TRADE UPDATE – APRIL 25, 2023

TRADE UPDATE

Food & Agriculture

April 25, 2023

By?Michael Anderson , Vice President of Trade and Industry Affairs

HIGHLIGHTS

• USMCA :?U.S. officials confirmed USMCA technical consultation on Mexico’s biotech decree continue, despite passing the 30-day threshold allowing for a dispute settlement request. USDA Under Secretary for Trade and Foreign Agricultural Affairs Alexis Taylor said the U.S. is still “assessing” Mexico’s comments under the technical consultations, according to Agri-Pulse.
• U.S. – Kenya :?U.S. and Kenyan officials concluded the first formal negotiating round under the bilateral Strategic Trade and Investment Partnership, in Nairobi, exchanging views on “proposed texts covering agriculture; anticorruption; micro, small and medium-sized enterprises; and services domestic regulation,” according to a?USTR readout .
• U.S. – U.K. :?The U.K. signed a?memorandum of understanding ?(MOU) on trade with the state of Oklahoma, the fourth state-level trade pact signed by the U.K. According to a statement by the U.K. government, “This MOU builds on the strong existing relationship between the U.K. and Oklahoma and sets out mutual goals and activities to strengthen our economic ties.”
• Food Security :?The latest?Global Food Security Index ?revealed a “deteriorating” and “fragile global food system that is under immense pressure and facing some of its worst outcomes ever. Food prices and hunger are hitting record highs, while affordability is plummeting as shocks like the covid-19 pandemic, armed conflict and climate change compound systemic stresses.” While the U.S. ranked only 13th (78.0) in regional rankings, North America (78.6) ranked highest compared to the global average index reading of 62.2.
• WTO :?WTO Director-General Okonjo-Iweala continues to urge members to coalesce around workable policy objectives for the 13th ministerial (MC13), aiming to manage expectations and build on the positive outcomes from the prior ministerial. The WTO leader specifically mentioned the goals of resolving the temporary moratorium on electronic commerce, continued advancement in curtailing fisheries subsidies, making progress on WTO reform, and agriculture reform and food security.
• IPEF :?A group of freshman Democrats in the U.S. House of Representatives penned a?letter ?to President Biden expressing support for IPEF and pursuing trade initiatives that include strong worker and environmental protections, building on USMCA as the standard. They further stated, “We strongly support your focus on setting the rules of commerce rather than cutting the few remaining U.S. tariffs,” a nod to the President’s current approach to trade policy that omits comprehensive free trade agreements.

“Crafting a Trade Promotion Authority bill to put Congress in the driver’s seat, reauthorizing critical trade programs aimed at increasing American competitiveness, and continuing efforts to add consequences for China’s trade practices are all things we can and should pursue right now.”

–Rep. Adrian Smith (R-NE), Chairman of the Ways and Means Trade Subcommittee

USMCA

U.S. AND MEXICO CONTINUE GM CORN TECHNICAL CONSULTATIONS

• U.S. officials are “assessing” Mexico’s comments under the technical consultations according to a statement by USDA Undersecretary for Trade and Foreign Agricultural Affairs Alexis Taylor, according to Agri-Pulse. Taylor provided no indication on the status of the consultations or potential for requesting a dispute settlement action. She emphasized that the U.S. remains confident in its position in the dispute stating, “science is on our side.”
• Over a month has passed since the U.S. requested technical consultation with Mexico and several industry groups and lawmakers have expressed concern that the U.S. should move swiftly to a dispute panel should technical consultations stall or gain little traction. Under USMCA provisions, the U.S. and Mexico have 30 days after receipt of the technical consultations request to meet, “with an aim of resolving the matter cooperatively with 180 days of the request if possible.” USMCA further provides that the complaining party (e.g., U.S.) could “cease technical consultations,” reverting to a dispute settlement procedure “following the meeting.”

