TRADE UPDATE: Food & Agriculture | July 18, 2023

HIGHLIGHTS

• USMCA: Last week the Office of the U.S. Trade Representative issued a readout of the third Free Trade Commission meeting held in Cancun, Mexico on July 7. Topics discussed at the meeting included North American competitiveness, including focusing on workforce development programs, promoting the role of small and medium enterprises (SMEs) in international trade, and upholding workers’ rights under USMCA provisions.
• IPEF: USTR and Commerce Department officials reported progress in the latest round of negotiations on the Indo-Pacific Economic Framework (IPEF) at the fourth in-person negotiating round held in Busan, South Korea from July 9-15, according to a joint statement from the U.S. Trade Representative’s Office and the Commerce Department.
• U.S.–China: Chinese exports continued to dip in June along with other East Asian economies, according to a Wall Street Journal report. The trend of falling exports in China, and a decline in global trade more broadly, is expected to continue as central banks raise interest rates to combat inflation.
• APEC: The U.S. will host the third ministerial meetings of the Asia-Pacific Economic Cooperation (APEC ) forum from July 29 to August 21 in Seattle, WA. More than 2,000 delegates from the 21 APEC member economies are expected to attend the ministerial and leaders’ meetings, including agriculture ministers.
• CPTPP: On Sunday, July 16, the U.K. officially joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP ) that includes Japan and 10 other countries during a meeting in New Zealand, according to the U.K. government .
• Trade Policy: United States Trade Representative Katherine Tai is traveling to Nairobi, Kenya from July 17-19, according to a USTR press release . Recall that the U.S. and Kenya launched FTA negotiations in July of 2020. An agreement has yet to be reached.
• Supply Chains: A nearly two-week strike at Canada’s busiest ports on the Pacific coast has ended with a tentative labor agreement reached through a federal mediator. Canadian Minister of Labor Seamus O’Regan announced that the International Longshore & Warehouse Union (ILWU) and the British Columbia Maritime Employers Association (BCMEA) had reached a tentative four-year agreement.
• Biden Nominees: Last week the Senate confirmed former Representative Xochitl Torres Small to serve as the next USDA Deputy Secretary. The nomination was approved 84-8 and she will replace Jewel Bronaugh, who vacated the role earlier this year.
• Food Security: Russia has reported that it will be stopping its participation in the Black Sea grain deal. On July 17, Kremlin spokesperson Dmitri S. Peskov informed journalists “The Black Sea agreements ceased to be valid today,” according to Politico. The deal allowed Ukraine to bypass the Russian blockade and export its grain by sea. It was first brokered by Turkey and the UN in the wake of the Russian invasion last year.
• WTO: Gabon joined the rapidly expanding list of WTO members formally adopting the Agreement on Fisheries Subsidies, becoming the 13th country to submit its instrument of acceptance.

“The US is not carrying out any free trade agreements with any country. Lots of countries have been looking to have free trade agreements with the US, including us, but for now they said that’s not something they want to do, and we need to respect that.” – U.K. Business and Trade Secretary, Kemi Badenoch

USMCA

USTR issues readout - USMCA Free Trade Commission meetings

Last week the Office of the U.S. Trade Representative issued a readout of the third Free Trade Commission meeting held in Cancun, Mexico on July 7. According to the agency readout , “the Ministers reviewed the progress made over the past year and took note of the readouts from Committees and Working Groups, including Trade in Goods, State-Owned Enterprises and Designated Monopolies, Environment, Agricultural Biotechnology, and Labor, among others. The Ministers offered guidance for future work and reiterated that ongoing engagement is critical to the Agreement’s full implementation. The Ministers also engaged in broader discussions on North American Competitiveness, SMEs and Inclusive Trade, and Labor.”?

• The Ministers further discussed North American competitiveness, including focusing on workforce development programs, promoting role of small and medium enterprises (SMEs) in international trade, and upholding workers’ rights under USMCA provisions. The Ministers agree to assess progress in the areas discussed going forward and convene a Deputies Meeting later this year to continue discussions.

IPEF

4th IPEF Round yields progress

USTR and Commerce Department officials reported progress in the latest round of negotiations on the Indo-Pacific Economic Framework (IPEF) at its fourth in-person negotiating round held in Busan, South Korea from July 9-15. “Building on the discussions that took place during the third negotiating round in Singapore and the Ministerial meeting in the United States in May 2023, the IPEF partners continued to make progress on negotiations towards high-standard outcomes under Pillars I (Trade), III (Clean Economy), and IV (Fair Economy). Officials also advanced the legal review of the proposed IPEF Supply Chain Agreement (Pillar II),” according to a joint statement from the U.S. Trade Representative’s Office and the Commerce Department.?

