TRADE UPDATE

Food & Agriculture
June 28, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

• USMCA: Ambassador Katherine Tai said that the U.S. still hopes to secure a new arrangement with Canada on softwood lumber. Tai said the softwood lumber issue is raised “almost every single time” she meets with her Canadian counterpart. She emphasized the U.S. is open to creative means of addressing the dispute and forging a successor to the 2006 agreement.
• China: Customs and Border Protection (CBP) issued guidance for the Uyghur Forced Labor Prevention Act (UFLPA) that went into effect last week. CBP said that importers should have sourcing documents ready for every material in their products’ supply chain.
• Indo-Pacific Economic Framework: U.S. business groups representing the Chambers of Commerce for the 12 initial IPEF countries expressed their support for IPEF. In a joint statement, the groups said, “Done correctly, the IPEF presents a significant opportunity to forge more resilient global supply chains, high-standard digital rules of the road, and energy transition outcomes that will drive prosperity on both sides of the Pacific.”
• U.S. – Ukraine: Ukraine’s minister of economy, Yuliia Svyrydenko, asked the Department of Commerce to “consider ways to ease access to Ukrainian products on the U.S. market to the extent defined by the U.S. legislation.” Specifically, to revoke antidumping orders on exports of certain Ukrainian steel products.
• WTO: As final outcomes of MC12 were released, timing and location of MC13 was already on the forefront of several WTO members minds. Both Cameroon and the United Arab Emirates expressed interest in hosting the next ministerial which could occur prior to December 31, 2023.

“You run risks, I think, when you discourage countries from doing business with autocracies, whether it’s China and Russia, but then we don’t offer them any viable alternatives. We say, ‘we’ll be there for you, but we’re not going to enter into a free trade agreement.”

— Sen. Lisa Murkowski (R-AK) to Ambassador Katherine Tai during the hearing on USTR’s fiscal year 2023 budget request

USMCA

U.S. flexible on a new softwood lumber deal with Canada

• Ambassador Katherine Tai posited that the U.S. still aims to secure a new arrangement with Canada on softwood lumber hoping Canada is willing to talk. Tai noted the softwood lumber issue is raised “almost every single time” she meets with Canada’s Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng. She emphasized the U.S. is open to creative means of addressing the dispute and forging a successor to the 2006 Softwood Lumber Agreement that expired in 2015. “When and if Canadian industry and the Canadian government are ready to address those issues, we stand ready and willing to enter into negotiations to see if we can, once again, come to some kind of an agreement with Canada,” Tai said.
  • The long-standing softwood lumber dispute was raised at the hearing on USTR’s fiscal year 2023 budget request. Sen. Jerry Moran (R-KA), ranking member of the Senate Appropriations Commerce, Justice, science and related agencies subcommittee, raised the issue with Tai, asking if the U.S. has “leverage” to motivate Canada to negotiate a new agreement. Tai told the Senator, “I like the way you think,” and that she would be happy to discuss the issue privately.

Section 301 & 232 Tariffs

Tai before the Senate Appropriations committee

• During the hearing on USTR’s fiscal year 2023 budget request, Ambassador Tai was the sole witness and answered questions about the Section 301 tariffs on goods from China posed by lawmakers from both parties. They urged Tai to restart a robust exclusion process for the tariffs and asked for details on how the administration plans to address unfair Chinese trade practices. Tai responded on the robust exclusion process that her office was taking into consideration input from Congress, and by stating, “I would direct you to the president’s comments over the weekend, that with respect to China tariffs and next steps on actions, that they are pending with him right now.”
  • Senators also expressed to Ambassador Tai the need for the administration to negotiate market-opening trade deals, enforcing China’s commitments to purchase U.S. lobsters, and an invitation to Alaska to hear firsthand about the retaliatory tariffs on the state’s seafood industry.  Tai’s prepared testimony emphasized it was time to turn the page on the old playbook. “The PRC’s non-market industrial policies unfairly target U.S. workers, businesses, and key sectors. We have to use all available tools, and develop new tools, to defend our economic interests and values.” 

Still no final decision on lifting of tariffs

• With still no final decision on whether to eliminate Section 301 and 232 tariffs, the tariff exclusion process has been reopened and other small moves have been made on European and Japanese tariffs. “The President is discussing with his team on ensuring that tariffs are aligned with our economic and strategic priorities, such as safeguarding the interests of workers and critical industries, advancing our national security, and not unnecessarily raising costs on Americans,” according to a White House spokesperson.
  • The White House has held at least three meetings of senior economic officials in recent weeks in addition to one-on-one meetings with the Treasury and Commerce chiefs to try to decide how to handle the tariffs imposed on goods from China by the previous administration.
  • An anonymous National Security Council official stated that “This is not a binary lift all tariffs or don’t – it’s about what industries make sense and what don’t.”

