[Senate Hearing 117-676]
[From the U.S. Government Publishing Office]
S. Hrg. 117-676
IMPLEMENTATION AND ENFORCEMENT OF THE
UNITED STATES-MEXICO-CANADA AGREEMENT:
ONE YEAR AFTER ENTRY INTO FORCE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
JULY 27, 2021
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
__________
U.S. GOVERNMENT PUBLISHING OFFICE
52-334-PDF WASHINGTON : 2023
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COMMITTEE ON FINANCE
RON WYDEN, Oregon, Chairman
DEBBIE STABENOW, Michigan MIKE CRAPO, Idaho
MARIA CANTWELL, Washington CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland RICHARD BURR, North Carolina
SHERROD BROWN, Ohio ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania TIM SCOTT, South Carolina
MARK R. WARNER, Virginia BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts BEN SASSE, Nebraska
JOHN BARRASSO, Wyoming
Joshua Sheinkman, Staff Director
Gregg Richard, Republican Staff Director
(II)
C O N T E N T S
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OPENING STATEMENTS
Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
on Finance..................................................... 6
Crapo, Hon. Mike, a U.S. Senator from Idaho...................... 7
.................................................................
WITNESSES
Davis, Benjamin, director of international affairs, United
Steelworkers, Pittsburgh, PA................................... 10
Huttema, Allan, chair, board of directors, Darigold and Northwest
Dairy Association, Parma, ID................................... 12
McMurry-Heath, Michelle, M.D., Ph.D., president and CEO,
Biotechnology Innovation Organization, Washington, DC.......... 13
Lowell, Beth, deputy vice president, U.S. Campaigns, Oceana,
Washington, DC................................................. 15
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Crapo, Hon. Mike:
Opening statement............................................ 7
Prepared statement........................................... 45
Davis, Benjamin:
Testimony.................................................... 10
Prepared statement........................................... 46
Responses to questions from committee members................ 49
Huttema, Allan:
Testimony.................................................... 12
Prepared statement........................................... 51
Responses to questions from committee members................ 57
Lowell, Beth:
Testimony.................................................... 15
Prepared statement........................................... 58
Responses to questions from committee members................ 67
McMurry-Heath, Michelle, M.D., Ph.D.:
Testimony.................................................... 13
Prepared statement........................................... 73
Responses to questions from committee members................ 77
Wyden, Hon. Ron:
Opening statement............................................ 6
Prepared statement........................................... 80
Communications
American Farm Bureau Federation.................................. 83
Cato Institute................................................... 84
Center for Fiscal Equity......................................... 89
CropLife America................................................. 90
National Automobile Dealers Association, National Independent
Automobile Dealers Association, and National Association of
Auto Auctions.................................................. 92
Ranchers Cattlemen Action Legal Fund United Stockgrowers of
America........................................................ 94
IMPLEMENTATION AND ENFORCEMENT OF
THE UNITED STATES-MEXICO-CANADA
AGREEMENT: ONE YEAR AFTER
ENTRY INTO FORCE
----------
TUESDAY, JULY 27, 2021
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 9:41 a.m.,
via Webex, in Room SD-215, Dirksen Senate Office Building, Hon.
Ron Wyden (chairman of the committee) presiding.
Present: Senators Stabenow, Cantwell, Menendez, Carper,
Brown, Bennet, Casey, Whitehouse, Hassan, Cortez Masto, Warren,
Crapo, Grassley, Cornyn, Thune, Toomey, Cassidy, Young, and
Sasse.
Also present: Democratic staff: Sally Laing, Senior
International Trade Counsel; and Joshua Sheinkman, Staff
Director. Republican staff: John O'Hara, Trade Policy Director
and Counsel; Mayur Patel, Chief International Trade Counsel;
Gregg Richard, Staff Director; and Jeffrey Wrase, Deputy Staff
Director and Chief Economist.
The Chairman. The Senate Committee on Finance will come to
order, and we have obviously had horrible news in the last 24
hours. A member of the Finance family has passed.
You just could not find a more decent and caring person on
earth than Mike Enzi. And he had policy ideas; he always talked
about the 80-percent rule getting everybody together. Early
this morning, I was looking at a text he sent me earlier this
year, inviting the Wyden family to Wyoming and all the great
places that we would go.
This is going to be a very, very hard day. I am going to
let colleagues speak, and I know the Senator from Idaho would
like to speak. He and I were both so fond of Mike. And then I
will recognize colleagues and go to our hearing when colleagues
have had a chance to talk about Mike and their stories.
I was just reminded, the Enzis always brought Christmas
cookies for the staff, and we all enjoyed them. We just so
appreciated them. So, at the end of colleagues' remarks, we
will have a moment of silence.
Senator Crapo?
Senator Crapo. Well, thank you, Mr. Chairman. I also do
want to say a few words about the passing of our good friend
Mike Enzi. He was a long-time valued member of this committee,
as you know, and all of us have our own personal stories with
regard to him. I know we have all been praying for him in the
last couple of days since his accident.
You know, I got to--actually, just to show the character of
Mike Enzi, I got an email from him a couple of weeks ago,
telling me that he was praying for us because of the very
difficult issues that we are working on right now. What a
thoughtful thing for Mike, from Wyoming, to share those words.
For over 2 decades, Senator Enzi passionately served the
people of Wyoming as a thoughtful conservative leader. He
brought his experience as an accountant and small businessman
to Washington, to tirelessly fight for the Federal Government's
broken budget process, and he never wavered in those efforts.
We had a shared philosophy when it comes to compromise,
which is to focus on the things you can agree on and worry
about the rest later. And I valued Mike's judgment and
friendship, and I will close with this. He said that he tried
to live by his mother's advice: ``Do what is right, do your
best, treat others as they want to be treated.'' And he
certainly did that. We will miss him.
The Chairman. Thank you, friend.
Senator Stabenow?
Senator Stabenow. Thank you, Mr. Chairman, Ranking Member.
