TRADE UPDATE

Food & Agriculture
January 10, 2023

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

  • U.S. – Indo-Pacific: IPEF negotiations, covering three of the four pillars: Pillar II (Supply Chains), Pillar III (Clean Energy), and Pillar IV (Anti-Corruption and Tax), are scheduled to take place from Feb. 8-11 in India. There is no word on the next round of talks regarding Pillar I, Trade.
  • USMCA: Biden Administration trade officials are weighing reported modifications to Mexico’s 2024 Presidential Decree to ban glyphosate and imported genetically modified (GM) corn. Several agriculture groups and lawmakers have requested the Administration pursue USMCA consultations regarding the decree.
  • U.S.- Taiwan: The Biden Administration announced the U.S. and Taiwan will hold a negotiating round for the U.S.-Taiwan Initiative on 21st-Century Trade. U.S. and Taiwanese trade officials will meet in-person Jan. 14-17 in Taipei, Taiwan, to resume negotiations. The scope of negotiations range from trade facilitation to anti-corruption standards to deepening agriculture trade, but excludes market access (e.g. tariff reductions) provisions.
  • WTO: Taiwan formally asked to join China’s WTO complaint against U.S. export control sanctions on semiconductors as a third-party observer. The request comes as the U.S. and Taiwan commence trade talks in Taipei next week.

“I don’t want to get ahead of the President but clearly trade issues will be on the agenda next week.”

— White House National Security spokesperson John Kirby speaking to reporters regarding the North American Leaders Summit in Mexico City

U.S. – Indo- Pacific

IPEF negotiations scheduled for India

  • India will host talks in February to continue discussions about the Indo-Pacific Economic Framework (IPEF), according to a press release from the U.S. Department of Commerce. The meetings are scheduled to take place from Feb. 8-11, with a focus on three of the four pillars: Pillar II (Supply Chains), Pillar III (Clean Energy), and Pillar IV (Anti-Corruption and Tax). Details for further negotiations on Pillar I (Trade) have yet to be announced.
    • “The ministers had productive discussions on the economic benefits of IPEF membership and reaffirmed their collective commitment to pursue an inclusive high-standard economic agreement that will enhance the economic competitiveness of all of the IPEF partners’ economies,” the Commerce Department stated.

USMCA

Biden trade officials continue to weigh Mexico’s proposed GM corn ban modification

  • Biden Administration trade officials are weighing reported modifications to Mexico’s 2024 Presidential Decree to ban glyphosate and import genetically modified (GM) corn but no readout from USDA or USTR officials on reaction to the Mexico’s proposal.
    • Agriculture Secretary Tom Vilsack conferred recently with U.S. Trade Representative Katherine Tai regarding the next U.S. response to Mexico’s plan to ban GMO corn. “I think we are on track to provide a response at some point in time in the near future to Mexico,” Vilsack told reporters last week. “Based on our final analysis and their response, we will then take the next steps as appropriate, but we’re not quite there yet,” Vilsack said.
    • On December 16th, Mexico dispatched a delegation of Ministers to meet with USDA Secretary Tom Vilsack and USTR Katherine Tai outlining a proposal to modify the Presidential Decree to ban glyphosate and GM corn imports. According to reports, Mexico proposed the exemption of GM corn for animal feed and certain other uses with the possibility of a delay for the ban, according to several sources. Mexican officials also offered to re-evaluate rejections of GM corn traits, another deep concern for U.S. agriculture stakeholders and policy officials. A USTR and USDA joint statement reported “There was candid conversation about our deep concerns around the restrictions of the importation of biotech corn and other biotechnology products stemming amendments to the decree in an effort to address our concerns. We agreed to review their proposal closely and follow up with questions or concerns in short order.”
    • Prior to the meeting with Mexican ministers, Secretary Vilsack said that if “the proposal doesn’t meet what we think is consistent with USMCA, we will absolutely continue to work with the Office of the U.S. Trade Representative to begin the process of triggering whatever needs to be triggered under USMCA, and that hasn’t changed. It’s not going to change.”
    • Mexico is the largest buyer and importer of U.S. corn according to recent weekly USDA data. The U.S. shipped about 1 million metric tons of corn during the week of Dec. 16-22 and Mexico was by the far the largest destination. Mexico imported 441,600 metric tons during this period, surpassing Chinese imports of 278,400 metric tons. Regarding corn purchase commitments, USDA reported that Mexican buyers contracted for 463,600 tons, more than half the total U.S. sales of 781,600 tons for the seven-day period.

