TRADE UPDATE

Food & Agriculture
October 26, 2021

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

  • U.S. – China: Several lawmakers are pushing for legislation to counter China’s coercive economic practices. The legislation requires the Biden administration to establish an interagency task force to investigate China’s economic practices.
  • USMCA: Mexico’s Agriculture Secretary Villalobos said Mexico would allow imports of U.S.-produced GMO corn, responding to increasing concern from U.S. officials and agriculture groups regarding a Presidential decree calling for the ban of GMO corn by 2024 in Mexico. The U.S. Customs and Border Protection (CBP) issued a withhold release order on certain tomatoes imports from Mexico citing violations of workers’ rights in the import supply chain.
  • Section 301: A group of Senate Democrats called on Ambassador Tai to impose Section 301 duties on all imported finished personal protective equipment (PPE) to facilitate greater domestic production. USTR recently re-opened the tariff exclusion process for Section 301 tariffs on China.
  • Section 232: Ambassador Katherine Tai expressed optimism in reaching a solution with EU officials in the Section 232 steel and aluminum trade dispute by the November 1st informal deadline.
  • WTO: Ambassador Tai signaled a more open stance towards the WTO and necessary reform. Tai affirmed the U.S. commitment to the WTO and the U.S. vision to make the WTO more relevant for the needs of regular people.

“The Biden-Harris Administration believes that trade — and the WTO — can and should be a force for good that encourages a race to the top and addresses global challenges as they arise.”

— Ambassador Katherine Tai, remarks at the WTO

China Trade

  • Several lawmakers are pushing for legislation to counter China’s concerning economic practices. Reps. Ami Bera (D-CA) and Ann Wagner (R-MO) last week unveiled a bill that would establish an interagency task force to craft and implement a government strategy to counter what they call China’s “coercive economic measures.” The U.S. has “seen the People’s Republic of China (PRC) Government increasingly use nefarious and coercive economic practices to punish countries, private entities, and organizations for pursuing policies that Beijing deems counter to its interests,” Rep. Bera said in a statement. “As China continues to threaten our partners in the Indo-Pacific and our own national security and economic well-being with its coercive measures, the U.S. government needs to better understand Beijing’s tactics.” The legislation would direct the Biden administration to establish within 180 days of the bill’s enactment an interagency task force charged with providing a host of information about China’s “economic coercion” practices as well as U.S. responses to these actions. The task force would include the U.S. Trade Representative, according to the “Countering China Economic Coercion Act.”

USMCA

  • In a meeting in Iowa with USDA Secretary Vilsack, Mexico’s agriculture minister Victor Villalobos said the country would not limit imports of genetically modified (GMO) corn from the U.S. “We will continue requiring and demanding yellow corn from the United States,” Villalobos told reporters, according to Reuters. He noted that Mexico depends on yellow corn “for agro industries.” He confirmed that Mexico would not allow the cultivation of GMO corn but would allow imports from the United States. In 2020, Mexico, the second largest market for U.S. corn producers, imported more than 16 million tons of corn from U.S. suppliers, almost all of it grown from GMO varieties.
Troy Miller, Acting CBP Commissioner
  • Based on evidence of forced labor, the U.S. Customs and Border Protection (CBP) issued a withhold release order (WRO) on tomatoes produced by a Mexican grower last week. In a statement the CBP said it found “abuse of vulnerability, deception, withholding of wages, debt bondage, and abusive working and living conditions,” at the tomato farm – Agropecuarios Tom S.A. de C.V., and Horticola. According to CBP, Mexico in October 2020 took action against the same farm over forced labor concerns, “demonstrating the Mexican government’s shared commitment to protecting the human rights of workers,” the agency said. Acting CBP commissioner Troy Miller, said that the USMCA facilitated a “strong framework” for the work with North American trade partners. “We trust that the foundations we’ve built with our Mexican partners will allow for a collaborative and multi-lateral response to forced labor enforcement actions within North American supply chains,” he said.
  • As reported earlier, Mexican regulatory authorities have rejected a new variety of GMO corn, developed by Bayer, for the first time. According to Reuters, Mexico’s Federal Commission for the Protection against Sanitary Risk (COFEPRIS) rejected a Bayer’s permit for a new GMO corn variety, based on a “precautionary principle,” noting the new seed variety was designed to tolerate weed-killer glyphosate, a widely used herbicide considered dangerous by COFEPRIS. The decision by COFEPIRS was not released publicly but was confirmed by Bayer and other sources familiar with the issue.
  • Bayer warned the COFEPRIS decision could have a “devastating impact” on Mexican supply chains. The company emphasized that GMO crops have undergone more safety tests than “any other crop in the history of agriculture” and are deemed safe. Rep. Adrian Smith (R-NE) added his concerns stating, “The rejection of this permit in conjunction with the decree banning glyphosate reinforces the direction President López Obrador’s administration plans to take Mexico.” He continued, “These policies, which are not based on science, will prove detrimental to American and Mexican producers and consumers if they continue.”