In walking in this morning, I looked up. We have a large
picture of the Finance Committee members from last session, and
in the front row is Mike Enzi. A big smile--and I have worked,
I worked with Mike for 20 years since coming to the Senate,
both on the Finance Committee and also on the Budget Committee.
I loved his sense of humor, and I loved his fairness. I
will never forget a couple of years ago when he was working to
make major changes in the budget resolution process and he
called me, knowing actually he was going to be showing me
something that he knew I did not agree with.
But he called me anyway. He called me--it was in August. He
called me, he walked through everything and listened to my
concerns and was very respectful, and he said, ``I look forward
to working with you when we get back into session in
September.''
So, he was a gentleman. He loved the Senate. He was
somebody who cared deeply about being fair to everyone, and I
am just so deeply saddened and sending a lot of prayers for his
family.
The Chairman. Senator Cornyn?
Senator Cornyn. Well, thank you, Mr. Chairman. I too have
many memories of serving with Mike Enzi, and it is not possible
to think--I cannot think of a nicer human being whom I served
with in the Senate.
When I first got here, he worked on the HELP Committee with
Teddy Kennedy, and Mike was one of the most conservative
members of the Senate, as you know. But he and Senator Kennedy
were enormously productive on the HELP Committee as chairman
and ranking member. They switched that out from time to time,
and I asked Mike about it.
He said, ``Well, it seems it is the 80-20 rule.'' He said
you can agree on the 80 percent you can agree on; you leave the
20 percent you cannot for another day and another fight. It
seemed so obvious, but that was his attitude, and that was one
reason why he was so productive.
There are a lot of other things I could say, and I will
not. I am going to talk about Mike a little bit on the floor.
But the other thing I remember about Mike is just his attitude
was always so positive. He was a little bit of an introvert, as
we all know, and he blamed that on his being an accountant.
He said, ``An extroverted accountant, I think, is somebody
who does not look you in the eye but stares at his shoes,'' or
something along that line. I will get that right.
But he talked about having an attitude of gratitude, and
how important attitude is in framing the way we live our lives
and how we think about the world we live in. So I will, we will
all say our prayers for Diana and the family as we remember a
great human being and a great Senator.
The Chairman. Senator Cantwell?
Senator Cantwell. I too want to make some comments about
our colleague and his amiable attitude towards working together
on legislation, and his representation of Wyoming. I worked
with him on several health-care issues, several tax policy
issues, several workforce issues.
At one point in time he said to me, ``You know, I actually
wrote software code.'' I thought, ``You know, you are the
original high-tech guy here in the Senate.'' It was that part
of him that we all loved, because he looked at policy issues
kind of straight up from how he looked at them. He did not add
an over-layer of politics on top of it.
If he could be with you, he told you, and if he could not,
he told you, and he told you why. But I loved the way Mike Enzi
got around in his State. We talked about this, and he said, ``I
just call somebody in a county and I tell them I am coming, and
then they tell all the people to come over and bring the food.
We have a potluck, and we just sit here and talk about the
issues.''
I thought, ``What a great way to really communicate to your
constituents.'' I think that is what Mike boiled it down to:
just the simplicity of the process.
I worry sometimes that the art of this is being lost, that
just that basic communication with our friends and neighbors
and people that we love is getting all stripped away and
sanitized down to an Internet meme or something, when in
reality, the face-to-face contact is really very important.
And I will just add this last point. We had a major
breakthrough on STELAR legislation, which is all about how we
reach our rural neighbors and communication, and the fact that
Mike Enzi and several of his colleagues were adamant about not
moving forward until we fixed it really gave us the impetus to
fix that last year. So I am really, really thankful for him.
My heart goes out to his family and the people who worked
with him so closely. This is not what we wanted for a colleague
who went into retirement to enjoy a little down time. This is
not, but our prayers are with all of them, and thank you for
giving us all this time to remember somebody who contributed so
much--in a very quiet way--but was a very, very big contributor
to this committee. Thank you, Mr. Chairman.
The Chairman. Senator Cassidy?
Senator Cassidy. You know, Mike loved to serve. He loved to
serve, and of course you know how he served our country. But I
once had a conversation with him. He had gone to Africa, and he
had seen how AIDS was devastating Africa.
Not an issue you would expect a fellow from Wyoming to be
interested in, but he saw the death. He recognized, frankly,
this is an opportunity for the U.S. to do something really
good, and that there would the chance to extend U.S. influence.
But his primary motivation was people dying of AIDS.
He worked with George W. Bush for the PEPFAR program, and
of course, in typical fashion, did it in a financially
responsible way, saved millions of lives, turned the corner for
the continent of Africa, and it is one of the things that may
not be mentioned in his obituary, but is one of the things that
he was most proud of.
And two more things that just come to mind of a fellow who
was all about service. He was supposed to be HELP chair last
year. He actually had the seniority over Lamar Alexander. But
he thought Lamar was so capable, and he just thought Lamar
should be chair even though he, Mike Enzi, would have been, by
years. I keep on hoping that my two senior members feel that
about me on Finance. [Laughter.]
And then lastly, I said, ``Mike, why are you leaving, man,
because you still have a lot to offer?'' He said, ``You know, I
can do it next year. I am not sure I can do it for 6. It is
important to have somebody here who can do it for 6.'' I just
join you all in our prayers for Diana and our great memories of
Mike.
The Chairman. Thank you, Senator Cassidy. This is going to
be a very hard day.
Senator Hassan?
Senator Hassan. Yes, it sure is, because my heart is heavy
this morning, as all of ours are. I got to know Mike a little
bit, first in our kind of get-to-know-you conversation just
after I got here, and I was just remarking to Catherine that
our staff actually had to break us up after an hour. You know,
they were like, ``You do not have time to sit here and just
keep talking.''
But we did, and we discovered a number of things in common.
My grandfather was a shoe salesman and Mike had owned a shoe
store, and we talked about the shoe business. But we also had a
couple of other things in common, one of which was having
children who had very difficult starts in life: his daughter,
my son.