Biden in Mexico for North American Leaders Summit

  • President Biden will meet with Mexican President Andrés Manuel López Obrador and Canadian Prime Minister Justin Trudeau for the North American Leaders Summit (Jan. 9-11). According to a White House press briefing, Biden and López Obrador will talk about “strengthening our supply chains to make our hemisphere even more competitive (and) discuss our shared security, including our joint actions to address fentanyl, and how we can continue to tackle irregular migration together.” Not clear whether President Biden will raise trade issues, including concerns in agriculture regarding Mexico’s planned ban on biotech corn.

USTR raises case against Canadian dairy

  • As reported earlier, USTR announced expansion of consultations with Canada regarding disputes over current dairy policies. Ambassador Katherine Tai noted that “We remain very concerned by Canada’s refusal to honor USMCA commitments,” with dairy policies that effectively “deny U.S. workers, farmers, producers, and exporters the full benefits of market access they were initially promised.” The U.S. has yet to request dispute settlement procedures on the issue but has demonstrated willingness to take action should dairy policies continue without changes.
  • Canadian Trade Minister Mary Ng pushed back stating “Dispute settlement panels have repeatedly confirmed that our supply management system is in line with our international trade obligations.”.

Biden Nominees

Taylor sworn in, McKalip swearing in expected this week

  • Alexis Taylor was sworn in on Dec. 29 as the second Under Secretary for Trade and Foreign Affairs at USDA, according to a recent USDA press release.
    • Secretary Vilsack said after the ceremony, “Alexis Taylor has a deep-rooted and impressive career working on matters related to agriculture, trade, and enhancing export opportunities for American farmers. She has not only spent her career serving the American people through her work in U.S. agricultural and trade policy, but also as a Veteran of the U.S. Army. I am confident Alexis is the right person to lead as we continue to address global food security challenges, promote American exports across the globe, and strengthen trade relationships with our global partners. I look forward to working with Alexis to further USDA’s mission to better serve farmers and ranchers and link U.S. agriculture producers to expanded global market opportunities.”
  • Doug McKalip, nominee for Chief Agricultural Negotiator at the Office of the U.S. Trade Representative was confirmed Dec. 22. Sources report McKalip’s swearing will occur this week, though no official confirmation as of 9 p.m. EST on Jan. 9. Taylor and McKalip were nominated by President Biden on May 13 and June 8, respectively.

U.S. – Taiwan

U.S.-Taiwan talks on trade deal resume

  • Last week the Biden Administration announced the U.S. and Taiwan will hold a negotiating round for the U.S.-Taiwan Initiative on 21st-Century Trade. U.S. and Taiwanese trade officials will meet in-person Jan. 14-17 in Taipei, Taiwan to resume negotiations, according to the Office of the U.S. Trade Representative.
  • By way of background, On June 1, 2022, U.S. and Taiwanese officials met virtually under the auspices of AIT and TECRO to launch the U.S.-Taiwan Initiative on 21st-Century Trade, which is “intended to develop concrete ways to deepen the economic and trade relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth for our workers and businesses, including through new trade agreements,” according to USTR.
    • According to USTR, the scope of negotiations include, trade facilitation, good regulatory practices, strong anti-corruption standards, enhancing trade between our small and medium enterprises, deepening agriculture trade, removing discriminatory barriers to trade, digital trade, robust labor and environmental standards, as well as ways to address distortive practices of state-owned enterprises and non-market policies and practices. Tariff reductions are not contemplated.
    • Several industry groups lament that the Biden Administration has excluded market access provisions (e.g., tariff reductions) from the initiative. The average Taiwanese tariff on agricultural goods is 15.12%. Despite the omission of tariff cutting provision in the negotiations, agriculture groups may see reductions in non-tariff measure from the endeavor. Taiwan is the sixth-largest foreign market for U.S. agriculture commodities.

