IATP | 7 September 2022
Agricultural trade and standards within the Indo-Pacific Economic Framework (IPEF)
by Dr. Steve Suppan
IPEF: More than a trade agreement framework?
On September 8-9 in Los Angeles, officials from the Office of the U.S. Trade Representative (USTR) and the Department of Commerce will meet with their counterparts from 13 countries to make initial commitments to the Indo-Pacific Economic Framework for Prosperity (IPEF) on topics for future discussion. IPEF members, as of mid-July, are Australia, Brunei, Fiji, India, Indonesia, Malaysia, New Zealand, Japan, the Philippines, Singapore, South Korea, Thailand and Vietnam. As explained below, the proposed four pillar structure of IPEF differs somewhat from the traditional United States trade policy focus on maximizing U.S. exports. If IPEF governments commit to work on all four pillars and follow through on their commitments, there is a chance that trade policy will be pulled kicking and screaming into the 21st century. There is a real risk, however, that abuse of scientific evidence in standards setting, implementation and enforcement will lock in outdated approaches to enabling agricultural trade, food safety, environmental health and public health.
Some of these countries (Indonesia, Japan, the Philippines, South Korea, Thailand and Vietnam) are among the top 10 destinations for U.S. agricultural exports for one or more of the top five commodity exports (corn, soybeans, beef, pork, wheat). At the end of August, USDA announced that the value of 2022 U.S. agricultural exports had reached an all-time record and projected another near record for 2023.
Other countries are of U.S. strategic interest (Brunei for oil; Fiji for its 300 islands in Oceania, some suitable for military purposes; Singapore for regional finance and shipping logistics). IPEF is understood to be a geopolitical bulwark whose incentive structure includes trade benefits against the China-led Regional Comprehensive Economic Partnership (RCEP). IPEF and RCEP have overlapping membership, with some IPEF members, India and South Korea above all, being highly dependent on trade with and investment by China.
The IPEF, as proposed by the Biden administration will have four pillars: trade; supply chains; “decarbonization” (greenhouse gas (GHG) reduction), clean energy and infrastructure; tax and anti-corruption. USTR oversees the trade pillar discussions for the U.S., while Commerce is in charge of the other three pillars. The trade pillar will include discussions on labor, environment and climate, digital economy, agriculture, transparency and good regulatory practices, competition policy and trade facilitation. According to the Asian Times, “Each of the 13 participating countries will be allowed to choose in which of the four areas to pursue deals without having to commit to all of them.” However, countries seeking to increase exports to the U.S. will likely start with a commitment to the “Fair and Resilient Trade Pillar” negotiations.
The old trade policy advisory structure for the new role of trade policy in IPEF?
The USDA/USTR Agricultural Technical Policy Committees and Agricultural Policy Advisory Committee represent commodity specific U.S. export interests and advise negotiators on a confidential basis. Civil society organizations wrote to President Joe Biden about opening the IPEF policy advisory process to a much broader range of groups and will reiterate their demands with a rally at the site of the IPEF meeting in Los Angeles. However, if the Biden administration follows the practice of the Obama administration, the trade pillar at least will remain advised overwhelmingly by myriad industry representatives.
Within the trade pillar, it seems very likely that discussions on agriculture will focus on market access and the non-tariff issues, such as Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary Measures (SPS), which are requisite for increasing market entry for exports of goods and services. U.S. agribusiness hopes that removing what they regard as unfair TBT and SPS rules, as described in USTR’s annual report on “Foreign Barriers to Trade,” will increase their prosperity.
Record high U.S. agricultural exports comes at a cost, e.g., of increased GHG emissions from U.S. agriculture, above all methane. There are no trade weighted GHG reduction disciplines. The IPEF “decarbonization” pillar negotiations could exclude agriculture-generated methane because there is already a diplomatic precedent to do so. As IATP noted about a U.S.- European Union agreement to reduce methane, which generates emissions more than 80 times as potent as carbon dioxide, standards designed to reduce agriculture generated methane were excluded, instead relying only on voluntary approaches to reduce emissions. Since agriculture accounts for about 40% of global methane emissions, that is a large exclusion. If that exclusion is replicated in IPEF “decarbonization” negotiations, agriculture-generated methane emissions will almost certainly increase as exports do.