There was never really a time when Mike did not see me
where he did not ask after Ben, after the family, after how we
were managing, having shared the experience of welcoming a
child into the world in really harrowing circumstances. Mike
never forgot how fragile things can be, but how great the
possibilities of inclusion are.
He was just always kind of giving me an ``atta girl'' when
things were going rough at home with Ben. And a couple of other
things. One is that Mike also is--was the prayer breakfast
pinch hitter. When somebody could not speak at prayer breakfast
at the eleventh hour, Mike had always told the organizers,
``You can call on me,'' because he always had something to
share about attitude.
More than anything, prayer and faith are about attitude, I
think, from Mike Enzi's point of view, and he really spoke
about that beautifully and movingly and gave us kind of ``how-
tos'' on days when things might be rough.
He was just on Zoom at a prayer breakfast last week, and we
were all just reveling in the fact that one of the gifts of
Zoom was that we could still see our retired colleagues and
they could join us. He was one of the kindest people I know. He
and I were trying to get this bill through to change the
composition of our coins so we could save about $10 million, so
I will just leave that out there.
I think Mike would want us to keep pushing on that, because
it was a very practical, common-sense thing that we could all
agree on and get done. And my thoughts too go to Diana and the
family. They were such a part of Mike's service, and he never
failed to mention them either.
So my thanks go to them, and my heart goes out to them.
The Chairman. Thanks.
My colleague, Senator Cortez Masto.
Senator Cortez Masto. Thank you. Similarly--as you can see,
there is a common theme here about who Mike really was, his
values, his principles, his priorities for his family, his love
of his family, but also his love of this process. I do not
think any of us have a different story. I do not care how long
you had worked with him or how new you were to the Senate.
To me, that says a lot about Mike, because when I first got
here, he treated me with respect. I think one of my second
opportunities to really get to know him--we traveled back to my
home State, to Las Vegas, to Nellis Air Force Base. It was a
codel. John, you were with us, and I think I was the only
Democrat on the codel at the time.
I have to tell you, he was just so gracious and, as western
Senators, we really had the opportunity to sit and talk to one
another, get to know one another, and just really understood
his commitment, most everything that you all have said.
And then after we got back, I was able to work with him on
legislation and really figure out how we could move the ball
forward on some of the issues that were important for this
country and the public. So I echo everything that everyone has
said.
My heart goes out to his family. He will be missed. I, as
someone who lost my father early in retirement, I think we were
all hoping he would enjoy his retirement with his family and
get the time finally to do just that.
So I am thinking of him. Like Maggie, my heart is sad
today, and I will not forget my opportunity just to get to know
him in the short time that I was able to work with him here in
the Senate.
The Chairman. This is going to be a day of swapping Mike
Enzi stories, whether it is shoe stores or the love of beef;
the list is going to go on and on. I like to think his
graciousness and thoughtfulness are going to continue to be
expressed in this room in the days ahead.
Let us have a moment of silence, and then we will go on. A
moment of silence for our special friend Mike Enzi.
[Moment of silence.]
OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM
OREGON, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. Thank you all very much, and the business of
this morning is the U.S.-Mexico-Canada trade agreement. And we
welcome our guests, and I wish they were here on a day that was
not so sad.
When a child turns one, you give them a birthday party.
When a trade agreement turns one, it seems appropriate to have
an oversight hearing in the committee. So today we will discuss
USMCA, which of course is the lingo for the U.S.-Mexico-Canada
Agreement. The timeline is pretty clear. Three years ago, the
Trump administration agreed to a rewrite of the North American
Free Trade Agreement, and the feeling up here was that it was
too weak on key issues to pass.
The Democrats got down to work improving it, and as a
result of those efforts, the text of it was the strongest trade
agreement ever for worker rights, environmental protections,
and particularly for trade law enforcement.
The Congress passed it, and it was up to the Trump
administration to carry it out early in 2020. Now you have to
have strong trade enforcement, because countries do not comply
with trade agreements by osmosis. They have to be held to their
commitments. They have to be held to their commitments.
And what is critical--and not much understood about all
this--is the time when you have the most leverage is before an
agreement goes into effect. So that is why Senator Grassley and
I, on a bipartisan basis, strongly urged the Trump
administration not to rush the process.
Unfortunately, the administration would not listen. It was
the middle of the year, and in effect they decided that a cake
was baked before it was ready to come out of the oven. 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.
Now it is up to the Biden administration to clean up the
messes that I am going to outline now, that the Trump
administration left behind.
For example, Canada has unfairly blocked American dairy
products for decades. Under USMCA, Canada agreed to give our
dairy products more access to the Canadian market. The
Canadians then undermined that commitment with new regulatory
barriers before USMCA went officially into effect last July.
The Trump administration hardly lifted a finger to do anything
about it. Now the Biden administration will have to work to
make sure that our dairy farmers finally get the access that
they were promised.
Another example: Mexico made commitments to improve the
rights and conditions for its workers. It is moving too slowly
on the implementation of those key reforms to labor laws. To
enforce some of those commitments, the Biden administration has
had to hit back, using what is called a rapid response
mechanism.
Senator Brown deserves enormous credit for his leadership
on this. I was pleased to partner with him. It is an important
tool, a rapid response mechanism. But the previous
administration should have done more to push Mexico to raise
the bar for labor rights prior to last summer. That would have
helped protect more American workers.
With the Trump administration coming up short and trade
enforcement looking weak, it is no surprise that Canada and
Mexico issued new laws and regulations that were inconsistent
with the text of USMCA, even walking back some of the core
commitments.
For example, Mexico is refusing to approve innovative
American ag products, including corn and soybeans, without any
scientific justification. It is also threatening to ban
agricultural products that have been previously approved.
Ambassador Tai and the administration are working hard now to
knock down those barriers as soon as possible.
Canada is joining a list of countries that are unfairly
targeting and discriminating against innovative American
employers with digital service taxes. Make no mistake about it.
