TRADE UPDATE

Food & Agriculture
August 23, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

  • U.S. – Taiwan: The U.S. and Taiwan announced the first round of negotiations on a trade and investment agreement for early this fall, under the U.S.-Taiwan Initiative on 21st Century Trade. The trade talks stop short of a full-scale, traditional trade agreement, as tariff reduction is not part of the negotiating mandate.
  • USMCA: The U.S. and Mexico announced resolution to a fourth labor dispute case filed under USMCA’s rapid-response mechanism. The case involved alleged labor rights infringement at an auto-parts facility owned by Stellantis.
  • USMCA: While visiting farmers and leaders in Iowa, Ambassador Tai said conversations with Mexico regarding its inaction or denial of biotech traits are “very, very difficult.” Secretary Vilsack expressed he was “hopeful” to make headway with Mexico on the biotech issues based on recent conversations with Mexican officials that demonstrated both trade partners want to “get to a better place.”
  • Section 232 tariffs: The Commerce Department transmitted to the White House its section 232 report on imports of neodymium-iron-boron permanent magnets and their potential threat to U.S. national security. Commerce declined to comment on whether the agency determined that the magnet imports threaten national security. President Biden has 90 days to from receipt of the report to take any policy actions, including imposing tariffs or other measures, based on the findings in the report.
  • Biden Nominees: Senator Grassley said he’s supports Doug McKalip’s nomination as Chief Agricultural Negotiator at USTR, though he’s reviewing the nomination paperwork. The Senate Finance Committee vote on McKalip’s nomination is scheduled for September 7th.
  • WTO: The U.S. and Vietnam requested the WTO allow more time to resolve the dispute over U.S. antidumping measures imposed on fish fillets from Vietnam. In a joint submission, the U.S. and Vietnam indicated they “still remained engaged in discussions with respect to the resolution of this dispute.”

“We plan to pursue an ambitious schedule for achieving high-standard commitments and meaningful outcomes covering the eleven trade areas in the negotiating mandate that will help build a fairer, more prosperous and resilient 21st century economy.”

— Deputy USTR Sarah Bianchi commenting on talks under the U.S.-Taiwan Initiative on 21st-Century Trade

USMCA

Another auto-parts facility labor complaint resolved

  • The U.S. and Mexico announced resolution to a USMCA labor dispute filed under the rapid-response mechanism, now ensuring labor rights at an auto-parts facility owned by Stellantis. This is the fourth case to be resolved under the rapid-response mechanism. The actions for the resolution include the facility providing the independent union with worker representation, a designated office space, payment of union dues, reinstating 36 workers, and issuing a neutrality statement. Of the resolution, U.S. Secretary of Labor Marty Walsh said, “The labor and trade policies of the Biden-Harris administration continue to make workers’ interests a priority, and the outcome at the Teksid auto parts plant shows the benefits of these policies.”

Mexico biotech discussions very difficult, some hope

Secretary Tom Vilsack, U.S. Department of Agriculture
Secretary Tom Vilsack, U.S. Department of Agriculture
  • Visiting local leaders and farmers in Iowa last week, USTR Katherine Tai and USDA Secretary Tom Vilsack addressed agriculture stakeholders concerned with Mexico’s ongoing denial of biotech traits and other impediments to U.S. exports utilizing advanced agriculture innovations.  Tai and Vilsack confirmed they have raised the issue multiple times with their Mexican counterparts, with Vilsack estimating he has discussed it with Mexican Agriculture Secretary Victor Villalobos nearly a dozen times.  Ambassador Tai described the conversations as “very, very difficult.” Secretary Vilsack expressed he was “hopeful” to make headway based on the most recent conversations demonstrating that both trade partners want to “get to a better place.” 
    • Vilsack added that Mexican President Lopez Obrador’s biotech policy derives from a cultural and political perspective. “For him it’s about Mexican pride, it’s about Mexican heritage, it’s about protecting something that is unique to them, that is that they believe is part of their identity. So, I get that,” Vilsack said. “But I pointed out to the to the president that that he’s also deeply concerned about people in his country – particularly those who are living on fixed incomes or small incomes – and that if he doesn’t see the value of our yellow corn coming into the country, and the biotech yellow corn coming into the country, to feed livestock, he’s going to have higher food prices,” the Agriculture Secretary added.
    • Vilsack said he warned López Obrador about higher food prices that would result in Mexico. “That made an impression on him, because I don’t think he had thought about that.”
    • Vilsack said. “I’m hopeful that those conversations end up in sending a strong message – stronger message – to our corn growers here in Iowa and across the Midwest that indeed that is a market that … is going to remain open.”  

