TRADE UPDATE

Food & Agriculture
October 18, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

  • U.S. – Indo- Pacific: During her recent trip to the U.S., Taiwanese Minister for Economic Affairs Mei-Hua Wang called for the coordination of a U.S. – Taiwan free trade agreement that would encourage other countries to expand relations with the island by demonstrating its independence from China.
  • U.S. – Mexico: Mexico’s new Trade Minister, Raquel Buenrostro, asked the former Undersecretary for her resignation alongside several other leading personnel in the Secretaría de Economía. Among those asked to step down was Orlando Pérez Gárate, General Director of International Trade Legal Consulting (a key negotiator for USMCA and dispute resolution in Mexico).
  • U.S. – Mexico: The U.S. spoke against Mexico’s proposed ban on biotech agricultural goods at the country’s trade policy review for the WTO. In addition to the ban, other members voiced concerns regarding Mexico’s investment environment, namely related to the shift in control over the energy industry to state-run entities.
  • Food Security: On October 13, Russia submitted concerns to the United Nations regarding the agreement for Black Sea grain exports and has threatened to end the arrangement next month unless its demands are met. In response, U.N. Secretary-General Antonio Guterres traveled to Moscow to discuss the renewal of the agreement.
  • Supply Chains: On October 10, the Brotherhood of Maintenance of the Way Employes Division (BMWED) rejected the tentative contract proposed by the White House last month. In light of the congressional recess, BMWED agreed to delay potential strikes until five days after Congress reconvenes on November 14.
  • WTO: The United States submitted a domestic support notification at the WTO, indicating that the U.S. beat its record for providing trade-distorting domestic support in 2020/21. This was primarily due to pandemic-related CFAP payments added on to traditional programs like ARC/PLC, market price support for sugar, and crop insurance subsidies.

“And no matter how high you dial the standards, no matter how modern the rules that you’ve brought in, if you can’t enforce them, then really it’s not worth very much. It’s really not worth very much to the members of Congress and their constituents.”

— Ambassador Katherine Tai, USTR

U.S. – Indo- Pacific

Tai responds to criticism over IPEF initiative

  • U.S. Trade Representative Katherine Tai spoke at the October 9-11 National Association for Business Economics conference to address criticism surrounding the Indo-Pacific Economic Framework (IPEF) and USTR’s refusal to negotiate traditional market access commitments. In a prior speech, Ambassador Tai suggested that the Biden Administration had not “sworn off” market liberalization and tariff reductions but clarified that the IPEF initiative is focused on addressing the negative consequences of globalization under a new trade framework. 
    • In her remarks, Amb. Tai emphasized the U.S. government’s commitment to the “corrective phase of globalization,” the goal of which “is to focus on the individual, the human being, the worker, the community, which forms really the human component of our economy” and somehow “creating a trade framework that doesn’t continue to pit our workers against the workers of our trading partners.”
    • Further, Tai caricatured past free trade agreements, stating, “while some sectors of the economy have benefited, many in this room know that the traditional approach to trade – marked by aggressive liberalization and tariff elimination – also had significant costs: concentration of wealth, fragile supply chains, deindustrialization, offshoring, and the decimation of manufacturing communities.”
  • In discussing the uneven global division of the “economic pie,” Amb. Tai stated that the war in Ukraine is not “economically rational” because it shrinks the pie. She identified resiliency, sustainability, and inclusivity as key goals for the framework and added that “tariff reduction and market liberalization are not goals in and of themselves.”

U.S. officials outline the importance of digitalization for IPEF

Robb Tanner, Director for ICT Services and Digital Trade, USTR
  • USTR Director for ICT Services and Digital Trade Robb Tanner, during the October 13 “Global Services Summit,” discussed the opportunities for digital trade under the IPEF agreement. “One of the things that’s really key when we talk about digital is it’s very difficult to pull digital out of an overall agenda,” he said. The official highlighted ongoing discussions about the inclusion of a digital component to the framework. 
  • Opponents of the digital trade element, as part of an “early harvest” agreement, hold that such a move would benefit technology companies and disproportionately harm labor and environmental concerns considered by the Administration. At the same time, incorporating a digital element to the framework was met with resounding support at the conference. 
    • Tanner also alluded to USTR’s efforts “to promote a worker-centered trade agenda,” an initiative that he thinks “absolutely goes to digital.”
    • Deputy Secretary for Singapore’s Ministry of Communications and Information Aaron Maniam also commented on the digital component, stating that the provisions should be “as open, inclusive and flexible as possible.”
    • Finally, Minister-Counsellor for Trade at the Australian embassy Andrew Jory held that “a digital agreement actually goes to the core of our democratic values because unfortunately what we’re seeing in the Indo-Pacific is a proliferation of digital authoritarianism, which doesn’t allow for free speech and doesn’t protect democratic ideas.”

