TRADE UPDATE

Food & Agriculture
November 29, 2022

By Michael Anderson, Vice President of Trade and Industry Affairs

HIGHLIGHTS

• U.S. – Indo-Pacific: Last week, Japan ratified the U.S.-Japan trade deal regarding the beef safeguard mechanism, raising the beef safeguard trigger levels under the U.S.-Japan Trade Agreement. The ratification will permit the expansion of U.S. beef exports to meet Japan’s growing demand for high-quality beef, according to a USTR press release.
• USMCA: Mexican President Andrés Manuel López Obrador suggested that the Mexican government would not be able to fully ban GM yellow corn imports from the U.S. In his remarks, the President stated that “we have limited the use, but we cannot cancel it outright, because we need the option.” President López Obrador emphasized that the Administration is “looking at yellow corn, primarily used as livestock feed” while Mexico relies on its domestic production of white corn for human consumption.
• U.S. – China: The Office of the United States Trade Representative (USTR) announced another extension of the COVID-related product tariff exclusions in the China Section 301 Investigation. In a press release, the agency reported that “The exclusions were previously scheduled to expire on November 30, 2022. In light of the continuing efforts to combat COVID, the exclusions have been extended for an additional 90 days, through February 28, 2023.”
• WTO: Last week, WTO members agreed on a food security work program stemming from the 12th Ministerial Conference’s (MC12) declaration on the emergency response to food insecurity. As outlined in the MC12 declaration, paragraph eight, WTO members will proceed to “consider the needs of LDCs … to increase their resilience in responding to acute food instability.”

“We have a lot of work ahead, but we also have an important opportunity here to choose a path for inclusive, equitable growth, and to forge a new tomorrow for our people and for our planet, to restore confidence in the global system by demonstrating that our work can build economies from the bottom up and the middle out.”

— Ambassador Katherine Tai, remarks on trade opportunities at an APEC press conference, Nov. 19.

U.S. – Indo- Pacific

Japan formalizes beef safeguard agreement

• Last week, Japan’s Diet formally ratified the U.S.-Japan trade deal regarding the beef safeguard mechanism, which finalizes the agreement. The amended beef safeguard protocol enhances the beef safeguard trigger level under the U.S. – Japan Trade Agreement with a higher safeguard level, permitting U.S. producers and exporters to meet Japan’s growing demand for high-quality beef.
  • USTR Katherine Tai said, “The protocol will ensure our farmers and ranchers continue to have access to one of the world’s most dynamic markets,” She continued, “We are excited that Japan’s consumers can enjoy high-quality U.S. beef that is a staple of our agricultural industry. The Protocol represents a foundational pillar of our bilateral trade relationship – and I am grateful to our producers and stakeholders who helped make it possible.”
  • According to a USTR press release, “In 2021, the United States was the top beef exporting country in the world, with global sales of beef and beef products valued at over $10 billion. Exports of U.S. beef to Japan totaled almost $2.4 billion in 2021, with Japan representing the United States’ second largest beef export market.”

USMCA

AMLO reveals possible concessions on GM corn ban

• President Andrés Manuel López Obrador during a press conference on Nov. 22, admitted that the Mexican government would not be able to fully ban GM yellow corn imports from the U.S. He stated that “we have limited the use, but we cannot cancel it outright, because we need the option.” The president revealed that the administration is “looking at yellow corn, primarily used as livestock feed” while Mexico relies on its domestic production of white corn for human consumption.
  • At the same time, President Obrador emphasized his commitment to national health and rejected the notion that U.S. pressure would prevent the ban from coming into effect.
• The proposed ban would effectively cut corn imports from the U.S. in 2024, risking increased inflationary pressure in the country. Ken Smith Ramos, partner at AGON, recently commented on the situation, stating “Trying to restrict imports of GMO corn — it’s really Mexico shooting itself in the foot.” While President Obrador’s final decision regarding the scope of the provision remains unclear, Mexican Secretary of Agriculture, Victor Villalobos has worked to reassure U.S. stakeholders that the ban would not block total imports of U.S. genetically modified corn upon implementation.

Brazil and Argentina side with U.S. over GM corn ban

• Members of the international group MAIZALL, comprised of corn farmers from the U.S., Argentina, and Brazil, have called for increased opposition to the proposed Mexican biotechnology ban. Participants hold that the implications of the decree would be severely damaging to the regional economy, with most corn production in the three countries conducted using biotechnology. Producers worry that there is simply not enough supply of non-GM corn to facilitate the shift.
• According to MAIZALL director John Linder, “The U.S., Brazil and Argentina feel they have the responsibility to supply the world with their needs, and they are doing that, but they are also using the same production practices to achieve those goals.” With MAIZALL representing over 80% of total corn exports, the issue has been lifted to the top of current agendas, particularly as concerns of rising food insecurity have taken center stage.
  • Many U.S. officials have cited a lack of understanding about the implications of the ban as a key reason for the Mexican government’s insistence on the provision. At the same time, there is still confusion surrounding the extent of the decree and whether it will apply to animal feed or solely human consumption, an issue keeping industry stakeholders on edge as they plan for future crop cycles.

U.S. – China

USTR extends COVID-19 tariff exclusions

• Last week, the Office of the United States Trade Representative announced another extension of the COVID-related product exclusions in the China Section 301 Investigation. In a press release, the agency reported, “The exclusions were previously scheduled to expire on November 30, 2022. In light of the continuing efforts to combat COVID, the exclusions have been extended for an additional 90 days, through February 28, 2023.” The exclusions cover 81 medical-care products and were initially granted on December 29, 2020.  

