TRADE UPDATE

Food & Agriculture
September 27, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

  • IPEF: The Office of the USTR released its negotiating objectives for the Indo-Pacific Economic Framework’s trade pillar. Key items in IPEF focus on improvements in labor and environmental standards, open markets, and eased supply-chain backlogs across borders. The trade pillar, in particular, will focus on resilience, inclusion, and sustainability.
  • USMCA: Senator Ron Wyden (D-OR) called on USTR Katherine Tai to ensure the U.S. takes full advantage of a USMCA provision to hold Canada and Mexico to their commitments on curbing emissions and fighting climate change in the Kigali Amendment to the Montreal Protocol. Senator Wyden’s comments followed a Senate vote last week to consent to ratifying the Kigali Amendment.
  • Biden Nominees: The nomination hearing for Alexis Taylor, President Biden’s nominee for Under Secretary for Trade and Foreign Agricultural Affairs, U.S. Department of Agriculture concluded last week with multiple Senate Agriculture Committee members expressing support for her confirmation.
  • Biden Nominees: In contrast, Senator Bob Menendez (D-NJ) has placed a hold on the nomination of Doug McKalip to serve as chief agricultural negotiator at the Office of USTR. Senator Menendez’ opposition centers around broader concerns with “oversight” and “transparency” at the Office of USTR, rather than Mr. McKalip’s qualifications to serve as the chief agricultural negotiator.
  • U.S. – UK: UK Prime Minister Liz Truss said she does not anticipate bilateral free trade agreement negotiations with the U.S. in the short to medium term. Truss said the UK trade agreement priorities are focused on Asia, namely an FTA with India, joining CPTPP, and joining the Gulf Cooperation Council.
  • Section 232: President Biden will not impose national security tariffs on imports of neodymium magnets, commensurate with the Department of Commerce’s section 232 investigation recommendations. While the Commerce Department found a U.S. over-reliance on imports of neodymium magnets, it did not recommend tariffs but rather U.S. government policies to incentivize domestic production.
  • WTO: U.S. Trade Representative Katherine Tai convened a small ministerial alongside representatives from Argentina, Brazil, Cambodia, India, Indonesia, and South Africa to discuss reforms to trade dispute settlements on the sidelines of the G20 gathering last week in Bali, Indonesia. Ambassador Tai emphasized the need more efficient and cost-effective procedures for dispute resolution, according to a statement.

“Ensuring market access abroad for our farmers and ranchers while keeping other countries honest as they supply our markets is critical for U.S. agriculture and the U.S. economy.”

— Senator John Boozman, comment during Senate Agriculture, Nutrition and Forestry Committee confirmation hearing

Indo- Pacific Economic Framework

USTR releases negotiating objectives for IPEF Trade Pillar

  • The Office of the U.S. Trade Representative on September 23 released its negotiating objectives for the Indo-Pacific Economic Framework trade pillar. The USTR negotiating objectives center around the trade pillar, with the U.S. Department of Commerce taking the lead on negotiations for the other three pillars. Key items in the IPEF pertain to improvements in labor and environmental standards, open markets, and eased supply-chain backlogs across borders. The trade pillar, in particular, will focus on resilience, inclusion, and sustainability.
  • U.S. negotiations will cover “labor; environment; digital economy; trade facilitation; agriculture; competition policy; transparency and good regulatory practices; inclusivity; and technical assistance and economic cooperation,” the USTR document outlines.
    • First, the document highlights the importance of supply chain resilience underscored by good regulatory practices, enhanced transparency, and commitments on competition policy. Further, the Biden-Harris Administration reaffirms its high-standards for labor rights commitments to make trade policy more inclusive with secure avenues for e-commerce. Lastly, the document outlines a focus on sustainability to pursue commitments on agriculture systems for secure access to food and support to farmers.
  • Thirteen of the IPEF countries signed the framework’s trade pillar with the only abstention coming on behalf of India. Signatories, therefore, include Australia, Brunei Darussalam, Fiji, Japan, Indonesia, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Viet Nam, and the United States.