USTR and USDA explain IPEF to agribusiness and farmers in Iowa
In mid-August, U.S. Trade Representative (USTR) Katherine Tai went with USDA Secretary Tom Vilsack to Des Moines, Iowa to tell Big Ag that opening foreign markets by lowering import tariffs for U.S. agricultural exports was no longer the primary goal of trade policy. In testimony in March to the U.S. Senate, she stated, “this framework [IPEF] will promote inclusive growth for workers and businesses, advance strong labor standards, and tackle climate change. The framework is also central to the Biden Administration’s economic strategy in the Indo-Pacific and complements our national security goals in the region.”
However, she did not talk about trade as a subset of foreign policy in Secretary Vilsack’s hometown. Des Moines is the capital of one of the major agricultural export states that contributed to record high 2021 U.S. agricultural exports, up 18% by value from 2020. Given those export numbers and the even higher 2022 numbers, Ambassador Tai’s audience may not believe that her job is about anything other than promoting U.S. agricultural and other trade interests.
Ambassador Tai and Secretary Vilsack also assured farmers that USTR and USDA were working hard to achieve more market access in the farmer and agricultural exporter wish list, including, but not limited to, India, the United Kingdom, African countries and Indo Pacific countries. However, she said, market access was not simply a matter of lowering tariffs in importing countries.
She did not say that agricultural export supply chains will have to become more resilient and redundant, without the vulnerabilities of just-in-time supply management. But farmers already know that. Notwithstanding a March 30 bipartisan congressional letter to Ambassador Tai and Secretary Vilsack to prioritize agricultural exports in the IPEF negotiations, increasing U.S. agricultural exports beyond their record high levels will not likely result from one-way U.S. market access demands.
Increasing U.S. agricultural market access by eliminating foreign non-tariff barriers to exports
USTR’s most recent “Foreign Barriers to Trade” report provides some evidence of likely priorities. According to the report, the primary current vehicle for discussing how to overcome barriers to U.S. exports are the bilateral trade and investment framework agreements (TIFAs) with IPEF members. These TIFAs are at least a decade old, and in the case of New Zealand, three decades old (p. 361). Through IPEF, the U.S. is seeking to advance its position on new trade issues, above all digital trade, and to harmonize and update the TIFAs, including on SPS, TBT and agricultural biotechnology standards.
Despite the promise of long-time USDA trade official Doug McKalip to the Senate that as the chief USTR agricultural trade negotiator he would increase market access for the U.S. agricultural exports to IPEF countries and elsewhere, he did not say how he would do so. A chief reason that he couldn’t say “how” is that market access depends on IPEF member agreement with USTR on the TBT and SPS issues outlined in “Foreign Trade Barriers.”
The report sets out the following definitions:
““Technical barriers to trade (e.g., unnecessarily trade restrictive or discriminatory standards, conformity assessment procedures, labeling, or technical regulations, including unnecessary or discriminatory technical regulations or standards for telecommunications products);
Sanitary and phytosanitary measures (e.g., measures applied to protect food safety, or animal and plant life or health that are unnecessarily trade restrictive, discriminatory, or not based on scientific evidence).” (p. 2)”
When countries bring these cases for dispute resolution at the WTO or other trade forums, the burden of proof is on the importing country to show that their SPS and TBT measures are necessary, not discriminatory (treat foreign exports and domestic products alike) and/or based on scientific evidence. That evidence does not have to be peer-reviewed nor publicly available to satisfy U.S. regulatory requirements. Consider the following alleged trade barrier:
“Korea’s regulatory system for agricultural biotechnology continues to present challenges to U.S. agricultural exports. The approval process for new biotechnology crop varieties is onerous and protracted due to inefficiencies that include redundant reviews and excessive data requests. The regulatory approval is managed across five different agencies, each with its own process and data submission requirements.” (“Foreign Trade Barriers,” p. 319)”
The U.S. regulatory system for agricultural biotechnology products is implemented by the FDA, USDA and Environmental Protection Agency, each with its own pre-market safety review and data requirements. Eliminating the reviews and data requests of two Korean agencies presumably will help reduce the USTR perceived trade barriers.