U.S. – Cuba

Senator Ron Wyden (D-OR)
Senator Ron Wyden (D-OR)

Wyden urges deeper economic ties with Cuba

  • On the heels of a recent visit to Cuba, Senate Finance Committee Chairman Ron Wyden (D-OR) reiterated the need for stronger U.S. economic engagement with Cuba. In a statement Wyden said, “During my visit to Cuba I was told by entrepreneurs that the vibrant Cuban private sector would benefit from narrow changes to US licensing and other rules.” Wyden continued, “Specifically, the entrepreneurs told me that general licenses, allowing them to operate in spite of the sanctions, would bring legitimacy and credibility to them and their businesses.” “They told me they expected these changes to lead to the creation of thousands of new businesses. In addition, they said bank accounts would make it easier to attract investment capital, and knowing that I authored the US e-commerce law, they requested that I assist with their e-commerce initiatives.” Sen. Wyden previously sponsored legislation to lift the economic embargo on Cuba and he indicated he plans to discuss this initiative to support Cuban small business with fellow lawmakers in the coming weeks.

Food Security

Global food prices decline modestly in December

  • The Food and Agriculture Organization’s (FAO) Food Price Index averaged 132.4 points in December, falling 2.6 points or 1.9 percent compared to November. December’s price index decline marks the ninth consecutive month of receding prices, and now stands 1.3 points below the price levels 12 months earlier. Decreases in the price indices for vegetable oils, cereals, and meat lead the price decline, somewhat offset by moderate price increases in diary and sugar, according to FAO. Other highlights from the report include:
    • The Vegetable Oil Price Index “averaged 144.4 points in December, down 10.3 points (6.7 percent) from November and hitting its lowest level since February 2021. The decrease in the index in December was driven by lower international quotations across palm, soy, rapeseed and sunflower seed oils. World palm oil prices dropped by nearly 5 percent after a short-lived recovery in the previous month, chiefly underpinned by a sluggish global import demand, despite lower outputs in major palm oil producing countries due to excessive rainfalls.”
    • The Cereal Price Index “averaged 147.3 points in December, down 2.9 points (1.9 percent) from November, but still 6.8 points (4.8 percent) above its December 2021 value. Wheat export prices fell in December, as ongoing harvests in the southern hemisphere boosted supplies and competition among exporters remained strong. World maize prices also eased month-on-month, mostly driven by strong competition from Brazil, although concerns over dryness in Argentina provided some support.”
    • The Dairy Price Index “averaged 139.1 points in December, up 1.5 points (1.1 percent) from November, registering an increase after five months of consecutive declines and surpassing by 10.1 points (7.9 percent) its value a year ago. In December, international cheese prices rose, mainly reflecting a robust global import demand and somewhat tighter export availabilities amid high internal retail and services sector sales, especially in Western Europe.”
    • The FAO Sugar Price Index “averaged 117.2 points in December, up 2.8 points (2.4 percent) from November, registering the second consecutive monthly increase and reaching its highest level in the past six months. The December increase in international sugar price quotations was mostly related to concerns over the impact of adverse weather conditions on crop yields in India, the world’s second largest sugar producer, and sugarcane crushing delays in Thailand and Australia.”
    • The Meat Price Index “averaged 113.8 points in December, down 1.4 points (1.2 percent) from November, marking the sixth consecutive monthly decline, but remained 2.8 points (2.5 percent) above its year-earlier level. The decrease in the index in December was driven by lower world prices of bovine and poultry meats, partially counterbalanced by higher pig and ovine meat prices. International prices of bovine meat fell, pressured by a higher supply of slaughter cattle in several large producing countries and lackluster global demand for medium-term supplies.”

