TRADE UPDATE

Food & Agriculture
June 30, 2023

By Michael Anderson, Anderson Global Trade, LLC

HIGHLIGHTS

• USMCA: USDA Secretary Tom Vilsack confirmed USMCA consultations have commenced regarding Mexico’s biotech policies and GM corn ban, characterizing Mexico’s recent imposition of a 50% tariff on GM white corn imports as an “inappropriate action,” ostensibly precluding U.S. white corn from being exported to Mexico.
• U.S. – China: Several reports suggest Treasury Secretary Janet Yellen intends to visit Beijing in early July for the first high-level economic talks with her new Chinese counterpart, Vice Premier He Lifeng. Though not officially announced, Yellen’s trip would follow on the heels of Secretary of State Anthony Blinken’s highly publicized visit with Chinese Premier Xi Jinping this month.
• EU: The EU’s Deforestation-Free Regulation (EUDR) entered into force, targeting supply chains for livestock and agricultural commodities to mitigate deforestation. The EUDR places compliance requirements on companies sourcing certain agricultural products that are associated with deforestation and farmland expansion.
• Trade Policy: During a webinar on the state of trade in the U.S., former Senator Rob Portman (R-OH) argued that Congress should use its powers to pass trade promotion authority (TPA) legislation, according to Inside U.S. Trade. TPA expired in June 2021, and the Biden Administration has yet to try to renew it.
• Food Security: USDA’s latest Food Price Outlook for 2023 projects that food prices “are expected to grow more slowly in 2023 than in 2022 but still at above historical-average rates.” The new report forecasts the cost to eat at home to be 5.9% higher in 2023 than in 2022.
• WTO: On June 27, China formally accepted the World Trade Organization (WTO) Agreement on Fisheries Subsidies. This development is significant because of China’s status as the world’s largest fisheries and aquaculture producer. The action follows the recent contributions by the governments of the Netherlands, France, and Australia in recent weeks—€ 1 million, €1 million, and AU$ 2 million, respectively—to assist the fisheries funding mechanism.

Note: This Trade Update was published early due to the July 4 holiday. Have a safe and wonderful Independence Day! 

“China sees us as being engaged in decoupling. The argument that I made to our counterparts is that if you actually look at what’s happening and what’s happened, the facts belie that assertion. Our trade with China last year reached the highest level ever. We had more foreign direct investment going to China last year than in any year since 2014.”

–Secretary Antony Blinken, comments at a Council on Foreign Relations event

USMCA

Vilsack, Mexico’s 50% white corn tariff “inappropriate”

• Speaking to reporters last week, Secretary of Agriculture Tom Vilsack said Mexico’s recent imposition of a 50% tariff on GMO white corn was further evidence of why the U.S. is pursuing USMCA dispute settlement consultation with Mexico. Referring to the request for USMCA consultations with Mexico, Vilsack stated, “The process was started by the U.S. Trade Representative’s office to request a consultation. Consultations have taken place and we’re just going through the process to try to [correct] what we believe is inappropriate action on the part of the Mexican government, which restricts, and in fact eliminates, the ability to import white corn into the country of Mexico. While we think it’s inconsistent with the trade agreement, it’s inconsistent with the science-based and rules-based trading system. That’s the reason why we are pursuing our remedies under the USMCA.” Vilsack added that the vast majority of U.S. corn exports to Mexico are yellow corn and not impacted by the tariff announcement.
• Recall that Mexico recently increased tariffs on white corn imports to 50 percent to boost domestic production. The tariff 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.
  • CRA’s position is that the tariffs will not apply to Mexico’s partners in USMCA or other nations that have FTAs with Mexico. It would be in violation of USMCA if it were applied to the U.S. and Canada. This would have potentially compounded 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.

U.S. – China

Yellen to Visit China in July

• Several reports suggest Treasury Secretary Janet Yellen intends to visit Beijing in early July for the first high-level economic talks with her new Chinese counterpart, Vice Premier He Lifeng. Though not officially announced, Yellen’s trip would follow on the heels of Secretary of State Anthony Blinken’s highly publicized visit with Chinese Premier Xi Jinping this month. Officials in China and the U.S. characterized Blinken’s visit as productive and said the two sides had candid conversations on a range of issues. To date, it is unclear what topics Yellen and Lifeng may discuss, including whether trade tensions will be on the agenda.

EU

EU moving towards relaxed GMO restrictions

• The European Union (EU) is moving towards relaxing some restrictions on GMOs, according to a leaked proposal from the European Commission. The proposal is expected to be officially announced on July 5, according to Euractiv. The leaked draft, obtained by food and farming platform ARC2020, states, “The authorisation procedure and risk assessment requirements of the current GMO legislation are not adapted to the variety of potential plant products that can be obtained by targeted mutagenesis and cisgenesis, and as a result are disproportionate or inadequate in certain cases.” The leaked draft further cites the potential for GMOs and new genomic techniques (NGTs) to be more sustainable and help with food security.
  • Opponents have already come out against the leaked draft. Greenpeace views the proposal as coming from an “unscientific fantasy world where corporations’ unproven claims of benefits are taken for granted and risks don’t exist.” Certain parties within the European Parliament, such as the European Greens, will also be against the proposal.
  • However, many EU officials and member states are in support of the change. One EU official stated, “This can have positive global consequences,” and that “Other countries, especially in areas where food security issues are more acute, are watching what we do. This can be important for them to deal with climate change,” according to the Financial Times.

