TRADE UPDATE – MARCH 28, 2023

TRADE UPDATE

Food & Agriculture

March 28, 2023

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

HIGHLIGHTS

• USMCA :?USDA Secretary Vilsack pushed back on concerns that the “Product of USA ” proposed rule would trigger trade disputes with Canada and Mexico. Vilsack said the proposed labeling rule is voluntary, a significant difference from the prior mandatory country of origin labeling regime which was struck down by the World Trade Organization. “This is a voluntary program. That is a significant distinction,” Vilsack emphasized.
• U.S. – China :?Senator Josh Hawley (R-MO)?announced ?proposed legislation to revoke China’s permanent normal trade relations status (PNTR). The bill, “The Ending Normal Trade Relations with China Act ” would fully remove China’s preferential access to the U.S. market, including raising tariffs on imported goods from China.
• Ag Economy :?A new?Feeding the Economy ?report shows the food and agriculture value chain accounts for nearly 20% of the country’s economic activity, contributing $8.6 trillion in economic output. The food and agriculture sectors directly supported nearly?23 million jobs ?according to this year’s report.
• IPEF :?During the?Senate Finance Committee hearing ?on the President’s 2023 trade agenda, Ambassador Katherine Tai reported the release of the?summaries ?of tabled negotiating texts from the most recent round of IPEF negotiations. Under a barrage of bipartisan criticism from Senators for lack of consultation with Congress on USTR’s trade activities, Ambassador Tai contended on multiple occasions that she and her staff had frequently briefed lawmakers and their staff on a range of issues including the IPEF.
• Trade Policy :?A group of Republican Ways and Means Committee Members penned a?letter ?to President Biden, citing a “lack of a clear trade agenda” and calling for the Administration to pursue tariff-reducing trade agreements, a shift from President Biden’s pause on new free trade agreements (e.g. FTAs). The lawmakers wrote, “Not pursuing new tariff-reducing enforceable trade agreements breaks a four-decade-long bipartisan approach to trade policy and means we are missing out on opportunities to advance U.S. economic interests, U.S. security, and create jobs right here in America.”
• U.S. – Kenya :?Kenya aims to complete negotiations with the U.S. this year under the bilateral Strategic Trade and Investment Partnership (STIP), according to?Reuters . Earlier this month USTR?announced ?that U.S. and Kenyan officials will meet in person in Kenya (April 17-20) to launch negotiations.
• Ecuador :?Senate Foreign Relations Committee leadership, introduced legislation to make Ecuador eligible for designation as a beneficiary country under the Caribbean Basin Economic Recovery Act (CBERA). Under the?Innovation and Development in Ecuador (IDEA) Act , Ecuador would lower tariffs for its exports to the U.S. as a beneficiary country under CBERA.
• WTO :?WTO members concluded positive discussions on the next wave of fishing subsidies ambitions during the first of a series of “Fish Weeks,” according to a?WTO readout . “I think it was a very successful first Fish Week,” Ambassador Gunnarsson chair of the?Negotiating Group on Rules . “I have seen this first week as devoted to discussing what we want to get out of this second wave of negotiations. As the next logical step, I see our second Fish Week in April as the beginning of our discussions of how to get to the result we want,” he said.

“The traditional approach to free trade agreements being comprehensively tariff-liberalizing has led to winners and losers. . . While it has been, in general, very good for our agricultural producers, the other parts of our economy feel like the playing field is not level.”