Food Security

Black Sea Grain Initiative extended

• As reported earlier, the Black Sea Grain Initiative was extended 120 days 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.”

Supply Chains

Ag groups and shippers prepare for potential rail strike

• With the threat of a looming rail strike following the rejection by several rail unions for the enforcement of a new agreement, railroads have begun to consider restrictions on shipping materials to prevent volatile or hazardous materials from sitting idle in rail cars should the strike be realized. Strikes could begin as early as Dec. 9, with the first self-help period ending at the beginning of the month. To date, eight of the rail unions have ratified the agreement, with four abstaining.
• The threat of the rail strike is especially serious following the recent harvest season. Should the railroads close, agriculture shippers would be forced to turn to trucks and ships to carry their goods to consumers. Low water levels on the Mississippi are also exacerbating the issue, with many ships being forced to decrease their carrying capacity in order to remain afloat.
  • According to American Chemistry Council Senior Director of Transportation and Infrastructure, Jeff Sloan, “It’s only possible for certain products and certain customers. If all your infrastructure is built around rail, it may not be feasible to shift to trucking even if there was trucking capacity to be found.”
• In response, agriculture groups have been pushing for action by the U.S. government to intervene before the Dec. 5 deadline. In their arguments, the groups argue for the protection of food and agribusiness supply chains. President and CEO of the National Grain and Feed Association Mike Seyfert declared that the strike “would be catastrophic for the U.S. economy.”

U.S. pushes for end to Canadian Freedom convoy blockades

• Canadian Prime Minister Justin Trudeau, earlier this year, invoked ‘Freedom Convoy’ blockades to break up the occupation of Ottawa. The act essentially served to ban travel to protests and freeze bank accounts. Since the enactment of the provision, voices from Washington, DC have been calling for an end to the blockades in an effort to free trade flows.
• In February, Director of the National Economic Council Brian Deese expressed concern about the situation stating that the blockades threatened a shutdown for “all of their northeaster car plants.” Given the tight integration of Canadian and U.S. markets, Transport Canada estimated that the blockades posed C$3.9 billion in halted trade, according to PoliticoPro. Further, President Biden emphasized that “this is a shared problem,” negating the potential for U.S.-imposed protectionist measures to counter the blockades. Likewise, U.S. Secretary of Transportation Pete Buttigieg also highlighted the need for constant communication with Canada on this issue until a resolution could be found.

Trade Trends

Goods barometer decreases

• On Nov. 28, the WTO released its latest edition of the Goods Trade Barometer, revealing an overall decrease in goods trade. The barometer indicates lessened trade growth projections for the remainder of 2022 and the beginning of 2023, citing low global demand as a key factor to the trend.

Trade Policy

U.S. bans sugar imports from Dominican producer

• U.S. Customs and Border Patrol (CBP), last week, announced that it would block sugar imports originating from the Dominican Republic due to allegations of forced labor. In its announcement, CBP held that “This Withhold Release Order demonstrates CBP’s commitment to protect human rights and international labor standards and to promote a fair and competitive global marketplace.”
• The company in question, Central Romana Corporation, is an agro-industrial and tourism company based in the Dominican Republic; it serves as one of the country’s largest sugar exporters. Further, the Dominican Republic is one of the largest suppliers of sugar to the U.S. market, with expanded access under the U.S. – Central America-Dominican Republic (CAFTA-DR) Free Trade Agreement.
  • Representatives Earl Blumenauer (D-OR) and Dan Kildee (D-MI) have long emphasized the need to address labor abuses in the Dominican sugar industry, holding that major players employ “arduous working and living conditions” under “a culture of fear.” In September, the U.S. Department of Labor included sugar imports from the Dominican Republic on the List of Goods Produced by Child Labor or Forced Labor.

USDA trade mission to Spain

• From Nov. 29 to Dec. 2, U.S. Department of Agriculture representatives and 32 agribusiness groups will meet with prospective customers in Spain and Portugal to discuss potential for new trade opportunities in the countries. Officials from Alabama, Indiana, Maine, Massachusetts, Minnesota, Montana, North Carolina, North Dakota, Texas, Vermont, and Wisconsin will also accompany the group.
  • Associate Administrator of USDA’s Foreign Agricultural Service, Clay Hamilton, commented on the competitiveness of U.S. agriculture, stating, “America’s farmers, ranchers, and producers have a compelling story to tell about the quality and sustainability of their agricultural production, and we’re confident that their story will resonate with buyers, result in sales, and provide a boost to the agriculture industry back at home.”

WTO

WTO members agree to food security work program

• Last week, WTO members agreed on a food security work program stemming from the 12th ministerial (MC12) declaration on the emergency response to food insecurity. As outlined in the MC12 declaration, paragraph eight, WTO members “shall consider the needs of LDCs and NFIDCs to increase their resilience in responding to acute food instability including by considering the best possible use of flexibilities to bolster their agricultural production and enhance their domestic food security as needed in an emergency.”
  • According to a WTO press release, “The work programme outlines four primary themes to guide future discussions: access to international food markets, financing food imports, agricultural and production resilience of LDCs and NFIDCs, and a set of horizontal issues to foster collaboration. Members also appointed the current chair as the coordinator to lead a working group for topic-by-topic discussions in the coming months.”