[CTC] Finance USMCA hearing focuses on Mexican biotech approvals, other irritants

[Arthur Stamoulis]

Finance USMCA hearing focuses on Mexican biotech approvals, other irritants
By Madeline Halpert, Inside US Trade
7/27/2021
 
The Biden administration should bring a U.S.-Mexico-Canada Agreement dispute against Mexico for its failure to approve biotechnology imports, a biotech industry representative told the Senate Finance Committee on Tuesday as the panel heard testimony on a variety of trade irritants related to the deal.

The Senate Finance Committee held Tuesday’s hearing to discuss USMCA implementation issues that have arisen since the deal took effect about one year ago. Senators touched on a range of issues, including Mexico’s biotech approval process, ongoing disputes with Mexico over labor rights, a dispute with Canada over dairy access, and other trade irritants including illegal, unreported and unregulated fishing and potato market access.

Senators repeatedly asked Biotechnology Innovation Organization President and CEO Michelle McMurry-Heath about Mexico’s biotech approval process. Mexico has not approved a biotech trait for import since May 2018, despite USMCA entering into force last July, McMurry-Heath said. Mexico has a backlog of 23 pending approvals, despite its commitment to cooperate on biotech trade, she said.

“With little indication from Mexico that it will adhere to USMCA’s commitment, BIO strongly urges the administration to begin taking enforcement action against Mexico's unjust treatment of agricultural biotechnology,” she said. “Without enforcement, BIO and its members fear the government of Mexico will continue and possibly even broaden the scope of its infringement to additional agricultural products.”

The group has not received any explanation from Mexico’s regulator on why dozens of biotech import applications have not been approved, McMurry-Heath added. The group also has “every reason to believe” that it could take U.S. companies up to seven years to get their products approved, as it does with China -- a delay that has cost the U.S. more than $50 billion, McMurry-Heath said.

USMCA’s agriculture chapter <https://insidetrade.com/sites/insidetrade.com/files/documents/2018/oct/03%20Agriculture%2030%20Sept%20clean.pdf> encourages trade in biotech products but does “not require a Party to mandate an authorization for a product of agricultural biotechnology to be on the market.” It does require that parties “accept and review applications for the authorization, if required, of products of agricultural biotechnology on an ongoing basis year-round.”

The enhanced provisions for agricultural biotech laid out in USMCA are a “significant improvement” from the North American Free Trade agreement, she said. But what exists “on paper,” McMurray-Heath added, is “a far cry from reality.”

The Trump administration in June 2020 initiated <https://insidetrade.com/node/169038> USMCA consultations, the first step in launching a dispute settlement case, over Mexico’s treatment of biotech imports.

But despite “clear economic and environmental benefits,” the Biden administration has yet to take any enforcement action on the biotech import issue, Finance Committee ranking member Mike Crapo (R-ID) said on Tuesday, calling the lack of action “fairly disappointing.”

Mexico escalated the problem, McMurry-Heath said, when it issued a December 2020 decree in announcing its intent to phase out the use of agricultural technologies by 2024, including biotech corn.

“An enforcement case would at the minimum give us a framework and a timeline to resolve the regulator delays in biotechnology approvals and the December 31, 2020 decree against biotech crops,” she said. “So this is incredibly important that we address this now with the government of Mexico so this bad problem doesn't go from bad to worse.”

USTR, she said, should appoint a chief agricultural negotiator as soon as possible to ensure enforcement action is taken.

“A chief ag negotiator at USTR would be our point person on this and would have the most pivotal influence to make sure that these points are made with all of our important trading partners,” she added.

President Biden has yet to announce his picks for chief agricultural negotiator as well as ambassador to the World Trade Organization, both Senate-confirmed positions.

“It now really behooves us to make sure that we double back and hold [Mexico] to the agreement, and we feel that this can best be done by the appointment of an agricultural negotiator through USTR,” McMurry-Heath said. “This is critically important to do because it affects not just our relationship with Mexico, but it has the potential to seep into our other trade agreements and with trading partners. So it's very important that we address it at this stage.”

Dozens of lawmakers in recent months have urged <https://insidetrade.com/node/171658> USTR to fill the chief agricultural negotiator role, arguing it is necessary for prioritizing agriculture in trade agreements and eliminating non-tariff barriers.

Sen. John Thune (R-SD) on Tuesday also lamented the administration’s failure to nominate a chief agricultural negotiator. Thune previously pressed USTR Katherine Tai on the issue during a Finance Committee hearing in May. Tai responded that the issue was a “priority for administration” that she hoped would be resolved “soon.”