However, USTR reports, Korea is moving in the U.S. direction of reducing risk assessments for genetically engineered plant varieties: “Korea proposed to classify genome edited products as LMOs [Living Modified Organisms], but also introduced a pre-review system to exempt certain products from a full risk assessment under certain conditions. Once the LMO Act revision is finalized, Korea will develop regulations to implement the prereview system and establish approval procedures for products that are not exempted.” (p. 319) According to the report, U.S. agencies advised Korean legislators on how to bring their legislation in line with the U.S. regulatory system.
For example, according to the pro-biotech Alliance for Science, USDA’s Biotechnology Regulatory Services allows GE plant developers to determine whether their product is exempt from regulation. USDA advises a voluntary consultation with its Biotechnology Regulatory Services office to determine if the product should be risk assessed. USTR aspires to have other IPEF governments adopt this “science based” system for deregulation of GE plants. (The U.S. does not have legislation specifically authorizing the regulation or risk assessment of GE plants or GE animals.)
Science: a servant of trade objectives
It is not an over-simplification to state that USTR and USDA’s use of science in trade policy serves primarily the purpose of increasing exports. The Trump administration, at the behest of the agribusiness lobby, reorganized USDA to put nominally scientific agencies under the supervision of economic and trade offices. For example, the Office of Pesticide Management Policy (OPMP) was taken out of the Agricultural Research Service, which supplied OPMP with scientific evidence for its risk management decisions and was made to report to the Office of the Chief Economist. This reorganization, to subordinate scientific agencies to trade and domestic commerce agencies, persists in the Biden administration.
Scientific evidence is only selectively the final arbiter in U.S. food safety controversies. Why should that evidence be treated less opportunistically in SPS controversies in agricultural trade policy? For example, in March 2022, the Food and Drug Administration (FDA) announced that the Food Safety Modernization Act (FSMA) authorized regulations that it could choose to not enforce, including Produce Safety and the Foreign Supplier Verification Program. When a non-U.S. IPEF negotiator reads that FDA optionally enforces its rules in the U.S., how should that negotiator respond to U.S. proposals to model IPEF SPS and TBT measures after the rules and enforcement practices of U.S. SPS and TBT agencies? Selective enforcement introduces uncertainty and even arbitrariness into the predictable and certain SPS and TBT rules and enforcement measures that U.S. agencies advocate in trade policy.
It may be difficult for USTR to persuade IPEF negotiators that adopting the U.S. regulatory use of scientific evidence is the global SPS gold standard. SPS officers in Washington embassies of IPEF countries can read in Politico about the widespread and long-time bureaucratic disfunction and food safety failures in the Food and Drug Administration. According to former FDA Commissioner Scott Gottlieb, as cited by Politico, “The food industry is lobbying USDA, which in turn puts pressure on FDA through the White House and Capitol Hill, in a way that’s unproductive and this spans multiple administrations.”
This complex lobbying process is one of the reasons that major regulations authorized by the FSMA of 2010 have been repeatedly delayed. The most contentious proposed rule, on how to regulate agricultural water quality to prevent contamination of horticulture products by pathogens of animal origin in fields fertilized with non-composted manure, was re-released for comment in August. According to Food Safety News, responding to grower complaints about the previously proposed rule, “the revised rule would replace the pre-harvest microbial quality standards and testing requirements with requirements for growers to conduct pre-harvest agricultural water assessments once annually, which do not necessarily include testing . . .”
When FDA delegates the risk assessment of agricultural water quality to horticulture growers, the scientific evidence of testing may be used or not in FDA’s produce safety program only when foodborne illness is traced back to a water contaminated horticulture product, whether exported or consumed in the U.S. Science-based sampling and testing is applied only after and if evidence of harm is proven.
Cargill advises USTR: a representative agribusiness synthesis of how to overcome SPS and TBT barriers to exports
When USTR identifies inefficiencies in import inspection, certification, labeling and approvals of novel foods and pesticides among IPEF governments, the default judgment is to regard foreign TBT and SPS measures as discriminatory, unnecessary and/or not based on science unless proven otherwise. The antidote to these inefficiencies and deficiencies is three-fold, according to agribusiness giant Cargill’s submission to USTR on IPEF. Cargill reminds USTR that it has been trading in IPEF countries since 1948. As the first among agribusiness equals in the Asia Pacific region, its advice carries a quasi-diplomatic status.
