TRADE UPDATE: Food & Agriculture February 21, 2023

HIGHLIGHTS?????????????????????

USMCA: Mexico released a new decree regarding banning imports of GM corn, maintaining the prohibition of the use of GM corn for human consumption in products such as flour and dough for tortillas while permitting the use of GM corn for industrial use for human consumption and animal feed. Several lawmakers, industry groups, and other stakeholders expressed disappointment with the new policy and elevated previous calls for USTR to pursue formal action under USMCA despite the narrower GM corn ban.

USMCA: Mexico announced further measures to prohibit forced labor in imported products as required under USMCA. USTR Katherine Tai applauded Mexico’s action stating , “the United States, Canada, and Mexico will work more closely together to eliminate forced labor from global supply chains and tackle transshipment, leveling the playing field for North American workers while protecting the most vulnerable workers around the world.”?

Biden Nominee: President Biden announced his intent to nominate Xochitl Torres Small to serve as Deputy Secretary of Agriculture.?A former Republican Congresswoman and currently USDA Under Secretary of Rural Development, Torres Small, if confirmed, would replace Jewel Bronaugh who announced she will step down to devote more time to family.

WTO: Japan became the first WTO member to contribute to the funding mechanism to facilitate implementation of the WTO’s Fisheries Subsidies Agreement. Japan donated approximately ￥90 million (CHF 763,000) to the WTO Fisheries Funding Mechanism to help developing and least-developed countries implement the landmark Agreement on Fisheries Subsidies adopted at the 12th Ministerial Conference (MC12).

Trade Trends: U.S. agriculture exports set a new record in 2022, increasing “in all of the United States’ top 10 agricultural export markets,” the USDA reported . U.S. farm and food products exports reached $196 billion, increasing 11% or $19.5 billion, from the previous record set in 2021.

“Let’s call it what it is – Mexico’s latest decree against genetically modified corn is an absurd rebuke of the United States and our shared trade agreements.” - Senator Deb Fischer (R-NE) commenting on Mexico’s new decree to ban GM corn imports

USMCA

Mexico releases new decree addressing GM corn ban

On Feb. 13, the Mexican Government released a new decree addressing the GM corn ban, superseding the 2020 decree. Effective immediately, the new decree maintains the prohibition of the use of GM corn for human consumption, in products such as flour, dough, and tortillas. In contrast to the 2020 decree, the new decree allows the use of GM corn for industrial use for human consumption and animal feed while Mexico seeks to pursue self-sufficiency in all corn consumption needs.

• In a statement, U.S. Secretary of Agriculture Tom Vilsack expressed dissatisfaction with the new decree: “The U.S. believes in and adheres to a science-based, rules-based trading system and remains committed to preventing disruptions to bilateral agricultural trade and economic harm to U.S. and Mexican producers…We are carefully reviewing the details of the new decree and intend to work with USTR to ensure our science-based, rules-based commitment remains firm."
• The National Corn Growers Association, which has praised U.S. trade officials for pursuing talks with Mexico on the decree, doubled down on its request for USMCA consultations. “The Biden administration has been more than patient with Mexico as U.S. officials have sought to enforce a rules-based trading system and stand up for American farmers,” NCGA President Tom Haag said in a statement . “The integrity of USMCA, signed by Mexican President Andrés Manuel López Obrador himself, is at stake. Singling out corn – our number one ag export to Mexico – and hastening an import ban on numerous food-grade uses makes USMCA a dead letter unless it’s enforced.”

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Increasing Congressional calls for USMCA case on Mexico’s GM corn ban

Several lawmakers expressed deep frustration with Mexico’s revised decree to ban GM corn imports and elevated a request for USTR to pursue formal action under USMCA. Ways and Means Committee Chairman Jason Smith (R-MO) called on USTR Katherine Tai and USDA Secretary Tom Vilsack to move swiftly to initiate a formal USMCA dispute on Mexico’s new decree. In a Feb. 15 letter , also signed by Representative Adrian Smith (R-NE), Chairman of the Subcommittee on Trade, wrote, “We must engage with the Government of Mexico from a position of strength, not weakness. Time is of the essence as farmers plan for the 2023 planting season that will feed the world in 2024.” The lawmakers further said they would consider “legislative proposals to incentivize compliance with any potential dispute settlement panel report.”

