TRADE UPDATE

Food & Agriculture
April 23, 2024

This week’s edition was written by DTB AgriTrade.

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HIGHLIGHTS

  • Biden Administration: On April 17, President Biden urged USTR to enhance the effectiveness of tariffs on Chinese steel and aluminum products by tripling them, in line with USTR’s review of Section 301 tariffs and investigation findings.
  • USTR: Ambassador Katherine Tai testified before the House Ways and Means Committee and Senate Finance Committee last week regarding the Administration’s trade policy agenda. USTR also opened a Section 301 investigation into Chinese shipbuilding and logistics practices, stating that the ongoing Section 301 tariff review process is almost complete.
  • Congress: Generalized System of Preferences (GSP) renewal bill moves forward following House markup.
  • USDA: Agriculture Secretary Tom Vilsack noted at the Senate Appropriations Hearing that the U.S. agricultural trade deficit this year correlates with a decrease in Chinese agricultural purchases; suggesting that China’s reduced purchasing could be a response to Congress’s efforts to restrict Chinese ownership of U.S. farmland.
  • World Trade Organization: WTO Director General Okonjo-Iweala visited Washington, D.C. as the agriculture delegates tried to pick up the pieces from the collapse of the Abu Dhabi ministerial. Meanwhile, USDA gave a presentation on how it is facilitating agricultural trade through digitalization.

“Across the board, our focus is to score singles and doubles that we can do with more agility, faster, with more effective results for our farmers and producers. And again, I know that we’re going to have differences of opinion, but I just want to reinforce how important our farmers are to us, from the large farmers all the way down to the small family farmers.”

—USTR Ambassador Katherine Tai responding to the question at the Senate Finance hearing, discussing why USTR is not prioritizing free trade agreements

Biden Administration

Section 301 Tariff on Chinese Steel and Aluminum

  • On April 17, President Biden urged USTR to enhance the effectiveness of tariffs on Chinese steel and aluminum products by tripling them, in line with USTR’s review of Section 301 tariffs and investigation findings.
  • The current average tariff on specific steel and aluminum products is 7.5% under Section 301.
  • Biden highlighted that Chinese policies and subsidies for their domestic steel and aluminum industries result in artificially low-priced Chinese alternatives, undercutting high-quality U.S. products.

USTR

2024 Trade Policy Agenda

  • On April 16, tensions flared between USTR Ambassador Katherine Tai and House Republicans during the Ways and Means Committee hearing to discuss Biden’s 2024 trade policy agenda.
  • Republican members sparred with Ambassador Tai at the hearing over perceived flaws in the administration’s trade policy, including disagreements over trade deficits, enforcement actions against China, and the administration’s approach to negotiations and new market access agreements, especially for agriculture.
    • Committee Chair Jason Smith (R-MO) criticized the administration’s “go-it-alone” approach and delayed reviews of Section 301 tariffs on Chinese goods. Tai defended the administration’s efforts, citing ongoing reviews and progress in addressing U.S.-China trade imbalances.
    • Tensions escalated as Republicans questioned the administration’s trade agenda, with Rep. Beth Van Duyne (R-TX) accusing Tai of lacking a coherent strategy. Tai pushed back, stating her willingness to engage respectfully and defend the administration’s trade policies.
  • On April 17, the Senate Finance Committee held its own hearing and likewise criticized Tai for lax trade enforcement, lack of leadership on digital trade policies, and failure to open markets for U.S. agricultural exporters. Tai again defended the administration’s trade agenda during the annual hearing, once again facing criticism from both Democrats and Republicans.
    • Chair Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) highlighted USTR’s weak enforcement record and the absence of pursuit of traditional tariff-cutting market access agreements.
    • Tai said enforcing existing trade deals has been the top priority for the administration and she referenced the dispute settlement process in the U.S.-Mexico-Canada Agreement.
      • Tai stated: “We have pursued two cases now against Canada’s dairy tariff rate quota allocation measures and we’re currently challenging Mexico’s restrictive measures on biotech corn before a panel.”

Tai Says Section 301 Tariff Review Almost Complete

  • At the House and Senate hearings this week, Tai indicated the administration is nearing completion of the long-awaited review of Section 301 tariffs imposed by former President Donald Trump.
  • The Treasury Department previously advocated for lifting some Section 301 tariffs, citing benefits to consumers and disinflationary effects it would have on the economy.
    • Lawmakers expressed frustration over the time taken to conduct the review during last week’s hearings. The review, which largely began in September 2022, examined the use of tariff tools in addressing U.S.-China trade inequities.
  • The fate of tariff exclusions for hundreds of products, set to expire at the end of May 2024, is also under review.
    • USTR has extended the 429 exclusions still in effect, with decisions aligning with the four-year review.
  • Tai emphasized that the purpose of the tariffs was to address imbalances in the U.S.-China trade relationship and encourage producers to diversify their supplies.