These unfair digital daggers are just knifing American firms
and the prospects for creating all of the high-scale, high-wage
jobs that we want.
It is a big setback to our trade relationship with Canada.
It goes against the spirit of USMCA and the global minimum tax
agreement that is in the works. I hope--and I press this case
to the Canadians--that they change course on the issue.
Otherwise, the United States will need to consider all options
for our response.
So, we have a lot to talk about. I come from a State where
one out of four jobs revolves around international trade.
Oregon has always been about just growing things, designing
things, innovating breakthroughs, adding value to them, and
then shipping them to Oregon lovers around the world.
In Oregon we talk about getting trade done right by
protecting workers and companies, creating high-wage jobs. We
want to raise the bar on issues like labor and environmental
protection. We want vigorous enforcement. It means not cutting
corners the way the previous administration did on USMCA.
Fortunately, the Biden administration is addressing all the
outstanding issues so that USMCA lives up to all its promise
about the challenges ahead.
I want to thank our witness panel for joining the
committee. I look forward to question and answers. In the
Pacific Northwest, we always try to find common ground on trade
policy. We will again.
[The prepared statement of Chairman Wyden appears in the
appendix.]
The Chairman. Senator Crapo?
OPENING STATEMENT OF HON. MIKE CRAPO,
A U.S. SENATOR FROM IDAHO
Senator Crapo. Thank you, Mr. Chairman, and I appreciate
you giving us an opportunity to remember Mike Enzi before
beginning the hearing.
But returning to work as Mike would have wanted, I also
appreciate our witnesses taking the time to discuss issues
critically important to the work of this committee. I
specifically welcome Allan Huttema, chairman of the Northwest
Dairy Association and Darigold board of directors, who is
joining us from Parma, ID. Thank you all for taking the time to
discuss these issues that are critical to us. Today's hearing
marks the 1-year anniversary of the United States-Mexico-Canada
Agreement, or USMCA as we all describe it.
Mexico and Canada are two of our most important trading
partners, and we cannot take these relationships for granted.
To take one example, the United States exported $1.4 billion
and $731 million worth of dairy products to Mexico and Canada,
respectively, in 2018. But just a generation ago, nearly all of
the dairy products produced in the United States stayed in the
United States. Today the Idaho dairy industry, which represents
6 percent of the State's GDP, produces more than 15 times the
production necessary for our State's needs. Opening markets
have fed our neighbors and created jobs at home.
However, our dairy industry faces a number of new barriers,
including attempts by trading partners to prevent our farmers
from using common cheese names by claiming that they are
geographic indications. The potato industry has also faced its
share of challenges, with the Mexican Supreme Court only
recently ruling that potato growers can sell fresh potatoes
into all of Mexico, consistent with its obligations under the
USMCA.
Now I have recently met with the President of Mexico and
the Ambassador from Mexico and the Minister in charge of the
economy in Mexico, and they have all assured me that they are
proceeding to implement that trade agreement and that Supreme
Court ruling, to get the potatoes, finally after years, into
Mexico. However, I will not consider the matter finished until
Idaho's farmers are able to sell high-quality potatoes to every
family in Mexico.
Likewise, when the North American Free Trade Agreement, or
NAFTA, was negotiated, we did not fully appreciate the
potential of digital trade, which my colleague Senator Wyden
has referenced, which now contributes over $2 trillion annually
to our GDP. That is why I support a number of USMCA innovations
to help us meet the challenges of the 21st-century economy and
drive economic prosperity in North America. These include
Canada allocating new tariff rate quotas for dairy products,
Mexico agreeing to protect 33 common cheese names, a cutting-
edge digital trade chapter, and better protection for
copyright.
This committee had a role in developing them, and it is
appropriate to examine whether these innovations are
delivering. That cannot be said for the last-minute changes
added through the USMCA protocol amendment at the behest of the
House Democrat working group.
This committee had no opportunity to vet those changes or
even see the text of these changes before they were finalized.
I am concerned that some of our Democratic House colleagues now
want to push their changes that allegedly strengthen labor and
environmental standards, but almost certainly weaken our
intellectual property rights, into new agreements before we
even have a complete understanding of their full implications.
I will not accept that.
That is why this hearing is so important. If we are going
to unlock the promise of the USMCA and also understand its
shortcomings, we need to press for effective implementation and
enforcement. To date, the administration's efforts on that
front are fairly disappointing, and I will highlight three
examples.
First, the USMCA contains commitments that should
facilitate cooperation on agricultural biotechnology, including
that decisions regarding the approval of such technology be
based on science. This technology not only increases farmer's
yields, but allows them to grow crops more sustainably,
including by using less pesticide and reducing tillage.
Unfortunately, Mexico has refused to approve any biotechnology
food or feed products since May of 2018. Despite the clear
economic and environmental benefits, the administration has yet
to take any enforcement action on this important issue.
Second, Mexico is proceeding with new discriminatory
actions, such as measures favoring its own state-owned
electricity and petroleum companies. Mexico previously
prioritized dispatch on its electrical grid on the basis of
cost, which allowed private producers, including wind and solar
energy providers, to compete. Instead, Mexico intends to give
preference to its state-owned electricity company. The
administration needs to be engaged now before barriers like
this are fully in place.
Finally, where the administration is taking enforcement
actions, it fails to do so transparently or in appropriate
consultation with Congress. I am referring to the use of the
USMCA rapid response labor mechanism. As I noted in our hearing
on the President's trade agenda, I am committed to ensuring
that our workers can compete on a level playing field. That
effort requires transparency. Otherwise, how would Congress,
the affected parties, and civil society know if the mechanism
is being used appropriately and effectively? Accordingly, the
USTR must explain what potential actions, in its view, may or
may not constitute a denial of rights. The USTR has failed to
do so with respect to its recent use of the mechanism with
respect to Tridonex's Mexico facility.
This hearing is a good opportunity for the committee to
examine whether USMCA's commitments are delivering on their
promise. This discussion will also help in developing a future
trade agenda, and I look forward to hearing what our
knowledgeable witnesses have to say in this effort.
