TRADE UPDATE

Food & Agriculture
November 22, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

• U.S. – Indo-Pacific: Ambassador Katherine Tai and Japanese Minister of Trade and Industry Nishimura Yasutoshi met to discuss negotiating objectives for the Indo-Pacific Economic Framework and “expressed their support for an ambitious negotiating schedule going forward, with a focus on inclusivity and strong outcomes for all IPEF member countries.”
• USMCA: Senators Joni Ernst (R-IA) and Chuck Grassley (R-IA), sent a letter to U.S. Trade Representative Katherine Tai, urging the ambassador to “intervene” in the enactment of a Mexican ban on GM corn imports slated for January 2024. The Senators wrote that they, “formally request dispute settlement consultations under Article 31.4 of USMCA. If at the end of the consultation period, Mexico has not confirmed that it will reverse its ban, USTR should proceed to request the establishment of a dispute settlement panel.”
• Food Security: Ukraine, the United Nations, and Turkey announced a 120-day extension of the Black Sea Grain Initiative after Russia agreed to support the existing deal. The initiative will keep grains shipments flowing out of the region.
• U.S. – China: In its annual report, the U.S. – China Economic and Security Review Commission recommends that Congress and the President suspend normal trade relations with China if the country is found to violate its obligations under the WTO.
• Supply Chains: Inbound cargo containers moving through the L.A. port complex declined sharply, 26% lower in October compared to a year earlier. The October data reflect declining consumer demand for foreign goods, increased EU trade flows, and importers shifting transport routes to Gulf and East Coast ports.
• WTO: A coalition of 25 agriculture groups transmitted a letter urging U.S. Trade Representative Katherine Tai to push for trade talks on agriculture at the World Trade Organization. The agriculture groups urged USTR to use the 12th Ministerial (MC12) to “clean the negotiating slate and launch talks on agriculture post-MC12 that are balanced and comprehensive, including on market access.”

“Despite overtures to the Mexican government for nearly two years, there is little indication from the country’s leadership that it will adhere to its commitments under USMCA. The time has come for the Office of the United States Trade Representative (USTR) to intervene on this issue. I am respectfully calling on you to formally request dispute settlement consultations under Article 31.4 of USMCA.”

— Senators Joni Ernst (R-IA) and Chuck Grassley (R-IA) calling on Ambassador Katherine Tai to counter Mexico’s announced ban on GM corn imports.

U.S. – Indo- Pacific

U.S. – Japan to hold IPEF negotiations

• On Nov. 17, U.S. Trade Representative Katherine Tai and Japanese Minister of Trade and Industry Nishimura Yasutoshi met to discuss negotiating objectives for the Indo-Pacific Economic Framework and “expressed their support for an ambitious negotiating schedule going forward, with a focus on inclusivity and strong outcomes for all IPEF member countries.” The U.S. and Japan have the largest economies out of IPEF participants.
• During the meeting, Tai and Nishimura discussed the U.S. – Japan beef safeguard agreement and the future of Japan’s ethanol-use targets. Ambassador Tai emphasized the need to address climate change through investments in clean technologies, and the leaders spoke about provisions under the U.S. Inflation Reduction Act.
• Further, the U.S. will host the Asia-Pacific Economic Cooperation (APEC) forum in 2023 to discuss initiatives with several countries, including IPEF members Vietnam, Indonesia, Malaysia, South Korea, Singapore, Thailand, and New Zealand. Ambassador Tai highlighted her primary objectives for the APEC forum: “First, protecting the environment, and second, addressing shared challenges like supply chain disruptions and economic inequality.” The meeting will also discuss opportunities for trade in “lifting up women entrepreneurs and workers, helping small businesses grow, and unlocking economic opportunities for underrepresented parts of our populations,” according to Tai.
  • IPEF members include the U.S., Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam.

Adam Hodge comments on upcoming IPEF negotiations

• Following Australia’s announcement of the first round for Indo-Pacific Economic Framework (IPEF) negotiations to be held in December, Assistant U.S. Trade Representative for Media and Public Affairs Adam Hodge issued a statement in favor of the initiative and its implications on trade. In his remarks, Hodge expressed his support for the current approach to address “supply chains, clean energy, digital trade, and sustainable agriculture, among other important issues.”
  • Further, Hodge referenced the success of the IPEF ministerial in September and thanked “Australia’s Department of Foreign Affairs and Trade for hosting this negotiating round and we look forward to several days of constructive engagement with our partners.”