–U.S. Trade Representative Katherine Tai during the Senate Finance Committee hearing on the Administration’s trade agenda

USMCA

NEW MEAT LABELING RULE WON’T TRIGGER TRADE DISPUTE

• USDA Secretary Vilsack rebutted concerns that the “Product of USA ” proposed rule would trigger trade disputes with Canada and Mexico. Speaking at the?Agri-Pulse?Ag and Food Policy Summit, Vilsack said the proposed rule was significantly different than a prior country of origin labeling regime struck down by the World Trade Organization (WTO).?Vilsack said, “The reason it’s not going to happen is that there’s a significant difference between the decision that was made at the WTO … when I was previously secretary on a mandatory (labeling) program. This is a voluntary program. That is a significant distinction.”?Vilsack further emphasized, “We did a survey” and “We know what consumers in this country think it means. It means everything that was done with that product was done in the U.S. In the past that was not the case.”
• Mexico has raised trade concerns with the proposed Product of USA rule. Mexico’s Agriculture Minister said the “proposal, even when it is a voluntary claim, could have implications for discriminating against Mexican exports of live animals and meat products, and would reopen unfortunate incentives for setback, inconsistency and opposition to the obligations of the World Trade Organization to comply with the ruling in the case of country-of-origin-labeling in meat products, of which Mexico reserves its rights.”
• Recall the USDA?announced ?a proposed new labeling regulation regarding the use of “Made in the USA” labeling for certain products. The regulation states that meat, poultry and egg products that are born, raised, slaughtered and processed in the United States, may then be labeled “Made in the USA.” Under current regulations, beef products imported from other countries, but that are processed in the US, may fall under the “Made in USA” label. Public comments on the voluntary rules will be open for 60 days.

USTR PURSUING TIMELY OUTCOME ON MEXICO’S BIOTECH POLICY

• Testifying before the Senate Finance Committee, U.S. Trade Representative (USTR) Katherine Tai said the U.S. will continue to press Mexico on its ban on GM corn imports as part the recently requested USMCA technical consultations.?In response to concerns of the USMCA consultations dragging out by Senator Chuck Grassley, Tai stated, “I assure you it is not my intention to let this go on indefinitely.” Responding to similar queries from both Republicans and Democrats regarding protracted talks beyond the USMCA 30-day technical consultation period Tai said, “All of the tools in the USMCA are there for a reason, and we stand ready to make use of those tools to help us to resolve this issue.” Tai stopped short of committing to move quickly to the dispute panel phase after 30 days should negotiations with Mexico fall short of U.S. demands.?

CHINA

LEGISLATION PROPOSED TO REVOKE CHINA’S PNTR

• Last week Senator Josh Hawley (R-MO)?announced ?proposed legislation to fully revoke China’s permanent normal trade relations status (PNTR). The bill, “The Ending Normal Trade Relations with China Act ” is a major component of Senator Hawley’s new Worker’s Agenda to Rebuild America.?“As we face a new age of competition with China, we need an agenda in Washington that will make our working class strong and independent,” he said. “We can start by revoking the sweetheart deal D.C. elites handed to China 23 years ago – end normal trade relations, put in place strong tariffs, and protect American workers,” Hawley said.?According to a statement, The?Ending Normal Trade Relations with China Act?would:
• Revoke China’s normal trade relations status.?Subject imports from China to higher tariff rates.
• ?Provide the President with the authority to increase these tariffs even higher.

U.S. – KENYA

KENYA SEEKS CONCLUSION TO TRADE TALKS IN 2023

• Kenya expects to secure a trade and investment arrangement with the U.S. by the end of the year, according to a?Reuters report .?“It is full steam ahead for both the Kenyan and U.S. sides,” Kenyan Trade Minister Moses Kuria?said . “By the close of this year, we will have finalized the actual negotiations to pave way for a signing probably by April next year.” The Office of USTR has not confirmed the report.
• Recall that U.S. and Kenyan officials will meet in-person in Kenya (April 17-20) to launch negotiations under the bilateral Strategic Trade and Investment Partnership (STIP), USTR?announced ?last week. 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 lead the U.S. delegation, accompanied by representatives from several other U.S. government agencies.

AG ECONOMY

FOOD AND AG ACTIVITIES ACCOUNTS FOR ONE-FIFTH OF U.S. ECONOMY

• In conjunction with?National Ag Day , over 25 food and agriculture groups released an annual report (Feeding the Economy ) on the economic contributions of the food and agriculture value chain to the U.S. economy. Nearly 20% of the country’s economic activity, or $8.6 trillion in economic output is directly supported by the nearly?23 million jobs ?in the food and agricultural sector, according to the report. The $8.6 trillion in total economic activity is up 21.8% since the 2019 report.?With the inclusion of industries indirectly involved with food and agriculture (input suppliers), employment extends to 46 million, or roughly 30% of the entire workforce of the United States.