USMCA

USMCA tool for enforcing international climate change treaty

  • Senator Ron Wyden (D-OR) is urging USTR to utilize USMCA to advance climate change enforcement under the 2016 Kigali amendment to the Montreal Protocol to address greenhouse gas emission.  “I’m looking forward to working with [U.S. Trade Representative Katherine] Tai to ensure the U.S. takes full advantage of this powerful tool and holds Canada and Mexico to their commitments on curbing emissions and fighting climate change,” Wyden said in a statement following a Senate vote to consent to ratifying the Kigali Amendment to the Montreal Protocol.
    • The U.S. is poised to join 137 other countries — including Canada and Mexico — in ratifying the international agreement to curb greenhouse gasses. Wyden said the Biden administration must hold its North American neighbors accountable for their obligations under the treaty, using provisions outlined in USMCA.  Wyden noted that Senate and House Democrats had previously secured inclusion of the treaty in USMCA. Because of their “hard work and forethought,” he said, commitments under the Kigali Amendment are now “automatically enforceable” under the trade deal.
    • Under USCMA, each of the three countries must adopt, implement, and maintain several multilateral environmental agreements, including the Montreal Protocol “as adjusted and amended,” based on the USMCA’s chapter on the environment.

U.S. – UK

Liz Truss, UK Prime Minister

Prime Minister Truss reveals obstacles to U.S.-UK FTA negotiations

  • In a recent visit to the U.S., UK Prime Minister Liz Truss revealed that she does not anticipate negotiations with the U.S. regarding a new trade deal in the short to medium term. “There aren’t currently any negotiations taking place with the US and I don’t have an expectation that those are going to start in the short to medium term,” the Prime Minister affirmed.
    • Ms. Truss’ comment reportedly reflects the viewpoint of former Prime Minister Boris Johnson and his Trade Secretaries—Liz Truss and subsequently Anne-Marie Trevelyan—who acknowledged President Biden’s commitment to a worker-centric trade policy and new trade policy approach that eschews traditional free trade agreements.
    • In response to reports regarding the import of U.S. products that do not meet UK standards, the Prime Minister held that “We will not be negotiating that away as part of a trade deal.” Instead, the UK is seeking an agreement that will facilitate easier manufacturing and sales of cars to the U.S., Ms. Truss revealed.
  • Minister Truss, a former foreign and trade secretary, said her priority with international allies was to “collectively deal with Russian aggression.” Her focus for trade deals had moved eastwards, she said, citing her desire for a trade deal with India. Her predecessor, Boris Johnson, pledged in June to secure one by the end of the year. Ms. Truss also is pursuing a deal with the Gulf Cooperation Council (GCC), made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The third target is to achieve UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) grouping of nations that includes Australia, Canada and Japan and is one of the world’s biggest trading blocs. “Those are our trade priorities,” she said.

77th UN General Assembly Conference

Biden announces new initiative to address food insecurity

  • President Joe Biden, at the 77th session of the United Nations General Assembly on Wednesday, shared his remarks on key issues related to growing food insecurity, extreme weather events, COVID-19, and the war in Ukraine. The president began by condemning Russia’s instigation of the war in Ukraine, stating that the country demonstrated a clear violation of the UN charter and calling for efforts to support democracy and democratic institutions. He also emphasized the detriment of the conflict in the face of growing food insecurity and price increases in food and fertilizer products.
    • “Russia, in the meantime, is pumping out lies, trying to pin the blame for the crisis — the food crisis — onto sanctions imposed by many in the world for the aggression against Ukraine,” the president stated.
  • Further, President Biden announced an initiative fund $2.9 billion in U.S. support to address the food security crisis for this year. Along this line, the president called for member countries to refrain from implementing food export bans to address the growing concerns about food supply.
    • The largest portion of these funds—$2 billion—will be allocated to the U.S. Agency for International Development, while an additional $140 million will fund the agency’s Feed the Future initiative to “accelerate last-mile delivery of agricultural tools, technologies, and production methods that will help smallholder farmers to boost their productivity, efficiency, and incomes.”