USTR Section 301 Investigation on Chinese Shipbuilding

  • In response to a petition from several labor unions, USTR announced it would launch a Section 301 investigation on China’s support for its shipbuilding sector.
  • Remedies requested by the labor unions include:
    • A variable fee on Chinese-made vessels berthing at U.S. ports;
    • Subsidies for U.S. shipbuilding funded by fee;
    • Supporting stronger demand for U.S.-built ships (including raising agricultural cargo preferences);
    • Addressing port and logistics infrastructure that rely heavily on Chinese equipment; and
    • Coordinating with other shipbuilding countries, such as Japan and South Korea, to address China’s unfair practices.

Congress

House Ways and Means Trade Committee Advances Several Trade Bills

  • On April 17, the House Ways & Means Committee held markups and advanced trade bills, including proposals to renew and reform the Generalized System of Preferences (GSP) and limit de minimis treatment for certain imports from China. The GSP Reform Act and the End China’s De Minimis Abuse Act were approved out of the Committee along party lines, sparking discontent among Democrats over the legislative process.
    • The GSP Reform Act aims to reauthorize the program for 10 years, increase thresholds, and exclude countries with ties to China or unfair access for U.S. agriculture exports.
    • Amendments to strengthen labor and environmental provisions were added but faced opposition from Democrats who argued they didn’t go far enough.
  • Democrats criticized the rushed markup and lack of bipartisan support for the GSP bill, expressing concerns over insufficient time to review the legislation.
  • Partisan disagreements were also evident regarding a de minimis reform bill aimed at adjusting eligibility and excluding shipments subject to tariffs and trade remedies.
    • An amendment to end de minimis treatment for all shipments from China was proposed but did not pass.
  • Legislation clarifying the definition of free trade agreements and setting limits on trade partners eligible for Inflation Reduction Act (IRA) electric vehicle tax credits was also advanced.
  • Bills tightening rules on foreign entities of concern and investigating forced labor in the cobalt mining industry were also approved.

USDA

2024 Ag Trade Deficit

  • At a Senate Appropriations Committee Hearing, Agriculture Secretary Tom Vilsack said China’s reduced agricultural purchase this year could be intended to send a signal to the United States. Vilsack highlighted that the U.S. agricultural trade deficit correlates with the decrease in Chinese purchases, suggesting a connection, and pushing for “a more nuanced conversation about China.”
  • Vilsack mentioned China’s reduction in agricultural purchases could be a response to continual efforts by U.S. states and Congress to restrict Chinese ownership of U.S. farmland. Lawmakers have proposed legislation to restrict Chinese ownership of farmland citing national security concerns.
    • Vilsack questioned whether Chinese ownership of farmland poses a greater risk than Wall Street and investment banks owning a significant portion of large farm operations in the country.

WTO

Post-MC13 Agriculture Talks

  • On April 15, WTO Director General Ngozi Okonjo-Iweala spoke in Washington, D.C., at the Peterson Institute for International Economics about the state of the 30-year-old WTO and international trade relations.
    • WTO Director General Ngozi Okonjo-Iweala suggested former President Trump’s proposal to raise tariffs on all imports would create a “free for all” in the trade policy arena with reactions that would be harmful to the global economy.
    • She also stressed that overuse of the national security exception within trade agreements could lead to instability, as it could pave the way for protectionist measures.
  • The Committee on Agriculture – Special Session (COASS) met for the first time since the failed Abu Dhabi ministerial conference (MC13).
    • It reviewed a communication from Brazil that would pick up where the negotiations collapsed at the ministerial conference, with similar timelines and ambition for domestic support and market access, a commitment to negotiate on public stockholding (i.e. market price support), and an agreed upon negotiating path by MC14. However, the fundamental differences that derailed this past ministerial remain unaddressed.
  • On April 17, an informal meeting was held by the Committee on Agriculture (the standing body that oversees implementation of the current agreement). During the meeting, the committee adopted a report on food security work program as mandated at MC12 after India dropped its objection.
    • The report provided recommendations on access to international food markets, financing of food imports, and agricultural production and resilience in least developed countries (LDCs) and net food-importing developing countries (NFIDCs).

Using Digital Tools to Facilitate Trade

  • Members of the Committee on Trade Facilitation shared experiences at a meeting on using data and digitalization to facilitate trade.
  • USDA’s Animal and Plant Health Inspection Service highlighted the growing use of ePhyto certificates, the benefits of going digital to government and industry, cooperation with the International Plant Protection Convention (IPPC), and lessons learned in the process.
Source: USDA APHIS
  • The adoption of ePhytos has grown rapidly since the IPPC solution was launched in 2018, and especially accelerated during the pandemic.
Source: USDA APHIS