U.S. – CHINA

GROWING BIPARTISAN SUPPORT FOR CHINA LEGISLATION

• Several Ways and Means Committee Members expressed support for new legislation to curb China’s pernicious unfair trade practices, an ambition that appears to have bipartisan support. During last week’s Ways and Means Committee?hearing , “Countering China’s Trade and Investment Agenda: Opportunities for American Leadership,” Subcommittee Chairman Adrian Smith (R-NE) said “Across the board, China seeks to dominate global trade and supply chains. They are using all tools at their disposal to advance their ‘Made in China 2025′ initiative.” Smith continued, “Today, we will hear why the United States must lead from a position of strength.” Smith emphasized, “We can do this by addressing the CCP’s practices directly while simultaneously using trade programs, agreements, and other tools to show we are a reliable and attractive alternative for nations around the world.”
• Committee Members highlighted concerns regarding China’s forced labor practices, closing the loophole in the U.S. di minis rule, reducing U.S. reliance on China in global supply chains, and China’s various predatory trade practices.
• Committee Chairman Jason Smith (R-MO) lent his full support for the committee to use its “authority over trade, and to use our leverage as a nation to strengthen critical supply chains and reduce dependence on adversarial nations like China and Russia.” He called for more action by the Administration and consultation on trade with Congress on trade policy saying that the Administration’s actions, “only emboldens China and ignores the voices of the American people. Frameworks and dialogues are no substitute for congressionally binding action on trade.”

U.S. – U.K.

U.K. SIGNS TRADE DEAL WITH OKLAHOMA

• Last week the U.K. signed a?memorandum of understanding ?(MOU) on trade with the state of Oklahoma, the fourth state-level trade pact signed by the U.K. According to a statement by the British government, “This MOU builds on the strong existing relationship between the U.K. and Oklahoma and sets out mutual goals and activities to strengthen our economic ties. It prioritises cooperation in the energy transition, carbon capture, utilisation and storage (CCUS), zero emission vehicles, carbon negative technology, and agriculture sectors. It provides a framework to address trade barriers, increase investment, and enhance business networks.”
• U.K. Trade Minister Nigel Huddleston said the trade pacts with individual states reflects the U.K.’s “twin-track approach to trade with the U.S., strengthening links with individual states in parallel with work with the federal government.” The Biden Administration has declined to pursue new free trade agreements, including resurrecting prior FTA negotiations with the U.K. under the prior Administration, as USTR pursues a more inclusive and work-centric trade policy.
• According to UK officials, nearly 3,000 jobs in Oklahoma are supported by exports to the U.K. and nearly 10,000 people in the state are employed by British companies. Leading exports from U.K. to Oklahoma in 2022 included nuclear equipment, precious stones and metals, photographic equipment, and medical equipment.
• The U.K. previously secured trade pacts with Indiana, North Carolina and South Carolina, and is currently pursuing additional pacts with other states including Utah, Texas and California.

FOOD SECURITY

GLOBAL FOOD SECURITY DECLINING

• The 11th Global Food Security Index (GFSI) developed by the Economist reveals “deteriorating” global food security. The report examines food affordability, availability, quality and safety, and sustainability and adaptation to derive an index ranking across 113 countries. In this year’s report, Finland ranked highest (83.7), followed by Ireland (81.7), and Norway (80.5) for overall food security, while the U.S. ranked 13th (78.0). Key findings of the?2022 GFSI ?include:
• The latest index reflects a “fragile global food system that is under immense pressure and facing some of its worst outcomes ever. Food prices and hunger are hitting record highs, while affordability is plummeting as shocks like the covid-19 pandemic, armed conflict and climate change compound systemic stresses.”
• In GFSI 2022, affordability drags the index down. The index’s affordability score has fallen by 4%, from 71.9 to 69, between 2019 and 2022 as shocks like the covid-19 pandemic and the war in Ukraine have led to rising costs for food. In addition, weakening trade freedom and an inability to fund safety nets have made it harder for people to afford food around the world.
• Eight of the top ten performers in 2022 come from high-income Europe, led by Finland (with a score of 83.7), Ireland (scoring 81.7) and Norway (scoring 80.5). In contrast, six of the bottom ten scoring nations in 2022 come from Sub-Saharan Africa. The difference between the top performer and the country at the bottom of the ranking has continued widening since 2019, reflecting the inequity of the global food system.