COVID-19 Developments

  • A survey of economists suggest that global inflation pressures may ease in the first half of 2022, though supply chain constraints are driving inflation at an unexpectedly fast pace. One potential threat to slowing inflation is an elongated resurgence of demand as lockdowns end, and supply chains disruptions are compounded.

Section 301

Sherrod Brown, U.S. Senator (D-OH)
  • A group of Senate Democrats are urging the Administration to impose Section 301 duties on all imported finished personal protective equipment (PPE) to facilitate greater domestic production. In a letter to Ambassador Tai, the senators said that Section 301 tariffs should be imposed on all imported finished PPE and key raw material inputs, including single-use N95 and KN95 masks, reusable and surgical masks and surgical gowns. “Rather than providing relief to Chinese-made products, we should invest in and support our domestic manufacturers,” the senators wrote. The letter was led by Sens. Sherrod Brown (D-OH) and Tammy Baldwin (D-WI) according to a press release. The letter continued, “Extending the Section 301 tariff exemption on imported essential items manufactured in China would undermine current U.S. manufacturing investments, discourage future domestic investments in PPE production, and harm the national security and economic interests of the United States.” The Senators’ request comes as the Biden administration has re-opened the Section 301 tariff exclusion process under its realigned China trade policy announced by Ambassador Tai earlier this month. 
  • USTR recently re-opened the tariff exclusion process for Section 301 tariffs against China. The comment period closes on December 1st, according to the USTR announcement. The resurrected tariff exclusion process was a major tenant of USTR’s newly revealed China trade strategy, announced last week by Ambassador Tai. Of the more than 2,200 product exclusions that were granted by USTR during the Trump administration, only 549 (or 25%) were ultimately extended beyond their initial expiration date. With the exception of exclusions related to the COVID-19 pandemic (see below), all of these product exclusions have now expired.

Section 232 Investigations

  • Ambassador Katherine Tai expressed optimism in reaching a solution with EU officials in the Section 232 steel and aluminum trade dispute. “The conversations are intensive,” Ms. Tai said speaking to reporters in Brussels.  She added, “Let’s say I’m optimistic.” In line with EU officials and representatives of the European Steel Association (EUROFER), Ms. Tai stressed the importance of reaching an agreement quickly. Tai argued that EUROFER could be a catalyst in reaching a deal and “reiterated that the United States’ proposal would ensure the long-term viability of the American and European steel and aluminum industries and strengthen the transatlantic relationship between the US and EU,” according to a readout by the agency.
  • Last May, the EU delayed its scheduled hike in retaliatory tariffs, originally scheduled for June 1st on $4 billion in U.S. exports to Europe, countering the Trump-era Section 232 steel and aluminum tariffs. The EU suspended the tariff increase until January 1, 2022, to provide more room for negotiating a solution to the transatlantic trade dispute.
  • The Tariff Reform Coalition, a cross-industry coalition urged Congress to pass recently reintroduced legislation to reform the use of national security as justification for imposing tariffs. In a letter to Senators, the group stated, “We write to urge your support for the Bicameral Congressional Trade Authority (BCTA) Act of 2021 (S.2934), which was introduced on October 5, 2021.”  “The undersigned organizations of the Tariff Reform Coalition represent many of the U.S. manufacturers, exporters, retailers, agricultural and food producers, and other supply chain stakeholders adversely affected by the Section 232 tariffs and quotas on imported steel and aluminum products,” the groups wrote.