First Cargill advises, “Align with International Standards: International standards like Codex Alimentarius Commission (CODEX), the World Organization for Animal Health (OIE) and the International Plant Protection Convention (IPPC) provide global science-based standards that safeguard public health and safety.” The primary role of international standards, which may or may not represent political consensus about scientific advisory committees, is to facilitate trade. Several Codex standards have been derived from defective agribusiness company risk assessments presented to those committees. For example, a Codex Maximum Residue Level in meat for ractopamine, a failed human asthma drug repurposed to increase metabolism in livestock, was approved in 2012 by a 69-67 vote. Six risk assessments, three supplied by ractopamine’s U.S. manufacturer, from the late 1980s and early 1990s provided the entire scientific basis alleged to justify the MRL standard. Meat imports with ractopamine residues are banned in China, the 27 countries of the European Union and other countries able to withstand U.S. trade retaliation for rejecting the ractopamine MRL. The Center for Food Safety sued FDA in 2014 to find out the scientific basis for the agency’s approval of ractopamine, documents which remain Confidential Business Information.
Cargill advises, “Mutual acceptance of trade standards among economies can resolve many non-tariff barriers such as ‘missing MRLs.’ We encourage continued progress toward regional regulatory cooperation, that reduces duplicative, redundant, or unnecessary requirements related to pesticide MRLs.” We don’t know which requirements Cargill has in mind, but IPEF negotiators should keep in mind that Crop Life International will advocate, as it did with the Trump administration, to prevent pesticide bans, e.g., even when medical evidence shows that there is no safe level of exposure to a pesticide, e.g., the chlorpyrifos insecticide. Is it “redundant or unnecessary” for a IPEF SPS officer to test for a MRL in horticulture or grain imports of a pesticide that medical evidence indicates causes brain impairment in the children of mothers exposed to the pesticide?
The second facet of Cargill’s advice refers to “zero tolerance” for MRLs of pesticides or veterinary drugs banned in the importing countries: “Zero-tolerance policies create significant challenges and risks for a global food system that cannot be mitigated or addressed by testing and sampling. To verify a zero-tolerance standard requires the entire consignment to be tested.” How would this advice be followed in practice?
The Trump administration worked with Bayer to reverse Thailand’s ban on glyphosate four days before it was to take effect in 2019. According to Reuters, the Thai government overruled its National Hazardous Substances Committee decision to ban glyphosate, citing “concerns over foreign trade impact, alongside the impact on farmers and food and animal feed industries.” If USTR follows Cargill’s advice, IPEF will eliminate “zero tolerance” policies for pesticides and veterinary drugs so that no agricultural chemical residue will result in trade barriers.
The Biden EPA announced it would ban chlorpyrifos, a pesticide whose drift exposure is linked to neurological damage in farmworkers and the children of mothers exposed to chlorpyrifos. However, the Biden administration has defended several Trump administration pesticide decisions, including pesticides banned in other countries. Cargill advises regulatory co-operation to overcome zero tolerance policies.
The third facet of Cargill advice is to “enhance transparency: “In order to effectively comply with trade rules and standards, we urge USTR to work with IPEF countries to improve the transparency around technical issues like testing methodologies, approvals and MRLs. . . Incorporating and enforcing regulatory cooperation provisions in IPEF will not only resolve existing trade barriers, but it will also prevent future ones.” Enforcing IPEF government transparency through regulatory cooperation sounds like a public good. However, as IATP wrote of regulatory cooperation in the U.S.-Mexico-Canada Agreement (USMCA),
“Unfortunately, past experience has shown that regulatory cooperation activities most often take place behind closed doors, with a corporate-directed deregulatory agenda, and with minimal participation by civil society or stakeholders outside of the regulated industries. Not even U.S. state governments may be consulted, including when they are the primary regulators.”
In the Orwellian language of trade policy, greater transparency by governments requires secrecy about regulatory cooperation meetings affecting health, safety and environment regulations and the human and environmental impacts of deregulating. Not surprisingly, Cargill also advises that USTR “build on the modernized trade language in the U.S. Mexico Canada Agreement.” However, as IATP has written of the USMCA agricultural biotechnology provisions, it appears that the Mexican government fought hard to retain its policy space. The text of the agreement specifies that nothing in the agreement requires countries to approve novel agricultural biotechnologies.