U.S. – INDO- PACIFIC

USTR RELEASES IPEF NEGOTIATION TEXTS

• During the Congressional hearings on the President’s trade agenda, several lawmakers expressed frustration with USTR’s lack of transparency and consultations. Prior to the Senate Finance Committee hearing the Office of USTR released?summaries ?of the tabled negotiating texts from the most recent IPEF round on Pillar I (Trade). Ambassador Tai, the sole witness at the hearing contended on multiple occasions that she and her staff have frequently briefed lawmakers and their staff on a range of issues including the IPEF. The agriculture summary from Pillar I on trade is proved below.
• Pillar I (Trade) – Agriculture: The United States tabled proposed text on Agriculture that includes a broad set of provisions designed to open or expand opportunities for agricultural producers to access markets throughout the IPEF region, advance food security, and promote sustainable agricultural production. In particular, the text is aimed at increasing transparency and regulatory certainty for agricultural exporters and importers, as well as encouraging collaboration and innovation in areas such as sustainability and food security.The text breaks new ground in including elements relating to sustainable agriculture as well as elements relating to innovation and technology, tabled for the first time in U.S. trade negotiations. The text acknowledges that there is no one-size-fits-all solution to sustainable agriculture and promotes collaborative work to share best practices and explore science- and evidence-based solutions tailored to the conditions of IPEF partners. The text also includes cooperative efforts to promote innovation, fair trade, and individualized approaches to advance environmental goals.The text also includes several provisions regarding food safety, plant health and animal health protection, and other provisions of importance for agricultural trade, preserving the role of regulatory authorities to ensure the safety of their domestic food supplies, while also facilitating trade in agricultural goods. These provisions are intended to: improve transparency of regulatory processes and procedures; advance science-based decision-making to protect human, plant, and animal life and health; improve processes and promote cooperation regarding regulatory and administrative requirements; and facilitate agricultural trade across the IPEF region. The text also includes provisions related to transparency in import licensing procedures for agricultural products, certification requirements, and equivalency to ensure that any requirements for importation are clearly communicated to regional agricultural producers.
• The agriculture text also contains provisions intended to promote food security in the region, such as disciplines regarding the imposition of export restrictions, an area of particular interest to net food importing countries in the region.

ECUADOR

SENATORS SEEK TO ADD ECUADOR TO CBERA

• Last week Senators Bob Menendez (D-NJ.), Chairman and Jim Risch (R-ID), Ranking Member of the Senate Foreign Relations Committee, introduced legislation to make Ecuador eligible for designation as a beneficiary country under the Caribbean Basin Economic Recovery Act (CBERA). Under the?Innovation and Development in Ecuador (IDEA) Act ,?Ecuador would be subject to lower tariffs for its exports to the U.S. as a beneficiary country under CBERA.
• “This new legislation will further expand the economic and commercial ties between our two countries,” Menendez said. “With this new bill, the United States is deepening its partnership with a key democratic partner in the Americas and creating the conditions for inclusive economic growth in both countries,” said Risch.?According to a joint?press release ?by the lawmakers, the legislation would:
• Reduce U.S. tariffs on nearly 50 percent of Ecuadorian exports to the United States.
• Promote market-based economic policies to reduce illegal immigration from Ecuador. Ecuadorians are the second largest group entering Panama illegally on their way to the United States, and illegal immigration from Ecuador has more than doubled so far in FY2023 compared to FY2022.
• Provide support to a democratic partner under extreme pressure from Chinese and other malign influences.