U.S. – China

Uyghur act currently in effect

• Customs and Border Protection (CBP) issued guidance for the Uyghur Forced Labor Prevention Act (UFLPA) that went into effect last week. CBP said that importers should have sourcing documents ready for every material in their products’ supply chain. High-risk sectors should have flow charts showing every step in the production process.
  • Domestic manufacturers who support the act have applauded the guidance. The National Council of Textile Organizations said, “Given the pervasiveness of horrific forced labor practices in Xinjiang associated with the cotton and apparel supply chain, it’s critical that we fully and effectively enforce this important law.”
  • 50% of the world’s supply of polysilicon came from the Xinjiang region last year, which is a concern for the solar industry who have been preparing for the implementation of UFLPA. “I think we’re looking at a range of possibilities that go from a minimal impact… to a very significant impact and that all depends on the details,” says a senior policy analyst at Clean Energy Associates.
  • UFLPA, signed into law last December, directs CBP to presume that all goods from the Xinjiang region in China are made with forced labor and, accordingly, are banned from importation under Section 307 of the Tariff Act of 1930. The new law will give importers who have goods detained at the border no more than 30 days to prove that they are not made with forced labor.

China’s official criticisms of the U.S. released

• China’s Ministry of Foreign Affairs published a document listing complaints about recent U.S. policies. Titled “Reality check: Falsehoods in U.S. perception of China,” the document is organized by 21 “falsehoods.” Its main criticism is of the Indo-Pacific Economic Framework (IPEF), in which Beijing states that, “IPEF actually pays little regard to the development level and real needs of the regional countries. It barely gives concessions to developing countries on tariff reduction and market access, but forces participating countries to accept the so-called high standards of the U.S. and its unilateral agenda. IPEF focuses solely on the U.S.’s self-interests and cares little about the needs of other parties. There is no such thing as mutual benefit in IPEF.”
  • In addition, the document says that the Bipartisan Innovation Act – the likely reconciled legislation of the House and Senate versions of the China-focused bills – “essentially aims to hold back China’s economic growth.”
  • Another remark was about ULFPA in which Beijing asserts that, “the U.S. has fabricated misinformation and disinformation concerning Xinjiang such as the existence of ’forced labor’ and, on the basis of those unfounded stories, has adopted [ULFPA],” calling it the “lie of the century.”

“Refined proposal” on outbound investment draft

• Senators Bob Casey (D-PA) and John Cornyn (R-TX) have a new modified proposal to screen outbound investments from the U.S. into the Chinese economy that is hoped to be included in a broader competitiveness package focused on China. The provision would force American investors and firms to disclose new investments in certain Chinese sectors, such as semiconductors, batteries, and pharmaceuticals and would dramatically expand U.S. government oversight of investments American companies make in foreign countries. The modifications from the original bill include leaving the designation of the oversight panel up to the president, rather than USTR, and extending jurisdiction of the bill so that all transaction of funding new facilities like factories, joint ventures that involve technological transfers, and capital investments in Chinese startups and technology firms must be reviewed.  

U.S. – Taiwan

New bill that would overhaul U.S. policy toward Taiwan

• Senate Foreign Relations Committee Chairman Sen. Bob Menendez (D-NJ) and Sen. Lindsey Graham (R-SC) have introduced the “Taiwan Policy Act of 2022,” a bill that would overhaul U.S. policy toward Taipei. Key provisions include measures designed to increase economic cooperation, support Taiwan’s inclusion in international organizations, and deter Chinese aggression against Taipei. The bill calls for USTR to “resume meetings under the United States and Taiwan Trade and Investment Framework Agreement with the goal of reaching a bilateral free trade agreement with Taiwan.”

Supply Chains

USDA announces partnership with the Port of Houston

• To increase service for shippers of U.S.-grown agricultural commodities, the Department of Agriculture (USDA) has announced a partnership with the Port of Houston. The partnership will include funding opportunities for companies and cooperatives to invest in more chassis and undercarriages to transport commodity containers from the shore to the water. Ag Secretary Tom Vilsack said, “As part of the Biden-Harris Administration’s creative approaches to improve port operation, we are collaborating with partners in the supply chain to adapt and overcome challenges facing agriculture.” The partnership is part of the Biden-Harris Administration’s Supply Chain Task Force efforts.
  • The Agricultural Marketing Service will cover 50% of the cost of obtaining and leasing chassis at the Port of Houston during the first year of its five-year lease of an additional 1,060 chassis.