TBT troubles and agricultural export dumping
Throughout the “Foreign Barriers to Trade” report, USTR identifies TBT measures that impede U.S. agricultural exports to IPEF countries. For example,
“Following a surge in imports, in July 2021 the Philippines abruptly began enforcing burdensome meat and poultry labeling requirements that, while in place for several years, had previously not been applied. This change resulted in many detained containers of U.S. products and delays of other container shipments en route. The Philippine Government subsequently issued policy clarifications in November 2021 granting labeling flexibilities indefinitely until the policies can be reviewed and revised, thereby allowing continued exports of U.S. meat and poultry. (p. 409)”
This is a more specific example of the generic advice of the North American Meat Institute: “Particular attention should be paid to removing or streamlining certification, labeling, and facility registration requirements by encouraging countries that participate in the Framework to recognize the strength of the U.S. food safety and animal health oversight systems.”
U.S. meat exports to the Philippines are indeed surging. For the first half of 2022, the U.S. Meat Export Federation (USMEF) reports, “[Beef] exports to the Philippines increased 26% to 10,928 mt and climbed 92% in value to $79.1 million.” Why do meat exporters complain about the enforcement of Philippine meat and poultry labeling and why did Philippine authorities decide to enforce, however momentarily, their labeling requirements?
“Import surges” often are the result of dumping, the unfair trade practice of exporting at below the cost of production. In the absence of trade disciplines on import surges or export dumping, developing countries ineffectively use TBT measures to reduce the surges. IATP first called on the World Trade Organization in 2000 to agree on agricultural dumping disciplines. However, agribusiness companies, no matter their headquarters, like to pay below cost of production prices whenever possible. They have effectively lobbied their governments to prevent the application of countervailing duties against dumping that are common for industrial exports.
Meat import surges are enabled by highly subsidized U.S. feed grains, above all corn and soy. USMEF stated, “Corn and soybean growers support the international promotion of U.S. pork, beef and lamb by investing a portion of their checkoff dollars in market development efforts conducted by USMEF.” According to IATP’s latest published dumping numbers, as of 2018, 9% of the corn export price and 17% of the soybean export price were dumped prices. IATP has reported on and advocated for the phaseout of U.S. agricultural export dumping of five row crops, underlining that lack of disciplines on dumping hurts both U.S. farms and rural communities, as well as farmers in the importing countries of dumped products.
Indonesia’s meat import requirements, including TBT requirements for halal certification (livestock and poultry raised, slaughtered and processed according to Islamic law) (p. 272) may have reduced the import surge of U.S. meat exports in the most populous Muslim nation. The agribusiness appeal to “science-based” rules as the final arbiter of import legitimacy doesn’t readily apply to Islamic law. Malaysia likewise has trade impeding halal certification rules according to “Foreign Trade Barriers:”
“Malaysia’s halal requirements are more prescriptive than internationally recognized guidelines on labeling food as halal. Specifically, Malaysia requires slaughter plants to maintain dedicated halal production facilities and to ensure segregated storage and transportation facilities for halal and non-halal products. In contrast, international guidelines allow for halal food to be prepared, processed, transported, or stored using facilities that have been previously used for non-halal foods, provided that Islamic cleaning procedures have been observed. . . . Malaysia’s Department of Veterinary Services . . . has approved only one U.S. beef plant and one U.S. turkey plant to export halal products to Malaysia.” (p. 338)”
Presumably, USTR will attempt to convince both Malaysian and Indonesia authorities to change their halal labeling requirements to conform with the “internationally recognized guidelines” and enable import surges of U.S. halal meat exports.
Will IPEF allow protection of national seed industries and farmer developed plant varieties?
One of the most important and complex topics in agricultural trade is not addressed in the “Foreign Trade Barriers” report — seeds. The American Seed Trade Association (ASTA) wrote to USTR:
“Many nations want to achieve self-sufficiency in seed production. Countries will adopt policies and regulatory systems that protect their domestic seed industries from foreign competition, rather than enact free trade policies to support comparative advantages in global seed trade. (p. 2)”
What are these advantages and who enjoys them? Evidently, ASTA members, particularly the transnational seed exporters whose products are engineered to withstand proprietary pesticides under a diplomatically engineered paradigm of food security. Much less evidently, developing country farmers not benefiting from the USDA crop subsidies and crop insurance subsidies that enable U.S. farmers to pay the escalating costs of GE seeds and their companion pesticides.