U.S. – Taiwan

Negotiating mandate for Initiative on 21st-Century Trade released

  • The U.S and Taiwan announced terms for negotiating a series of bilateral trade arrangements.  The first round of negotiations to be held “early this fall,” according to USTR, the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office (TECRO) in the U.S. jointly released the negotiating mandate last week. Deputy USTR Sarah Bianchi said in a statement, “Today, we begin negotiations with Taiwan under the auspices of AIT and TECRO that will deepen our trade and investment relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth for our workers and businesses.”
    • The trade areas to be discussed are trade facilitation, good regulatory practices, anticorruption, SMEs, agriculture, standards, digital trade, labor, environment, state-owned enterprises, and non-market policies and practices.
    • The U.S. – Taiwan Initiative on 21st-Century Trade is viewed by many as an alternative approach by the Biden administration to deepening trade ties with the island nation in lieu of negotiations on a comprehensive bilateral free trade agreement or Taiwan’s participation in the Indo-Pacific Economic Framework.

Trade Missions

Trade Mission to Central America conducted

  • Department of Commerce Under Secretary for International Trade, Marisa Lago, led a trade mission of 32 companies to Central America to promote U.S. exports in the region and strengthen bilateral commercial relations. The six Central American markets were Belize, Costa Rica, El Salvador, Guatemala, Honduras, and Panama. “Central America is home to crucial export markets that offer immense opportunities for U.S. businesses and workers across industries,” said Under Secretary Lago.

USTR Actions

Tai visits Iowa and addresses FTAs, Mexico’s GM corn ban, and fertilizer tariffs

  • Last Thursday, USTR Tai spoke with Iowa farmers during a roundtable discussion on priorities for the U.S. agriculture industry regarding trade. The ambassador was accompanied by USDA Secretary Tom Vilsack and Rep. Cindy Axne (D-IA). The farmers’ requests for market-access included the UK, India, the Indo-Pacific, and countries in Africa. As a response, Tai said “every market that was mentioned on the wish list … I’ve got teams that are working there.” Tai and Vilsack reminded farmers of past examples that have liberalized agricultural trade, including allowing U.S. potatoes into Mexico, pork into India, and beef into Japan. Further, she mentioned that the IPEF trade pillar will include a component focused on aligning  sanitary and phytosanitary issues and installing science-based regulatory approaches, which she argued would open the Indo-Pacific markets.
  • As noted earlier Ambassador said the discussions with Mexico on biotech and the GM corn ban were “very, very difficult” and that USTR has raised the U.S. concerns frequently with Mexican officials.
  • Another item requested by farmers is to reduce the high cost of inputs, most notably fertilizer. The farmers were echoed by Sen. Joni Ernst (IA-R) who said in a statement that Tai and Vilsack should “take a message back to the president for me: it’s past time we eliminate fertilizer tariffs.” Tai agrees that short-term needs must be considered while addressing long-term goals, such as expanding domestic fertilizer production.

U.S. – China

Wang Wenbin , Spokesperson for the Chinese Foreign Ministry
Wang Wenbin , Spokesperson for the Chinese Foreign Ministry

China responds to U.S.-Taiwan trade announcement

  • During a press conference last Thursday following the announcement of the beginning of negotiations between the U.S. and Taiwan on the Initiative on 21st-Century Trade, Chinese Foreign Ministry spokesman Wang Wenbin responded to the situation by stating that, “China is always against any country negotiating agreements of sovereign implication or official nature with China’s Taiwan region.” In addition, the spokesman specifically singled out the U.S. by saying that, “The U.S. must not negotiate agreements with sovereign implication or official nature with China’s Taiwan region or send any wrong signal to the ‘Taiwan independence’ separatist forces in the name of trade and economic interactions. China will act resolutely to defend its sovereignty and territorial integrity. We urge the U.S. not to miscalculate on this.” 