Mr. Chairman, thank you again for organizing this hearing,
and again thank you to our witnesses for appearing today.
[The prepared statement of Senator Crapo appears in the
appendix.]
The Chairman. Thank you, Senator Crapo, and I think it is
very important that we work to find common ground on this issue
so important to American workers and American businesses.
Let me give a brief introduction to our guests. Mr. Ben
Davis of Pittsburgh, PA is the director of international
affairs for the United Steelworkers. He also chairs the
Independent Mexico Labor Expert Board established by the
Congress to monitor implementation of the labor provisions of
USMCA. He has decades of experience in this field, and we
appreciate him.
Mr. Allan Huttema of Parma, ID--a guest of Senator
Crapo's--is a dairy farmer and owner of Almar Dairy, a member
of the Northwest Dairy Association since 2003. Mr. Huttema
farmed in Whatcom County, WA for several years before moving to
his current dairy farm in Idaho with his wife and four
children. He too has decades of experience in the field and is
on the Northwest Dairy Association Darigold board.
Dr. Michelle McMurry-Heath of Washington, DC is the
president and CEO of Biotechnology Innovation Organization,
which represents 1,000 life sciences companies and
organizations that are involved in research and development of
health care, agricultural, industrial, and environmental
biotechnology products. She is a medical doctor, and members of
this committee, both Democrats and Republicans, have worked
closely with her organization for many years.
Finally, online today will be Ms. Beth Lowell of
Washington, DC, who serves as the deputy vice president for
U.S. campaigns at Oceana. Ms. Lowell oversees Oceana's
campaigns related to ocean conservation, illegal fishing,
seafood farms, and other issues. She has 20 years-plus of
working on these issues and joined Oceana in 2005.
So let us go now to hear from our witnesses. We will make
your prepared remarks a part of the record, and if you can take
5 minutes or so to summarize your views, that would be helpful.
We will begin with you, Mr. Davis.
STATEMENT OF BENJAMIN DAVIS, DIRECTOR OF INTERNATIONAL AFFAIRS,
UNITED STEELWORKERS, PITTSBURGH, PA
Mr. Davis. Chairman Wyden, Ranking Member Crapo, members of
the committee, thank you very much for the opportunity to
testify on the implementation of the USMCA, and specifically
labor provisions which are so important to workers in the U.S.,
Canada, and Mexico. I am Ben Davis, director of international
affairs for the United Steelworkers, and also Chair of the
Independent Mexico Labor Expert Board, an entity created by the
USMCA implementing bill passed by this committee and signed
into law.
The USMCA passed Congress with a large bipartisan majority.
The Steelworkers, along with the AFL-CIO, supported the final
agreement after the Congress improved upon the text negotiated
by the prior administration. Most critical to our support was
the emphasis on labor rights improvements in Mexican law,
backed up by the rapid response mechanism initially developed
by you, Chairman Wyden, and Senator Brown. The focus of the
labor law changes was to disrupt the protection union system in
Mexico, under which most workers have no real voice in choosing
their union representatives, and often have no knowledge of the
contract that determines their wages and working conditions.
This system has maintained artificially low wages. For
example, at the GM Silao plant, the starting wage is $1.35 per
hour. Workers' rights to democratic unions and collective
bargaining have been denied in Mexico for many years, and the
jury is still out as to whether Mexico's new laws and the USMCA
will make a difference.
Let me briefly summarize the key conclusions and
recommendations of the Board's report of July 7th, which is in
the record. While there has been some significant progress on
USMCA implementation in some areas, the Board raised concerns
about transparency, the contract legitimation process, budget
and staffing of Mexico's new labor institutions, and U.S.
technical cooperation.
On transparency, almost 27 months after Mexico's labor law
reform was approved, most workers covered by union contracts
still do not have a copy of that contract or their union
statutes, including the workers at Tridonex in Matamoros which
is, as has been mentioned, the subject of a rapid response
mechanism case under the USMCA.
The 2019 labor law requires employers and unions to give
workers copies of their contracts. But these provisions will
not be fully implemented for several years. Online access,
which is already available for contracts in some jurisdictions,
should be accelerated and should not require workers to submit
individual requests.
On contract legitimation, the Board raised significant
concerns about the effectiveness of the contract legitimation
process. As of today, Mexico reports that 1,378 legitimation
votes have been held, covering 797,587 workers, which is about
18 percent of the estimated unionized workforce. Government
officials have stated that they ultimately expect at least
80,000 contracts to be voted on. This would require about 120
legitimation votes per day every day from now until May 1st,
2023. That clearly exceeds the capacity of the government
institutions and may require them to rely on private notaries
hired by the incumbent unions. As we have seen in the GM Silao
case initiated by USTR, putting the incumbent union in charge
of the vote creates an inherent conflict of interest and
potentially disastrous consequences.
On budget and staffing, the Board raised concerns about
staff shortages at the Labor Secretariat and the Federal
Conciliation and Labor Registration Center, which have faced a
huge challenge of implementing the reforms under pandemic
conditions. For example, the Federal Center currently has only
29 staff responsible for monitoring legitimation votes.
Clearly, there is not enough money to support timely and
effective implementation of the reforms. The Inter-American
Development Bank gave Mexico an $800-billion unsecured loan to
support the labor reform, but it appears that none of these
funds have been used for this purpose.
Finally on U.S. technical assistance, the Board raised
significant concerns about the pace and focus of U.S.
assistance to support Mexico's labor reforms. Of the $180
million appropriated by Congress, only 50 million has been
allocated and only 10 million of that directly supports efforts
by Mexican workers to establish democratic unions. Strangely,
this initial allocation of USMCA funds excluded the auto and
auto parts sector from labor capacity building. The Board
referenced the recommendation of Ways and Means Democrats that
IMLEB should spend at least $30 million annually of USMCA
appropriated funds on worker organizing and union capacity
building. I personally believe this funding will be essential
to achieve our goals.
