TRADE UPDATE: Food & Agriculture | September 19, 2023

HIGHLIGHT

• IPEF: Deputy United States Trade Representative Sarah Bianchi will visit with Japanese officials this week to discuss IPEF and other trade issues, according to a USTR report. Bianchi will travel to Tokyo Sept. 18-21, 2023, to meet with the Vice Minister of Economy, Trade, and Industry Hosaka Shin, Senior Deputy Minister for Foreign Affairs Ono Keiichi, and other Japanese officials.
• WTO: The WTO’s World Trade Report 2023 urges countries to consider “re-globalization,” a less economically costly and disruptive approach to rethinking global supply chains and sustainable trade. The WTO estimates that the cost of fragmenting the global trade system into separate blocs would depress global real income by an estimated 5%, with some developing economies withstanding double-digit GDP losses.
• WTO: The Government of Iceland pledged to contribute 500,000 Swiss Francs ($560,000) to the WTO Fisheries Funding Mechanism to assist developing members and least-developed country members in implementing the Agreement on Fisheries Subsidies. Iceland joins seven other WTO members—Japan, Germany, Canada, Australia, Netherlands, France, and Sweden—contributing to the funding mechanism.
• GSP: ?The U.S. House Ways and Means Committee announced a hearing titled “Reforming the Generalized System of Preferences to Safeguard U.S. Supply Chains and Combat China.” The hearing is scheduled for Wednesday, Sept. 20, 2023, at 2:00 p.m. EDT at 1100 Longworth House Office Building.
• EU: EU limits on allowable polyfluoroalkyl substances (PFAS) in food are the first of several policies expected to significantly impact U.S. food exports, according to Bloomberg reporting. The regulation limits the amounts of four PFAS chemicals that can be in meat, poultry, fish, and eggs raised in or exported to Europe. This puts certain U.S. food exports at immediate risk of rejection under the new PFAS restrictions.
• Trade Policy: The USTR invites comments to assist in identifying significant foreign barriers to U.S. exports of goods and services, U.S. foreign direct investment, and U.S. electronic commerce. This is in conjunction with USTR’s annual National Trade Estimate Report on Foreign Trade Barriers (NTE Report). Comments will be accepted until Oct. 23, 2023, according to a Federal Register notice.

“International trade, anchored in a strengthened multilateral trading system, plays an indispensable role in creating a more secure, inclusive, and sustainable world. Building upon these findings, the Report makes the case that a better alternative to fragmentation is ‘re-globalization’ – understood as extending trade integration to more people, economies and issues.” - WTO’s World Trade Report 2023

WTO

WTO report warns against global trade fragmentation

The WTO’s World Trade Report 2023 examines the cost of global trade fragmentation and urges countries to consider “re-globalization,” a less economically costly and disruptive approach to rethinking global supply chains and sustainable trade. The WTO estimates that the cost of fragmenting the global trade system into separate blocs would depress global real income an estimated 5%, with some developing economies experiencing double-digit GDP losses. “Globalization is at a crossroads and we need to think about where we go,” WTO Chief Economist Ralph Ossa said during an interview in conjunction with the release of the report. Ossa added, “The various crises have generated the perception that globalization exposes us to increased risks,” and urged policymakers to “embrace trade instead of rejecting it, if we want to overcome the most pressing challenges of our time.”

One of the report’s conclusions states that “international trade, anchored in a strengthened multilateral trading system, plays an indispensable role in creating a more secure, inclusive, and sustainable world. Building upon these findings, the Report makes the case that a better alternative to fragmentation is ‘re-globalization’ – understood as extending trade integration to more people, economies and issues.”

Further, the report highlights the U.S.-China bilateral trade relationship, one of the largest in the world. The report acknowledges that deepening trade tensions are increasingly reflected in current trade data despite the record volumes of two-way trade in 2022 between the two countries. The report contends that tariff measures and import restrictions are compelling a sharp trade decline in certain product segments such as semiconductors and moderation of reciprocal reliance on each other for certain products, such as China’s shift to Brazil and other countries for certain agriculture goods.

The report concludes that the analysis demonstrates, “that today’s world needs more trade and more cooperation, not less... solutions cannot be found unilaterally, in isolation of the actions of others. Globalization and cooperation need to be a part of the answer if the world is to solve its crises.” The report argues that to realize the economic and societal benefits of global trade, “international cooperation needs to be strengthened – on trade as well as on a wide range of other issues. This can be achieved through ‘re-globalization’, with a re-invigorated and reformed WTO playing a central role in this effort.”

Iceland donates 500,000 Swiss Francs to WTO Fisheries Funding Mechanism

The Government of Iceland is contributing 500,000 Swiss Francs ($560,000) to the WTO Fisheries Funding Mechanism to assist developing members and least-developed country members in implementing the Agreement on Fisheries Subsidies. The Permanent Secretary of State at the Ministry for Foreign Affairs of Iceland, Martin Eyjólfsson, presented the contribution to WTO Director-General Ngozi Okonjo-Iweala on 13 September.