SUPPLY CHAINS

AG GROUPS WANT WHITE HOUSE INTERVENTION IN PORT LABOR TALKS

• Last week over 100 agriculture and business groups sent a letter to President Biden calling for intervention to resolve the protracted West Coast port labor negotiations between dockworkers and port facilities owners. In the?letter ?the groups wrote, “It is imperative that the administration work with the parties to quickly reach a new agreement and ensure there is no disruption to port operations and cargo fluidity.” “Significant cargo flows have shifted away from the West Coast ports because of the uncertainty related to the labor negotiations.” Spearheaded by the National Pork Producers Council, the letter signatories further requested the Biden Administration appoint a new administration point person given the departure of Marty Wash from the post of Secretary of Labor.
• Contract negotiations started over 10 months earlier between the International Longshore and Warehouse Union and the Pacific Maritime Association. The drop in west coast port cargo volumes and demand has complicated the negotiations, according to sources. Exports moving through the L.A. port were down 14 percent in February?from year-ago levels, but that was about one-third of the drop in import volume. “Over the next several months, we’ll continue to see lighter volume, particularly compared to all the records we set in the first half of last year,” said Gene Seroka, executive director at the Port of the Los Angeles.

SECTION 301

COURT UPHOLDS SECTION 301 TARIFFS

• The U.S. Court of International Trade (CIT)?ruled ?in favor of the Trump Administration’s imposition of Section 301 tariffs on billions of dollars of Chinese goods. In its decision the Court upheld the U.S. Trade Representative’s Office (USTR) decision to increase the number of Chinese products subject to the Section 301 tariffs by adding two additional product lists (e.g. List 3 and List 4A). While the CIT last year affirmed the agency’s legal authority to impose the tariffs, CIT found that USTR had not fully complied with the Administrative Procedure Act in expanding the scope of the products subject to Section 301 tariffs and remanded the case to the agency.
• The court case stems from multiple legal challenges stretching back more than two years ago and brought by over 3,600 companies against the Section 301 tariffs. Legal counsel for the petitioning companies indicated they will appeal the CIT ruling, according to reports.
• Recall that Section 301 authorizes USTR to take action to counter or mitigate foreign countries’ unfair trade practices affecting U.S. commerce. In 2017, under then President Donald Trump, USTR began an investigation into China’s trade practices, and ultimately concluded that a variety of Chinese practices unfairly inhibited U.S. commerce. Under Presidential authority USTR imposed Section 301 tariffs ranging from 7.5% to 25% on four successive rounds of Chinese products between July 6, 2018 and September 1, 2019.

TRADE POLICY

TRADE COMMITTEE MEMBERS CRITICIZE?LACK OF?TRANSPARENCY UNDER BIDEN’S TRADE AGENDA

• Testifying on the President’s trade agenda, Ambassador Tai fielded a bevy of criticism from both sides of the political aisle, with lawmakers frustrated with USTR “going it alone” and not consulting with Congress on trade activities. Chairman Ron Wyden (D-OR) called the lack of consultation with lawmakers “unacceptable.” “The Executive Branch has begun to embrace a “go it alone” trade policy. Let me be clear: Congress’ role in U.S. trade policy is defined by the Constitution. It’s right there in Article I, Section 8. That is black-letter law, and it’s unacceptable to suggest otherwise. It’s my expectation that Ambassador Tai and this Committee can begin to chart a new path forward when it comes to transparency, consultation, and ultimately, approval of trade agreements,” Wyden said in an?opening statement .
• Committee Ranking Member Mike Crapo (R-ID) said in an?opening statement , “In the case of IPEF, the Administration refuses to share the views of the same congressionally established advisory committees that assist Congress in determining whether a proposed trade agreement will assist Americans.?The text of the relevant statute is behind me and it is crystal clear that such information must be shared with designated Members of Congress.”?
• Several Lawmakers in the House of Representative’s continued the theme of frustration with lack of consultations on trade policy by USTR. During the House?hearing ?on the President’s 2023 trade agenda, Representative Jason Smith (R-MO), Chairman of the Ways and Means Committee, lamented the Biden Administration’s exclusion of Congress in trade policy endeavors.?In?opening remarks ?for the Committee’s hearing on the President’s Trade Agenda, Chairman Smith stated, “The Biden Administration unfortunately has refused to recognize that the Constitution requires Congress be at the center of U.S. trade policy. Through so-called “trade frameworks” that sidestep Congress and fail to establish durable agreements, this Administration is fueling the supply chain crisis and plunging American workers, farmers, and manufacturers into prolonged uncertainty. Endless dialogues and frameworks are no substitute for exercising Congress’s constitutional authority – and giving the American people a voice – over trade. In order to succeed, this Administration must recognize that Congress is in the driver’s seat in setting priorities and deciding whether to approve any trade agreements.”