Food Security

Blinken co-hosts food security summit

  • Secretary of State Antony Blinken co-hosted a Food Security Summit alongside the UN General Assembly meeting. The summit follows a previous meeting at the UN Security Council in May which addressed the link between food insecurity and conflict. The U.S. also chaired a Food Security Ministerial at the UN to launch the Roadmap for Global Food Security: A Call to Action, an initiative that seeks to keep global agricultural markets open for investment in climate-resilient agriculture and fertilizer production.
    • At the summit, Secretary Blinken called for emergency aid to countries suffering from food insecurity and pushed to extend the deal between the UN and Turkey which has allowed for grain and agricultural exports from Black Sea ports. The secretary also emphasized the need to strengthen global food systems. “We need durable agricultural production.  We have to respond to the emergency, but we also have to set ourselves up for the long term.”

UN warns of food shortages in face of fertilizer crisis

  • Secretary-General António Guterres, in his address to the UN General Assembly on Tuesday, emphasized his growing concern about the fertilizer crisis. While there are no sanctions currently imposed on fertilizer exports from Russia, Guterres held that the UN will work to prevent Western sanctions that have an indirect impact on the exchange of fertilizers. Mr. Guterres also expressed his concern with regards to the impact of high fuel prices on the production of nitrogen fertilizers, holding that the fertilizer shortage could ultimately lead to a global food crisis.
    • “This year, the world has enough food; the problem is distribution. But if the fertilizer market is not stabilized, next year’s problem might be food supply itself,” Guterres revealed in his statement to the assembly.

USDA raises food prices estimates

  • August food prices at supermarkets are expected to increase 10.5% to 11.5% this year, according to USDA’s most recent forecast. The latest price projection is a half-percent higher than USDA’s estimate in August, confirming continued increases in food costs. In the forecast, USDA expects higher costs for eggs, fats and oils, cereals and bakery products, and non-alcoholic beverages. The agency lowered its price estimates for beef and poultry products by a half percent. Other highlights of the USDA forecast include:
    • In 2022, food price increases are expected to be above the increases in 2020 and 2021. In 2022, all food prices are predicted to increase between 9.0 and 10.0 percent, food-at-home prices are predicted to increase between 10.5 and 11.5 percent, and food-away-from-home prices are predicted to increase between 6.5 and 7.5 percent. Food prices are expected to grow more slowly in 2023 than in 2022, but still above historical average rates. 
    • In 2023, all food prices are predicted to increase between 2.5 and 3.5 percent, food-at-home prices are predicted to increase between 2.0 and 3.0 percent, and food-away-from-home prices are predicted to increase between 3.0 and 4.0 percent.

U.S. – Paraguay

U.S. hosts first meeting for Trade and Investment Council

  • The U.S. and Paraguay convened the first meeting for the Trade and Investment Council. The council was commissioned under the 2021 U.S.-Paraguay Trade and Investment Framework Agreement (TIFA) with delegations led by Assistant USTR for the Western Hemisphere Daniel Watson and Vice Minister for Economic Relations and Integration Ambassador Enrique Franco, addressing issues, such as high labor standards, sustainability, good governance, inclusivity, and equity.
    • In the context of trade, delegates discussed the need for full implementation of the WTO Trade Facilitation Agreement. The leaders also paid particular attention to the Trade-Facilitating Agricultural Systems and Technology (T-FAST) program and its focus to modernize Paraguay’s trade facilitation processes.
    • In discussing next steps for engagement on agriculture, both leaders expressed priorities in promoting sustainable agriculture, ensuring food security, and supporting science-based agricultural policies, including biotechnology.
    • The Paraguayan delegation underlined the country’s efforts to comply with U.S. requirements to authorize raw beef imports from Paraguay by 2023. “The delegation of Paraguay stressed that all the necessary measures have been adopted to comply with the standards required by the United States Department of Agriculture to gain access to the United States market as soon as possible,” a Paraguayan statement said, according to an informal translation. The leaders plan to host the next TIFA Council meeting in Asunción, Paraguay in 2023.

Supply Chains

U.S. container shipping volumes shift to eastern ports

  • The Port of New York and New Jersey processed more ocean shipping containers in August, surpassing both the ports of Los Angeles and Long Beach, historically the nation’s busiest ports for container trade. The rebalancing away from the West Coast reflects long-standing delays and supply chain disruptions in the LA port complex stemming from the commercial upheavals on the global pandemic. But more recently, logistics managers have been concerned about a labor strike or lockout at west coast ports.
    • In August, the Port of New York and New Jersey processed 843,191 containers, followed by Port of Long Beach, moving 806,940 export and import containers. The Port of Los Angeles ranked third, processing 805,314 total containers.

