Lighthizer’s Crystal Ball

Lighthizer’s Crystal Ball: U.S. Trade Policy Chief Outlines Agricultural Trade Agenda

BY PATRICK WADE Policy Director, Texas Grain Sorghum Producers

I doubt I am the only one whose perception of time is increasingly distorted these days. Without the routine of conferences, visiting our members, and board meetings my days have blurred into weeks and my weeks have blurred into months. At a time when so many of us are feeling unmoored, a little perspective can go a long way towards achieving greater clarity about the future.

On June 17, U.S. Trade Representative Robert Lighthizer proffered that perspective for agricultural trade policy with a marathon testimony to Congress about the Trump administration’s trade agenda. Between the House Ways and Means Committee and the Senate Finance Committee, Ambassador Lighthizer spoke for over seven hours regarding the Office of the U.S. Trade Representative’s (USTR) past achievements, current activities, and future priorities. Naturally, this agenda is predicated on the assumption that President Trump is reelected in November. Through this dialogue, American agricultural producers can glean a clearer picture of what is to come with respect to trade agreements and international market access.

Concerning the immediate future, Lighthizer spoke to Congress in part about how enforcement of the U.S.-Mexico-Canada Agreement (USMCA), which entered into effect on July 1, would commence. From a big-picture perspective, the tariff-free flow of U.S. agricultural goods into Mexico and Canada will continue as it has for the past two decades. However, Lighthizer indicated that some of the new provisions secured in the renegotiation may need to be utilized almost immediately. USMCA is the first trade agreement the U.S. has been party to that contains a chapter dedicated to the resolution of agricultural biotechnology disputes. It has been over two years since Mexico last approved a biotechnology product and there are presently 18 approvals still pending in the country. On top of this, Mexico’s Secretary of Environment and Natural Resources, Victor Manuel Toledo Manzur, recently announced that Mexico soon intends to phase out its use of glyphosate. In his testimony to Congress, Lighthizer suggested that the U.S. may begin consultation – and possibly enter the state-to-state dispute settlement process – with Mexico on these issues immediately upon USMCA entering into force. This will be an important test of the mechanisms established by USMCA to resolve non-tariff agricultural trade barriers.

In attempting to justify these actions, Mexico has drawn from the European Union’s “precautionary principle,” which essentially replaces science-based thresholds with an outright rejection of agricultural goods when any level of pesticides or biotechnologies are detected. In his testimony, Lighthizer claimed that the EU has turned the practice of disguising agricultural protectionism as nonscience-based consumer preferences into a “high art.” This tension between the EU and U.S. on agricultural trade policy is permeating multiple upcoming negotiations. Following its withdrawal from the EU, the United Kingdom is currently engaged in negotiations with the U.S. for a trade deal. While the UK has been more amenable to modern agricultural practices – the country frequently voted in the minority to approve biotechnologies while still a member of the EU – there is growing domestic pressure for the UK to protect its farmers and ranchers. Concurrent with our negotiations, the UK is also negotiating its trading terms with the EU, and Lighthizer noted that USTR will be closely monitoring those proceedings. While the UK’s initial proposals related to agricultural tariff schedules have been well-received by U.S. negotiators, the closer the UK mirrors the EU’s agricultural trade policies, the less inclined Lighthizer said

product and there are presently 18 approvals still pending in the country. On top of this, Mexico’s Secretary of Environment and Natural Resources, Victor Manuel Toledo Manzur, recently announced that Mexico soon intends to phase out its use of glyphosate. In his testimony to Congress, Lighthizer suggested that the U.S. may begin consultation – and possibly enter the state-to-state dispute settlement process – with Mexico on these issues immediately upon USMCA entering into force. This will be an important test of the mechanisms established by USMCA to resolve non-tariff agricultural trade barriers.

In attempting to justify these actions, Mexico has drawn from the European Union’s “precautionary principle,” which essentially replaces science-based thresholds with an outright rejection of agricultural goods when any level of pesticides or biotechnologies are detected. In his testimony, Lighthizer claimed that the EU has turned the practice of disguising agricultural protectionism as nonscience-based consumer preferences into a “high art.” This tension between the EU and U.S. on agricultural trade policy is permeating multiple upcoming negotiations. Following its withdrawal from the EU, the United Kingdom is currently engaged in negotiations with the U.S. for a trade deal. While the UK has been more amenable to modern agricultural practices – the country frequently voted in the minority to approve biotechnologies while still a member of the EU – there is growing domestic pressure for the UK to protect its farmers and ranchers. Concurrent with our negotiations, the UK is also negotiating its trading terms with the EU, and Lighthizer noted that USTR will be closely monitoring those proceedings. While the UK’s initial proposals related to agricultural tariff schedules have been well-received by U.S. negotiators, the closer the UK mirrors the EU’s agricultural trade policies, the less inclined Lighthizer said he is to grant the UK access to American markets.