Section 232 Tariffs

Commerce Department sends magnets report to President Biden

  • The Commerce Department transmitted its section 232 investigative report on imports of neodymium-iron-boron permanent magnets and their potential threat U.S. national security.  Commerce has declined to comment on findings or whether the agency determined that the imports under investigation threaten national security. President has 90 days  from receipt of the report to take any policy actions, including imposing tariffs or other measures, based on findings in the report.
    • The Commerce Department launched the Section 232 investigation of the Trade Expansion Act of 1962 into certain magnets last September as part of the Biden Administration’s 100-day supply chain review. Under Section 232, Commerce’s Bureau of Industry and Security (BIS) examines whether certain imports pose a risk to national security and whether the U.S. should impose tariffs or other import restrictions on the imports, in this case neodymium magnets to safeguard national security.  

Section 301 Tariffs

White House decision on China tariffs delayed as China-Taiwan tensions escalate

  • The Biden administration has paused any action on revamping the China tariff policy as tensions with the country have escalated in recent weeks, including China’s recent war game near Taiwan and House Speaker Nancy Pelosi’s visit to Taiwan. “The president had not made a decision before events in the Taiwan Strait and has still not made a decision, period. Nothing has been shelved or put on hold, and all options remain on the table,” said White House spokesperson Saloni Sharma. “The only person who will make the decision is the president – and he will do so based on what is in our interests.”
    • For the past several months the Biden administration has wrestled with a China reformulated tariff strategy as stakeholders await the results of USTR’s statutory 4-year review of the Section 301 tariffs. An announcement of the continuation or removal of List 1 tariffs was expected around July 5, ahead of the four-year anniversary of the tariffs, but to date USTR has still made no formal announcement and the tariffs remain in effect. Several domestic producers and other groups have argued for continuation of the tariffs. A second comment solicitation on the List 2, 3, and 4A tariffs remains open until Aug. 22, and another comment opportunity is expected to open sometime after that date for public comment on the case for removing the tariffs.
    • As a refresher, USTR announced its long-awaited review of the Section 301 tariffs on List 1 and 2 goods from China, which are currently scheduled to expire July 6 and Aug. 23, respectively. Requests to continue these tariffs may be submitted by representatives of domestic industries that benefit from them (1) between May 7 and July 5 for List 1 goods and (2) between June 24 and Aug. 22 for List 2 goods. 

Indo- Pacific Economic Framework

Biden official to discuss IPEF in India

Wally Adeyemo, Deputy Treasury Secretary
  • The Treasury Department reported that Deputy Treasury Secretary Wally Adeyemo will visit India this week to discuss a range of issues including the IPEF.  Adeyemo will hold meetings in Mumbai and New Delhi that include Prime Minister Narendra Modi’s office, the finance ministry, the Reserve Bank of India, and the Ministry of Petroleum and Natural Gas during a 3-day visit. “Throughout his trip, Deputy Secretary Adeyemo will reaffirm and strengthen the U.S.-India relationship and our shared commitment to a secure and prosperous Indo-Pacific, including by underscoring our two countries’ deep economic, security, and cultural ties,” Treasury reported. 
    • Adeyemo intends to “focus on the strong U.S.-India bilateral economic relationship, highlight the extensive investment and trade flows between our two countries, and discuss ways to deepen them, including through building more resilient supply chains with trusted partners like India, as well as through initiatives like the Indo-Pacific Economic Framework that India joined as a founding member in May,” the statement emphasized.
    • India’s participation in the framework is one of the major question marks heading into a September ministerial at which the founding members are expected to declare which of the four IPEF pillars they will join. Some stakeholders contend that India may not opt in for the trade pillar, but is more interested, at least initially, in the supply chain, infrastructure and clean energy, and tax and anticorruption pillars, all led by the Commerce Department.

IPEC may facilitate expanded ASEAN membership

  • US-ASEAN Business Council President and CEO Ted Osius recommended that outcomes from the expected IPEF ministerial next month should create pathways for how participants in each pillar can meet the envisioned high standards and that eventually could lead other less-developed countries to join. Osius expressed optimism that the seven participating ASEAN nations could subscribe to each of IPEF’s four pillars if those pathways are clearly defined.
  • “I think there’s potential for the ASEAN nations to join all four pillars,” he said. “I hope that will be the case because I think there are opportunities for greater tradeoffs, a greater set of appealing incentives if they’re part of all four pillars. But that only happens if there are clear pathways defined for each of the pillars, including in what ways member economies can be supported if they’re going to participate in a particular pillar. Some ASEAN nations are less developed than others and they’re going to need either more time or a pathway to be able to reach the high standards that I hope will be features of IPEF,” Osius said.