GOP calls for Cambodia’s incorporation into IPEF

  • House Ways and Means Trade Subcommittee members Carol Miller (R-WV) and Ron Estes (R-KS) wrote an op-ed last week alongside Representative Beth Van Duyne (R-TX), calling for the addition of Cambodia to the Indo-Pacific Economic Framework. The representatives highlighted the opportunities for trade and investment in the country and urged the Biden Administration to work for Cambodia’s immediate incorporation into the framework. 
    • In their op-ed, the lawmakers held that IPEF could provide “a launch point for the United States to reenter the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which features high-standards trade and market access chapters.”
  • The op-ed reflects growing concerns by lawmakers who wish to see the framework expanded to include traditional market access negotiations. Further, the representatives continued by emphasizing the urgency of the issue. “We have the means to make Southeast Asia a key partnership region. This will lead to the expansion and adoption of U.S. values, including the rule of law, human rights, and upward economic mobility,” the document states.
  • Cambodia, Laos, and Myanmar are the only members of the Association of Southeast Asian Nations (ASEAN) that have not been invited to join IPEF. Last month, the Secretary-General of ASEAN expressed hope that all members of the bloc would be invited to join the initiative to strengthen the regional economy and its ties to the U.S. 

Australian Trade Minister: China unlikely to join CPTPP

  • In an interview, Australian Minister for Trade and Tourism Don Farrell revealed that he does not “believe there’s any prospect that China could join” the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) due to the country’s long-time breach of trade rules. To join the agreement, China would need to lower tariffs on imports and abide by trade provisions under the WTO, the minister explained. China applied for membership to the CPTPP in 2021 but has not received concrete evaluation by the group thus far. 
    • The original TPP was seen as a U.S.-led counterweight in the region, though there was disagreement if this meant that it would exclude China or force China to raise its standards to meet membership requirements. As Minister Farrell points out, China’s current policy approach suggests that it will remain on the outside, though without U.S. participation, this exclusion is far less meaningful. 

U.S. Taiwan Relations

Mei-Hua Wang, Minister of Economic Affairs, Taiwan
  • Taiwanese Minister for Economic Affairs Mei-Hua Wang stated during her October trip to the United States that coordinating a bilateral trade agreement between the U.S. and Taiwan would encourage other countries to expand relations with the island by demonstrating the country’s independence from China. Ms. Wang revealed the challenges other countries face in approaching Taiwan for bilateral or multilateral agreements due to China’s perceived influence over the island. 
    • “If we can have the relationship with the U.S., [it would] not only strengthen the Taiwan-U.S. relationship but also can strengthen the supply chain and also make Taiwan more separate and make other countries understand ‘Hey, you can also have more bilateral trade with Taiwan, ‘” the minister revealed at a conference with the Center for Strategic and International Studies (CSIS). 
  • The comment comes after a recent proposal by House Republicans that would complement the “Taiwan Policy Act of 2022,” which supports Taiwan’s inclusion in IPEF and seeks to allow for the negotiation of a free trade agreement. The Biden Administration previously elected to exclude Taiwan from the IPEF agreement, instead proposing the similar Initiative on 21st Century Trade
  • Minister Wang last week visited the U.S. for the in-person meeting of the U.S.-Taiwan Trade and Investment Collaboration (TTIC) meeting. The TTIC was launched in December 2021 “to expand U.S.-Taiwan cooperation on critical supply chains by promoting two-way investment.”

U.S. – Mexico

Luz Maria de la Mora, Undersecretary for Foreign Trade, Mexico

Economia transformation continues

  • Undersecretary for Foreign Trade, Luz María de la Mora, has been shown the door, President Lopez Obrador confirmed on October 14. Dr. de la Mora’s leave from office comes as a blow to the ministry due to the loss of her extensive international trade experience in areas including Washington, Brussels, and Montevideo, and expertise in trade policy demonstrated through her complimentary degrees from universities in Mexico, Canada, and the United States. The ousting immediately follows the departure of former Trade Minister Clouthier. The new minister, Raquel Buenrostro, asked the former Undersecretary for her resignation alongside several other leading personnel in the Secretaría de Economía.
    • On October 14th, Alejandro Encinas Nájera was appointed the new Undersecretary for Foreign Trade. He has served as the Lopez Obrador Administration’s point person on labor issues in trade agreements as head of the Labor Policy and Institutional Relations Unit of the Ministry of Labor.
  • Ms. Buenrostro was previously the head of the Tax Administration Service. When asked to characterize Ms. Buenrostro, Associate Professor at Texas A&M University Guillermo Garcia Sanchez referred to the leader as a “hardliner” with a history of strong crackdowns on tax evasion. Other spectators reportedly viewed the change in leadership as a threat to investment security, according to Inside U.S. Trade.
    • The new Trade Minister will be the third to serve in the López Obrador Administration. As such, Senior Vice President at Albright Stonebridge Group Antonio Ortiz-Mena publicly deemed the frequent changes in leadership a concern for investment stability. He held that “this is not good for both foreign or domestic investors” as it eliminates the certainties for businesses and individuals in the country. 
  • Minister Buenrostro also removed Orlando Pérez Gárate, General Director of International Trade Legal Consulting, from his post. Gárate was a key figure in the negotiations of USMCA and directly headed the dispute settlement cases in Mexico. 