• Prior to the fourth negotiating round in Busan, the two agencies jointly held an IPEF listening session on June 28 in Washington, DC. A second listening session was held with the government of South Korea on July 13 for interested stakeholders. ??
• The U.S. delegation was co-led by Sarah Ellerman, Assistant United States Trade Representative for Southeast Asia and the Pacific and IPEF Pillar I Chief Negotiator, and Sharon H. Yuan, U.S. Department of Commerce Counselor and IPEF Pillars II-IV Chief Negotiator.?
• Recall that on May 27, the U.S. hosted delegates from 13 IPEF countries in Detroit, MI for the IPEF ministerial led by Commerce Secretary Gina Raimondo and U.S. Trade Representative Katherine Tai. Prior rounds were held in Brisbane, Australia (round one, Dec. 10-12, 2022), followed by a special negotiating round on Pillars II-IV in New Delhi, India (Feb. 8-11, 2023), Bali, Indonesia (round two, Mar. 13-19, 2023), and Singapore (round three, May 8-15, 2023).?
• The IPEF negotiating countries besides the U.S. include Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. Notably, India opted out of negotiations on the trade pillar.

U.S.–China

Chinese exports fall signaling drop in global trade

Chinese exports continued to dip in June along with other East Asian economies, according to a Wall Street Journal report. The trend of falling exports in China, and a decline in global trade more broadly, is expected to continue as central banks raise interest rates to combat inflation. Global trade is also expected to remain lower in the long term as many countries attempt to return chunks of their manufacturing base home. ??

• The WSJ report cited that the value of exports from China to the world has fallen 12.4% since June of last year. Exports to the U.S. from China saw an even starker drop, being 24% lower than June of last year.?
• China remains a powerhouse in global trade as it pushes into growing markets outside the West, accounting for 14.4% of goods exports in 2022. The U.S. accounted for 8.3% of goods exports in 2022.

APEC

APEC Agriculture Ministers to convene in Seattle

The U.S. will host the third ministerial meetings of the Asia-Pacific Economic Cooperation (APEC ) forum from July 29 to August 21 in Seattle, WA. More than 2,000 delegates from the 21 APEC member economies are expected to attend the ministerial meetings, including agriculture ministers. Leaders will discuss a multitude of economic priorities within the Asia-Pacific region including food security, finance, health, energy, and small and medium-sized enterprises.?

U.S. initiatives and goals at the APEC forum include advancing free, fair, and reciprocal trade in the region, delivering for U.S. exporters concrete and meaningful results that reduce trade barriers in the region, and creating jobs. According to the Office of USTR, U.S. trade priorities in APEC include:?

• Promoting the adoption of high-standard, market-opening actions to eliminate barriers to trade and investment, and addressing trade distorting and other unfair practices?
• Reducing barriers to digital trade to support innovation and the growth of the digital marketplace?
• Increasing services competitiveness in the region by lowering barriers that impede U.S. services exports?
• Promoting good regulatory practices in such areas as public consultations, assessing the impact of regulations, and internal coordination of rulemaking?
• Promoting regulatory cooperation in key sectors such as chemicals, life sciences, and autos?
• Reducing transaction costs for U.S. businesses by implementing the WTO Agreement on Trade Facilitation through capacity building projects and public-private engagement.?

The 21 APEC member economies account for nearly 40 percent of the global population, or nearly 3 billion people, and nearly 50 percent of global trade.?APEC membership includes Australia; Brunei Darussalam; Canada; Chile; People's Republic of China; Hong Kong, China; Indonesia; Japan; South Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; the Philippines; the Russian Federation; Singapore; Chinese Taipei; Thailand; the United States of America; and Vietnam.

CPTPP

UK formally joins CPTPP

On Sunday, the UK officially joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP ) that includes Japan and 10 other countries during a meeting in New Zealand, according to the UK government . Business and Trade Secretary Kemi Badenoch has formally signed the treaty following the substantial conclusion of negotiations earlier this year. “We are honored to become the CPTPP’s first new member and to join this extraordinary community of now 12 economies spanning Asia, the Pacific and now Europe,” said British Trade Minister Kemi Badenoch. “This is a modern and ambitious agreement and our membership of this exciting, growing and forward-looking bloc is proof that the UK’s doors are open for business.” ?

