the meeting.”

U.S. – China

Senate leadership preparing sweeping China legislation

Senator Chuck Schumer (D-NY)
  • Senate majority leader Chuck Schumer (D-NY) said he is spearheading pending legislation to counter competition with China and the country’s pernicious unfair trade practices. Senator Schumer said the legislation, which would draw on existing bills but add new provisions, will focus on five main themes: limiting the flow of advanced technology to the Chinese government; limiting the flow of investment to the Chinese government; securing domestic economic investments; underscoring U.S. commitment to economic allies and maintaining partner alignment; and safeguarding our allies’ and partners’ security and maintaining our strategic alliances.
    • Senator Schumer said he aims to coordinate a bipartisan effort with legislation emerging in the next few months. “The United States cannot sit idly by as the Chinese government continues to lie, cheat and steal its way to global dominance,” Senator Schumer told reporters. He expects broad bipartisan support in both the Senate and House for legislation taking on China. “We have the opportunity to work this Congress on safeguarding our future. [Chinese] President Xi has made clear he will not stop his campaign to rival America on the world stage. We cannot stop either.”
    • In conjunction with the expected legislation, Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) has said she is particularly interested in adding the USDA secretary and FDA commissioner as permanent members on the Committee on Foreign Investment in the U.S. (CIFIUS), which reviews commercial transactions for national security implications. Several lawmakers have voiced support for proposed legislation to limit Chinese purchases of U.S. agriculture land. The addition of the two officials from USDA and FDA would give greater voice on CIFIUS issues for food and agriculture stakeholders.

House Rules Committee schedules China hearing

  • The House of Representatives Committee on Rules announced a hearing on “Examining China’s Coercive Economic Tactics” May 10th at 2:00 pm. Scheduled witnesses are:
    • Dr. Victor Cha, Senior Vice President for Asia and Korea Chair, Center for Strategic and International Studies
    • Mr. Jamil Jaffer, Founder and Executive Director, National Security Institute
    • Dr. Derek Scissors, Senior Fellow, American Enterprise Institute
    • Ms. Yaqiu Wang, Senior China Researcher, Human Rights Watch

Biden Nominees

Nomination hearing set for nominee Xochitl Torres Small for Deputy Secretary of Agriculture

Xochitl Torres Small, USDA Under Secretary for Rural Development
Xochitl Torres Small, USDA Under Secretary for Rural Development
  • The Senate Agriculture Committee has scheduled a confirmation hearing next Wednesday, 10th for Xochitl Torres Small, President Biden’s nominee for the USDA Deputy Secretary position. Torres Small, who has been serving as USDA’s undersecretary for rural development, would succeed Jewel Bronaugh, who left USDA earlier this year.
    • Recall that last February President Biden announced his intent to nominate Xochitl Torres Small to serve as Deputy Secretary of Agriculture. Prior to her current USDA position, Torres Small was a Member of Congress, serving New Mexico’s second congressional district. Torres Small was a member of the House Agriculture Committee and the House Armed Services Committee, and Chairwoman of the Oversight, Management, and Accountability Subcommittee of the House Homeland Security Committee. She was the first woman and first person of color to represent New Mexico’s second congressional district, according to a White House statement.

Food Security

Global food prices rebound in April

  • The Food and Agriculture Organization’s (FAO) Food Price Index averaged 127.2 points in April, up 0.6 percent compared to February. April’s slight price index increase reversed a 12-month trend of receding prices since their peak level in March 2022. A steep increase in the sugar price index, coupled with an upturn in the meat price index, offset price declines for cereals, dairy and vegetable oils, according to the FAO. Other highlights from the report include:
    • The Vegetable Oil Price Index “averaged 130.0 points in April, down 1.8 points (1.3 percent) from March, marking the fifth consecutive monthly decline. The continued decrease of the price index reflected the combined effect of stable world palm oil prices and lower soy, rapeseed and sunflower oil quotations. Following a short-lived rebound in March, international palm oil prices remained virtually unchanged in April, as the downward pressure stemming from a lackluster import demand from key importing countries was offset by support from comparatively limited supplies of leading producers.” 
    • The Meat Price Index “averaged 114.5 points in April, up 1.5 points (1.3 percent) from March and standing 7.4 points (6.1 percent) below its value in the corresponding month last year. In April, international price quotations for pig meat rose the most on increased import purchases by Asian countries and the continued supply limitations in several leading exporters due to high production costs and animal health issues.”
    • The Cereal Price Index “averaged 136.1 points in April, down 2.4 points (1.7 percent) from March and as much as 33.5 points (19.8 percent) below its value one year ago. A decline in world prices of all major grains outweighed an increase in rice prices month-on-month. International wheat prices declined by 2.3 percent in April to their lowest level since July 2021, principally driven by large exportable availabilities in the Russian Federation and Australia.”
    • The Dairy Price Index “averaged 124.6 points in April, down 2.2 points (1.7 percent) from March and 22.1 points (15.1 percent) from its level one year ago. In April, international prices of milk powders fell for the tenth consecutive month, primarily underpinned by the impact of the persistent slack global import demand. Increased purchases by China and seasonally declining supplies from New Zealand prevented a potentially steeper fall in the world prices of whole milk powder, while increased current supplies from Western Europe exerted further downward pressure on skim milk powder prices.”
    • The FAO Sugar Price Index “averaged 149.4 points in April, up 22.4 points (17.6 percent) from March, marking the third consecutive monthly increase and reaching its highest level since October 2011. The hike in prices was mostly related to heightened concerns over tighter global availabilities in the 2022/23 season after further downward revisions to the production forecasts for India and China, along with lower-than-earlier-expected outputs in Thailand and the European Union.”