Supply chain constraints primary source of inflation

• Supply constraints account for about half of the rise in U.S. inflation, with demand currently making up a third of the increase, according to new research from the Federal Reserve Bank of San Francisco. Adam Hale Shapiro, an economist at the San Francisco Fed, wrote that “because supply shocks raise prices and suppress economic activity, the prevalence of supply-related factors raises the risk of entering a period of low growth and elevated inflation levels.”  Inflationary pressures and rising prices in energy, food, manufactured goods, and other sectors were well entrenched in the U.S. economy prior to Russia’s invasion of Ukraine, which has further propelled rising inflation.

Department of Commerce rules fertilizer imports were dumped

• On Friday, the U.S. Department of Commerce (DOC) issued a final ruling that urea ammonium nitrate (UAN) fertilizer exported to the U.S. from Russia and Trinidad and Tobago were subsidized and sold at less than normal value in the U.S. market. The International Trade Commission (ITC) and DOC were petitioned by CF Industries Holdings Inc. to impose duties on UAN imports from the two countries.
  • However, this ruling does not place duties on nitrogen fertilizers from these countries, the final stage of this investigation is for the U.S. International Trade Commission (USITC) to determine its own final decision, and if USITC agrees, DOC will issue AD/CVD orders that will be in place for at least five years. The final determination is scheduled for July 18^th.

Indo- Pacific Economic Framework

U.S. and international business groups support IPEF potential

• Several U.S. business groups expressed their support for the potential of the U.S.-led Indo-Pacific Economic Framework (IPEF) emphasizing the opportunity through the framework to build deeper U.S. economic relations in the region.  In a joint statement, the groups said, “Done correctly, the IPEF presents a significant opportunity to forge more resilient global supply chains, high-standard digital rules of the road, and energy transition outcomes that will drive prosperity on both sides of the Pacific.” The groups continued, “Facilitating greater economic connectivity between the United States and the Indo-Pacific has never been more important.” The statement was signed by all the bilateral U.S. chambers of commerce representing the initial 12 IPEF countries.  The groups contended that “Commercial interests are inseparable from strategic interests in the Indo-Pacific, and the United States needs a forward-leaning economic approach in a region that is home to 60% of humanity and nearly two-thirds of the world’s economy.”

U.S. – EU

EU reducing pesticide usage despite tightening global food supplies

• The EU confirmed its target for 50% reduction in the use of pesticides by 2030 despite global concerns with food shortages resulting from Russia’s military incursion in Ukraine. The European Commission last week proposed to use legally binding targets to reach its plan, though stops short of an overall ban on pesticides rather focusing on organic products and other alternatives. The plan, the first action from the EU’s Sustainable Food System, a component in the Farm to Fork strategy, would prohibit using pesticides in public spaces and around facilities like schools and hospitals.
  • Many countries are facing elevated or record food prices as the war in Ukraine has disrupted trade, food insecurity. According to reports, the EU had delayed the pesticides directive, which was due in the first quarter. The measure requires approval from the European Parliament and member states before it comes into effect and could still be modified during this process.
  • “We will replace chemical pesticides with safe alternatives,” Health Commissioner Stella Kyriakides said. “Farmers will be fully supported with unprecedented EU funding possibilities to cover the cost of the transition.”

U.S. – UK

Portman & Coons introduce 5-year TPA bill to pursue UK FTA

• Last week, Sens. Rob Portman (R-OH) and Chris Coons (D-DE) introduced a bill to provide the president with Trade Promotion Authority (TPA) for a five-year period. Titled the “Securing Privileged Economic, Commercial, Investment, And Legal Rights to Ensure Longstanding Atlantic Trade and Investment Opportunities and Nurture Security, Happiness, Innovation, and Prosperity Act,” or the “SPECIAL RELATIONSHIP Act,” for short, the bill would provide limited authority for the President to pursue a UK trade pact. The Senators said in announcing the bill, “We need to get back into the business of expanding trading relationships around the world so we can export more American-made products and create jobs here at home.  Reaching a bilateral trade agreement with the United Kingdom will benefit U.S. workers and businesses and strengthen the economic and security ties between our two countries.”
• Senators Portman and Coons are co-founders and co-chairs of the Senate UK Trade Caucus and have long pushed for reinvigorating FTA talks with the UK.  Five rounds of bilateral negotiations were conducted under the prior administration.
  • Portman previously suggested that pursuing a limited TPA might resolve the impasse in Congress on the two versions of a China-focused competition bill. Portman has noted conferees are “at loggerheads” over the trade provisions in the two competition bills, in part, due to the House version calling for expansion and extension of Trade Adjustment Assistance (TAA), which is typically paired with TPA. He suggested including a “limited TPA” might deliver a “potential breakthrough” in the current impasse, if  “we can have this moment where we are saying ‘OK, we are willing to extend … existing Trade Adjustment Assistance but do it in a way where we have also trade enhancement with it, as we always have done.”