U.S. – Japan

U.S.-Japan supply chain task force to eradicate forced labor

Nishimura Yasuthoshi, Japan’s Minster for Economy, Trade, and Industry
Nishimura Yasutoshi, Japan’s Minster for Economy, Trade, and Industry
  • Last week, the U.S. and Japan announced a task force aimed at elevating labor standards and combating forced labor in global supply chains. In a joint statement, USTR Katherine Tai and Japan’s Minster for Economy, Trade, and Industry, Nishimura Yasutoshi announced signing a Memorandum of Cooperation (MOC) to launch the task force. The leaders noted, “The Task Force represents an opportunity for the United States and Japan to protect and promote human rights and internationally recognized labor rights, including prohibiting the use of forced labor in supply chains through trade policy. Through the Task Force, the United States and Japan will exchange information on relevant laws, policies, and guidance; facilitate stakeholder dialogues with businesses and worker organizations; and promote best practices for human rights and internally recognized labor rights due diligence.”
    • Ambassador Tai noted, “From their leadership in the development of the Group of 7 Trade Ministers’ Statement on Forced Labor to their first-ever release of human rights due diligence guidelines for responsible supply chains to their commitment to carry out shared principles to combat forced labor with the United States and the European Union, the Government of Japan has consistently been a trusted partner in the fight to promote workers’ rights and drive the race to the top in trade.”

U.S. overall trade deficit shrinks sharply in November

  • The U.S. deficit for goods and services narrowed 21.0% in November propelled by a large drop in imports. The deficit for goods and services declined to $61.5 billion in November, down $16.3 billion from $77.8 billion in October (revised), according to the U.S. Census Bureau. Additional details released by the Census Bureau:
    • November exports were $251.9 billion, $5.1 billion less than October exports. November imports were $313.4 billion, $21.5 billion less than October imports. The November decrease in the goods and services deficit reflected a decrease in the goods deficit of $15.3 billion to $84.1 billion and an increase in the services surplus of $1.0 billion to $22.5 billion.
    • Year-to-date, the goods and services deficit increased $120.1 billion, or 15.7 percent, from the same period in 2021. Exports increased $439.4 billion or 18.9 percent. Imports increased $559.5 billion or 18.1 percent. Year-to-date, the goods and services deficit increased $136.9 billion, or 19.9 percent, from the same period in 2021. Exports increased $415.3 billion or 19.8 percent. Imports increased $552.2 billion or 19.8 percent.
    • The average goods and services deficit decreased $1.4 billion to $71.2 billion for the three months ending in November. Average exports decreased $3.3 billion to $255.8 billion in November. Average imports increased $4.7 billion to $327.0 billion in November
    • The average goods and services deficit increased $2.5 billion to $72.7 billion for the three months ending in October. Average exports decreased $1.4 billion to $258.9 billion in October. Average imports increased $1.1 billion to $331.6 billion in October.

WTO

Taiwan seeks to join China’s WTO complaint on U.S. semiconductor sanctions

John Deng, Taiwan's Minister Without Portfolio
John Deng, Taiwan’s Minister Without Portfolio
  • Last week Taiwan formally asked to join China’s WTO complaint against U.S. export control sanctions on semiconductors. China filed a dispute with the WTO to overturn U.S.-imposed export controls, which are aimed at protecting U.S. intellectual property positions. A Taiwanese government spokesperson said Taiwan has a “clear and substantial trade interest” in the matter. Taiwan contends in its request at the WTO it needs to know how the U.S.-China chip disputes will affect the supply and demand of semiconductor products in its bilateral trade and the world market.
    • John Deng, Taiwan’s Minister Without Portfolio, emphasized Taiwan’s participation is not intended to take a position in support or opposition for either the U.S. or China, rather Taiwan wants to observe the consultations as a “third country” to better understand the positions of both the U.S. and China.

Ag Economy Barometer

The Ag Economy Barometer rebounds strongly in December

  • The December Ag Economy Barometer jumped 24 points to a reading of 126. The strong reversal after recent months of decline, was generated by stronger farmer expectations for improved financial performance in 2023. December’s index level was the highest in 2022 and mirrored levels at the end of 2021, though significantly below the peak observed in late 2020.
    • Despite rising optimism in 2023 farming operations, operating costs remain a top concern for producers in the months ahead. Almost half (47%) of the survey respondents indicated they expect farmland cash rental rates in 2023 to rise above the prior year. Similarly, 45% of producers cited higher input costs as their top concern in 2023 followed by rising interest rates (22% of respondents) and lower crop or livestock prices (13% of respondents).