• The British government reported that “one in every 100 UK workers was employed by a business headquartered in a CPTPP member nation in 2019, equating to over 400,000 jobs across the country. Membership of the trade group is expected to spark further investment in the UK by CPTPP countries, already worth ￡182 billion in 2021, by guaranteeing protections for investors.”?
• CPTPP embodies the largest trade pact secured by the UK since exiting the EU more than three years ago. Last March the UK announced reaching an agreement to join CPTPP, which was created in 2018, after more than two years of negotiations. The UK becomes the first new member to join the CPTPP since the U.S. withdrew from the pact in 2017 under the former name TPP.?
• Recall that Ukraine recently submitted a formal request to CPTPP and the request could be discussed this week during CPTPP meetings. Ukraine joins China, Taiwan, Ecuador, Costa Rica, and Uruguay, seeking to join the 12-country trade agreement.?
• The trade pact covers more than 500 million people and 15% of the world’s economy. CPTPP membership includes New Zealand, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, and Vietnam.

U.S. - UK

U.S.-UK FTA chances are very low

Speaking around the contours of the UK formally joining the CPTPP, UK Secretary for Business and Trade, Kemi Badenoch said chances of the UK securing a free trade agreement with the U.S. are “very low.” While entering into a bilateral trade agreement with the world’s largest economy was a major emphasis with staunch Brexit supporters, Badenoch acknowledged that circumstances have changed.?

• “The US is not carrying out any free trade agreements with any country. Lots of countries have been looking to have free trade agreements with the US, including us, but for now they said that’s not something they want to do, and we need to respect that,” Badenoch said.

Trade Policy

Katherine Tai travels to Kenya this week

United States Trade Representative Katherine Tai is traveling to Nairobi, Kenya from July 17-19, according to a USTR press release . She will be there to co-lead a meeting of the U.S. – East African Community (EAC) Trade and Investment Framework Agreement (TIFA) Council.?

• The press release further stated, “During this trip, Ambassador Tai will meet with senior government officials in Kenya, including President William Ruto, Cabinet Secretary for Trade Moses Kuria, and Cabinet Secretary for EAC and Arid and Semi-Arid Lands Rebecca Miano. She will also meet with U.S. Ambassador Meg Whitman. Ambassador Tai will also meet with labor stakeholders, members of Kenya’s civil society, local businesses, and private sector representatives to discuss opportunities for increased cooperation with the United States.”?
• According to USAID , Kenya was one of the five quickest growing African economies prior to the COVID-19 pandemic. The Department of Commerce’s website export.gov further reports that: “Kenya has a market-based economy and is generally considered the economic, commercial, financial and logistics hub of East Africa. With the strongest industrial base in East Africa, Kenya has been successful in attracting U.S. exporters and investors. More U.S. companies are investing in Kenya and setting up local and regional operations to take advantage of Kenya’s strategic location, diversified economy, entrepreneurial workforce, comprehensive air routes, and status as a regional financial center.”?

Recall that the U.S. and Kenya launched FTA negotiations in July of 2020. An agreement has yet to be reached.

Supply Chains

Canadian port labor deal ends strike

The nearly two-week strike at Canada’s busiest ports on the Pacific coast has ended with a tentative labor agreement reached through a federal mediator. The 13-day strike by more than 7,000 dock workers across 30 maritime hubs in British Columbia, including the Port of Vancouver and Port of Prince Rupert which are the country’s first and third largest ports, threatened to disrupt trade in U.S. supply networks in the Pacific Northwest and potentially the Los Angeles Port complex. Canadian Minister of Labor, Seamus O’Regan announced that the International Longshore & Warehouse Union (ILWU) and the British Columbia Maritime Employers Association (BCMEA) had reached a tentative four-year agreement, subject to ratification by both parties. The parties adopted a federal mediator’s proposal that had a strict, 24-hour deadline. No details on the recommendation or final agreement are publicly available.?

• As the strike entered a second week, nearly 300 vessels arrived at Vancouver and Prince Rupert ports, with 73 more scheduled to make a call. The backlog at impacted ports, which account for one quarter of Canada’s total traded goods, impeded exports of several natural resources and imports of many manufacturing imports. The Canadian Manufacturers & Exporters group estimated the strike caused daily trade disruptions amounting to 500 million Canadian Dollars ($376 million) in trade flow.