U.S. questions Mexican policies at WTO review

  • The U.S., at Mexico’s trade policy review for the WTO, stated that the country must address international concerns regarding the energy law and Mexico’s proposed ban on biotech agricultural products. In this, both lawmakers and agriculture groups have pressed the Office of the USTR to initiate a dispute over the biotech provision for discrimination to foreign investors and other violations of USMCA. Specifically, the U.S. highlighted the country’s “obligation to maintain science- and risk-based regulatory processes” regarding biotechnology and the potential ban on G.M. corn. 
  • At the same time, the U.S. applauded efforts by the Mexican government to implement regulatory infrastructure, new intellectual property protection, and labor reforms. Despite these positive steps, the U.S. claimed that “after two years of implementing the USMCA, the number and scope of concerns we hear from U.S. stakeholders about Mexico, many directly implicating important USMCA obligations, has not stopped and remains concerning.” Other members also voiced concerns regarding Mexico’s investment environment, namely related to the shift in control over the energy industry to state-run entities. 
    • In response to member comments, the Mexican Undersecretary of Economy for Foreign Trade at that time, Luz Maria de la Mora, stated, “Mexico’s legal framework for FDI is significantly open” while “few activities are reserved for the state and for nationals.”
  • Recall that on October 3rd, a coalition released a study conducted by World Perspectives, Inc., outlining the effects of a proposed ban on genetically modified (GM) corn in Mexico. Mexican media outlets picked up on the information and ran articles outlining the effects of the ban on inflation, food security, and turning the egg into a luxury item.
  • The meeting minutes of the trade policy review will be published in November.

Rubio lashes out at Mexico over Section 301 probe

  • In a release posted on October 14, Senator Marco Rubio (R-FL) blasted the Mexican government and 24 American commodity trade groups due to the former’s warning to Ambassador Katherine Tai and the latter’s letter opposing the pending Section 301 investigation on seasonal produce. In his statement, Senator Rubio noted the “ridiculous” prospect of Mexico’s “bluff” to “limit its access to American bulk commodities in an environment of such scarcity,” though Mexico has a history of adept targeting of U.S. commodity exports. Rubio continued by stating that the only avenue for dispute settlement is the initiation of a Section 301 investigation and discounts alternative measures, such as antidumping and countervailing duties as well as USMCA dispute resolution. 
    • As reported earlier, a bipartisan group of lawmakers — spearheaded by Senators Marco Rubio (R-FL) and Tim Scott (R-SC) and Representative Al Lawson (D-FL) — petitioned U.S. Trade Representative Katherine Tai to investigate the import of seasonal and perishable fruits and vegetables grown in Mexico under government subsidies to bring relief to Florida growers. The Office of USTR has until October 23 to render a decision.

Food Security

Moscow threatens end to Black Sea Grain Initiative

  • On October 13, Russia submitted its concerns to the United Nations regarding the agreement for Black Sea grain exports and has threatened to end the arrangement next month unless its demands are met. The threat follows a recent destruction of a bridge connecting Russia to the occupied Crimean Peninsula. In response to a letter submitted by Russia’s Ambassador to the U.N. Gennady Gatilov, U.N. Secretary-General Antonio Guterres traveled to Moscow to discuss renewal of the agreement. 
    • When discussing the dynamics of the agreement, Mr. Guterres revealed that Russia’s threat could very well come to pass, “but this deal should be equal, it should be fair and fairly implemented by all sides.”
    • At the same time, U.N. spokesperson Stephane Dujarric reiterated the seriousness of the situation, insisting that the U.N. remains “in constant touch with Russian officials, as well as with officials from the European Union, the United Kingdom and the United States in order to remove the last obstacles to facilitate the export of Russian grain and fertilizer.”
  • The agreement was originally established in July between the UN and Turkey to enable Ukraine to continue grain exports from Black Sea ports that had previously closed due to the Russian invasion. Russia and Ukraine are the two largest exporters of grain with Russia leading the charge on global fertilizer exports. 
  • Meanwhile, a Bloomberg report demonstrates how Russia has laundered Ukrainian grain by mixing it with its own shipments at sea. Ukrainian analysts estimate that Russia has stolen or destroyed over 4 million tons of Ukrainian grain and oilseeds. The report notes that ostensibly Russian food shipments from Sevastopol in Crimea have increased tenfold since March:

FAO hosts 50th Session for Committee on World Food Security

Qu Dongyu, Director-General, Food and Agriculture Organization of the United Nations
  • On October 13th, The Food and Agriculture Organization (FAO) hosted the 50th Session of the Committee on World Food Security (CFS) to discuss the coordination of policy responses to the current global food crisis. At the ministerial meeting, Director-General of the FAO Qu Dongyu stressed the committee’s “important supporting role in this aspect as a global multilateral policy platform.” With a panel of high-level experts, the committee provided “scientific reports and policy guidelines that contribute to advisory global management of food security & nutrition.” 
  • During the meeting, Qu described the draft Policy Recommendations on Youth Engagement & Employment as “key in engaging the youth, especially young women farmers, scientists & entrepreneurs, in global food security.” Voluntary Guidelines on Gender Equality and Women & Girls’ Empowerment in the context of food security and nutrition will also provide support in achieving the SDGs and sustainable agri-food systems, Qu said. 
  • The meeting further discussed the 231-page 2022 ‘State of Food Security & Nutrition in the World‘ report (SOFI) prepared by a group of UN institutions to focus on growing food insecurity. The report indicates that 828 million people were affected by hunger globally in 2021, increasing by 46 million since 2020 and 150 million from the start of the pandemic. Further, there were 2.3 billion people in the world who were moderately or severely food insecure in 2021, 350 million more people than before the outbreak.
  • Members of the plenary deliberated the strategy for CFS based on seven identified issues affecting food security:
    • Building resilient and equitable supply chains for food security and nutrition
    • Strengthening urban and peri-urban food systems in the context of urbanization and rural transformation
    • Conflicts and the fragility of food systems
    • Revitalizing climate policies for food security and nutrition
    • Recognizing the role and rights of food system workers
    • Building a meaningful interface for diverse knowledge systems, technologies and practices for food security and nutrition
    • Emerging and re-emerging infectious diseases and other biological hazard events challenging food security and nutrition

Trade Trends

USDA decreases projections for corn/soy yield, production, and exports

  • The U.S. Department of Agriculture (USDA) recently announced in the World Agriculture Supply and Demand Estimates report its decreased projections for 2022/2023 soybean yields, production, and exports. Specifically, the report details a drop in yield forecasts from the September estimate of 50.5 bushels per acre to 49.8 bushels per acre. Further, the department cut its estimate for feed and residual use in grain by 30 million bushels while decreasing the wheat export prediction by 50 million bushels. The average corn yield prediction also faced significant cuts, now sitting at a total 49-million-bushel reduction from previous estimates. However, drops in export demand combined with increased international competition have worked to counter the impact of lower U.S. yields. October marks the third consecutive month in which the USDA has predicted decreased corn yields this year. 
    • In contrast, Brazilian farmers are anticipating higher production levels with the country’s National Supply Company (CONAB) raising its projection to 5.6 billion bushels. Along this line, the company also expects Brazilian corn exports to increase 24% from 2021/2022 with some shipments likely bound for China.

Supply Chains

Rail union rejects White House resolution

  • On October 10, the Brotherhood of Maintenance of the Way Employes Division (BMWED) rejected the tentative contract proposed by the White House last month. Under the original deal, railroad workers would have benefited from higher pay and more flexible schedules with labor wages increasing by a total of 24% over five years. After the vote — four unions in favor and seven against — negotiations must resume between the two parties and heightens the risk of a nationwide strike in the industry. 
  • In a statement, President of the BMWED Tony Cardwell acknowledged the seriousness of the national agreement and highlighted the industry-wide discontent with current working conditions. 
    • “Railroaders are discouraged and upset with working conditions and compensation and hold their employer in low regard. Railroaders do not feel valued. They resent the fact that management holds no regard for their quality of life, illustrated by their stubborn reluctance to provide a higher quantity of paid time off, especially for sickness,” he claimed. 
  • The National Carriers’ Conference Committee (NCCC) assured that there will be no immediate operational impacts of the decision. However, risks of a strike still loom. According to the Association of American Railroads, a potential strike could result in $2 billion in lost economic output per day. In light of the congressional recess, the BMWED union agreed to delay potential strikes until five days after Congress reconvenes on November 14. 

Low Mississippi water leads to trade disruptions

  • Shipping disruptions along the Mississippi River affected roughly 1,600 commercial barges with stoppages spanning several miles to pass through Lake Providence, LA, an area that had been closed for most of the week due to low water levels. The halted shipments disrupted the transport of grain, fertilizer, and other commodities. According to shipping sources, about 60% of U.S. corn, soybean, and wheat exports exit the country along the Gulf Coast export terminals, many of which have experienced closures in the past couple of weeks. 
  • The U.S. Army Corps of Engineers has been working to deepen the shipping channel to allow cargo ships to pass, but lack of persistent rain is drawing concerns for further disruptions during what is normally one of the busiest export periods for grain in the year. In response to lower water levels, shippers have been decreasing the cargo loaded onto each barge to allow the ships to sit higher on the water.
  • Last week, two closed sections of the river reopened, helping to decrease the backlog of barges, but shippers are still wary about continuing droughts and low water levels.