Container Costs ease with slowing volumes

  • Shipping prices for a 40-foot container transported from Shanghai to Los Angeles were valued at $3,779 last week—the first time the spot rate has dropped to under $4,000 since September 2020, according to a report by Drewry. The decrease in value for Chinese exports is expected to continue in the coming weeks, driven by soaring inflation and a rising dollar to central bank interest rate hikes on top of supply chain disruptions caused by the war in Ukraine.
    • Primary factors in the declining rates include, China’s economic slowdown, decreasing import demand related to orders from Chinese companies experiencing weaker growth, and declines by factories in Europe and other parts of Asia.

U.S. – EU

U.S. and EU officials held first “trade and labor” dialogue

  • Senior U.S. and EU trade and labor officials met virtually with union and business leaders to discuss worker concerns under the auspices of a new dialogue established by the U.S.-EU Trade and Technology Council (TTC). The U.S.-EU “Trade and Labor Dialogue,” established in May during the second meeting of the TTC, “allows participants to engage on trans-Atlantic trade and labor issues with government, labor and business stakeholders” from both countries, as described in a joint statement issued by the Office of the U.S. Trade Representative and the Labor Department.
    • Co-hosting the meeting were Assistant USTR for Labor Joshua Kagan, Assistant USTR for Europe and the Middle East Dan Mullaney and Deputy Under Secretary of Labor for International Affairs Thea Lee,  along with European Commission Acting Deputy Director General and Director for the Americas, Agriculture and Food Safety at the Directorate General for Trade Rupert Schlegelmilch and Deputy Director General for Jobs, Skills and Social Policies at the Directorate General of Employment Stefan Olsson, according to the statement.

Biden Nominees

Alexis Taylor, Biden nominee for Under Secretary of Trade, USDA

Confirmation hearing for Alexis Taylor

  • The Senate Agriculture, Nutrition and Forestry Committee on September 22nd held the nomination hearing for Alexis Taylor, President Biden’s nominee for Under Secretary for Trade and Foreign Agricultural Affairs, U.S. Department of Agriculture. The hearing also considered the nominations of Dr. Jose Emilio Esteban to be Undersecretary for Food Safety for the U.S. Department of Agriculture and Mr. Vincent Garfield Logan to be a member of the Farm Credit Administration Board.
  • In her testimony, Ms. Taylor discussed the detrimental impacts of the war in Ukraine on global food security and expressed her commitment to finding solutions for issues, including supply chain disruptions, inflation, maintaining strong and reliable market access, removing tariffs and non-tariff barriers, and enforcing scienced-based regulations bilaterally and multilaterally.
  • Further, Ms. Taylor addressed concerns regarding the challenges posed to U.S. producers of seasonal goods in the face of subsidized imports that are undercutting U.S. markets. In this, Ms. Taylor revealed that she supports a resolution that follows a multi-pronged approach:
    • First, she stressed that “our producers are the most innovative in the world, so continuing to advocate for research into innovation and technology advancements so they can continue to be competitive is extremely important.”
    • Additionally, given the increasing interest among U.S. consumers regarding the origins and processing procedures surrounding food, Ms. Taylor identified an opportunity to continue supporting the work around building strong local and regional markets for local producers.
    • Third, she emphasized the crucial role of regulators to ensure that markets looking to import products to the U.S. follow the health and safety standards set forth by U.S. regulations.
    • Finally, Ms. Taylor held that “expanding markets for our specialty crops producers to support strong, diverse export markets around the world” would be a crucial step in expanding trade and market access for U.S.
  • Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) during the hearing expressed hope that the Senate would confirm the three agriculture nominees this week by unanimous consent. Her comments were proceeded by Sen. Chuck Grassley (R-IA) who called for unanimous consent this week on Taylor’s nomination. After the hearing, Sen. John Boozman, (R-AK)., the ranking member on the committee, concurred telling reporters he supported a Senate confirmation soon.
  • President Biden announced his intent to nominate Taylor to the top trade position at USDA on May 13th.  A White House press release at the time detailed Ms. Taylors’ experience as follows:
    • Alexis Taylor serves as Director of the Oregon Department of Agriculture (ODA), having served since her appointment by Oregon Governor Kate Brown in December 2016. As Director, Taylor works to promote and regulate agriculture and food, upholding ODA’s mission to ensure healthy natural resources, environment, and economy for Oregonians now and into the future at the forefront.
    • Prior to her appointment as Director of ODA, Ms. Taylor oversaw the U.S. Department of Agriculture’s (USDA) Farm and Foreign Agricultural Services (FFAS). Before joining USDA, she worked for several Members of Congress. Taylor is an Iowa native who moved to Oregon after working for 12 years in Washington D.C. with a focus on U.S. agricultural and trade policy. She is a graduate of Iowa State University and grew up on her family farm in Iowa, which has been in her family for more than 160 years. While still in high school, she enlisted in the U.S. Army Reserves. During her junior year in college her army reserve unit was deployed to Iraq, where she served one tour with the 389th Combat Engineer Battalion. While no longer an active reservist, Taylor continues to advocate for veterans.
Senator Bob Menendez (D-NJ)