Supply Chains

Supply chain pressures continue to abate

  • The latest Logistics Manager’ Index confirmed that supply chain pressures continue to ease, a trend that started in the first quarter of 2022. April’s Logistics Managers’ Index declined to an index reading of 50.9, after peaking above 90.1 as recently as the fourth quarter of 2021.
    • The authors of the index noted that the declining pressures were “driven by a dip in Inventory Levels, which are down (-4.7 points) to 50.9, suggesting that respondents continue to get closer to properly balancing their supply of goods and working through the glut many of them have been saddled with for the last year.” They further noted, “The drop in inventories has led to a significant (-9.9 points) drop in Warehousing Utilization which in turn has dropped Warehousing Prices – particularly for Downstream firms – as the metric reads in below 70.0 for the first time since August of 2020.”

U.S. trade deficit shrinks in March

  • The U.S. trade balance in goods and services declined $6.4 billion to $64.2 billion or 9.1%, from $70.6 billion in February. The March decrease in the goods and services deficit reflected a decrease in the goods deficit of $6.4 billion to $86.6 billion and a decrease in the services surplus of less than $0.1 billion to $22.4 billion. Additional details released by the Census Bureau:
    • March exports were $256.2 billion, $5.3 billion more than February exports. March imports were $320.4 billion, $1.1 billion less than February imports.Year-to-date, the goods and services deficit decreased $77.6 billion, or 27.6 percent, from the same period in 2022. Exports increased $61.4 billion or 8.7 percent. Imports decreased $16.2 billion or 1.6 percent.
    • The average goods and services deficit decreased $1.0 billion to $67.8 billion for three months ending in March. Average exports increased $2.4 billion to $255.0 billion in March. Average imports increased $1.4 billion to $322.8 billion in March. Year-over-year, the average goods and services deficit decreased $25.9 billion from the three months ending in March 2022.

Indo-Pacific Economic Framework

U.S. to host IPEF ministerial meeting in May

Ambassador Katherine Tai and Commerce Secretary Gina Raimondo
  • The U.S. will host delegates from 13 IPEF countries in Detroit, MI on May 27th. U.S. Secretary of Commerce Gina Raimondo and U.S. Trade Representative Katherine Tai announced the ministerial meeting in a joint statement. The IPEF ministerial meeting in Detroit follows on the heels of the third round of talks in Singapore held this week (May 8-15).
    • In announcing the IPEF ministerial, Commerce Secretary Gina Raimondo stated, “I am pleased that we are maintaining positive momentum and a fast pace on negotiations with our IPEF Partners.” She continued, “Ambassador Tai and I look forward to hosting the IPEF Ministers in Detroit to continue the progress we have made and deepen cooperation in the region on our shared economic priorities.”
    • Ambassador Tai added, “Over the last year, the United States and our IPEF partners have made tremendous progress in developing a robust framework that will deliver inclusive, meaningful benefits for all of our citizens. Tai continued, “I look forward to hosting trade ministers in Detroit as we build on this momentum and negotiate a 21st century trade framework that addresses today’s pressing challenges.”  
    • Ambassador Tai confirmed that the upcoming trade talks in Singapore are indicative of an ambitious schedule to move forward on IPEF. The Singapore negotiations will be the third round in the last five months, and Tai noted USTR plans a similarly aggressive timeline through the end of the year. Tai emphasized that IPEF, unlike other trade negotiations, is focused on upfront capacity building and trade facilitation, particularly for developing countries, rather than after the agreement is concluded.
    • Recall the IPEF negotiating countries besides the U.S. include Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam. Notably India opted out of negotiations on the trade pillar.

WTO

India offers WTO reforms

  • Last week India shared a proposal for 30 specific incremental reforms of the WTO, rather than sweeping changes that are being pushed by several developed country members. Titled the “30 for 30” proposal, a nod to the WTO’s upcoming 30th anniversary in 2024 since its creation and move from the General Agreement on Tariffs and Trade (GATT), the proposals are aimed to improve the operational effectiveness of the institution and its various committees. The proposal ranges from improvements to minutes and committee meeting scheduling to enhanced transparency of WTO deliberations.
    • “Beginning next January, as we enter the thirtieth year of this organization as the central pillar of the global multilateral trading system, we have a collective opportunity to demonstrate Members’ continued commitment to the work of the WTO, thereby strengthening its effectiveness,” India said in its proposal. India proposed to “galvanize the collective resolve of this Organization behind an initiative we have dubbed as “30 For 30” – a Member-led effort to bring at least 30 operational improvements to the WTO before the Organization completes 30 years, i.e., by January 1, 2025.” India noted the proposals are also intended as a catalyst for larger discussions on comprehensive WTO reform, not the proposed 30 incremental changes “could be implemented quickly, as developing a common understanding on these would be easy considering the nature of these suggestions for enhancing of operational efficiency of the organization.”

Ag Economy Barometer

The Ag Economy Barometer improves in April

  • The April Ag Economy Barometer rose 6 points to a reading of 123, after declining in the past two months, according to Purdue University and the CME Group. The modest rebound in farmer sentiment in April was largely driven by moderately easing concerns over rising interest rates, though 66% of respondents still anticipate further interest rate hikes, down from 75% in February’s survey. Farmers’ future sentiment continues to reflect concerns with rising input costs. April’s sentiment level parallels the index level in late 2021, which hovered around 115-121 points.
  • Views on passage of a Farm Bill this year were mixed with 40% of producers indicating that passage was at least somewhat likely while nearly 30% of respondents indicated that passage is at least somewhat unlikely. Crop insurance (40%) and the commodity program (31%) registered as the most important Farm Bill titles among survey respondents.