TRADE UPDATE

Food & Agriculture
December 19, 2023

By Kristy Goodfellow, Vice President of Trade and Industry Affairs

The next CRA Trade Update will be published on Tuesday, Jan. 9, 2024.

HIGHLIGHTS

  • U.S. – China: The U.S. House of Representatives Select Committee on the Chinese Communist Party (CCP) published a report with nearly 150 policy recommendations for resetting the U.S. economic and technological competition with the People’s Republic of China (PRC). Farmers for Free Trade delivered a letter to the Select Committee on the CCP, signed by 17 food and agriculture trade associations, asking the committee to consider the negative impacts on farmers.
  • U.S. – China: On Dec. 12, 2023, the U.S. Department of Commerce announced its preliminary affirmative determination of the countervailing duty (CVD) investigation of certain pea protein from China.
  • U.S. – EU: On Dec. 18, Politico reported that the European Commission was expected to announce that it would extend its truce on tariffs with the United States.
  • WTO: Despite efforts from the WTO to prepare outcomes for the upcoming WTO 13th Ministerial Conference (MC13), it appears that little progress was made during last week’s meeting, including a Dec. 11 “mini-ministerial” on development and e-commerce.
  • Regional Trade Agreements: The EU-Mercosur negotiations have stalled after opposition was voiced by the new Argentinian government and France. Both parties signal intent to continue discussions.
  • Economic Analysis: USDA Economic Research Service (ERS) reports continued decline in global agricultural output and productivity growth.

“Digital economy and trade issues are highly relevant and evolving at the moment. We believe it is vitally important to continue the e-commerce work program and maintain the moratorium for now in order to provide space for robust exploration within the work program. The WTO is an appropriate venue for these discussions and we need to continue to draw attention to the development dimension of these issues.”

—U.S. Ambassador Maria L. Pagán at Virtual World Trade Organization Mini-Ministerial

U.S. – China

SELECT COMMITTEE ON CHINESE COMMUNIST PARTY PUBLISHES RECOMMENDATIONS

  • The U.S. House of Representatives Select Committee on the Chinese Communist Party (CCP) published a report with nearly 150 policy recommendations in resetting the U.S. economic and technological competition with the People’s Republic of China (PRC).
  • Most notable among the recommendations, the committee suggests that Congress “Move the PRC to a new tariff column that restores U.S. economic leverage to ensure that the PRC abides by its trade commitments and does not engage in coercive or other unfair trade practices and decreases U.S. reliance on PRC imports in sectors important for national and economic security.”
  • Other notable recommendations for food and agriculture producers and exporters include:
    • Urging USDA and USTR to collaborate to determine alternative markets for agricultural exports that predominantly rely on the PRC market;
    • Directing USTR to publish a full assessment of the PRC’s “Phase One” agreement and remedies necessary to address any areas of non-compliance;
    • Consideration of additional appropriations to offset retaliation for farmers and ranchers, U.S. exporters, and other American workers; and
    • Requiring USDA to assess annually the U.S. dependence on critical agricultural products or inputs that could be exploited in the event of the PRC or another country weaponizing any of these critical dependencies.
  • Farmers for Free Trade delivered a letter to the Select Committee on the CCP, signed by 17 food and agriculture trade associations, asking the committee to consider the negative impacts on farmers as they consider recommending that Congress repeal China’s Permanent Normal Trade Relations (PNTR) status.
    • The letter highlighted the importance of China for U.S. farm exports. “The market access created following China’s accession to the WTO has been an enormous driver of growth for America’s farm economy: In the past two decades, U.S. export sales to China have skyrocketed. In 2022, the U.S. exported $38.11 billion in food and agricultural products to China—an astounding 22-fold increase – since gaining PNTR status. China is now the largest buyer of U.S. food and agricultural products, purchasing 19% of our exports. These exports are critical to America’s farmers and rural communities.”

DEPARTMENT OF COMMERCE ANNOUNCES COUNTERVAILING DUTY RATES FOR PEA PROTEIN FROM CHINA

  • On Dec. 12, 2023, the U.S. Department of Commerce announced its preliminary affirmative determination of the countervailing duty (CVD) investigation of certain pea protein from China.
  • The United States imported $267 million in certain pea proteins in 2022, up from $175 million in 2020.
  • Preliminary subsidy rates assigned to specific companies ranged from 15-343%.