EU Deforestation regulation to impact agriculture supply chains

• The European Union’s Deforestation-Free Regulation (EUDR) entered into force last week and targets supply chains for livestock and agricultural commodities to mitigate deforestation. The EUDR puts forth compliance requirements for companies sourcing certain agricultural products that are associated with deforestation and farmland expansion. Under the EUDR “any operator or trader who places these commodities on the EU market, or exports from it, must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation.” The rules stipulate that commodities shouldn’t be produced on land subject to deforestation or forest degradation after Dec. 31, 2020.
  • Products and crops affected by the rules, and which account for most EU-driven deforestation, include palm oil (34%), soy (32.8 %), wood (8.6%), cocoa (7.5 %) and coffee (7%), cattle (5%) and rubber (3.4%). The regulation also covers products derived from these commodities, such as leather, chocolate, furniture, charcoal and printed paper, according to the European Commission.
• Operators and traders will have 18 months from the effective date to implement the new rules, with “micro and small enterprises” granted a “longer adaptation period.” The European Commission noted the EUDR aims to:
  • avoid that the listed products Europeans buy, use and consume contribute to deforestation and forest degradation in the EU and globally
  • reduce carbon emissions caused by EU consumption and production of the relevant commodities by at least 32 million metric tones a year
  • address all deforestation driven by agricultural expansion to produce the commodities in the scope of the regulation, as well as forest degradation

Trade Policy

Former Senator Rob Portman argues Congress should pass TPA legislation

• During a webinar on the state of trade in the U.S., former Senator Rob Portman (R-OH) argued that Congress should use its powers to pass trade promotion authority (TPA) legislation, according to Inside U.S. Trade. TPA expired in June of 2021 and the Biden Administration has yet to try to renew it. The Trump Administration had attempted to make FTAs with both Kenya and the U.K. which the Biden Administration has not made an effort to complete.
  • Portman stated, “Congress should sort of grab the bull by the horns here and move forward if the administration refuses to, before it’s too late.” He further said that “Traditionally the administration would propose extending Trade Promotion Authority,” but argued in favor of Congress doing so on its own.

Food Security

USDA lowers food inflation forecast for this year

• The USDA has recently updated its Food Price Outlook for 2023. The updated outlook finds that food prices “are expected to grow more slowly in 2023 than in 2022 but still at above historical-average rates.” The new forecast predicts the cost to eat at home to be 5.9% higher in 2023 than 2022, lower than last month’s forecast of a 6.3% increase, according to Agri-Pulse.
  • Recall that earlier this month updated data from the Bureau of Labor Statistics showed overall inflation eased for the 11th straight month. The Consumer Price Index (CPI) rose only 0.1% in May, lower than the 0.4% increase in April. The food price index increased slightly by 0.2% in May, with grocery food prices increasing by 0.1%.

Trade Trends

May goods trade deficit shrinks on declining import demand

• The U.S. trade deficit in goods decreased $6.0 billion in May, propelled by decreasing imports. The international goods trade deficit registered at $91.1 billion in May compared with $97.1 billion in April, a 6.1% decline. Exports of goods for May were $162.8 billion, $1.0 billion less than April exports. Imports of goods for May were $254.0 billion, $6.9 billion less than April imports.

WTO

China accepts WTO fisheries subsidy agreement

• On June 27, China formally accepted the World Trade Organization (WTO) Agreement on Fisheries Subsidies. WTO Director-General Ngozi Okonjo-Iweala received the formal acceptance from Chinese Commerce Minister Wang Wentao. This is a significant development due to China’s status as the world’s largest fisheries and aquaculture producer.
• DG Okonjo-Iweala stated, “I am delighted to welcome China’s formal acceptance of the Agreement on Fisheries Subsidies. As the world leader in marine fish catch, China’s support for the implementation of this agreement is critical to multilateral efforts to safeguard oceans, food security, and livelihoods. By curbing harmful fishing subsidies worldwide, we can together forge a path towards a legacy of abundance and opportunity for generations to come.”
• Minister Wang added, “The Agreement on Fisheries Subsidies is the second multilateral agreement reached by the WTO since its establishment in 1995, and the first WTO agreement aimed at achieving the goal of environmental sustainable development. It is a significant agreement to boost the confidence of all members in multilateralism. China has completed the approval procedure of the agreement and will work with all members to push the agreement to enter into force before the 13th WTO Ministerial Conference. At the same time, China will participate in the second phase of negotiations in a positive and constructive manner and look forward to an early outcome of the negotiations.”
  •  Okonjo-Iweala has previously stated, “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 governments of the Netherlands, France, and Australia in recent weeks, €1 million, €1 million, and AU$ 2 million, respectively to assist the fisheries funding mechanism.