Tai meets with officials in Singapore

• U.S. Trade Representative Katherine Tai met with Singapore government officials on Nov. 14 to discuss the future of the bilateral trade relationship under the Indo-Pacific Economic Framework (IPEF). During her visit, Ambassador Tai met with Deputy Prime Minister and Minister of Finance Lawrence Wong, Minister of Foreign Affairs Dr. Vivian Balakrishnan, Minister of Trade and Investment Gan Kim Yong, Minister of State and Deputy Secretary General Desmond Tan, and Minister of Communications and Information Josephine Teo.
  • The ambassador emphasized the U.S.’ “commitment to an open, free, secure and prosperous Indo-Pacific Region” and praised initiatives aimed at technical assistance and economic cooperation through the Trade Pillar.

USMCA

Senators urge Tai to act on Mexican GM corn ban

• Senate Agriculture Committee members senators Joni Ernst (R-IA) and Sen. Chuck Grassley (R-IA), on Nov. 14, sent a letter to U.S. Trade Representative Katherine Tai urging the ambassador to intervene in the enactment of a Mexican ban on GM corn imports slated for January 2024. Currently, 92 percent of U.S. produced corn is genetically modified. In their remarks, the senators emphasized the threat posed to U.S. growers, stating that such a measure would breach Mexican commitments under USMCA. Further, the pair cites concerns with farmers’ ability to respond to the measure should the decree be enforced with current seed cycles set to circulate through the grain channels until 2025.
  • “Any interruption to [corn export] shipments will severely affect our farmers and the state’s economy and have dire economic consequences for the entire Corn Belt,” they said.
• The senators highlighted the ambiguity of the decree, calling on USTR to “formally request dispute settlement consultations under Article 31.4 of USMCA.” In their remarks, the senators referenced the findings of a study conducted by World Perspectives which estimates a $73.89 billion loss in economic output for the U.S. within a ten-year forecast. Further, the senators highlighted the current disruptions to global supply chains given the conflict in Ukraine. In this, they hold that “it is critical to remove arbitrary barriers to seed technology that supports resiliency throughout the agricultural value chain.”

Pending ruling for USMCA auto trade dispute

• A decision regarding the future of a U.S. auto trade provision is expected to be released by Dec. 14 under USMCA. To date, an unofficial copy of the report has been circulated to the three parties for a chance to provide final input for the case. In the dispute, Canada and Mexico hold that the U.S. has unilaterally imposed provisions for auto rules of origin with specifications about the number of components in a vehicle that can be produced in Mexico and Canada while still qualifying for duty-free treatment under USMCA.
  • President of the American Automotive Policy Council (AAPC) Matt Blunt noted that the organization will “encourage a thoughtful but expeditious resolution as lack of clarity on how this part of the ROO will operate only adds to the already high level of uncertainty faced by our industry” following the report’s release.
• Under the provision, cars and light trucks would have to contain “regional value content” of at least 75 percent to waive U.S. duties. The measure also applies to certain parts used to make components, such as engines and suspension systems.

U.S. – China

Tai discusses trade with Chinese Commerce Minister

• On Nov. 18, U.S. Trade Representative Katherine Tai met with Chinese Minister of Commerce Wang Wentao on the outskirts of the Asia-Pacific Economic Cooperation (APEC) summit. During the discussion, Ambassador Tai outlined her priorities for APEC and emphasized the importance of communication between the U.S. and the People’s Republic of China.
• The ambassador also met with Thai Commerce Minister Jurin Laksanawisit to discuss IPEF negotiating objectives for the meetings in Australia and South Korean Trade Minister Ahn Dukgeun who voiced concerns about the EV tax credit under the Inflation Reduction Act.

U.S. congressional commission calls for halt of China trade

• The U.S. – China Economic and Security Review Commission has called for Congress and the President to suspend normal trade relations with China if Beijing is found to have violated its obligations under the WTO. In its annual report, the commission held that “If the report concludes that China has failed to comply with the provisions agreed to for its accession to the WTO, Congress should consider legislation to immediately suspend China’s Permanent Normal Trade Relations treatment.” The commission is urging the Biden Administration to conduct a 90-day review of China’s WTO compliance regarding the country’s trade status. Further, the report advocates for use of the Defense Production Act to re-shore production of pharmaceutical goods and decrease U.S. dependence on China.
  • Kim Glas, vice chairwoman of the commission said, “There is a cost associated with the predatory trade practices of China on American workers and industries that has been well documented since their accession to the WTO.”  She continued, “We’re asking Congress to do a systematic and thorough review of that and determine what would normalize trade relationships look like.”
  • The Commission’s full set of recommendations are detailed here.