U.S. – China

USTR announces next steps in Section 301 tariffs on Chinese goods

  • On October 12, the Office of the U.S. Trade Representative announced that next month, it will request feedback on the effectiveness of Section 301 tariffs imposed under the previous Administration on imports from China. The comment period will begin on November 15 and close on January 17. According to the notice published on the Federal Register, USTR is seeking feedback on “other actions or modifications that would be more effective in obtaining the elimination of or in counteracting China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.”
  • Recall that on October 4, more than 170 business groups petitioned the Office of the U.S. Trade Representative to extend Section 301 tariff exclusions on Chinese goods with expirations set for November and December. In an October 4 letter to USTR Katherine Tai, the group called for 352 exclusions as well as restrictions imposed on 81 medical-care products to be extended as soon as possible, allowing for companies to “plan accordingly.” The group also asked USTR to consider a “more robust exclusions process” for all products under Section 301 tariffs. 
    • In a statement regarding the tariff, National Security Advisor Jake Sullivan said, “what ultimately is going to strengthen the hand of the U.S. industrial innovation base and our workforce here in the United States.”

E.V. Tax Credit

Executive Vice President, Valdis Dombrovskis, European Commission

U.S. addresses trading partners’ concerns over tax credit

  • The U.S. has initiated conversations with key trading partners to discuss their concerns and the Biden Administration’s underlying goals regarding the electric vehicles (EV) tax credit enveloped in the U.S. Inflation Reduction Act. Several major importers of U.S. agricultural products, including South Korea, the EU, and China, previously voiced concerns regarding the implications of the tax credit, citing the discriminatory nature of the provision and the negative consequences associated with its implementation. 
  • At the Global Services Summit, U.S. Trade Representative Katherine Tai clarified her understanding of countries’ concerns, stating that “our partners are doing what we do with them, which is raising concerns in clear, honest terms.” “What we are offering them is a real conversation now about where we are and what our goals are. And I think, you know, that’s an important piece of the Inflation Reduction Act, which addresses clean technology and the economy that we’re trying to build towards.”
  • Government officials have discussed the importance of an ongoing dialogue between the U.S. and South Korea to address their concerns.
  • Further, European Commission Executive Vice President Valdis Dombrovskis and U.S. Trade Representative Katherine Tai met last week to discuss key trade issues for the bilateral relationship given the current conflicts over the U.S. E.V. tax credit. “I think that, on the strength of the U.S.-EU relationship and the work that we have done over the past 18 months, I have every confidence that this is something that we can work through with the EU right now, in this period of time,” the ambassador said after the meeting. 
    • While Dombrovskis expressed the EU’s support for the aims of the IRA, the official also revealed that “this concept of local assembly or local content requirements is very present throughout this Inflation Reduction Act” which could discriminate against EU companies in a way that slows “the rollout of green investments.”
    • Along this line, both officials agreed to speed up talks on global steel issues. The discussion precedes the expected meeting for the U.S. — European Trade and Technology Council to be held by the end of the year.
  • On October 12, Secretary of Commerce Gina Raimondo emphasized the need for a “fulsome plan to develop the supply chain” in the U.S., Mexico, and Canada to effectively enforce the E.V. tax credit. The Secretary, speaking at the International Trade Administration’s Advisory Committee on Supply Chain Competitiveness, claimed that the committee should begin by studying the ability of the North American supply chain to source minerals needed for U.S. companies to benefit from the tax credit. 
    • “[W]e need your help in thinking about how we build not only stockpile resilience, but execute effectively against a broad strategy for critical minerals and metals, supply chain resilience,” said National Economic Council Director Brian Deese following Raimondo’s comments.
    • Under the Inflation Reduction Act, a tax credit of up to $7,500 could be granted to lower the cost of an electric vehicle. The bill requires that electric vehicles contain a battery built in North America with minerals mined or recycled on the continent.

U.S. – EU

EU concerned about Commerce probe into Spanish olives

  • Last week, the European Commission voiced its concerns about a probe initiated by the U.S. Department of Commerce to examine ripe olives from Spain. In its arguments, the EC voiced opposition to the department’s attempt to re-litigate a dispute that was resolved by the World Trade Organization in 2021. Under the WTO panel, the statute in question — Section 771B of the Tariff Act of 1930 ­— failed to meet WTO standards for subsidization on the production of raw agricultural products; the U.S. also applied the law improperly. 
  • In September, the Department of Commerce issued a memo stating that, as the law is still in place, “Commerce must continue to evaluate its applicability in the ripe olives from Spain proceeding, and continue to apply it, if the circumstances in this case so warrant.” The department also continued in outlining the agreement between the U.S. and the EU to allocate “a reasonable period of time” to implement the panel’s ruling which expires on January 14, 2023. 
  • In its comment to Commerce, the Commission stated that the department had relied on outdated data that “would strongly undermine the reform path of agricultural policies in the WTO” and has called for compliance. In response, Commerce issued a notice on the Federal Register to review the issue, implying the possible use of a hearing to determine next steps. 
    • Some of the subsidies targeted by the CVD investigation were green box payments that the EU provides to producers regardless of prices or output. The EU claims that targeting green box subsidies in CVD investigations will discourage countries from reforming policies towards this form of support.