Override of NIP not to threaten U.S.-UK trade talks

• Boris Johnson’s proposal that would allow the U.K. to unilaterally rewrite parts of the Northern Ireland Proposal (NIP) would not harm trade relations with the U.S., according to White House spokesperson Karine Jean-Pierre. She was asked if this move would be an impediment for the U.S.-U.K. trade discussions for this week in Boston to which she responded, “No, I don’t believe it will be.” “We recognize there have been challenges over the implementation of the NIP,” she stated, adding that the U.S. urges the U.K. and the EU “to return to talks to resolve these differences.”
  • Renegotiating or eliminating the protocol has been controversial, including House Speaker Nancy Pelosi (D-CA) who previously warned that a U.S.-U.K. FTA would not happen if the U.K. went through with undermining the NIP.
  • The NIP is the legal instrument that governs trade in goods in relation to Northern Ireland post-Brexit. When Brexit occurred, it was seen as important to maintain the Good Friday Agreement which aims to avoid a ‘hard’ land border between Northern Ireland and the Republic of Ireland. As a result, Northern Ireland is part of the EU’s single market, creating border checks between the UK and Northern Ireland.

Ukraine

Ukraine asks U.S. to revoke several antidumping measures

• In a letter to Commerce Secretary Gina Raimondo, Ukraine’s minister of economy, Yuliia Svyrydenko, asked her to “consider ways to ease access to Ukrainian products on the U.S. market to the extent defined by the U.S. legislation.” Specifically, to revoke antidumping orders on several products and terminate a suspended antidumping investigation on exports of certain cut-to-length carbon steel plate.
  • The U.S. has imposed antidumping duty orders on Ukrainian silicomanganese; steel concrete reinforcing bars; hot-rolled steel products; carbon and allow steel wire rod; certain oil country tubular goods; prestressed concrete steel wire strand; and seamless carbon and allow steel standard, line, and pressure pipe.

Ukraine to receive temporary storage for grain

• Ukraine’s agriculture ministry said early last week that they will soon receive the first temporary storages, either special big plastic bags or temporary silos, from abroad. In a Reuters interview, the agriculture minister said “The ministry… has appealed to the governments of the U.S., Canada, UK, and the EU to provide Ukraine with temporary storage facilities. Preliminary results are: the first batch is already sailing to Ukraine.”
  • President Biden announced two weeks ago that the U.S. will build temporary silos on Poland’s border with Ukraine to facilitate the export of grain as part of his plan to address rising food prices occurring across the U.S.
  • Biden echoed Ukraine’s concerns about shipping grain through the Black Sea, as he stated that the grain would be “blown out of the water” by Russia’s naval blockade.

WTO

Host and timing of MC13?

• At the closing of MC12 two weeks ago in Geneva, Switzerland, both Cameroon and the United Arab Emirates expressed interest in hosting the next ministerial, or MC13. The timing of MC13 is already on the forefront of several WTO members and the DG Okonjo-Iweala.  One possibility is prior to December 31, 2023, as noted in the WTO’s statement on the outcomes of MC12, the Chair recalled that the Decision on the Work Programme on Electronic Commerce contains an understanding that MC13 should ordinarily be held by 31 December 2023.”
  • Brazil earlier floated a proposal for an annual ministerial to facilitate more effective functioning of the global trade institution.  The U.S. and EU responded favorably to the proposal when suggest. Regardless of MC13 timing, Director-General, Ngozi Okonjo-Iweala, made clear at the close of the 12th that she is ready. “Members have agreed to pick up right where we left off this morning, raising the possibility of an earlier MC13,” she said. “I promise to go back to work immediately. Get ready, tomorrow is another day post-MC12,” Okonjo-Iweala said.