Xi lashes at U.S. trade moves

• Chinese President Xi Jinping spoke on Nov. 14 against recent attempts by the U.S. to target the Chinese economy through restrictions on technology access and trade barriers along supply chains. In a readout following a recent meeting between President Biden and President Xi, the Chinese government released a statement, stating “Suppression and containment will only strengthen the will and boost the morale of the Chinese people.” Further, President Xi condemned actions by the U.S. which “run counter to the principles of market economy and undermine international trade rules.”
  • China’s assertions mirror those of the U.S. and other countries regarding the PRC’s loose regulation on intellectual property protection and underlying industrial subsidies set to affect global prices.

U.S. – U.K.

U.K. remains open to bilateral FTA talks

• The United Kingdom’s new Secretary of State for International Trade, Kemi Badenoch, signaled the U.K. remains poised to returning to the negotiating table to pursue a bilateral FTA. Speaking at an event hosted by the Cato Institute last week, Secretary Badenoch said, “What do we want from the United States? We have made no secret we want a comprehensive FTA.” Badenoch acknowledged that work remains for both trade partners prior to formally convening FTA talks, including deepening trust for trade and trade agreements, and countering rising protectionist sentiment. She noted the global pandemic, Russia’s invasion of Ukraine and inflationary pressures around the world are contributing to greater concerns regarding economic security and the role of trade in solving such challenges.

Food Security

Black Sea Grain Initiative extended

• Ukraine, the United Nations, and Turkey last Thursday announced a 120-day extension of the Black Sea Grain Initiative after Russia agreed to support the existing deal. The initiative will keep grain shipments flowing out of the region, particularly from three Ukrainian ports disrupted by Russia’s invasion. The deal extends the agreement reached last summer that was set to expire on Nov. 19, to which Russia threatened multiple times to abandon. In a statement, U.N. Chief António Guterres welcomed the agreement “by all the parties” and asserted that the U.N. is “fully committed to removing the remaining obstacles to exporting food and fertilizers from the Russian Federation.”
  • Turkish President Recep Tayyip Erdogan said in a tweet, “With the delivery of more than 11 million tons of grains and foodstuffs to those in need via approximately 500 ships over the past four months, the significance and benefits of this agreement for the food supply and security of the world have become evident.”
  • Ukrainian President Volodymyr Zelensky confirmed via tweet that the grain deal would be extended.

• Following the announcement that the Black Sea Grain initiative will be renewed for the next 120 days, global grain prices fell, with wheat priced at $7.96 per bushel (a 2.6 percent decrease) and corn priced at $6.56 per bushel (down 1.4 percent).

USDA urges WIC reform

• On Nov. 17, the U.S. Department of Agriculture proposed an expansion of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to bolster access to fruits, vegetables, dairy, and other products not currently provided by the program. The proposal will be open for comment from Nov. 21 to Feb. 21, 2023 and seeks to permanently fix the program extension facilitated under the American Rescue Plan. Under the provision, limitations on monthly juice and milk will be reduced or removed with added access to substitutes for yogurt and cheese, canned fish, and canned beans.
  • Secretary of Agriculture, Tom Vilsack praised the efforts, stating that the department has “undertaken a comprehensive effort to modernize, to improve and address issues in the program so that we are making it more appealing to eligible households and then also conducting aggressive outreach to make sure that eligible households participate.”

Biden Nominees

Ag nominees continued hold in approvals

• Biden nominees Alexis Taylor for USDA Undersecretary for Trade and Foreign Agricultural Affairs, Jose Emilio Esteban for USDA Undersecretary for Food Safety, and Doug McKalip for Chief Agriculture Negotiator at the Office of the U.S. Trade Representative are awaiting final votes on the Senate floor before assuming office. When asked about the status of the nominations, Senate Agriculture Chair Debbie Stabenow revealed that the committee is “working on it.”
• However, the candidates have faced roadblocks to their progression, with two separate holds on each nominee. Senators Bill Hagerty (R-TN), Dan Sullivan (R-AK), and Cory Booker (D-NJ) have placed holds, citing concerns with USDA programs. On one side, Senator Hagerty voiced concerns regarding new USDA oversight on the walking horse industry, while Sullivan pointed to issues with logging restrictions in Alaska’s Tongass. Further, Senator Booker raised issues with Esteban’s written responses relating to food labeling requirements. Senator Bob Menendez also denied recent rumors of the lift regarding his hold on McKalip’s nomination, continuing “to hope for substantive actions by USTR to address his longstanding transparency concerns at the agency.”