Without a fundamental shift from protection unions like the
ones at GM and Tridonex towards democratic labor organizations,
no amount of government oversight will result in a trade union
movement that can organize and bargain for higher wages for
Mexican workers to address the structural inequality in the
USMCA region that drives both migration and loss of good
manufacturing jobs.
Thank you, and I will be happy to answer any questions.
[The prepared statement of Mr. Davis appears in the
appendix.]
The Chairman. Thank you, Mr. Davis.
Mr. Huttema, welcome.
STATEMENT OF ALLAN HUTTEMA, CHAIR, BOARD OF DIRECTORS, DARIGOLD
AND NORTHWEST DAIRY ASSOCIATION, PARMA, ID
Mr. Huttema. Good morning and thank you, Chairman Wyden and
Ranking Member Crapo. It is truly an honor for a farmer from
Parma, ID to be here today, so thank you. I am Allan Huttema,
and I am here today to discuss the critical role of trade
policy in supporting U.S. dairy farmers. I started milking cows
in Chilliwack, British Columbia in 1991. Twelve years later, I
moved to Everson, WA, where I started a 500-cow dairy. In 2010,
along with my wife Mary Jo and our two sons Christopher and
Jeremy, we relocated to Parma, ID, where we currently operate
an 800-cow dairy and farm 500 acres of corn and triticale for
silage.
I also serve as the chairman of the board at Darigold and
Northwest Dairymen's Association, and I am also on the board of
the National Milk Producers Federation. The American dairy
industry is an economic force employing almost a million
Americans. The industry contributes $64 billion in tax revenue,
and almost ten times that amount to the U.S. economy. Trade
opportunities are an integral part of that story.
Despite last year's difficulties, U.S. dairy upheld its
reputation as suppliers of a variety of high-quality dairy
products to the world. Around one in every six gallons of milk
produced here was exported to foreign markets to meet global
demand. When on a level playing field, American dairy products
are highly sought after in international markets.
Unfortunately, without sufficient market access opportunities
to provide us with tariff parity, or better, in key markets
when compared to our trade competitors, American dairy farmers
are left feeling the effects.
Today I will discuss three primary trade topics of great
importance to the American dairy industry. First, the
importance of USMCA as a catalyst to pursuing new market-
opening trade agreements. Second, the subsequent enforcement of
existing agreements. And last but certainly not least, the
chronic misuse of non-trade tariff barriers, specifically the
European Union's continued desire to lay claim to geographical
indications.
It has been a very long time since Congress passed a new
trade agreement aside from USMCA, for which we are very
grateful. Our industry needs new trade agreements with key
export markets to counter our competitors, namely the EU and
New Zealand. As our competition continues to ink new trade
deals, the U.S. is increasingly left in the dust. We are the
only country in the G7 or G10 that has such an incredibly
difficult time understanding that trade is a good thing. We
just need to work in a bipartisan manner and drop the extreme
positions that have not been conducive to new market
opportunities. We must focus on concluding comprehensive
agreements with the United Kingdom, Vietnam, and Japan, as well
as seeking new opportunities in China and Southeast Asia.
On USMCA, we look at the agreement as an important
accomplishment. As we like to say on the farm, a deal is a
deal, which is why our industry appreciates the decision by the
U.S. Trade Representative Katherine Tai to initiate a dispute
settlement proceeding with Canada over its government's
administration of the dairy tariff rate quota system. We are
grateful for this committee's support and advocacy in securing
that step. I am Canadian-born, and I have worked in that
system, so I know that the government will do all they can to
avoid fulfilling their dairy commitments.
The U.S. should not tolerate trading partners not living up
to their obligations, so we also must encourage this committee
and Ambassador Tai to keep a careful eye on milk protein
isolate and skim milk powder blend exports out of Canada. We
are concerned that they may be increasing production to
circumvent milk protein export caps, undermining the spirit of
USMCA.
Our other USMCA partner, Mexico, warrants greater
integration and collaboration. A surge of newly devised Customs
and regulatory requirements have been in the works or
instituted, including new documentation requirements for milk
powder for U.S. exports that differ from requirements for
domestic Mexican companies. In addition, several unwarranted
regulatory barriers appear to have a more political connotation
than a scientific background.
Let me now turn to a topic that would be amusing if it were
not so serious: the EU's non-stop campaign on attacking names
like parmesan, feta, and asiago through GI provisions. I urge
Congress to remind the Biden administration of the letter
signed by 61 Senators supporting the protection of common food
names as a formal trade policy objective of all future trade
agreements.
Again, Chairman Wyden and Ranking Member Crapo, thank you
so very much for the opportunity to testify to this committee
on the importance of global trade to all American dairy farm
families, including my own.
[The prepared statement of Mr. Huttema appears in the
appendix.]
The Chairman. Thank you, Mr. Huttema. We are glad you are
here.
Dr. Michelle McMurry-Heath.
STATEMENT OF MICHELLE McMURRY-HEATH, M.D., Ph.D., PRESIDENT AND
CEO, BIOTECHNOLOGY INNOVATION ORGANIZATION, WASHINGTON, DC
Dr. McMurry-Heath. Chairman Wyden, Ranking Member Crapo,
members of the committee, my name is Dr. Michelle McMurry-
Heath, and I am the president and CEO of the Biotechnology
Innovation Organization. I am honored to testify before you
regarding the 1-year anniversary of USMCA's entry into force,
and how the agreement has impacted the biotech sector,
particularly as it relates to agricultural biotechnology.
BIO represents over 1,000 members, and our central mission
is to advance public policy that supports the application of
biology and technology in energy, agriculture, manufacturing,
and health. Our members work every day to cure patients,
protect our climate, and nourish humanity.