U.S. – U.K. Trade

Mike Lee, U.S. Senator (R-UT)
  • Senator Mike Lee (R-UT) on Thursday asked the Senate to pass his resolution supporting a free trade agreement between the U.S. and U.K. Senator Lee has pushed for the bilateral trade agreement for many years, citing both national benefits for the agreement and state level benefits for Utah, with the U.K. being Utah’s largest export market. During his speech he discussed the historical special relationship between the U.K. and the U.S. and spoke of the benefits of continued cooperation. He called for future negotiations between the two countries to work on continuing the trade talks started under the Trump Administration and to focus on “clear opportunities for both countries to further strengthen economic ties.”
  • As noted earlier, interim U.S. ambassador to the U.K. Philip Reeker was asked repeatedly about a potential U.S.-U.K. trade deal and the future of U.S.-U.K. trade in general during a BBC interview. Ambassador Reeker responded that the U.K. should not focus on a “headline trade agreement” but instead put focus more broadly expanding trade between the two countries. The diplomat continued, saying “Trade deals are part of a longer process, but we should focus on what we do have, which is an enormous level of trade and two-way investment.” He used the example of removing U.S. trade barriers for British lamb exports as an example of trade progressing separate from an official trade deal. On the difficulties of achieving a trade deal, the ambassador referenced Congress, saying “A trade deal involves the Congress which is far more complex than anything we do at the executive level. There is a lot going on before Congress at the moment.”

U.S. – EU Trade

  • As reported earlier, stemming from the U.S.-EU Trade and Technology Council (TTC) meetings, the Commission has set up an online consulting system on its online “Futurium” platform in order to collect stakeholder’s input related to the TTC. Stakeholders that can contribute include but are not limited to businesses, think tanks, labor, non-profit and environmental organizations, academics and other parties. Interested parties can use the platform to receive information and updates on the progress of different working groups. Executive Vice-President and Commissioner for Trade, ValdisDombrovskis, said, “The EU – US Trade and Technology Council is a critical initiative to cement transatlantic leadership on these key topics. We want it to become a successful platform with a broad stakeholder’s involvement by listening to everyone who has a stake in these issues.”