Supply Chains

West coast ports inbound flows plumet

• Inbound cargo containers moving through the L.A. port complex declined sharply as consumer demand abated for foreign goods and importers shifted transport routes to Gulf and East Coast ports. Historically the busiest U.S. port system (L.A. and Long Beach ports), the complex saw 630,231 loaded inbound containers in October, down 26% from the same month a year ago and the lowest volume of goods coming into the ports since May 2020. However, container volumes remained above pre-pandemic levels. The port of Long Beach alone moved approximately 8 million units during the first 10 months of 2022, up 1.5% from the same period in 2021.
  • In comparison, overall U.S. container imports fell 13% in October from a year earlier and remained above the pre-pandemic levels two years ago (October 2019) according to a report by Descartes Datamyne, a supply chain software and database firm. Specifically, inbound container volumes from China fell 5.8% from September to October and were down 22.8% from the 2022 high in August.

Trade Policy

Rep. Smith calls for TPA renewal

• U.S. Representative Adrian Smith (R-NE), in his bid for Chair of the House Ways and Means Committee, called for the House of Representatives to “lead” on trade by reinstating the Trade Promotion Authority under a Republican majority. In his remarks, Rep. Smith held that the provision would allow for a bipartisan consensus on trade objectives for renewed free trade agreement negotiations with countries, including Kenya and the U.K.
  • At the same time, Smith acknowledged the challenge of pursuing TPA, stating “Even getting TPA done, not to mention carried out once it becomes law, is tedious. It involves a very diligent effort” by all parties. In this, he cites challenges with the president who he believes to be “so timid on the trade issue that it’s almost like he’s frozen in place.”
• Contender for the chair position, Rep. Jason Smith (R-MO) is also calling for the renewal of the TPA. In his remarks, the representative casted doubt on the Biden Administration’s willingness to cooperate, stating “We need to have a partnership with this administration. If they’re not willing to negotiate, we can’t force them to negotiate.” He furthered his comments in proposing that the committee “start having conversations with other countries, and maybe [the] administration will come to the table and actually feel like there’s something that they need to do.”

Lawmakers seek clarification following USDA testimony in sugar antitrust case

• Following the testimony of an official from the U.S. Department of Agriculture regarding a Department of Justice (DOJ) sugar anti-dumping case, Senators Elizabeth Warren (D-MA) and Cory Booker (D-NJ) called for an ethics review in a letter to U.S. Secretary of Agriculture, Tom Vilsack. In their letter, the senators question the testimony of USDA Sugar Administrator Barbara Fecso which appears to “greenlight a corporate merger that is likely to increase sugar prices.”
• As such, the senators hold that the testimony likely violates ethics rules for federal employees and ask that USDA “provide details about the clearance and conflict of interest processes for employees to testify; to provide compensation Fecso received for her testimony; for details of any of Fecso’s previous testimony and if Fecso will be recused from future sugar-related USDA matters,” according to PoliticoPro.

WTO

Agriculture groups push for WTO ag trade discussions

• A group of 25 agriculture groups transmitted a letter urging U.S. Trade Representative Katherine Tai to push for trade talks on agriculture at the World Trade Organization. The groups also called for the U.S. to work for resolution in the dispute settlement system at the WTO stating, “Now more than ever, international agricultural trade and global food security depend on continued U.S. leadership at the WTO.”
• In their comments, the groups claimed that the discussions would allow for collaboration on market access, export competition, trade liberalization, and biotechnology in climate change. As such, “Indefinitely extending the block on Appellate Body appointments or agreeing to reforms that weaken dispute settlement will be detrimental to U.S. agricultural producers and future discussions on agricultural trade issues,” the groups revealed.

WTO hosts 22^nd AMIS Global Food Market Information Group

• Deputy-Director of the WTO Anabel González began the meeting by highlighting the critical role of the Agricultural Market Information System (AMIS) in “bringing together governments, international organizations, and the private sector, always championing market transparency and policy coordination to effectively counter instances of extreme food price volatility” over the last eleven years. In her remarks, the Deputy-Director highlighted the main goals of AMIS, which include actions to address:
  • Market and trade disruptions related to food security
  • Public dissemination of market outlook reports
• As such, Deputy-Director González emphasized the need to generate and distribute accurate trade statistics to eliminate overlap and uncertainties and allow for informed policy decisions. She also announced that the WTO’s Agri-Food Business Days event will be held from Dec. 8-9 to address concerns from the “agri-food business community, farm leaders, and several grain, feed, and fertilizer associations, on the obstacles to trade, with a focus on the resilience of global agricultural value chains; food standards; trade facilitation, digitalization, e-commerce; as well as environmental sustainability.”