• In a press release Chairman Smith acknowledged the efforts of U.S. officials to resolve the issue through diplomatic channels yet said Mexico’s policies have threated corn trade the past two years and remain unresolved. “We appreciate your engagement on this vital issue and the recent statement from Ambassador McKalip and Under Secretary Taylor emphasizing that these measures are not grounded in science and would cause serious harm to American farmers. We are supportive of efforts ‘to hammer out a solution,’ but we must emphasize that these restrictions have been hanging over the heads of American farmers for over two years now and the Government of Mexico has not addressed core U.S. concerns,” the statement read.
• Nebraska Senator Deb Fischer (R-NE) in a press release said, “Let’s call it what it is – Mexico’s latest decree against genetically modified corn is an absurd rebuke of the United States and our shared trade agreements. As I’ve said before, any ban is a clear violation of the U.S.-Mexico-Canada Agreement and has no basis in scientific fact. Such a ban would not only hurt Nebraska farmers, but also would directly harm Mexico’s food security and undermine ag innovation.?While I appreciate the Biden Administration’s attempts to negotiate, it is clear that the United States needs to immediately pursue a dispute settlement process through the USMCA. There can be no flexibility here.”

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USTR welcomes Mexico announcement on forced labor

Ambassador Katherine Tai applauded Mexico’s recently announced policy to prohibit imports produced with forced labor. “With this resolution, Mexico has taken an important step toward joining the United States and Canada in prohibiting the importation of goods produced with forced labor.?In light of this progress, the United States, Canada, and Mexico will work more closely together to eliminate forced labor from global supply chains and tackle transshipment, leveling the playing field for North American workers while protecting the most vulnerable workers around the world,”?Tai said in a statement .

• Under USMCA, the three trade partners are required to “prohibit the importation of goods into its territory from other sources produced in whole or in part by forced or compulsory labor, including forced or compulsory child labor,” USTR said. On Feb. 17, the Mexican government published a resolution to expand its commitment to combat forced labor in trade goods with Canada and the United States.?

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USTR confirms receipt of Mexico’s response to science behind GM corn ban

According to reports, Mexico submitted its response to USTR regarding a Jan. 30 request to explain the scientific justifications for the country’s ban on GM corn and biotech products. Speaking on the sidelines of the National State Departments of Agriculture (NASDA) policy conference, USTR Chief Agricultural Negotiator Doug McKalip confirmed receipt of Mexico’s response and that USTR was “translating and analyzing the responses to those questions.”

Recall the Office of the U.S. Trade Representative (USTR) has requested Mexico explain the science underpinning the planned ban on GM corn imports and glyphosate by Feb. 14. In the Jan. 30 letter to Mexico’s Economy Minister Raquel Buenrostro, USTR requested Mexico provide details and scientific evidence, required under USMCA, supporting the Presidential Decree to ban GM corn and glyphosate in 2024. The USTR letter followed U.S. trade officials’ visit to Mexico City in late January to voice concerns over the pending policy and reiterate the U.S. position that Mexico must fully comply with its USMCA obligations.

U.S. – Indo-Pacific

USTR’s McKalip to recognize U.S. agriculture sustainability in IPEF

Speaking at an agriculture industry policy conference, Doug McKalip, USTR’s Chief Agricultural Negotiator, said U.S. official are “working hard to make sure that in the name of things like sustainability, that there are not non-tariff barriers that are inevitably erected that end up distorting or unbalancing trade.” McKalip emphasized the need for IPEF and other trade arrangements to avoid inadvertently erecting a barrier that slows down trade or is a disruption to trade. During his Senate confirmation hearing last July, McKalip said, if confirmed, he would work to “advocate for U.S. agriculture” and promote U.S. farmers strong record of agriculture sustainability.

Biden Nominees

Biden will nominate Xochitl Torres Small for Deputy Secretary of Agriculture

On Feb. 15, President Biden announced his intent to nominate Xochitl Torres Small to serve as Deputy Secretary of Agriculture.?Torres Small currently serves as USDA Under Secretary of Rural Development and, if confirmed, would replace Jewel Bronaugh who recently announced her resignation from the position.

• Prior to her current USDA position, Torres Small was a Member of Congress, serving New Mexico’s second congressional district. Torres Small was a member of the House Agriculture Committee and the House Armed Services Committee, and Chairwoman of the Oversight, Management, and Accountability Subcommittee of the House Homeland Security Committee. She was the first woman and first person of color to represent New Mexico’s second congressional district, according to a White House statement.
• The statement continued, “The granddaughter of farmworkers, Torres Small grew up in the borderlands of New Mexico. She has worked as a Field Representative for Senator Tom Udall (D-NM), clerked for United States District Court Judge Robert C. Brack, and served as an attorney practicing water and natural resources law.”