U.S. – UK

GOP of Ways and Means call for U.K. FTA

  • On October 12, U.S. House Ways and Means GOP members sent a letter to the UK’s newly appointed Secretary of State for International Trade, Kemi Badenoch, expressing support for the renewal of U.S.-U.K. negotiations on a “gold-standard” free trade agreement. The members acknowledged current obstacles, including the Biden Administration’s approach to trade policy and the continued concerns over the Northern Ireland Protocol. 
    • Signs of progress include eased U.S. restrictions on British lamb, imposed as a result of the 1990s BSE outbreak, and $34 million worth of British lamb will soon be on American tables as the first shipment heads towards these shores. 
  • The UK still faces considerable challenges in catching its regulatory competence up to its regulatory independence, according to a new report from a Parliamentary committee investigating the post-Brexit regulatory regime. Staffing at the regulatory agencies is far behind what is needed, as newly hired toxicologists and veterinarians, for example, still leave the UK with far less capacity than it had as an EU member.

U.S. – Saudi Arabia

Biden reevaluates relationship with Saudi Arabia

  • On October 11, President Biden stated that the U.S. is considering the state of the national relationship with Saudi Arabia based on OPEC’s recent decision to cut oil production by two million barrels per day. The White House alluded to the subsequent benefits to Russia that underline the decision. 
    • “I am in the process, when the House and Senate comes back, there’s going to be some consequences for what they’ve done with Russia,” Biden said in a CNN interview. 
  • National Security Council spokesperson John Kirby revealed that Saudi Arabia played a fundamental role in the OPEC decision and continued to state that the Biden Administration is consequently looking to the future of the U.S.’s relationship with the country. Mr. Kirby expanded on his statements, calling the decision “a short-sighted decision that benefitted Russia, at a time when nobody — in any capacity — should be trying to benefit Vladimir Putin.” Saudi Minister of State for Foreign Affairs, Adel al-Jubeir, denied U.S. claims that the decision was made using political motives against the country. 
  • According to the U.S. Embassy and Consulates in Saudi Arabia, the countries have strengthened the bilateral relationship since 1940 with common interests pertaining to “regional security, oil exports and imports, and sustainable development.” However, tensions have risen due to promises made during President Biden’s campaign to hold the country accountable for its human rights abuses, including the murder of journalist Jamal Khashoggi. 
  • Further, Senator Bob Menendez (D-NJ) issued a statement following recent attacks against civilian targets in Ukraine, stating that he “also must speak out against the government of Saudi Arabia’s recent decision to help underwrite Putin’s war through the OPEC+ cartel. There simply is no room to play both sides of this conflict – either you support the rest of the free world in trying to stop a war criminal from violently wiping off [sic] an entire country off of the map, or you support him.”

Trade Policy

Biden Administration releases 2022 National Security Strategy

Jake Sullivan, National Security Advisor, U.S.
  • The Biden Administration recently published a National Security Strategy which outlines some of the Administration’s key stances on the future of U.S. trade. While acknowledging the benefits of trade (i.e., economic growth, lower prices, and access to foreign markets), the document claims that the rules of trade are “designed to privilege corporate mobility over workers and the environment, thereby exacerbating inequality and the climate crisis” and are unable to prevent violations by non-market actors like China. 
    •  “We are charting new economic arrangements to deepen economic engagement with our partners, like the Indo-Pacific Economic Framework for Prosperity (IPEF); a global minimum tax that ensures corporations pay their fair share of tax wherever they are based in the world; the Partnership for Global Investment and Infrastructure (PGII) to help low- and middle-income countries secure high-standard investment for critical infrastructure; updated rules of the road for technology, cyberspace, trade, and economics; and ensuring the transition to clean energy unlocks economic opportunities and good jobs around the world,” the strategy reads. 
  • The document specifically mentions both the U.S.-European Union Trade and Technology Council and the IPEF initiative as central efforts to counteract Chinese and Russian influence economically and technologically. This follows recent comments made by the U.S. Trade Representative Katherine Tai, in which the ambassador outlined the need for inclusive economic growth and efforts to counteract the negative consequences of globalization. 
  • Further, in a set of published remarks, National Security Advisor Jake Sullivan emphasized his support of the Administration’s National Security Strategy, applauding “the President’s vision of a free, open, prosperous, and secure international order” with efforts to counter the climate change, food insecurity, and diseases, such as COVID-19. 