Even in the absence of a chief negotiator, USTR should “act now to try to right some of the missteps” in the implementation of USMCA, McMurry-Heath said.

Other irritants

The Biden administration has to “clean up the messes” that the Trump administration left behind when it “rushed the process” of USMCA, Finance Committee Chairman Ron Wyden (D-OR) said.

“Only a few months were given to carry out the agreement -- not anywhere near enough time to protect workers and businesses by holding Canada and Mexico to their commitments,” he said.

Wyden cited several trade issues under USMCA that have yet to be resolved, including digital services taxes, workers’ rights violations in Mexico and access to Canada’s dairy market.

While the “spirit” of USMCA is “great” for dairy farmers, the agreement has not been upheld by Canada, Allan Huttema, the chairman of the Northwest Dairy Association testified on Tuesday. The Canadian government will “do all it can” to avoid fulfilling its dairy commitments, he said.

USTR in May requested <https://insidetrade.com/node/171393> a dispute settlement panel to review Canada’s decision to set aside a percentage of each of its dairy tariff-rate quotas specifically for Canadian processors. Canada has denied that its dairy policies are in violation of USMCA.

According to Huttema, the dairy industry appreciated Tai’s decision to initiate the dispute settlement process with Canada, but remains concerned that the country may be creating products -- such as milk protein isolate and skim milk powder -- to circumvent USMCA rules.

“The U.S. shall not tolerate trading partners not living up to their obligations,” he said. “It is definitely very advantageous for American dairy farmers to access markets, and when we're held out, it hurts dairy farm families.” Huttema added that USTR should “keep a careful eye” on milk protein isolate and skim milk power exports because of concerns that Canada may be increasing production of the products to avoid milk protein export limits.

Meanwhile, while there has been “significant progress” on the enforcement of USMCA’s labor provisions, concerns remain about Mexico’s ability to implement labor reforms, Benjamin Davis, the director of international affairs at the United Steelworkers Association, testified. Davis cited a July 7 labor report <https://insidetrade.com/node/171719> from the Independent Mexico Labor Expert Board established by USMCA that found a “number of serious concerns” with labor enforcement processes. The board, however, did not determine that Mexico was not in compliance with its labor obligations.

USW has been “pleased” to see USTR’s “emphatic” use of the USMCA rapid response mechanism, Davis said. USTR in recent months initiated two complaints under the mechanism, one in May against <https://insidetrade.com/node/171293> a General Motors plant in Silao, Mexico, for alleged workers’ rights violations, and another in June <https://insidetrade.com/node/171594> involving worker rights at a Tridonex auto parts facility, following a petition from the AFL-CIO. The U.S. and Mexico two weeks ago announced a remediation plan <https://insidetrade.com/node/171720> to resolve the labor complaint involving the General Motors plant.

Sen. Pat Toomey (R-PA), however, lambasted the rapid response mechanism, which he argued has only had a “negative” impact on American workers thus far.

"In my state, constituent jobs are at stake as an investigation continues into one of my constituent’s Mexican subsidiary,” he said. “The firm has given no details about the investigation and no recourse to defend themselves.”

Aside from a chapter on digital trade, there’s “really very little evidence” USMCA provisions are good for U.S. workers, Toomey said.

Asked by Wyden -- who helped develop the rapid response mechanism with Sen. Sherrod Brown (D-OH) -- how the U.S. can make the mechanism “stronger,” Davis said the administration needs to use it “regularly and effectively.”

“But we also need to look beyond this to other aspects of USMCA and other aspects of the Mexican labor law reform which they're committed to implementing,” he said.

Davis also pointed to three other areas for improvement in the implementation of USMCA’s labor provisions.

“We need strong enforcement,” he said. “We need to support the process that Mexico has started of creating new labor market institutions and new domestic enforcement mechanisms. And we need to help workers build their own capacity.”

Potato access issues have also long vexed U.S. growers who have urged <https://insidetrade.com/node/170910> Tai and Agriculture Secretary Tom Vilsack to consider launching a dispute under USMCA to address the issue. Democratic lawmakers in recent months also have called for <https://insidetrade.com/node/170896> stronger enforcement measures against seafood imports caught through illegal, unreported and unregulated fishing.

USMCA prohibits subsidies for vessels involved in such fishing and requires parties notify each other yearly about their fisheries subsidies, Beth Lowell, the deputy vice president of U.S. Campaigns at Oceana said. While the U.S. and Canada have reported some of the subsidies information required under the World Trade Organization Agreement on Subsidies and Countervailing Measures, Lowell said none of the three has provided the additional subsidies information required under USMCA.

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826




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