USDA Secretary Tom Vilsack praised the announcement stating , “The nomination of Xochitl Torres Small to serve as Deputy Secretary reflects the Biden-Harris Administration’s commitment to rural prosperity, advancing equity, and making USDA the best place to work.” Secretary Vilsack continued, "The granddaughter of migrant farm workers, Under Secretary Torres Small represents the heart and soul of rural communities. She began her work in southern New Mexico, serving as a field organizer in colonias, and continued her work in rural New Mexico as a field representative for Senator Tom Udall, where she collaborated with local leaders and elected officials…Her expertise will further USDA’s mission to advance equity and opportunity in and for rural America, and USDA’s commitment to build an organization invested in the success of its workforce and the customers we serve. I am pleased President Biden has nominated her to be Deputy Secretary and I am fully confident in Under Secretary Torres Small’s ability to excel in this essential role at the Department.”

Trade Trends

2022 U.S. agriculture exports reach record level

The U.S. exported $196 billion in agriculture products in 2022 the U.S. Department of Agriculture (USDA) announced last week. U.S. farm and food products increased 11%, or $19.5 billion, from the previous record set in 2021. “The value of sales increased in all of the United States’ top 10 agricultural export markets – China, Mexico, Canada, Japan, the European Union, South Korea, Taiwan, the Philippines, Colombia and Vietnam, with sales in seven of the 10 markets (China, Mexico, Canada, South Korea, Taiwan, the Philippines and Colombia) setting new records,” the department said in?a statement .

• “This second consecutive year of record-setting agricultural exports, coupled with a record $160.5 billion in net farm income in 2022, demonstrates the success of the Biden-Harris Administration’s efforts to create new and better markets for America’s agricultural producers and businesses,” Vilsack said. “We’re strengthening relationships with our trading partners and holding those partners accountable for their commitments. We’re making historic investments in infrastructure to strengthen supply chains and prevent market disruptions. We’re knocking down trade barriers that hamper U.S. producers’ access to key markets. And we’re continuing to invest in export market development programs, partnering with industry to bring high-quality, cost-competitive U.S. products to consumers around the world.”

Over the last decade (2013-2022), U.S. agriculture exports increased 3.3% annually, while imports increase 6.7% annually, according to analysis by the American Farm Bureau Federation. In 2022, the U.S. posted a $3 billion deficit in agriculture trade flows, only the second deficit in the past 10 years. The 10-year period, U.S. agriculture trade posted an average $12.5 billion surplus, according to the Farm Bureau.

Trade Policy

GAO study -FTAs not suited to tackle supply chain challenges

According to a recent report, most U.S. trade agreements weren’t designed to adequately tackle supply-chain challenges, including those exposed during the global pandemic and the Russian invasion of Ukraine. In a report released by the Government Accountability Office (GAO), U.S. trade officials noted that rethinking trade agreement frameworks may be necessary to tackle existing and future supply chain vulnerabilities. U.S. trade agreements have “historically focused on trade liberalization and maximizing economic efficiency” rather than on supply chain resiliency, comments from USTR officials GAO captured in the report.

• GAO’s Director of International Affairs and Trade Kimberly Gianopoulos reported that “most of the free trade agreements on the books simply didn't include supply chain concerns as a consideration when they were being negotiated or agreed upon” with the “possible slight exception” of the recently renegotiated USMCA. GAO examined recent diplomatic efforts by the Office of the USTR, and the Commerce and the State departments, to strengthen U.S. supply chains. GAO reported that the three agencies have initiated “over a dozen engagements, including dialogues, working groups, and forums, to coordinate with allies and partners on supply chain resilience” to address supply chain weakness and that trade officials described limitations of traditional FTAs.

U.S. - China

China Phase One deal not successful

On the third anniversary of the China Phase trade pact, White House Press Secretary Karine Jean-Pierre said, “Phase one did not work. It did not have a meaningful purpose.” Responding to a specific query by reporters at a press conference , Jean-Pierre said “The PRC did not meet its commitment, even in first year of the phase one deal going into effect during the Trump Administration.” When pushed whether the Administration would pursue full enforcement of the deal, she emphasized the Biden Administration inherited the agreement stating, “Let’s not forget that it’s not ours, it’s theirs,” a reference to the previous Administration. President Biden feels that the deal “did not meaningfully address our fundamental concerns with the PRC's trade practices. That is just the fact,” she continued. She noted that President Biden is focused on defending U.S. economic interests “in ways that will work, including in coordination with our allies and partners through initiatives like the Trade and Technology Council and the Indo-Pacific Economic Framework, and by investing more at home through the Bipartisan Infrastructure Act, through the CHIPS Act, and through the Inflation Reduction Act.”