Seamus O’Regan, Canadian Minister of Labour

Biden Nominees

Torres Small confirmed as Deputy Agriculture Secretary

Last week the Senate confirmed former Representative Xochitl Torres Small to serve as the next USDA Deputy Secretary of Agriculture. The nomination was approved 84-8 and she will replace Jewel Bronaugh, who vacated the role earlier this year. Prior to the vote Senator Debbie Stabenow (D-MI), Chairwoman of the Senate Agriculture Committee said in a statemen t, “I am pleased that today the Senate will confirm Xochitl Torres Small to serve as the Deputy Secretary of Agriculture. Ms. Torres Small’s impressive and wide-ranging resume makes her an ideal appointee to help lead the more than 100,000 public servants that USDA has stationed at more than 4,500 locations across the country and around the world. Her predecessor in this position, Jewel Bronaugh, was instrumental in helping to restore one of the Department’s key functions—serving our constituents on the ground in the communities in which they work, live, and farm. A trailblazer like Ms. Torres Small, Ms. Bronaugh was the first woman of color to hold the Deputy position at USDA. Her leadership will be missed, but I have every confidence that Ms. Torres Small is up to this task.”

• USDA Secretary Tom Vilsack lauded the Torres Smalls’ confirmation stating , "Xochitl Torres Small has dedicated her career to serving the agriculture industry and the American people, and I have witnessed her lead with energy, authenticity and personal investment that I know will leave an impact on USDA for years to come.” He continued, “At this critical time when USDA and the Biden-Harris Administration are laser-focused on mobilizing historic investments to rebuild our economy and secure healthier, more vibrant communities for future generations, I am grateful to have Xochitl’s partnership at the helm of the People’s Department. She has time and again met the moment with a collaborative approach and a can-do spirit, and I applaud Congress for confirming her as USDA’s next Deputy Secretary.”
• Recall that last February President Joe Biden announced his intent to nominate Xochitl Torres Small to serve as Deputy Secretary of Agriculture. 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, according to a White House statement.

Food Security

Russia to pull out of Black Sea grain deal

Russia has reported that it will be stopping its participation in the Black Sea grain deal. On July 17, Kremlin spokesperson Dmitri S. Peskov informed journalists “The Black Sea agreements ceased to be valid today,” according to Politico. The deal allowed Ukraine to export its grain by sea and was first brokered by Turkey and the UN in the wake of the Russian invasion last year.?

• Peskov stated, “As the president of the Russian Federation said earlier, the deadline is July 17. Unfortunately, the part relating to Russia in this Black Sea agreement has not been implemented so far. Therefore, its effect is terminated.” He further said, “As soon as the Russian conditions are met, the Russian Federation will return to the implementation of the deal.”?
• Russia has argued that the deal is lopsided in favor of Ukrainian agricultural exports, citing Western sanctions as hindering Russia’s ability to export agricultural products. Ukraine has exported close to 33 million tons of grain and other foodstuffs since the deal was implemented, according to the UN.?

Global food prices continue descent

The Food and Agriculture Organization’s (FAO) Food Price Index averaged 122.3 points in June 2023, down 1.7 points (1.4 percent) from May, continuing the downward trend and averaging as much as 37.4 points (23.4 percent) below the peak it reached in March 2022. Declines in vegetable oils, sugars, cereals, and dairy contributed to a lower index while meat prices remained unchanged, according to the FAO. Other highlights from the report include:?

