TRADE UPDATE

Food & Agriculture
June 27, 2023

By Michael Anderson, Anderson Global Trade, LLC

HIGHLIGHTS

  • USMCA: This past week, Mexico increased tariffs on white corn imports to 50% to boost domestic production. It will be in force until the end of 2023. This increase in tariffs should not apply to Mexico’s USMCA partners as it would violate the free trade agreement.
  • U.S. – India: During Indian Prime Minister Narendra Modi’s visit with President Joe Biden, the two leaders announced several steps towards “deepening bilateral cooperation to strengthen…the bilateral economic relationship, including trade ties.” Specifically, the two trade partners agreed to terminate six outstanding World Trade Organization (WTO) disputes—three initiated by the U.S. and three by India—covering trade disputes ranging from U.S. Section 232 steel and aluminum tariffs to retaliatory measures by India.
  • U.S. – China: House Select Committee on the Chinese Communist Party Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL) released interim investigation findings into Chinese fast fashion brands Shein and Temu. The report lambasted the two companies’ use of the de minimis rule to avoid paying duties and alleged that Temu uses forced labor in its supply chains.
  • EU – Kenya: On June 19, the EU and Kenya announced the conclusion of negotiations on an economic partnership agreement (EPA). Kenya is generally considered the economic hub of East Africa. Recall that the U.S. and Kenya launched FTA negotiations in July of 2020 and an agreement has yet to be reached.
  • U.S. – Russia: Senators Dan Sullivan (R-AK) and Lisa Murkowski (R-AK) reintroduced legislation to expand a ban on seafood imports from Russia to include Russian-origin seafood that is reprocessed elsewhere.
  • USDA: The Foreign Agriculture Service announced a trade mission to Santiago, Chile, from Sept. 25-29, for food and agriculture exporters interested in the Chilean market. Applications will be accepted through Wednesday, July 5.
  • Trade Policy: Representative Earl Blumenauer (D-OR), Ranking Member of the Ways and Means Subcommittee on Trade, floated a trade and worker legislative package to increase U.S. competitiveness. The American Worker and Trade Competitiveness Act would reauthorize the expired Generalized System of Preferences (GSP), Trade Adjustment Assistance (TAA), and the Miscellaneous Tariff Bill (MTB).
  • WTO: France joined an expanding group of WTO members adding funds to the WTO Fisheries mechanism to assist developing members and least-developed country members in implementing the Agreement on Fisheries Subsidies.

Note: The next Trade Update will be published early on Friday, June 30, because of Independence Day. 

“Passing the Taiwan trade agreement bill is a can’t miss opportunity to support Taiwan, clarify Congress’ role in trade, call for more transparency and consultation.”

–Senator Ron Wyden (D-OR)

USMCA

Mexico implements a 50% tariff on white corn imports

  • This past week, Mexico has increased tariffs on white corn imports to 50% to boost domestic production. It will be in force until the end of 2023. White corn imports were previously exempted from tariffs in an attempt by the Mexican government to decrease food price inflation.
  • This increase in tariffs should not apply to Mexico’s partners in USMCA. However, it would be in violation of USMCA if it were applied to the U.S. and Canada. This would potentially compound on other disputes between USMCA partners related to GM corn. Recall earlier this month that the U.S. formally requested dispute settlement consultations with Mexico through USMCA because of “Mexican measures concerning products of agricultural biotechnology.”
    • Note that Mexico does not import much white corn, with most of Mexico’s domestic corn production being white corn.

USTR gives guidance to USMCA’s labor protection mechanisms

  • USTR published a webpage answering frequently asked questions on “both (a) the web-based tip hotline for labor issues among USMCA countries, and (b) USMCA Petitions: Rapid Response Petitions, and Labor Chapter Petitions.” This comes in the wake of increased use of USMCA’s Rapid Response Labor Mechanism. Recall that the Office of USTR and Department of Labor have recently filed the 10th and 11th labor rights reviews under USMCA’s Rapid Response Labor Mechanism
    • The website gives a clear guide of how and when to use the web-based tip hotline for labor issues in Canada and Mexico, the Rapid Response Labor Mechanism, and the Labor Chapter Petition in USMCA.