Supreme Court hears National Pork Producers Council v. Ross

  • On October 11, the U.S. Supreme Court considered a case brought by the National Pork Producers Council against California’s Proposition 12, a law that imposes California’s animal husbandry standards on livestock producers that wish to sell in the state, regardless of where the farm is located. The NPPC cited the “dormant commerce clause” as a key element of its case; this legal doctrine seeks to prohibit the implementation of state legislation that discriminates against or burdens interstate commerce. In a trade policy context, this is somewhat similar to a GATT Article III argument on national treatment. 
  • California accounts for 13% of national pork consumption with a heavy reliance on imports to source the meat. As such, opponents of Prop. 12 claim that the law would put an undue burden on the interstate sale of pork into California. The U.S. government argued in favor of the NPPC’s claims and asked the Supreme Court to move forward with the case. Proponents of the law claim that Prop. 12 does not only work to better animal welfare, but it also seeks to “phase out extreme methods of farm animal confinement, which also threaten the health and safety of California consumers and increase the risk of foodborne illness and associated negative fiscal impacts on the State of California.” Justice Gorsuch suggested that as the commerce clause falls under Article I, perhaps it should be Congress’ responsibility to resolve these interstate questions.
  • Several members of Congress have also weighed in on the dispute and the potential implications Prop. 12 could have on interstate commerce. In particular, Senate Agriculture Chair Debbie Stabenow (D-MI) sided with California’s argument with a letter to Secretary of Agriculture Tom Vilsack alongside Senator Dianne Feinstein (D-CA), Senator Cory Booker (D-NJ), and Senator Alex Padilla (D-CA). 
    • Despite the case’s initial focus on the pork industry, stakeholders speculate that the decision could have implications outside of agriculture to affect provisions regarding energy, wildlife, and more with stakes in interstate commerce. 
    • Should the Supreme Court require states to comply with Prop. 12, “there are hundreds, if not thousands, more local regulations of food safety, packaging, labeling, and production,” said a paper released by the Harvard Law School’s Animal Law Policy Program. 
  • The case is now awaiting a vote by the U.S. Supreme Court.

Blumenauer criticizes Colombian labor conditions

Earl Blumenauer, Chair of the U.S. House Ways and Means Trade Subcommittee
  • Chair of the House Ways and Means Trade Subcommittee Earl Blumenauer (D-OR) during his trip to Colombia last week issued comments on the lacking improvements in labor conditions displayed by the country under the Labor Action Plan of the U.S.-Colombia Trade Promotion Agreement. Given concerns, the representative called for the use of committee “tools” for a more inclusive economy alongside fellow subcommittee members Ron Kind (D-WI) and Brendan Boyle (D-PA) who also joined the delegation. 
  • During his visit, Rep. Blumenauer met with Colombian Vice President Francia Márquez and members of the Petro Administration to discuss “labor rights, environmental protections, and the redistribution of farming land, all as potential economic drivers,” according to an October 14 statement. In his comments, the representative revealed that several of the labor groups present cited issues with working conditions “in stark contradiction to the Labor Action Plan that is the foundation of our Free Trade Agreement.” Among the concerns were outstanding threats towards organized unions, poor working conditions, and lacking job security in Teleperformance call centers. 
    • In the statement, Blumenauer highlighted the countries’ joint commitment to democratic values and expressed his eagerness “to use the tools under the Ways and Means Committee’s jurisdiction to aid in a new economic chapter for Colombia – one that allows for inclusive success.”

Senators highlight violations of CAFTA-DR in Honduras

  • On October 14, members of the Senate Foreign Relations Committee Bill Hagerty (R-TN) and Ben Cardin (D-MD) issued a letter for increased pressure on Honduras to improve compliance under the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). In their remarks, the senators noted inconsistency with the country’s enforcement of commitments under CAFTA-DR and drew attention to the potential for investments in closer supply chains based in Honduras should compliance improve. 
  • Specifically, the senators highlighted concerns with the “legal guarantees” of U.S. investments in Honduran Economic Development and Employment Zones (a special provision created under the agreement). The ZEDEs have been “broadly unpopular, including with much of the private sector, and viewed as a vector for corruption,” according to a statement by the U.S. Department of State.  
    • According to the document, “rather than pursuing reforms or seeking dialogue with the ZEDE investors, by eliminating the frameworks without any regard for the protections afforded the investors under the U.S.-Honduras Bilateral Investor Treaty (BIT) or the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), the government has exposed itself to potentially significant liability and fueled concerns about the government’s commitment to commercial rule of law.”
  • Senators Hagerty and Cardin called for U.S. pressure on Honduras to protect investments in ZEDEs under CAFTA-DR, stating that expropriation on U.S. investments “would be regarded as a direct assault on the guarantees of CAFTA-DR and surely trigger a devastating loss of private sector confidence.” The Senators also hinted at potential “enhancements” to the 1962 Hickenlooper Amendment for threats to U.S. investments in the country. The U.S. has displayed increased interest in the investment climate in Honduras, with Secretary of State Antony Blinken announcing $3.2 billion “investment commitments from more than 40 companies to promote broad-based economic opportunity” in El Salvador, Guatemala, and Honduras. 
  • In addition to the U.S. and Honduras, the CAFTA-DR comprises of El Salvador, Guatemala, Costa Rica, Nicaragua, and the Dominican Republic.