Senator Menendez places a hold on McKalip nomination

  • Senate Finance Committee member, Bob Menendez (D-NJ) has placed a hold on the nomination of Doug McKalip to serve as chief agricultural negotiator the Office of USTR, according to Inside U.S. Trade. Senator Menendez’s opposition centers around broader concerns with “oversight” and “transparency” at the Office of USTR, rather than Mr. McKalip’s qualifications to serve as the chief agricultural negotiator.
    • A spokesperson for the Senator said, “Senator Menendez supported the McKalip nomination in committee while he hoped to receive assurances from USTR to establish greater oversight and transparency of U.S trade policy led by the agency.”  “As he awaits commitments and specific actions to this end, he opposes confirmation of this nominee as a way to send the clearest signal that he firmly believes Americans deserve honest and transparent trade policy that prioritizes the economic interests of the country and cracks down on waste, fraud, and abuse.”
    • A USTR official said the agency has pursued discussions with Menendez’s office, hoping to resolve the impasse, noting, “Menendez is unsettled about things that happened during the Trump administration, and we’re working constructively on those things that have fallen short in previous administrations but we’re doing our part within the Biden administration.”
  • Earlier this year, Senator Menendez joined five other Senators in a letter to Ambassador Katherine Tai, asserting the USTR had failed to consult Congress properly in activities with WTO members over a “compromise outcome” on intellectual property rights in conjunction with distribution of COVID-19 vaccines. Senator Menendez has also sought placement of an inspector general at the agency, having voiced concerns about agency oversight.  In 2020 Menendez said, “An agency led by a Senate-confirmed appointee tasked with carrying out decisions affecting every worker, business and consumer in this country is currently operating without one of the most effective guardrails we have against overreach.”
  • News of the hold on McKalip emerged the day after Alexis Taylor’s confirmation hearing, casting considerable questions on a unanimous consent action in the Senate this week as called for by multiple Senators during the Alexis Taylor confirmation hearing.

Section 232 Tariffs

President Biden declines to impose 232 tariffs on magnets

  • President Biden will not impose national security tariffs on imports of neodymium magnets, commensurate with the Department of Commerce’s section 232 investigation recommendations. The decision is based on a Section 232 national security investigation launched by Commerce last year in response to the Administration’s resilient supply chains initiative. While the Commerce Department concluded a U.S. over-reliance on imports of neodymium magnets poses a national security concern, the agency declined to recommend employing tariffs or other means to restrict imports as the magnets are essential to national security.
    • “Despite the heavy dependence of the United States on direct and indirect imports of NdFeB magnets, the Department currently recommends that the Administration not impose tariffs, quotas, or other import restrictions on NdFeB magnets or component products,” according to the report. “Given the current severe lack of domestic production capability throughout the magnet supply chain, tariffs and quotas would have an adverse impact on consuming sectors and might incentivize businesses to move operations incorporating NdFeB magnets offshore. In both industry meetings and public comments, most representatives of consuming sectors oppose the imposition of trade restrictions for these reasons.”
  • Instead of restricting imports of the magnets, which are used in electric vehicles and wind turbines, among other products that are mostly imported from China, Commerce recommended policy actions to enhance domestic production, including:
    • The U.S. Government should engage with allies through existing fora to efficiently develop production from diverse sources, promote research on NdFeB magnet-related technologies, encourage intellectual property licensing and cooperate on foreign investment review mechanisms.
    • To bolster the U.S. NdFeB magnet industry by targeting domestic supply, the U.S. Government should also:
      • Establish a tax credit for domestic manufacturing of rare earth elements, NdFeB magnets, and NdFeB magnet substitutes.
      • Continue to direct Defense Production Act (DPA) Title III funding to firms in the U.S. NdFeB magnet industry to establish metal refining and alloy production facilities.
      • Encourage eligible NdFeB magnet industry participants to use Export-Import Bank financing through the Make More in America Initiative and the China and Transformational Exports Program.