U.S. – India

U.S., India settle WTO Disputes, India removes retaliatory ag tariffs

Shri Narendra Modi, Prime Minister of India
  • During the Indian Prime Minister Modi’s visit with President Joe Biden, the two leaders announced several steps toward “deepening bilateral cooperation to strengthen…the bilateral economic relationship, including trade ties,” according to a White House press release. Specifically, the two trade partners agreed to terminate six outstanding World Trade Organization (WTO) disputes – three initiated by the U.S. and three by India—covering trade disputes ranging from U.S. Section 232 steel and aluminum tariffs to retaliatory measures by India. The six WTO disputes that will be terminated according to USTR press release are listed here:
    • United States – Countervailing Measures on Certain Hot-Rolled Carbon Steel Flat Products from India (DS436);
    • India – Certain Measures Relating to Solar Cells and Solar Modules (DS456);
    • United States – Certain Measures Relating to the Renewable Energy Sector (DS510);
    • India – Export Related Measures (DS541);
    • United States – Certain Measures on Steel and Aluminum Products (DS547); and
    • India – Additional Duties on Certain Products from the United States (DS585).
  • India also agreed to eliminate retaliatory tariffs on certain U.S. agriculture products, including chickpeas, lentils, almonds, walnuts, and apples, imposed in response to U.S. Section 232 tariffs U.S. Trade Representative Katherine Tai lauded the outcome of Modi’s official state visit, stating, “Prime Minister Modi’s visit has underscored the importance of the U.S.-India bilateral relationship and our cooperation on a range of shared priorities. Today’s agreement represents the culmination of intensified bilateral engagement over the last two years, including through the U.S.-India Trade Policy Forum, to deepen our economic and trade ties. As a result of our work, U.S. agricultural producers and manufacturers will now enjoy renewed access to a critical global market and we will strengthen our trade relationship with one of our closest partners. I look forward to continue to working with my counterpart, Minister Goyal, as we identify additional ways to bring our people and our economies together.”

U.S. – China

Congress releases report critiquing use of the de minimis rule by Chinese retail firms Temu and Shein, finds it likely that Temu uses forced labor

  • House Select Committee on the Chinese Communist Party Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL) released interim findings of investigations into Chinese fast fashion brands Shein and Temu. The report lambasted the two companies’ use of the de minimis rule to avoid paying duties that other firms are subjected to. The rule allows companies to send packages to U.S. consumers duty free if they are under $800 and sent directly to the consumer. Bipartisan bills have been proposed earlier this month to address the alleged abuse of the de minimis rule by companies like Shein and Temu.
  • The report particularly took aim at Temu for failing to ensure compliance with the Uyghur Forced Labor Prevention Act (UFLPA). The report further stated, “American consumers should know that there is an extremely high risk that Temu’s supply chains are contaminated with forced labor.”
    • Chairman Gallagher said, “These results are shocking: Temu is doing next to nothing to keep its supply chains free from slave labor. At the same time, Temu and Shein are building empires around the de minimis loophole in our import rules—dodging import taxes and evading scrutiny on the millions of goods they sell to Americans. We need to take a hard look at this loophole that is being abused to tilt the playing field against American companies.”
    • Ranking Member Krishnamoorthi added, “The initial findings of this report are concerning and reinforce the need for full transparency by companies potentially profiting from CCP forced labor. Our Select Committee heard from experts under oath that these practices persist to this day and we intend to strengthen laws like the Uyghur Forced Labor Prevention Act to put an end to them once and for all.”

Commerce sets steep duties in tin mill anti-dumping case

  • The Department of Commerce set high preliminary countervailing duties against Chinese steel firms as a part of a broader case brought by the petitioners Cleveland-Cliffs Inc. Cleveland-Cliffs is targeting over $1 billion of steel products from eight countries. Commerce imposed a 542.55% preliminary duty against one firm, Baoshan Iron & Steel Co., Ltd., putting an 89.02% duty against the rest of the Chinese steel milling companies involved. China is the only country of the eight in the dispute that Cleveland-Cliffs is seeking countervailing duties from, according to Politico.
    • Consumer advocate groups have pushed back against the case arguing it will negatively impact canned food prices. The Consumer Brands Association predicts that consumer costs of this case could include a “19 to 30 percent increase in canned food costs.”

EU – Kenya

Kenya, EU sign trade deal

  • On June 19, the EU and Kenya announced the conclusion of negotiations on an Economic Partnership Agreement (EPA). According to the announcement, this constitutes the “most ambitious EU trade deal with a developing country when it comes to sustainability provisions such as climate and environmental protection and labour rights.” Some provisions in the agreement include:
    • Immediate duty-free quota-free access to the EU for all Kenyan exportsPartial, gradual opening of the Kenyan market, in full consideration of its economic development
    • Ban on unjustified or discriminatory restrictions on imports and exports
  • According to USAID, Kenya was one of the five quickest growing African economies prior to the COVID-19 pandemic. The Department of Commerce’s website export.gov further reports that: “Kenya has a market-based economy and is generally considered the economic, commercial, financial and logistics hub of East Africa. With the strongest industrial base in East Africa, Kenya has been successful in attracting U.S. exporters and investors. More U.S. companies are investing in Kenya and setting up local and regional operations to take advantage of Kenya’s strategic location, diversified economy, entrepreneurial workforce, comprehensive air routes, and status as a regional financial center.”
  • Note that the U.S. and Kenya launched FTA negotiations in July of 2020. An agreement has yet to be reached. These developments fit into the broader trend of the U.S. being reluctant to pursue FTAs, something the EU has not been shy about pursuing.