USDA announces plan for poultry inspection in supply chains

  • Last week, the U.S. Department of Agriculture announced a proposal to target Salmonella in food. According to Deputy Undersecretary Sandra Eskin, the Food Safety and Inspection Service (FSIS) could begin unrolling proposed rules by mid-2023. Under the framework, the FSIS will:
    • Require Salmonella testing before animals enter processing facilities and incentivize companies to monitor for the disease throughout their supply chains
    • Improve testing and tracing processes in multiple areas of poultry processing
    • Create standards for Salmonella strains by recalling products that test above specified levels
  • According to federal data, more than one-fifth of Salmonella infections are sourced from poultry products. To meet its goals, the FSIS will need to reduce the infection rate by 25%. The agency will open a public meeting on November 3 for solicited public feedback. 
  • Several groups have voiced opposition to the proposal with the National Chicken Council stating its disappointment “that the agency has failed to use science and research to drive its regulatory policies.” According to the NCC, from July 2021 to June 2022, roughly 90% of chicken tested negative for Salmonella. The proposed regulation would significantly increase the frequency of inspections along supply chains for poultry and other products with the capacity to carry the disease, including fruits and vegetables.

Ambassador Tai attends International Council Conference 2022

  • U.S. Trade Representative Katherine Tai attended on October 13th, a virtual conference hosted by the Bretton Woods International Council to participate in a conversation with Dartmouth College professor Doug Irwin about “Shaping the future: Making multilateralism work.” During the discussion, Ambassador Tai alluded to the unfair competition present in the world economy and the current Administration’s efforts to counteract the negative impacts of globalization. 
    • “One of the things we have to contend with is a very changed global economy and also our own reflection on where our strengths and weaknesses are in that economy. So, one aspect of it is looking to engage in industrial strategies and industrial policies that we haven’t traditionally done as a way to correct for the challenges and pressures that we are feeling in particular in competing with a system like the Chinese economic system,” she stated. 
  • In this, Ms. Tai identified engagement with partners as a top priority for the U.S. and pivoted to address key challenges with China. She identified the large impacts associated with China’s rapid growth in the past few decades and outlined the Biden Administration’s dissatisfaction with China’s lacking implementation of the Phase One agreement. Despite challenges on this front, Tai drew attention to strides made in the bilateral relationship with the EU, particularly along steel trade and the resolution of Airbus disputes. 
  • With regards to the IPEF, Ambassador Tai identified opportunities to strengthen supply chains, invest in decarbonization and infrastructure, and promote good regulatory practices through taxes and anti-corruption efforts.

WTO

Tai addresses WTO on global economy

  • On October 13, U.S. Trade Representative Katherine Tai addressed the Geneva Trade Platform about the World Trade Organization (WTO), its important role in the world economy, and the need for it to adapt quickly to changing economic conditions. In her remarks, Ms. Tai reaffirmed the U.S. commitment to the WTO and discussed several key issues:
    • The need to address and enhance intellectual property protection through trade facilitation
    • The goal of bridging gaps in current and future negotiations
    • The prevention of forced labor on fishing vessels
    • The reform of the WTO monitoring function, negotiating pillar, and dispute settlement procedures
  • Ambassador Tai also met with Director-General of the World Trade Organization Ngozi Okonjo-Iweala to discuss the success of the 12th ministerial conference, the future of electronic commerce, and the second wave of negotiations surrounding fisheries subsidies. Prior to the meeting, the WTO held a retreat in which more than 200 officials gathered to discuss further negotiations on the Agreement on Fisheries Subsidies. 
    • The agreement prohibits the implementation of certain subsidies for the protection of fish stocks and seeks to meet the needs of fishers in less developed countries. It also encourages members to conduct talks regarding outstanding issues before the WTO’s 13th Ministerial Conference (MC13). 
  • The ambassador reiterated her commitment to promote reforms that will support American workers. 

U.S. beats its personal record for trade-distorting subsidies

  • The U.S. submitted its domestic support notification at the WTO Committee on Agriculture for 2020/21, highlighting the highest level of subsidies since the creation of the WTO. The product-specific support was slightly below last year’s notification, but non-product specific support was the highest on record and pushed the total trade-distorting subsidy level above last year’s (see chart below). The high level of payments primarily reflects the Coronavirus Food Assistance Program (CFAP) payments that were paid to producers of specific products, though the way these are calculated means that subsidies that are normally below a de minimis threshold (e.g. crop insurance premium payments) now count towards the total subsidy level for those commodities. For non-product-specific subsidies, the high level of subsidies reflected high payments under the Price Loss Coverage (PLC) program for Title I commodities and the sales-based payment calculations under CFAP 2.