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USMCA implementation shortfalls incite calls for action

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ACTION NEEDED NOW: Biotechnology Innovation Organization President and CEO Michelle McMurry-Heath calls for USTR action now on addressing Mexico's lack of acceptance of agricultural biotechnology “so this bad problem doesn’t go from bad to worse.”
Senators call on naming of chief agricultural negotiator and USTR action to hold Mexico accountable on ag biotech approvals.

Although initial talks between U.S. Trade Representative Katherine Tai and her Mexican counterparts have occurred in recent months on Mexico’s failure to adhere to science-based approvals of agricultural biotechnology, members of Congress and industry members called for further action to hold Mexico accountable and the appointment of a chief ag negotiator during a Senate Finance Committee hearing on Tuesday reviewing the U.S.-Mexico-Canada Agreement.

USMCA contains commitments that should facilitate cooperation on agricultural biotechnology, including decisions regarding the approval of such technology be based on science. Unfortunately, Mexico has refused to approve any biotechnology food or feed products since May 2018 and issued a decree at the end of 2020 laying out the banning of the technology for human food use by 2024. In 2020, the U.S. exported $2.7 billion of corn to Mexico and nearly 90% of corn, soybeans and cotton grown in the United States utilizes biotechnology.

“This technology not only increases farmers’ yields, but allows them to grow crops more sustainably, including by using less pesticide and reduced tillage,” explains Sen. Mike Crapo, Senate Finance Committee ranking member. “Despite the clear economic and environmental benefits, the administration has yet to take any enforcement action on this important issue.”

Michelle McMurry-Heath, president and CEO of the Biotechnology Innovation Organization, thanked Congressional members for speaking out against Mexico’s actions, but says more is needed. “It’s time for USTR to take enforcement action,” she says and explains an enforcement case at a minimum gives the industry a framework and timeline for solving regulatory delays.

Related: Is Mexico living up to their USMCA promises?

She says while Mexico never fully embraced the cultivation of agricultural biotechnology, it was a model trading partner. The Government of Mexico’s food and drug regulatory authority (COFEPRIS) routinely processed new product applications within Mexico’s statutory limit of six months. The process was largely transparent, science-based and predictable. Since the election of President Andrés Manuel López Obrador, however, COFEPRIS has effectively shut down and Mexico’s regulatory system has become nonfunctional.

During questioning, McMurry-Heath says COFEPRIS’ lack of approval creates uncertainty for U.S. farmers and ag biotech companies creating a breakdown of the ability to innovate and export ag products to Mexico, and also breaks down the ability to innovate for all markets “including our own,” she warns. “We need certainty and we need action to make sure innovations have a path forward as long as they’ve proved safe and effective.”

In 2018, BIO and international partners conducted an extensive economic analysis of the impact of regulatory delays in China which average seven years. The analysis showed that delays in China decreased U.S. farm income by $5 billion and cost nearly 34,000 jobs between 2011 and 2016. Like Mexico, China is a major importer of U.S. soybeans and corn.

She adds it’s incredibly important to address the issue now with the government of Mexico “so this bad problem doesn’t go from bad to worse.”

Chief ag negotiator needed

McMurry-Heath notes many provisions included in USMCA sets the gold-standard for science-based trade policy and ensures science, rather than misplaced concerns, dictate policies. She says an ag negotiator at USTR could be the point person and have the “most pivotal influence to make sure points are made.”

Naming a chief agricultural negotiator was asked for by members of the Senate Finance Committee as well as those who testified. Since the role’s creation, the chief agricultural negotiator has been instrumental in prioritizing our producers in trade policy and eliminating numerous non-tariff barriers for American agriculture dominance and global food security. In early July, a bipartisan group of legislators sent a letter to President Joe Biden seeking a nomination.

When asked what Congress can do to prevent irreversible harm from Mexico’s action, McMurry-Heath says, it’s critically important to see movements on the naming of a chief agricultural negotiator so we can enhance our efforts and “show the Mexican government that we’re serious about these concerns.”

Related: USMCA celebrates one-year anniversary

Dairy concerns

National Milk Producers Federation Executive Committee member Allan Huttema testified on the importance of holding Canada and Mexico accountable for their USMCA promises on the dairy side. Huttema is a dairy farmer from Parma, Idaho with 800 cows and 500 acres of corn and triticale for sileage.

While the USTR’s recent initiation of USMCA dispute settlement proceedings over Canada’s allocation of dairy tariff-rate quotas is a welcome step, additional monitoring and enforcement efforts must also focus on Canada’s implementation of its commitments on Class 7 pricing and export surcharges on Canada’s dairy protein exports, as well as on Mexico’s proliferation of ill-intended regulations that are aimed at disrupting trade. Close attention must also be paid to Mexico’s implementation of USMCA provisions on geographical indications, Huttema says.

Canada and Mexico now take 27% of all U.S. agricultural exports and over 30% of U.S. dairy exports, providing critical farm income to America’s farmers and ranchers.

Canada has not administered its TRQs fairly, as required by its USMCA obligations. “Unfortunately, this is consistent with Canada’s long history of undermining its market access commitments to protect its tightly controlled dairy market,” Huttema’s testimony says.

Canada’s TRQ system discourages full utilization and valuation of agreed upon quantities. For example, the system allocates up to 85% of each TRQ to Canadian processors who have little incentive to import and fails to allocate TRQs in the quantities that applicants request. Further, up to only 15% of the TRQs are allocated to distributors and zero is administered to retailers. “USMCA dispute settlement is the right course of action to address these unfair restrictions,” he says.

He says USTR may also need to monitor Canada’s implementation of other dairy-related USMCA provisions such as those eliminating Canada’s discriminatory Class 7 dairy pricing policy and requiring export surcharges on dairy protein exports like skim milk powder, milk protein concentrate and infant formula.  

“Canada’s actions have given cause for concern. Canadian exports of milk protein isolates and certain skim milk blends manufactured under the new Class 4a have been increasing in a manner that seems designed to evade USMCA disciplines,” he continues. “USTR and USDA should move quickly to deploy the dairy consultation tools laid out in USMCA’s Agriculture Chapter to address this concern and to ensure that Canada’s other policies comply with USMCA disciplines affecting trade in milk proteins.”

Krysta Harden, president and CEO of the U.S. Dairy Export Council, agreed with comments offered from Huttema calling for more trade agreements to expand on USMCA.

“We need new trade agreements to expand on Congress’ hard work in passing USMCA,” Harden says. “The EU is filling the vacuum that American trade policy is leaving – an issue that Congress needs to address with additional market opportunities for U.S. exports.” 

TAGS: Regulatory
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