U.S. – Russia

Senators seek expanded import restrictions on Russian seafood

Senator Dan Sullivan (R-AK)
  • Senators Dan Sullivan (R-AK) and Lisa Murkowski (R-AK) reintroduced legislation to expand the ban on seafood imports from Russia to include Russian-origin seafood that is reprocessed elsewhere. The U.S.-Russian Federation Seafood Reciprocity Act of 2023” would impose a ban on Russian seafood imports “until American fishermen and processors are afforded reciprocal access to the Russian market,” Sullivan said in a statement. Sullivan said “We should not be allowing Russian seafood to enter the U.S. market at the same time Russia is barring America’s fishermen and seafood processors from accessing their market. This is a matter of basic fairness and reciprocity that every American can understand. Since the brutal invasion of Ukraine, we fought even harder and secured an executive order putting sanctions on a significant portion of Russian imports, but loopholes are still allowing Russian seafood to be imported when reprocessed in other countries, especially Communist China. This has to end.”
  • Senator Murkowski added, “There are many ways to support Ukraine in this awful war waged by Putin. Sanctions should matter as we squeeze Russia’s economic prosperity used to attack Ukraine. Alaskans have faced a one-sided Russian embargo on seafood since 2014. It’s well past time we ensure America’s seafood economy is safeguarded against unfair trade practices. This legislation will help correct this trade imbalance and bring parity to Alaska’s world-class seafood industry.”
    • Recall that last March President Joe Biden signed an executive order banning the import of several key Russian products, such as seafood and vodka, following Russia’s invasion of Ukraine. The Alaskan Senators contend that the executive order “fails to block Russian seafood that has been substantially transformed in another country through reprocessing,” according to the joint statement.

USDA

USDA announces Chile trade mission

  • The U.S. Department of Agriculture (USDA) announced a trade mission to Santiago, Chile from September 25th to the 29th for food and agriculture exporters interested in the Chilean market. USDA’s Foreign Agriculture Service (FAS), which coordinates trade missions, reported that this trade mission “will coincide with the USDA-endorsed Espacio Food and Service trade show, Chile’s major food show and a significant gateway to the Latin American market, offering additional networking opportunities for U.S. participants.” In addition, participating U.S. agribusinesses will receive detailed market briefings from FAS staff and local and regional industry experts. “The event will include receptions and other opportunities to network, engagements with USDA leadership, and relevant site and retail visits in Santiago and the surrounding area,” according to the FAS announcement. FAS highlighted export opportunities in the following sectors:
    • Alcoholic beverages
    • Animal protein
    • Cheese
    • Consumer-oriented products
    • Dog and cat food
    • Ingredients for processing
    • Tree nuts
    • Wheat
  • The deadline to apply for the Chile trade mission is Wednesday, July 5th.

U.S. – Taiwan

Senate passage of Taiwan trade pact punted until July

Senator Tom Cotton (R-AR)
  • Last week, Senate Finance Committee Chair Ron Wyden (D-OR) called for a vote on the Taiwan trade pact recently approved by the House, titled the “United States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act,” before the chamber recessed for two weeks. Wyden characterized the bill as legislation that both parties could swiftly agree on and pass. “This is a proposal that brings both sides together. Every member of the [House] Ways & Means Committee, every Democrat, every Republican, is on board. So, the glide path to passage here was no accident,” Wyden stated. Despite the effort, Senator Tom Cotton (R-AR) objected to the expeditious move stating that more time was required to review the 70-page document, suggesting the 2-week recess should provide ample time for review.
    • Recall the House Ways and Means Committee unanimously voted to advance the United States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act (H.R. 4004). This legislation approves President Biden’s recent trade deal with Taiwan and requires the Administration to seek Congressional approval for future rounds of agreements with Taiwan, according to a Politico report. The legislation confirming Congress’ role in trade was drafted with bicameral and bipartisan support, manifesting increasing frustrations in Congress with the Biden Administration’s engagement with lawmakers on trade deals.
    • The U.S. and Taiwanese officials recently signed components of a trade deal made through the U.S.-Taiwan Initiative on 21st-Century Trade. This included chapters on customs administration and trade facilitation, good regulatory practices, services domestic regulation, anti-corruption, and small- and medium-sized businesses.