LAWMAKERS CALL FOR TARIFF REDUCING AGREEMENTS

• Last week, 20 Republican members of Ways and Means penned a?letter ?to President Biden, citing a “lack of a clear trade agenda” and calling for the Administration to pursue tariff-reducing trade agreements, a shift from President Biden’s pause on new free trade agreements (e.g. FTAs). The lawmakers wrote, “Not pursuing new tariff-reducing enforceable trade agreements breaks a four-decade-long bipartisan approach to trade policy and means we are missing out on opportunities to advance U.S. economic interests, U.S. security, and create jobs right here in America.”
• The letter further highlighted lack of Congressional consultation with Congress on trade initiatives. “To the extent that your focus on less traditional dialogues and frameworks is a result of a desire to avoid agreements that require congressional approval, we urge you to reconsider this approach. Trade agreements approved by Congress are more durable than any trade-related initiatives that are concluded as executive agreements, and given Congress’s exclusive Constitutional authority over foreign commerce, you lack the ability to bind the United States in this area without congressional approval.”
• The letter was led by Trade Subcommittee Chair Adrian Smith (R-NE) and signed by 19 other Members singing the letter: Reps. Darin LaHood (R-IL),?Ron Estes (R-KS), Carol D. Miller (R-WV), Beth Van Duyne (R-TX), A. Drew Ferguson, IV (R-GA), Vern Buchanan (R-FL), David Kustoff (R-TN), Blake Moore (R-UT), Kevin Hern (R-OK), Michelle Steel (R-CA), Brad Wenstrup, D.P.M (R-OH), W. Gregory Steube (R-FL), Nicole Malliotakis (R-NY), Randy Feenstra (R-IA), Gregory F. Murphy, M.D. (R-NC), Claudia Tenney (R-NY), Lloyd Smucker (R-PA), Michelle Fischbach (R-MN), and Jodey C. Arrington (R-TX).

APPLICATION OPENS FOR USDA MARKET DEVELOPMENT PROGRAMS

• Applications for fiscal year 2024 funding for USDA’s five export market development programs are being accepted from eligible entities. The programs are the Market Access Program, Foreign Market Development Program, Technical Assistance for Specialty Crops Program, Quality Samples Program and Emerging Markets Program. The?application deadline ?for the five programs is May 19.

WTO

SUCCESSFUL FISHERIES DISCUSSIONS WTO CHAIR REPORTS

• WTO members concluded discussions on the next wave of fishing subsidies ambitions during the first of a series of “Fish Weeks.” “I think it was a very successful first Fish Week,” Ambassador Gunnarsson said at the close of the week, speaking at a meeting of the?Negotiating Group on Rules ?attended by heads of WTO delegations. “I have seen this first week as devoted to discussing what we want to get out of this second wave of negotiations. As the next logical step, I see our second Fish Week in April as the beginning of our discussions of how to get to the result we want,” he said. “It has been illuminating to listen to members. I noticed members’ positive spirit and the willingness to understand each other.”
• According to a?WTO readout , “Many delegations reported that they are optimistic about depositing their acceptance of the Agreement soon. Many other members noted that they expect to make donations to the WTO Fisheries Funding Mechanism very soon to help developing and LDC members meet their obligations.” The second Fish Week will be held on April 25-28.