This philosophical difference – science-based thresholds versus the precautionary principle – will guide the flow of agricultural goods to international markets for years to come, and Mexico is far from the only country to which these ideas have spread from the EU. The U.S. is also set to formally begin negotiations with Kenya this summer, marking our first robust, bilateral free trade agreement with a sub-Saharan African country. Kenya, however, is also part of an Economic Partnership Agreement with the EU, which affords them duty- and quota-free access to each other’s markets. Although Kenya conducts its own research and approval of biotechnology products, it maintains a strict ban on their import. Removing this barrier, and many other tariff and sanitary and phytosanitary (SPS) barriers, will be a major focus of the agricultural provisions in this negotiation. Kenya has long been a consumer of U.S. Food Aid deliveries of U.S. sorghum, which is a historical staple food in the region. Lighthizer confirmed that the free trade agreement with Kenya is an effort to set a precedent for future agreements with the rest of sub-Saharan Africa, a region whose population is projected to double to over two billion by 2050. Kenya is an economic leader in the region and the U.S., per Lighthizer’s comments, looks forward to complementing Kenya’s economic growth and helping the country develop a robust infrastructure for free, science-based trade. Looming over all of Ambassador Lighthizer’s testimony in mid-June was China. Lighthizer repeatedly defended China’s progress in the Phase One agreement, reaffirming his confidence that the historically-precedented uptick in agricultural sales after fall harvests will help China meet the purchasing goals set out in the agreement. He said that Chinese officials have reiterated their commitment in every conversation he has had with them, and that China’s Premier Li Keqiang made a similar guarantee when speaking to the National People’s Congress earlier in June. Some commodities, such as sorghum, cotton, and pork, are already on track to meet their Phase One sales obligations. In fact, as Lighthizer noted and as I wrote about in my previous contribution to this publication, sorghum sales to China in 2020 are currently outpacing sales from the agreement’s base year of 2017.

While much of his testimony spoke to the progress made in future free trade agreements, Lighthizer threw cold water on suggestions of some potential trade partners. Despite rumors, he said that a deal with Brazil was unlikely at this time. Negotiations with India, also, were at a stalemate, although the Indian ambassador to the U.S. still maintains optimism in achieving a limited deal in 2020. Little clarity was offered about progress towards second phases of agreements with China or Japan, either. In the case of the latter, the U.S.’s approach to Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, formally known as TPP) members like Japan is critical for the future of the U.S. grain industry. Southeast Asia is one of the fastest growing regions in the world, with a burgeoning middle class and significant feed grain deficits. When commending the non-FTA accomplishments of USTR under his leadership, Lighthizer cited the recent phytosanitary approval of U.S. sorghum exports to Vietnam. While clearing this capricious hurdle was important, there is still a 5% tariff on U.S. sorghum and corn going into Vietnam, as well as numerous other SPS and non-tariff barriers. Vietnam’s fellow CPTPP members are not subject to any of these barriers, and with every day that passes American farmers grow increasingly disadvantaged with respect to these critical markets. The United Sorghum Checkoff Program and the U.S. Grains Council recently completed an aquaculture study in Vietnam and learned that U.S. sorghum would fit well into its catfish industry. In 2019, the U.S. was able to ink an agricultural trade deal with Japan in record time because we essentially applied the same provisions we had already agreed to in TPP negotiations. Any future trade policy agenda for U.S. agriculture should prioritize free trade agreements with all other CPTPP members in Southeast Asia, as well.

As we stand a crossroads of sorts – three and a half years into this administration’s agricultural trade policy agenda, four more potentially to come – it is important to take this time to reflect on both the successes and shortcomings in order to prepare for the future. Ambassador Lighthizer’s testimony in June was clarifying for a number of reasons, and Texas Grain Sorghum Producers will continue to do all we can to support the Office of the U.S. Trade Representative in meeting the challenges to come and guiding our trade policy towards opportunities yet unrealized.