Current Account deficit expands

  • The U.S. current-account deficit grew by $3.1 billion, or 1.5 percent, to $219.3 billion during the first quarter of 2023, according to the Commerce Department. The $3.1 billion widening of the current-account deficit was propelled in part by an expanded deficit on secondary income and a reduced surplus on primary income that were partly offset by a reduced deficit on goods.
    • The Commerce Department noted that, “exports of goods and services to, and income received from, foreign residents increased $16 billion to $1.15 trillion in the first quarter, while imports rose $19.1 billion to $1.37 trillion. Exports of goods increased $8.9 billion to $526.6 billion, reflecting increases in consumer goods, mostly medicinal, dental and pharmaceutical products.”
    • Imports of goods decreased $2.1 billion to $789.7 billion “reflecting a decrease in industrial supplies and materials, mainly petroleum and products and chemicals, that was partly offset by an increase in automotive vehicles, parts and engines, mainly passenger cars and trucks, buses and special purpose vehicles. Exports of services increased $3.5 billion to $244.3 billion, while imports were up $2 billion to $182.2 billion. The increases in both exports and imports primarily reflected an increase in travel, mostly other personal travel.”
    • The current account is the broadest measure of trade and income flows between the U.S. and the rest of the world, a measure broadly monitored by economists for trends in domestic production and income.

Trade Policy

Trade package renewing GSP, TAA, and MTBs introduced

  • Last week Representative Earl Blumenauer (D-OR), Ranking Member of the Ways and Means trade subcommittee, introduced a trade and worker legislative package to increase U.S. competitiveness. The American Worker and Trade Competitiveness Act, would reauthorize the expired Generalized System of Preferences (GSP), Trade Adjustment Assistance (TAA), and the Miscellaneous Tariff Bill (MTB). The legislation calls for updates to all three trade programs, including retroactively renewing GSP through 2026 and excluding finished goods from MTB eligibility. Further, the bill includes new criteria regarding labor, rule of law, human rights, and environment that countries must abide by to receive duty-free access to the U.S. market.

Ellerman names as Assistant USTR for SE Asia

  • Last week the Office of the United States Trade Representative (USTR) promoted Sarah Ellerman to the Assistant United States Trade Representative for Southeast Asia and the Pacific position. Ellerman has more than two decades of trade policy experience in key roles in USTR, including most recently as Assistant USTR for Southeast Asia and the Pacific (Acting), according to an agency press release.
    • U.S. Trade Representative Ambassador Katherine Tai lauded Ellerman’s experience stating, “As USTR’s chief negotiator for the Indo-Pacific Economic Framework, she is developing an ambitious framework that will strengthen our ties to a dynamic and critical region. I congratulate Sarah on today’s announcement and am excited for her to continue representing our office throughout Southeast Asia.” Tai continued, “The Biden-Harris Administration is committed to deepening our economic engagement throughout Southeast Asia and the Pacific, and Sarah has played an essential role in delivering on that vision.” Ellerman will continue to serve as the Indo-Pacific Economic Framework Pillar I Chief Negotiator.

WTO

France contributes €1 million to WTO Fisheries Funding Mechanism

  • France joined an expanding group of WTO members adding funds to the WTO Fisheries mechanism to assist developing members and least-developed country members in implementing the Agreement on Fisheries Subsidies. France’s Minister for Foreign Trade, Economic Attractiveness and French Nationals Abroad, Olivier Becht, presented the €1 million contribution to WTO Director-General (DG) Ngozi Okonjo-Iweala. Brecht said, “The landmark Fisheries Agreement was a crucial first step toward satisfying the United Nations’ 14th Sustainable Development Goal, and a better consideration of sustainable development in trade rules. While WTO members still have negotiating to do, France’s contribution symbolizes our ongoing commitment to these negotiations, to the preservation of marine biodiversity and to the inclusion of developing countries and LDCs in international trade.”
    • DG Okonjo-Iweala said, “The WTO Agreement on Fisheries Subsidies is a landmark in global efforts to preserve our ocean and protect the welfare of the 260 million people who depend on marine fisheries for their livelihoods. I thank France for its very generous contribution to the funding mechanism for members that need technical assistance and capacity-building to implement the agreement.”
    • The action follows the recent contributions by the Government of the Netherlands and Government of Australia in recent weeks, €1 million and AU$ 2 million, respectively to assist the fisheries funding mechanism.
Oliver Becht, France’s minister for Foreign Trade, Economic Attractiveness and French Nationals Abroad, and Ngozi Okonjo-Iweala, WTO Director-General