• The Vegetable Oil Price Index “averaged 115.8 points in June, down 2.9 points (2.4 percent) from May and marking the lowest level since November 2020. The continued decline of the index was driven by lower world prices of palm and sunflower oils, more than offsetting higher soy and rapeseed oil quotations. International palm oil prices dropped for the second consecutive month in June, mainly reflecting prospects of seasonally higher outputs from leading producing countries that coincided with lingering subdued global import demand.”?
• The Cereal Price Index “averaged 126.6 points in June, down 2.7 points (2.1 percent) from May and as much as 39.7 points (23.9 percent) below its value a year ago. The month-on-month decline reflects a fall in the world prices of all major cereals. International coarse grain prices fell the most, down 3.4 percent since May. A fifth consecutive monthly decline in international maize prices was mostly driven by increased seasonal supplies from ongoing harvests in Argentina and Brazil.”?
• The Dairy Price Index “averaged 116.8 points in June, down 1.0 points (0.8 percent) from May and 33.4 points (22.2 percent) below its corresponding value a year ago. The decline in June was again led by lower international cheese prices, reflecting ample export availabilities, especially in Western Europe, where milk production tracked seasonally higher, while retail sales were somewhat subdued. Meanwhile, whole milk powder prices fell slightly on lower import purchases by North Asian buyers and increased supplies, especially from New Zealand.”?
• The FAO Sugar Price Index “averaged 152.2 points in June, down 5.1 points (3.2 percent) from May, marking the first decline after four consecutive monthly increases. International sugar quotations remained, however, 34.9 points (29.7 percent) above their levels in the same month last year. The June decline in international sugar prices was mainly triggered by the good progress of the 2023/24 sugarcane harvest in Brazil and a sluggish global import demand, particularly from China, the world’s second largest importer of sugar.”?
• The FAO Meat Price Index “averaged 117.9 points in June, virtually unchanged from May, as increases in international quotations for poultry and pig meats were nearly offset by declines in those for bovine and ovine meats. However, compared to its value in June of last year, the index was down 8.1 points (6.4 percent). International poultry meat prices increased further, reflecting high import demand from East Asia, especially for supplies from Brazil, amidst the continued supply challenges stemming from widespread avian influenza outbreaks.”

?

U.S. inflation cools to lowest rate in two years, food prices remain steady

According to a Bureau of Labor Statistics press release , inflation compared to a year prior in the U.S. went down to 3% in June. This constitutes the lowest rate in over two years. Last month, inflation compared to a year prior in the U.S. was at 4%. Inflation rose 0.2% month-to-month in June.?

• Food prices remained steady, going up by 0.1% when compared to the previous month. The price to eat at home was the same as last month, whereas eating out went up 0.4%, not accounting for a seasonal adjustment.

WTO

Gabon formally accepts Agreement on Fisheries Subsidies

Gabon joined the rapidly expanding list of WTO members formally adopting the Agreement on Fisheries Subsidies, becoming the 13th country to submit its instrument of acceptance.?

• Gabonese Ambassador Mireille Sarah Nzenze stated, “A major step was taken on 17 June 2022, when trade ministers reached unanimity and concluded the first phase of the years-long fisheries subsidies negotiations. My country's authorities, aware of the environmental emergency, including that of saving the oceans, have accelerated the process for the domestic ratification of the Agreement on Fisheries Subsidies. By depositing its instrument of acceptance of that Agreement, Gabon expresses hope that the ongoing negotiations will result in a comprehensive agreement that will take into account the vulnerabilities of a certain number of WTO Members.”?
• In receiving the formal acceptance, Director General of the WTO Okonjo-Iweala said, “I am grateful to Gabon for its formal acceptance of the WTO Agreement on Fisheries Subsidies. Illegal, unreported and unregulated (IUU) fishing costs Africa over $2.3 billion in economic losses every year, according to estimates from the African Union Commission, so I am particularly pleased to see another acceptance from the continent. This is the latest sign of Gabon's commitment to building a truly sustainable ocean environment and economy: the country has created one of the largest marine reserves in Africa, and its Gabon Bleu programme includes measures to fight IUU fishing. Fish consumption in Gabon is above the global average, and food security in the country stands to gain from the agreement's rapid entry into force. I hope this serves as an inspiration to other WTO members.”?
• The Agreement enters into force once acceptances are received from two-thirds of WTO members. Current list of acceptances available here .

Trade restrictive measures high despite recent declines

The WTO reported that new trade restrictive measures in G20 economies have slowed, yet the inventory of measures remains at historically elevated levels. According to the WTO Monitoring Report , which examined the period (mid-May to mid-October 2022), “G20 economies introduced 66 new trade-facilitating measures (covering trade worth USD 451.8 billion) and 47 trade-restrictive measures on goods (with a trade coverage of USD 160.1 billion). These measures were not related to the pandemic. At the same time, the accumulated stockpile of G20 import restrictions continued to grow. By mid-October, 11.6% of G20 imports were affected by trade-restricting measures implemented since 2009 and still in force.”?

• The report further noted that, “Initiations of trade remedy investigations by G20 economies declined sharply during the review period (17 initiations), after a peak in 2020 that was the highest since the beginning of the trade monitoring exercise in 2009. Anti-dumping measures continued to be the most frequent trade remedy action in terms of initiations and terminations.”