U.S. – EU

ANNOUNCEMENT EXPECTED DEC. 18 ON TARIFF TRUCE BETWEEN THE U.S. AND EU

  • On Dec. 18, Politico reported that it expected the EU and U.S. to announce a last-minute agreement, once again avoiding escalating tariffs. The EU was expected to announce that it would not reimpose tariffs on American goods, including whiskey; in turn, the United States would continue to suspend steel and aluminum tariffs.
  • Several news outlets report that the European Commission is considering reviving its World Trade Organization (WTO) dispute against the steel tariffs. WTO panels have consistently found U.S. steel and aluminum tariffs, which the U.S. argued was for national security, to be inconsistent with the WTO.
  • The EU retaliation list includes several agricultural products, most notably whiskey. It also includes some corn and rice products, peanut butter, cranberries, some juices, and tobacco products.
  • Distilled Spirits Council of the United States (DSICUS) highlights that, without tariffs, the United States exports over $550 million in American Whiskey to the EU, accounting for 44% of all whiskey exports in 2022.

WTO

MEETINGS CONTINUE IN PREPARATION FOR MC13

  • Despite efforts from the WTO to prepare outcomes for the upcoming WTO 13th Ministerial Conference (MC13), it appears that little progress was made during last week’s meeting, including a Dec. 11 “mini-ministerial” on development and e-commerce.
  • The WTO Secretariat reports that there are proposals on almost all agriculture negotiating topics, including food security. The Trade Negotiations Committee Chair said that this “confirms the interest of members in achieving an outcome on agriculture.”
  • The next round of agriculture negotiations will be Jan. 16-17, 2024.
  • Note that the MC12 SPS declaration established a work program that was intended to “identify: (1) challenges in the implementation of the SPS agreement and the mechanisms available to address them; and (2) the impacts of emerging challenges on the application of the SPS Agreement.” The declaration includes a requirement for the SPS Committee to report on key findings and actions undertaken as a result of the work program and MC13.
  • MC13 will take place in Abu Dhabi, United Arab Emirates from Feb. 26-29, 2024.

Regional Trade Agreements

EU-MERCOSUR TRADE AGREEMENT STALLED

  • After speculation that the EU-Mercosur free trade agreement would conclude at the end of this year, negotiations have stalled after opposition emerged from the new Argentinian government.
  • Within the EU, France continues to voice opposition to the agreement, articulating concerns about environmental rules, including decarbonization.
    • As quoted in the Financial Times, French President Macron states: “I can’t ask our farmers, our industrialists in France but also everywhere in Europe to make efforts to apply new rules to decarbonise . . . and then say all of a sudden, ‘I’m removing all the tariffs to allow products to enter which do not apply these rules’.”
  • In a joint press statement on Dec. 7, the EU and Mercosur state:
    “Considerable progress has been made in the past months. Negotiations continue with the ambition to conclude the process and reach an Agreement that is mutually beneficial for both regions and which responds to the demands and aspirations of their respective societies.

    Based on the progress made so far in the negotiations, both parties hope to promptly achieve an agreement which corresponds to the strategic nature of the ties binding both parties and the crucial contribution they can offer to address the global challenges in areas such as sustainable development, reduction of inequality and multilateralism.”

Economic Reporting

USDA ECONOMIC RESEARCH SERVICE SHOWS WORLD AGRICULTURAL OUTPUT AND PRODUCTIVITY GROWTH HAVE SLOWED

  • USDA Economic Research Service (ERS) reported on global output and productivity growth, showing continued decline in both.
  • ERS data on International Agricultural Productivity tracks the total volume of global agricultural output (the amounts of crop, animal, and aquaculture commodities produced at constant prices) and the total amounts of land, labor, capital, and materials (inputs) used to produce this output for the world as a whole and for individual countries.
  • According to the report, over the last six decades (1961 to 2021), world agricultural output increased at an average annual rate of 2.3%, faster than the 1.2% average growth rate for input use. This means world agricultural total factor productivity (TFP)— the ratio of total output to total input—grew 1.1% a year.
  • In summary, the report claims that improvement in total productivity was responsible for nearly half the growth in world agricultural production.