In-person ministerial planned for September

  • Several recent reports suggest IPEF formal talks may kick-off in early September in Los Angeles, though the Office of USTR and Department of Commerce have not confirmed. For many months, USTR Katherine Tai and Commerce Secretary Gina Raimondo, along with other senior Biden administration officials have conducted a plethora of scoping meetings with officials in the IPEF partner countries.
    • A recent meeting between Katherine Tai and an Australian official illustrates the nature of such talks.  According to a readout from USTR on the meeting, “They welcomed the ongoing positive and constructive work to develop the Indo-Pacific Economic Framework for Prosperity.” Ms. Tai “reaffirmed the United States’ goal to pursue a high-standard framework that advances resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness.”
    • At the anticipated IPEF ministerial, participants likely will issue ministerial statements outlining which issues each of the four IPEF pillars will cover, as well as which of the 14 parties will take part in which pillars. A country can take part in any or all of the pillars but must take on all the commitments of each one it joins. The four pillars cover trade, supply chain resiliency, decarbonization and clean infrastructure, and tax and anticorruption.

New IPEF negotiator at USTR

  • According to reports, Sarah Ellerman will become acting AUSTR for Southeast Asia and the Pacific, taking over the chief IPEF negotiator role. Ellerman will take over the role from Dawn Shackleford who departed USTR for the Commerce Department as executive director for trade agreements, policy and negotiations, beginning at the end of the month. Shackleford was the lead USTR negotiator for talks on the proposed Indo-Pacific Economic Framework agreement and joined the USTR in 2004.  Ellerman was deputy to Shackleford and is expected to transition smoothly into the role.

Supply Chains

Cargo demand abating in second half

  • U.S.  ports are predicted to see slowing inbound cargo volumes in the second of half  of the year as inflation pressures and rising interest rates tamper import demand. As a harbinger of U.S. port activities, container trade at west coast ports has eased in July. Loaded inbound containers arriving at Port of Oakland declined to 69,463 20-foot equivalent units, or TEUs. This level is 27% lower than both the prior month and same month a year earlier, and the lowest activity for July for imports since 2009. At Long Beach, the country’s busiest location after Los Angeles, inbound shipments fell to 376,175 TEUs — the smallest amount this year and the lowest July volumes since 2019. 

Trade & Economic Trends

  • U.S. agriculture exports reached above  the 10 percent share of total U.S. good exports, propelled by record U.S. agriculture exports the past two years.  During the past decade, agriculture’s share of U.S. goods exports has hovered consistently around 8-9 percent while the value of non-agriculture exports surged unevenly to a record level in 2021.

Biden Nominees

Grassley states support for McKalip

  • Recently Senator Grassley, a Finance Committee member, told reporters that he’s inclined to support Doug McKalip’s nomination for the role of Chief Agricultural Negotiator at USTR.  Grassley added that his final decision is pending review of McKalip’s submitted materials to the Committee following his nomination hearing last month.
    • The Senate Finance Committee vote on the nomination of Doug McKalip is scheduled for September 7th  at  10:00 am, according to the Committee’s website.  Mr. McKalip’s nomination hearing was held on July 8th. A majority of the confirmation hearing was spent with McKalip contending that he would be able to increase market access for U.S. farm goods without negotiating new free trade agreements. Several  Republican Senators in particular were critical of the Biden administration’s trade policy which purposefully declines new free trade agreement negotiations and omission of market access ambitions in the Indo-Pacific Economic Framework.

WTO

U.S. and Vietnam seek more time for negotiation on fish fillet dispute

  • The U.S. and Vietnam requested the WTO allow more time to resolve the dispute over U.S. antidumping measures imposed on fish fillets from Vietnam. The WTO’s dispute settlement panel (DSB) confirmed the request to delay, issuing the final panel report until November 18th.  In a joint submission to the  panel, the U.S. and Vietnam indicated they “still remained engaged in discussions with respect to the resolution of this dispute.”
    • In 2018, Vietnam filed a complaint with the WTO against antidumping duties on its fish fillets, contending the duties were inconsistent with WTO rules. The panel originally expected to issue its final report in late 2019. But in February 2020, the panel chair told the DSB that the final report would be late because of the dispute’s complexity. The final report was issued to the parties in February 2020 but public circulation was delayed due to the COVID pandemic.