As the U.S. biotechnology industry demonstrated with our
response to COVID-19, our Nation can lead the world in
developing technologies that will solve critical health and
economic challenges. American innovation in biosciences,
coupled with government leadership, can address growing crises
such as climate change and malnutrition. Executing thoughtful
and creative trade strategies is among the most effective means
to strengthen the U.S. bioeconomy and enhance global science-
based collaboration to effectively confront these and other
public health, environmental, and nutritional issues.
The enhanced provisions for agricultural biotechnology in
USMCA represented a significant improvement on NAFTA for the
industry. As a result, BIO applauded the inclusion of these
provisions. Unfortunately, what exists on paper is a far cry
from reality.
The Government of Mexico's treatment of agricultural
biotechnology clearly demonstrates how trade barriers still
actively restrict the development of new biotechnologies.
Mexico's regulatory authority, COFEPRIS, has not granted a
single new agricultural product application in more than 3
years, and its backlog of pending approvals has grown to 23.
This bottleneck affects all of BIO's agricultural members,
covering a wide range of commodities: apples, canola, corn,
cotton, potatoes, and soybeans. Compounding matters, on
December 31st of last year, Mexico issued a decree announcing
its intention to phase out the use of important agricultural
technologies, including biotech corn, from human consumption by
2024.
There are numerous consequences to Mexico's actions. For
one, they are impeding global research and development, and
jeopardizing the potential for biotechnology to address the
many challenges that I previously mentioned. Take climate
change and nutrition. According to the International Service
for the Acquisition of Agro-Biotech Applications, biotech crops
reduced carbon dioxide emissions by 27.1 billion kilograms in
2016. These crops also helped to maintain yields in the face of
drought, which has direct bearing on food security and poverty
alleviation.
Unfortunately, provisions in the USMCA intended to
invigorate investment and development of these technologies is
now threatened by the obstruction of one of the agreement's key
signatories. BIO appreciates the U.S. Government for being a
consistent champion for biotechnology, defending it against
scientifically unjustified regulatory practices. However, with
little indication from Mexico that it will adhere to USMCA's
commitments, BIO strongly urges the administration to begin
taking enforcement action against Mexico's unjust treatment of
agricultural biotechnology. Without enforcement, BIO and its
members fear the Government of Mexico will continue the status
quo and possibly even broaden the scope of its infringement to
additional agricultural products.
In closing, United States global leadership in biotech
innovation is vital to the Nation's security, climate policy,
pandemic preparedness, and international diplomacy. Yet our
biotech sector is faced with tremendous uncertainty. Companies
are making decisions today about whether to proceed with launch
plans or delay, potentially costing them billions of dollars in
revenue and future investment. Similarly, U.S. farmers are
facing increasing challenges related to climate change and
sustainability. Doing so without
cutting-edge biotechnology tools at their disposal is like
fighting with one hand tied behind their back.
I submitted a more in-depth statement for the record on the
need for industry and government to work together to leverage
American strengths and remove barriers that restrict the
development of the global biotech ecosystem.
Thank you, and I look forward to your questions.
[The prepared statement of Dr. McMurry-Heath appears in the
appendix.]
The Chairman. Thank you very much, Dr. McMurry-Heath.
So let us go now online to Ms. Beth Lowell.
STATEMENT OF BETH LOWELL, DEPUTY VICE PRESIDENT,
U.S. CAMPAIGNS, OCEANA, WASHINGTON, DC
Ms. Lowell. Good morning and, first of all, my condolences
on the loss of your colleague and friend. My name is Beth
Lowell, deputy vice president for U.S. Campaigns at Oceana, an
international conservation organization dedicated to protecting
the world's oceans.
After 1 year in force, Oceana has identified some ways to
improve the implementation of the USMCA, and we have some
outstanding questions. While the environmental chapter covers a
wide range of issues, my testimony is focused just on
fisheries.
Seafood is a highly traded commodity, with domestic and
international fisheries management; high prevalence of illegal,
unreported, and unregulated, or IUU fishing; opaque supply
chains; and links to forced labor and other human rights
abuses. IUU fishing undermines the legal seafood trade,
destabilizes coastal States with limited resources to enforce
and protect their waters, and impacts national security. The
International Trade Commission estimated the U.S. imported $2.4
billion worth of IUU seafood products in 2019 alone, and 25
percent of the imports from Mexico were products of IUU
fishing.
IUU fishing, paired with fishery subsidies, puts U.S.
fishermen at a disadvantage, forcing them to compete with
highly subsidized fleets and those that fish outside the
boundaries of the law. The world's top industrial fishing
nations are providing subsidies that make distant-water fishing
more profitable, drive over-capacity, and shift the risk of
overfishing to the waters of other countries. Some distant-
water fleets subsidize as much as 20 to 40 percent of the value
of their catch. We were happy to see subsidies included in the
agreement, and the USMCA requires the parties to notify each
other of their fisheries subsidies within a year. This
information is now overdue.
The IUU fishing provisions include requirements to
implement stronger measures including Port State controls,
improved monitoring control, and surveillance to deter IUU
fishing. The USMCA also helps promote transparency through
better documentation of vessels, and it requires each country
to develop a publicly available and easily accessible registry
of flag vessels.
Earlier this month, Oceana in Mexico released a report
reviewing compliance with the USMCA. Our team in Mexico
recommends that the government require more documentation,
transparency, and traceability for seafood to comply with the
terms of the USMCA, but also to comply with the requirements
under NOAA's Seafood Import Monitoring Program, or SIMP, and
other trade requirements on fisheries like the use of turtle
excluder devices in shrimp fishing nets.
Multiple Federal agencies under various authorities address
international fisheries, trade, IUU fishing, and forced labor.
It is critical that these programs are coordinated, including
sharing information and capacity. The USMCA is one of these
tools. Oceana wants to thank the committee for the inclusion of
language to address forced labor in seafood in the U.S.
Innovation and Competition Act. This directed Customs and
Border Protection to work with NOAA's SIMP program to inform
implementation of the Tariff Act. This is the type of
government-coordinated approach that is needed and can be
achieved through leadership in the administration and direction
from Congress.