“I am very pleased to formalise Icelands donation of CHF 500,000 to the Fisheries Funding Mechanism today. Iceland is a global leader when it comes to sustainable fishing, and we have a long history of assisting countries in need of building sustainable fisheries management capabilities. We look forward to working closely with the Fund to secure a timely ratification and successful implementation of the Fisheries Subsidies Agreement,” said Eyjólfsson.

• Okonjo-Iweala said, "I extend my gratitude to the government of Iceland for its contribution to the WTO Fisheries Funding Mechanism. Icelands continuing support for the implementation of the Agreement on Fisheries Subsidies underscores the importance of collective action in preserving our oceans and promoting responsible fishing practices worldwide. I commend Icelands leadership in this critical endeavour.”

Iceland joins seven other WTO members—Japan, Germany, Canada, Australia, Netherlands, France, and Sweden—contributing to the funding mechanism.

• Recall that Article 7 of the Agreement stipulates the creation of a funding mechanism to “provide targeted technical assistance and capacity building to help developing and least-developed country members with implementation.” The fund is operated by the WTO with partner organizations, namely the Food and Agriculture Organization (FAO) of the United Nations, the International Fund for Agricultural Development, and the World Bank Group.

?

Europe’s PFAS rule creates uncertainty for U.S. exports

EU limits on allowable polyfluoroalkyl substances (PFAS) in food are the first of several policies expected to significantly impact U.S. food exports and the domestic food supply in Europe, according to Bloomberg reporting. The regulation limiting the amounts of four PFAS that can be in meat, poultry, fish, and eggs raised in or exported to the EU puts certain U.S. food exports at immediate risk of rejection under the new PFAS restrictions.

The new EU regulations are colliding with insufficient data on PFAS levels in U.S.-produced foods creating significant uncertainty and alarm for American producers. “We are aware of the regulation in the EU related to PFAS, and we’re currently looking into any potential trade implications,” American Farm Bureau said in a statement. The largest U.S. agriculture trade association added, “It’s important to remember that farmers do not knowingly use PFAS chemicals, which are finding their way onto some farms just as is happening in other places and sectors.”

Under the EU rules, the regulated parts per billion (ppb) limits vary depending on the specific PFAS, type of food, and consumers’ age, adding to the complexity and compliance challenges for U.S food exporters. U.S. producers are particularly concerned that the regulations are another step in shielding the EU domestic market from import competition and impede competition. EU officials rebut the contention. “There is no distinction between domestic and imported food. Both have to follow the same rules,” said Harald H?ndel, a spokesman for Germany’s Federal Office of Consumer Protection and Food Safety. The EU Commission emphasized that PFAS limits will be monitored by enforcement authorities, noting that “Member states should target their controls towards products with a high risk of contamination.”

• By way of background, The European Food Safety Authority by contrast set in 2020 limits on the amount of four PFAS—perfluorooctane sulfonic acid (PFOS), perfluorooctanoic acid (PFOA), perfluorononanoic acid (PFNA) and perfluorohexane sulfonic acid (PFHxS)—that the body could absorb weekly yet avoid increased risk of developmental harms or adverse serum cholesterol, liver, and immune system effects. Those recommendations informed the foundation of the current regulation of the four PFAS varieties in the European Economic Area—consisting of the 27 EU member states, Iceland, Liechtenstein, and Norway.

IPEF

U.S., Japanese officials discuss IPEF

Deputy United States Trade Representative Sarah Bianchi will visit Japanese officials this week to discuss IPEF and other trade issues, according to a USTR report. Bianchi will travel to Tokyo Sept. 18-21, 2023 to meet with the Vice Minister of Economy, Trade and Industry, Hosaka Shin, Senior Deputy Minister for Foreign Affairs, Ono Keiichi, and other Japanese officials. Her schedule includes a meeting with the U.S. Ambassador to Japan, Rahm Emanuel. USTR noted in the announcement that “Through the Biden-Harris Administration, the United States and Japan have made significant strides to deepen their bilateral trade relationship, including through the U.S.-Japan Partnership on Trade.”

Generalized System of Preferences

GSP hearing announced by Ways and Means Committee

The U.S. House Ways and Means Chairman Jason Smith (R-MO) and Trade Subcommittee Chairman Adrian Smith (R-NE) announced a hearing titled “Reforming the Generalized System of Preferences to Safeguard U.S. Supply Chains and Combat China.” The hearing is scheduled for Wednesday, Sept. 20, 2023, at 2:00PM in 1100 Longworth House Office Building.

• The Generalized System of Preferences (GSP) provides, “nonreciprocal, duty free treatment for certain U.S. imports from eligible developing countries. GSP is the largest and oldest U.S. trade preference program. Established by the Trade Act of 1974, GSP promotes economic development by eliminating duties on thousands of products when imported from one of 119 designated beneficiary countries and territories,” according to the Office of USTR. The GSP program expired on Dec. 31, 2020. The leading import sources for prior imports under GSP authority include Thailand, Indonesia, Brazil, Cambodia, and the Philippines.