• Regarding regional food security rankings, North America (78.6) ranks highest, with the lowest performance recorded in Sub-Saharan Africa (47.0), compared to the global average index reading of 62.2.

• The GFSI measures food security in 113 nations, based on food affordability, availability, quality and safety, and sustainability and adaptation. Since its launch in 2012, GFSI has served as a policy benchmark for governments and a country diagnostic tool for investment for both the private and public sectors regarding food and agriculture policy, according to the index’s sponsor Corteva Agriscience.

GLOBAL TRADE KEY TO FOOD SECURITY FAO SAYS

• Qu Dongyu , Director General of the United Nations Food and Agriculture Organization (FAO) speaking at the?G7 summit ?of agriculture ministers in Japan said that strong global agricultural trade is key to food security. Dongyu noted that while food prices have declined from peak levels, certain areas remain under extreme price pressure. “Yet, while prices have fallen in international markets, they have frequently remained high at (the) local level, particularly in net food importing developing countries reflecting the weakening of their currencies against the U.S. dollar,” according to Agriculture Marketing Information System (AMIS). “As a result, food price inflation is still a serious concern in many countries, also because post-farm gate costs for shipping and processing remain subject to inflationary pressures.”
• USDA Secretary Tom Vilsack attended the G7 summit, noting the importance of trade in addressing food security. In a?tweet , Vilsack stated, “It’s an honor to take part in the #G7 Agriculture Ministers’ Meeting in Japan as we rally across the globe to address food security needs and call attention to the interrelationship among food security, climate, sustainable productivity growth, innovation, and trade.”

U.S. – KENYA

U.S. AND KENYA COMPLETE FIRST ROUND TALKS

• Last week U.S. and Kenyan officials concluded the first formal negotiating round under the bilateral Strategic Trade and Investment Partnership, discussing text related to small businesses, services regulations, agriculture, and anti-corruption. According to a?USTR readout . “During the four-day negotiating round in Nairobi, the two sides exchanged views on proposed texts covering agriculture; anticorruption; micro, small and medium-sized enterprises; and services domestic regulation. Officials from both sides agreed to pursue an ambitious negotiating schedule in the coming months to continue making progress.”
• Recall that U.S. and Kenyan officials announced the in-person meetings (April 17-20) to launch negotiations under the bilateral Strategic Trade and Investment Partnership (STIP). In accordance with “conceptual discussions” held earlier, the U.S. and Kenya will discuss agriculture, anti-corruption; digital trade; environment and climate action; good regulatory practices; micro, small and medium size enterprises; protecting worker’s rights and protections; supporting the participation of women, youth and others in trade; standards collaboration; trade facilitation and customs procedures and services domestic regulation under the STIP arrangement.
• The STIP negotiations omit market access (tariff reductions) unlike prior trade negotiations for a bilateral free trade agreement started under the prior Administration. Assistant USTR for Africa,?Connie Hamilton ?will led the U.S. delegation, accompanied by representatives from several other U.S. government agencies.