CPTPP

  • Japan’s foreign minister has called on the U.S. to join the CPTPP in a move that he says would support stability in the Ind-Pacific region. The minister said, “It’s important for the U.S. to be engaged in creating regional economic order, including by returning to [the negotiating table for] the TPP,” in a video message to an event hosted by the Japan Center for Economic Research and Japan Institute of International Affairs. U.S. ambassador to Japan Raymond Greene spoke on China’s recent CPTPP application, saying “China’s nonmarket trade practices and use of economic coercion that cause harm to workers and businesses around the world to factor into any evaluation of its potential for accession [to CPTPP].” Greene in his remarks also supported Taiwan’s CPTPP application.
  • As reported earlier, Sen. Tom Cotton (R-AR) called on Ambassador Katherine Tai to utilize provisions of the USMCA as “leverage” to block China’s entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Cotton sent a letter to Ambassador Tai urging USTR to use all measures under USMCA to  preclude China’s entrance into the CPTPP.  “Fortunately, you are in a position to take action,” he wrote. “I urge you to remind Canada and Mexico of their obligations under the USMCA.” USTR also should notify the two countries that “the United States will use all mechanisms available to us in the USMCA to ensure China not be allowed to join the CPTPP,” Cotton added.  
  • Article 32.10 of USMCA allows a member country to terminate USMCA if another party entered into a free trade deal with a “non-market country” and also requires that USMCA members notify one another of their intent to begin free trade agreement negotiations with non-market economies 90 days before commencing discussions.
  • South Korea was the most recent country expressing interest in joining the CPTPP, adding to the growing list of countries.  South Korea’s trade minister, Yeo Han-koo, discussed the country’s possible future within the CPTPP, stating that the government is “seriously and actively considering” joining the free trade deal. If South Korea were to join, it would boast the third largest economy in the agreement, behind Japan and Canada. This discussion follows the recent formal applications of the U.K., China, and Taiwan.
  • Ambassador Tai’s recent comments were non-committal when questioned about the U.S. warming to the concept of entering or re-engaging in the CPTPP during the speech on China trade policy. Rather she mentioned continued U.S. engagement in the Indo-Pacific region and stressed the importance of the region to U.S. trade.

Biden Transition

  • The Senate Finance Committee has scheduled its confirmation hearing for Maria Pagán, President Biden’s pick to serve as ambassador to the World Trade Organization for Oct. 26th. Late last Friday, the Committee reported adding a second deputy U.S. Trade Representative nominee, Christopher Wilson. The Committee will vet Wilson, the president’s pick to serve as the first-ever chief innovation and intellectual property negotiator at USTR, along with Maria Pagán. The other Deputy USTR nominee Elaine Trevino, Chief Agricultural Negotiator, is awaiting scheduling of a confirmation hearing (see Biden Nominee Tracker below).

WTO

  • During China’s eighth WTO trade policy review multiple nations derided the country’s trade and economic policies, a sharp contrast to the relatively warm reception the country received in the 2018 trade policy review. Australia and Canada made note of the multiple restrictions China has imposed on those countries’ imports, while the U.K. spoke against the use of forced labor within China. The U.S. referred to the regret that China’s 2001 accession to the WTO has not delivered the envisioned change within its economy, saying that “Members expected that the terms set forth in China‘s protocol of accession would permanently dismantle existing Chinese policies and practices that were incompatible with an international trading system … But those expectations have not been realised.”
  • Ambassador Tai signaled a more open stance towards the WTO and necessary reform. In her speech, on the WTO and the forthcoming 12th Ministerial (MC12), Ambassador Tai affirmed the U.S. commitment to the WTO. She also discussed the U.S. vision to make the WTO more relevant for the needs of regular people and the importance of countries working together to make the WTO an organization that empowers workers, protects the environment a promotes equitable development. She emphasized the need for a more flexible WTO, a collective approach to problems and the need for transparency and inclusiveness. She noted importance of tangible outcomes from the MC12. Highlights from Ambassador Tai’s speech include: 
    • Despite the ravages of the global pandemic, WTO rules have kept global trade flowing and fostered transparency with respect to measures taken by countries to respond to the crisis.
    • Efforts to reform the WTO should focus on three key pillars: bringing “vitality” back to the negotiations, improving the WTO monitoring function and the importance of transparency, and reforming dispute settlement to “secure acceptable resolutions” and “provide confidence that the system is fair.”  
    • By the upcoming ministerial conference, the United States is seeking an agreement on trade and health issues, and the conclusion of the longstanding fisheries subsidies negotiations.

Ambassador Tai stated, “We believe we may succeed in reforming the negotiating pillar if we create a more flexible WTO, change the way we approach problems collectively, improve transparency and inclusiveness and restore the deliberative function of the organization,” referencing earlier calls for WTO reform. WTO Director-General Ngozi Okonjo-Iweala welcomed the comments from Ambassador Tai, “strongly supporting the need for WTO reform.”

Biden Nominee Tracker