Proposed Legislation

CREAATE bill introduced in the U.S. Senate

  • Senators Tina Smith (D-MN), Angus King (I-ME), Joni Ernst (R-IA), and Charles Grassley (R- IA) introduced on September 23 the Cultivating Revitalization by Expanding American Agricultural Trade and Exports Act (CREAATE) to the U.S. Senate. The bill would double funding for the Foreign Market Development (FMD) Program and the Market Access Program (MAP), rising to $69 million and $400 million, respectively. The proposed legislation seeks to advance agricultural export market development for U.S. producers and exporters. After its introduction, the bill will be subject to the review of the Senate Agriculture Committee.
    • Agricultural economists at HIS Market and Texas A&M University recently released a study, predicting that doubling funds for these programs would generate $44.4 billion in additional U.S. agricultural exports between 2024 and 2029. The increase in export revenue would directly benefit dairy operators, livestock producers, farmers, and small businesses in the industry.

WTO

Tai convenes mini-WTO ministerial for reform

  • U.S. Trade Representative Katherine Tai convened a small ministerial alongside representatives from Argentina, Brazil, Cambodia, India, Indonesia, and South Africa to discuss reforms to trade dispute settlements on the sidelines of the G20 gathering in Bali, Indonesia. For the past five years, the U.S. has blocked nominations to fill vacancies on the WTO Appellate Body, arguing that the group has overstepped its mandate and failed to uphold member interests since its commission in 1995.
    • According to a statement from the USTR, Ms. Tai emphasized the need for reform to reflect the interests of WTO members for more efficient and cost-effective procedures for dispute resolution. She also expressed a willingness to host future discussions along this line.

Agency heads call for action on global food security

  • On September 21, leaders from the UN Food and Agriculture Organization, International Monetary Fund, World Bank Group, World Food Program, and the WTO issued a joint statement, urging governments to address the acute food crisis. The issuance follows an earlier statement regarding food security that focused on four pillars: providing immediate support to the vulnerable; facilitating trade and the international supply for food; boosting production; and investing in climate-resilient agriculture. Building on these principles, the new declaration seeks to:
    • Support efficient production and trade
    • Improve transparency
    • Accelerate innovation and joint planning

Deputy Director-General Angela Ellard addresses multilateralism

Angela Ellard, Deputy Director-General, WTO
  • WTO Deputy Director-General (DDG) Angela Ellard discussed the benefits of multilateralism and the effectiveness of international trade in countering the growing challenges in the global economy. In addressing issues, such as global pandemics, “To tackle them effectively, we need the participation of as many countries as possible — big and small, developed and developing,” Ms. Ellard said.
  • In her remarks, Ms. Ellard alluded to the success of the recent 12th Ministerial Conference in which participants discussed health of the ocean, addressing the trade aspects of COVID-19, and efforts to lift threats to food security on the poorest populations.
    • Ms. Angela Ellard (U.S.) has worked as the WTO Deputy Director-General since June 2021. Prior to her position, Ms. Ellard worked at the U.S. Congress as a Majority and Minority Chief Trade Counsel and Staff Director. She is recognized as an expert on international economic policy and trade. DDG Ellard earned her Juris Doctor from Tulane University School of Law and received her Master of Arts in Public Policy also from Tulane.