INDO-PACIFIC ECONOMIC FRAMEWORK

NEW DEMOCRATS SUPPORT IPEF

• Last week several freshman Democrats penned a?letter ?to President Biden expressing support for IPEF and pursuing trade initiatives that include strong worker and environmental protections, protect consumers, and foster fair competition, rather than focusing on cutting tariffs. Spearheaded by Representatives Nikki Budzinski (D-IL) and Chris Deluzio (D-PA), the lawmakers wrote, “As new Members of Congress representing diverse districts across the United States, we look forward to working with you to ensure U.S. trade policy delivers for working people, helps to build a more resilient and fair economy, safeguards the environment, public health, and civil rights, and ensures independent farms, small businesses, and innovators can succeed,” wrote the Members. “As your administration implements important new industrial policies and begins negotiations on new trade policies, we respectfully urge you to work with us and our constituents in a transparent and inclusive manner.”
• The lawmakers call on the Administration to employ USMCA as a model to improve “labor standards, add effective environmental and climate standards, and include facility-specific enforcement of both. Any new pacts should only go into effect after our trade partners implement these obligations in their law and practice. The right rules and enforcement measures are key to ensuring any new agreements truly are worker-centered. We strongly support your focus on setting the rules of commerce rather than cutting the few remaining U.S. tariffs.”

IPEF LISTENING SESSION SET AHEAD OF ROUND THREE TALKS IN MAY

• The Department of Commerce and USTR?announced ?two listening sessions ahead of the third round of IPEF talks in May. The first listening session will be hosted virtually by the two agencies on May 3. The second session will be held in-person on May 11 in Singapore.
• The Commerce Department?announced ?the third negotiating round of the Indo-Pacific Economic Framework (IPEF) will be held May 8 – 15 in Singapore. The agency outlined that the U.S. delegation for the third round will be “led by Sharon Yuan, Commerce Department Counselor and Chief Negotiator for Pillars II-IV, and Sarah Ellerman, IPEF Pillar I Chief Negotiator and Assistant United States Trade Representative for Southeast Asia and the Pacific (Acting).”
• Recall that in late March, the Office of USTR released?summaries ?of the tabled negotiating texts from the most recent IPEF round on Pillar I (Trade). The released text coincided with bipartisan frustrations expressed during the recent Congressional hearing on the President’s 2023 trade agenda.
• The Biden Administration has indicated ambitions to achieve “early harvests” on certain components of the IPEF text before an agreement on the entire Framework is reached. Several reports confirmed that the U.S. and other IPEF countries aim to finalize the deal during this calendar year.
• IPEF ?negotiating countries besides the U.S. include Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam. Notably India opted out of negotiations on the trade pillar.

U.S. – ECUADOR

ECUADOR’S PRESIDENT SEEKS FTA WITH THE U.S.

• Ecuador’s President, Guillermo Lasso, is calling for the negotiation of a free trade agreement with the United States. In an article he wrote for the Wilson Quarterly, President Lasso emphasized Ecuador’s desire to deepen commercial ties with the U.S. President Lasso suggested using USMCA as a template for the free trade agreement, highlighting that Ecuador already complies with many of the standards and regulations typically contained in U.S. free trade agreements.

WTO

WTO LEADER SETS EXPECTATION FOR 13TH?MINISTERIAL

• WTO Director-General Okonjo-Iweala recently urged members to approach the 13th ministerial (MC13) next February with realistic and workable expectations, to build momentum on outcomes from the prior ministerial. Speaking at an event hosted by the Washington International Trade Association, Okonjo-Iweala highlighted several top MC13 goals, including resolving the temporary moratorium on electronic commerce, continued advancement of curtailing fisheries subsidies, making progress on WTO reform, and agriculture reform and food security, among others.
• Regarding food security and agriculture negotiations, the U.S. continues to play an important role in outlining key areas of discussion and positions. The U.S. recently filed a 3-page?communications ?for circulation among WTO members outlining objectives to address food security, agricultural supply chains, sustaining agriculture productivity growth, climate change resiliency, and long-term agriculture sustainability.
• In an event hosted by American University, Okonjo-Iweala touched on WTO dispute settlement reform efforts. While reforming the dispute settlement system is a priority, she acknowledged uncertainty regarding what reform will look like. She highlighted the importance of successful reform for maintaining credibility and legitimacy, stating “I believe that as long as we don’t deliver a reform of the dispute settlement system, we’ll continue to hear about a hobbled and non-functional WTO even while so many aspects of the organization are working well.”