ASTA advocates that all IPEF members sign on to the International Union for the Protection of New Plant Varieties (UPOV): “Acceding to the 1991 Act of the UPOV Convention has been a requirement found in all U.S. free trade agreements since NAFTA [North American Free Trade Agreement] so plant breeders have access to globally harmonized protection for their new varieties. The 1991 Act provides the best protection and assurance for U.S. plant breeders conducting business internationally, while still affording the farmer’s exemption.” Critics of UPOV 1991 charge that the “farmers exemption” is a legal fiction: “individuals or companies can take seeds from peasants’ fields, reproduce them, do some selection to homogenise them (this is what they call ‘developing’), and then privatise them as a variety they have “discovered.” (p. 7) No IPEF disciplines are proposed against biopiracy of genetic resources and associated Indigenous knowledge about them, an unfair trade practice essential to colonial exploitation.
In addition, like Cargill, ASTA urges USTR to extrapolate the provisions on agricultural biotechnology in USMCA to IPEF countries and to do so with the help of “regulatory cooperation” programs. ASTA’s objectives extend not only to facilitating export of GE seeds and their associated pesticide products, but also seeds coated with pesticides: “Seeds that are treated with crop protection products in the U.S. may face restrictions in another country based on differing product registrations. Regulatory cooperation on crop protection registration will benefit farmers in all countries by providing greater access to the most effective, latest tools.” (p. 4) It is unlikely that USTR and USDA will inform IPEF governments of the well-documented hazards of pesticide-coated seeds. Otherwise, IPEF countries might not want to allow import of such seeds.
The U.S. Environmental Protection Agency allows seeds to be coated with insecticides, despite their environmental impact. According to one critic, “Depending on the crop, only about five percent of the active chemical enters the plant. The remaining 95 percent of the pesticide is left to pollute the environment through seed dust or soil contamination and water runoff. This situation creates multiple toxic routes which can affect bees and other wildlife through the contaminated plant, air pollution, and toxic run-off.” The USDA does not count the use of such seed coatings in its pesticide use data and therefore does not recognize the correlation between increased coated seed acreage, particularly corn acreage — the largest U.S. crop — and the decline in pollinating insects. Such is the science-based trade-related U.S. SPS rules that ASTA advocates exporting to IPEF countries.
The prior regional meeting organized by the Biden administration, the Summit of the Americas, held in June, also in Los Angeles, was little noticed by U.S. media and disparaged elsewhere. Many hemispheric leaders rejected the summit due to the Biden administration’s exclusion of Cuba, Nicaragua and Venezuela, as well as its failure to resolve the Trump administration’s policies in the Americas, especially its interference in the Bolivian elections. According to one analyst, the “Americas Partnership for Prosperity,” announced in June, “appears to seek to counter China’s trade and investment in the region (which now significantly surpasses that of the United States) through ‘public-private partnerships,’ the beefing up the of Inter-American Development Bank’s private sector lending arm, and fresh bilateral trade negotiations with countries that already have free trade agreements with the United States.” In sum, no fundamental change to the traditional exercise of U.S. hegemony in the region.
The IPEF’s four pillar structure appears to be different from that of “America’s Partnership for Prosperity,” even though the geopolitical counter to China is the same. Old trade policy objectives and negotiating practices are very hard to change, in part because of the industry lobbying pressure outlined here. If IPEF further maximizes U.S. agriculture exports by knocking down SPS and TBT measures and exporting U.S. deregulatory practices in the form of IPEF SPS and TBT rules, the Biden administration’s trade policy will remain firmly anchored in 20th century practices.
It is far from certain which countries will commit to work on which IPEF pillars. However, if Ambassador Tai can persuade her counterparts that commitments to the “decarbonization,” supply chain and “tax and anti-corruption” pillars are at least as important as the “Fair and Resilient Trade Pillar,” then the Biden administration might start to bring trade policy into the 21st century. According to the Center for Strategic and International Studies, Ambassador Tai expects to show progress on the three optional pillars by the Asian Pacific Economic Cooperation summit in November 2023, while progress on the trade pillar is expected to take longer. Perhaps by that point it will become clearer whether IPEF represents a new approach to economic and trade policy or a continuation of the flawed approaches of the past.