Food Security

Food prices continue increase

New data from the Bureau of Labor Statistics shows overall inflation jumped 0.6% last month, with overall prices rising 3.6% when compared to a year prior. The Consumer Price Index (CPI) rose 0.6% in August, driven largely by a 5.6% increase in the cost of energy. The food index increased 0.2% in August, replicating results in July. The index for food at home increased 0.2% over the month while the index for food away from home rose 0.3% in August.

• Over the 12 months ended August 2023, prices for food at home increased 3.0%, compared with an increase of 4.3% for food overall. Prices for food away from home increased 6.5% for the year ending August 2023.

Trade Policy

House lawmakers envision agriculture trade caucus ?

A quad of Republican and Democratic House Members, Representatives Adrian Smith (R-NE), Dusty Johnson (R-SD), Jimmy Panetta (D-CA) and Jim Costa (D-CA), are spearheading plans to establish an agriculture trade caucus and boost U.S. agriculture exports, according to Politico. Further details regarding the timing and policy vision of the caucus are not publicly available at this time.

As U.S. agriculture producers face increasing export challenges in major markets, coupled with the Biden Administration’s redesigned trade policy that eschews tariff reductions in trade arrangements, food and agriculture groups are increasingly concerned of declining global competitiveness as other trade partners outpace the U.S. in opening foreign markets through new trade agreements.

• Recall that a coalition of U.S. food and agriculture groups penned a letter to all 2024 presidential candidates to prioritize new market access trade agreements to ensure “U.S. farmers and ranchers can grow and export enough food, feed, fiber, and fuel to supply the global marketplace” and reduce reliance on China. The groups further requested that U.S. trade policy balance the need to hold China accountable to its international trade commitments while not adversely impacting U.S. food and agriculture’s largest export market or threaten the domestic producers with new retaliatory tariffs.

USTR seeks comment on foreign trade barriers

The Office of USTR invites comments to assist in identifying significant foreign barriers to, or distortions of, U.S. exports of goods and services, U.S. foreign direct investment, and U.S. electronic commerce, in conjunction with its annual National Trade Estimate Report on Foreign Trade Barriers (NTE Report). Comments will be accepted by Oct. 23 according to a Federal Register notice.

Comments may be submitted with respect to one or more of the following categories of trade barriers:

• Import policies (e.g., tariffs and other import charges, quantitative restrictions, import licensing, pre-shipment inspection, customs barriers, trade facilitation or customs valuation practices, and other market access barriers)
• Subsidies (e.g., subsidies contingent on export performance and agricultural export subsidies that displace U.S. exports in third-country markets)
• Intellectual property protection (e.g., inadequate patent, copyright, and trademark regimes, trade secret theft, and inadequate enforcement of intellectual property rights)
• Services (e.g., prohibitions or restrictions on foreign participation in the market, discriminatory licensing requirements or standards, local presence requirements, and unreasonable restrictions on what services may be offered)
• Digital trade (e.g., restrictions on the supply of Internet-enabled services and other restrictive technology requirements)
• Investment (e.g., limitations on foreign equity participation and on access to foreign government-funded research and development programs; technology transfer and export performance requirements; and restrictions on repatriation of earnings, capital, fees, and royalties)
• Competition (e.g., government-tolerated anticompetitive conduct that restricts the sale or purchase of U.S. goods or services in the foreign country’s markets)
• Sanitary and phytosanitary measures (e.g., measures relating to food safety or animal and plant life or health that are unnecessarily trade restrictive, discriminatory, or not based on scientific evidence)
• Technical barriers to trade (e.g., unnecessarily trade-restrictive or discriminatory standards, conformity assessment procedures, labeling, or technical regulations)
• Government procurement restrictions (e.g., closed bidding and bidding processes that lack transparency)
• State-owned enterprises (e.g., actions by SOEs and governments with respect to SOEs involved in the manufacture or production of non-agricultural goods or the supply of services that constitute significant barriers to, or distortions of, U.S. exports of goods and services, U.S. investments, or U.S. electronic commerce that may negatively affect U.S. firms and workers)
• Labor (e.g., failures by a government to protect internationally recognized worker rights or to eliminate discrimination in respect of employment or occupation in cases where these failures influence trade flows or investment decisions in ways that constitute significant barriers to, or distortions of, U.S. exports of goods and services, U.S. investment, or U.S. electronic commerce that may negatively affect U.S. firms and workers)
• Environment (e.g., a government’s levels of environmental protection, unsustainable stewardship of natural resources, and harmful environmental practices that constitute significant barriers to, or distortions of, U.S. exports of goods and services, U.S. investment, or U.S. electronic commerce that may negatively affect U.S. firms or workers)
• Other barriers, including those that encompass more than one category, such as bribery and corruption, or that affect a single sector

The NTE report provides valuable information for U.S. negotiations “aimed at reducing or eliminating these barriers and is a valuable tool in enforcing U.S. trade laws and agreements and strengthening the rules-based trading system,” according to USTR. The agency’s 2023 NTE Report is available here.