U.S. – U.K.

U.K. poised for U.S.-U.K. FTA says British agriculture leader

Recently, U.K. Secretary of State for Environment, Food and Rural Affairs Thérèse Coffey , speaking to the Association of State Departments of Agriculture (NASDA) said, that U.S. famers have said “they wanted to get on with a free trade agreement, and I hope we can resume it.” She continued, “I spent the last few days in the great state of North Carolina” speaking with farmers and many noted that the U.K. is an important market for their products. She noted that farmers are keenly aware that prior bilateral trade talks were suspended during the transition to the current Administration and farmers would like U.S. and U.K. officials to resume trade talks.

• Numerous U.K. trade officials, including former Secretary of State for International Trade Anne-Marie Trevelyan,?have publicly stated the U.K. stands ready to resume FTA negotiations with the Biden Administration. Meanwhile, the U.K. continues to pursue Memorandums of Understanding (MOUs) with individual states, Indiana being the first (May 2022), to lay the ground work for more comprehensive negotiations with U.S. officials. Additional MOUs include South Carolina and North Carolina .

Supply Chains

Labor agreement at West Coast ports remains elusive

Contract negotiations continue with signs of little progress for a new labor pact at West Coast ports, 10 months since the prior contract expired (Jul. 1). Easing pressure on cargo volumes and falling shipping costs have somewhat diminished the urgency of a new contract according to observers. Port officials and the Biden Administration were looking for a new contract by now between the workers’ International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), which acts as a broker for more than 70 terminal operators and ocean carriers. “I wish this negotiation was done, but there’s a lot of issues out there they want to get through,” commented Labor Secretary Marty Walsh. One of the sticking points centers on balancing the right of West Coast ports to pursue automation of cargo handling versus worker guarantees. The talks cover more than 22,000 dockworkers at 29 ports stretching from California to Washington state.

• Meanwhile, union representatives and companies operating at East and Gulf Coast ports from Maine to Texas are starting negotiations for a new agreement to replace the?current pact?which expires on Jun. 30. Last week, the National Retail Federation (NRF) urged the ILWU and PMA to begin talks immediately on replacing the current contract to avoid worsening backlogs from robust consumer demand colliding with COVID-19-related labor, equipment, and facility shortages.
• “Both parties should attempt to reach a contract well before expiration for the benefit of the national economy and to provide the needed certainty to all the stakeholders in the supply chain that rely on the U.S. West Coast ports. We would further ask that you issue a statement committing to the commencement of meaningful negotiations now, and to commit to continue negotiating and working without interruption, even if negotiations extend beyond the June 30 contract expiration,” NRF President Matthew Shay said in a letter to the PMA and ILWU leaders.

WTO

Japan first donor to WTO Fisheries Funding Mechanism

The WTO announced that the government of Japan is contributing approximately ￥90 million (approximately CHF 763,000) to the WTO Fisheries Funding Mechanism to help developing and least-developed countries implement the landmark Agreement on Fisheries Subsidies adopted at the 12th Ministerial Conference (MC12) in June 2022. Japan’s donation is the first funds contributed by a WTO member since conclusion of the Fisheries Subsidies Agreement. Ambassador Kazuyuki Yamazaki of Japan presented the contribution at a Feb. 8 meeting in Geneva with WTO Director-General (DG) Ngozi Okonjo-Iweala. Article 7 of the Agreement? provides for the creation of a funding mechanism to provide targeted technical assistance and capacity building to help developing and least-developed country members with implementation.

• DG Okonjo-Iweala applauded Japan’s leadership stating, "I am very grateful to Japan for making the first donation to the new Fisheries Fund. The Fund can now become fully operational and is ready to staff up and start receiving applications for assistance from members once they have formally joined the Agreement. This donation sends a strong signal that developing, and least-developed country members will receive the assistance they need to implement the Agreement on Fisheries Subsidies. Today's donation is yet another meaningful step toward safeguarding global fish stocks and restoring the ocean's health and the livelihoods of millions of people around the world who depend on fishing."
• Ambassador Yamazaki said: "We are faced with two big issues. One is bringing the Agreement into force as soon as possible. The other one is, under the new Chair, accelerating the second wave negotiation towards MC13. One of the key elements for this achievement is commitment from developing countries. At such a critical juncture, I am pleased Japan's contribution can be made today and hope this will serve as a thrust for further replenishment of the Fund." The funding mechanism will enter operation Nov. 8, 2023.