So, after 1 year, Oceana still has outstanding questions on
how the U.S., Mexico, and Canada are implementing the USMCA,
specifically on fishery subsidies. It appears that the U.S. and
Canada have reported some of their subsidies information under
the requirements of the WTO's Subsidies and Countervailing
Measures Agreement. But the USMCA requires additional reporting
that it does not look like any of the countries have complied
with yet.
Second, the IUU provisions call for more transparency on
fishing. So, when and how is NOAA going to improve the
transparency of our vessel documentation, including providing
that publicly available and easily accessible registry of
vessels?
Third, NOAA was provided additional resources in the
implementation legislation for USMCA for addressing IUU,
including SIMP implementation. Specifically, they received $8
million. NOAA needs to report how that money is being spent,
and if it is not spent yet, what is the spending plan?
In a recent report by NOAA about SIMP implementation, the
agency discussed how the lack of resources is hamstringing the
implementation of the SIMP program. So this $8 million should
allow NOAA to prioritize expanding the program to all seafood,
ensuring that information collected can help identify shipments
of the high risk of IUU fishing, seafood fraud, forced labor,
and other human rights abuses.
Lastly, how does the U.S. plan to work with the other
parties when it identifies areas of non-compliance with the
measures of the USMCA? Illegally caught or produced products
give bad actors an advantage over those that follow the law.
Trade agreements like the USMCA and trade programs like SIMP
help set the minimum standards that seafood must meet to enter
the legal seafood market. The White House, Federal agencies,
and Congress should work together to ensure that all seafood is
safe, legally caught, responsibly sourced, and honestly
labeled.
Thank you.
[The prepared statement of Ms. Lowell appears in the
appendix.]
The Chairman. Great; thank you very much, Ms. Lowell.
So let us begin with you, Mr. Davis. From Day 1, it was
important that USMCA was a game changer in terms of trade law
enforcement. American workers and American companies win when
they are not being undercut by trade cheats. So, to cut off the
opportunities for the trade rip-off artists, Senator Brown and
I came together to create what has been called the Brown-Wyden
rapid response mechanism, a faster, tougher labor enforcement
tool that is directly responsive to American workers and
American businesses, and Mexican workers and Mexican
businesses.
So the rapid response mechanism, Mr. Davis, is pretty new.
So far the reviews are good, and my question to you to begin
our discussion is--I think you are going to have a number of
colleagues ask about this--are there additional steps so as to
be able to make the rapid response mechanism even stronger,
particularly to help address facility-specific labor
violations?
Mr. Davis. Thank you, Chairman Wyden. Rapid response is
something that we fought very hard for in the labor movement.
It is a very important mechanism, and we are very pleased that
USTR is putting this into effect in a pretty emphatic way
initially.
We think it--and in the report, the Board pointed to some
of the difficulties that have occurred in the implementation,
in the specific cases, by Mexico of its labor law reforms, and
that is certainly complicated a little bit. I am thinking
particularly of the Silao case, which is a complicated case.
So we need to have the mechanism. We need to be using the
mechanism 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 are committed to
implementing.
So for example, in the General Motors case, we have a
contract legitimation vote, which is the focus, the focal point
of the alleged denial of rights, and that vote initially took
place on April 20th. There was documented fraud and ballot
tampering by the incumbent union which was, as I pointed out
previously, under the procedure actually in charge of
conducting the vote. The authorities intervened, but they did
not--they stopped the vote, but then they allowed the incumbent
union to rerun the vote, still in control of the process. The
incumbent union from the CTM said, ``No, we are not going to do
that.'' So now USTR has taken action, and there is an agreement
that that vote will finally take place on August 20th, but that
is 4 months after the original vote took place.
Our experience from anti-union campaigns in the U.S. is
that you may start out with a good, strong group of workers who
want a union, but after they have been pressured and
intimidated and all the things that happen in these
circumstances for 4 months, there is often not a whole lot
left.
So we are very pleased with the fact that USTR is going
forward with this, but there are definitely concerns about the
capacity of the Mexican institute.
The Chairman. We will want to follow up with you, Mr.
Davis, on that, because you have years of expertise, because we
need to know about the next steps, and I appreciate that.
Just because time is short, a question for you, Dr.
McMurry-Heath. We looked to USMCA--updated obligations, new
enforceable chapters on labor, environment, digital trade--and
it took a long time to negotiate. But the administration seemed
so eager with respect to actually going during this election
season. They were so eager to close on the house, they did not
wait for the inspections to be done.
So here we are. We are still talking about some basic
implementation on a host of issues that relate to your members
for example, that relate to the digital sector--you know,
hugely important areas.
Could you tell us what kind of compliance and
implementation actions, in your view, should have been taken
before the agreement went into effect to make sure that our
innovators, our workers, and our businesses could get the
bargain that was written in the text? Your thoughts.
Dr. McMurry-Heath. Well, thank you, Chairman Wyden, for the
question, and you are absolutely right. Our innovators deserve
and need our protection under these trade agreements.
It would have been prudent--given the fact that we knew
that COFEPRIS, the Mexican regulator, had ceased new approvals
back in May of 2018--to insist upon their resumption before the
trade agreement went into effect. Given that that was not the
case, it now really behooves us to make sure that we double
back and hold them to their agreement.
We feel that this can best be done by the appointment of an
Agricultural Negotiator for USTR. This is critically important
to do because it affects not just our relationship with Mexico,
but it has the potential to creep or seep into our other trade
agreements and with trading partners. So it is very important
that we address it at this stage.
The Chairman. Thank you. We will work closely with you. My
time has expired. What is so important about this area is,
having worked with you all for years, you are on the cutting
edge with your members in so many fields of innovation. When
there is a delay on, particularly updating the kinds of rules
that are a way to green-light opportunities for them, our
workers and our companies suffer. So I appreciate your answer.
Senator Crapo?
Senator Crapo. Thank you, Mr. Chairman.
And, Mr. Huttema, as you well know, we have had issues with
Canada over dairy for years and years and years. And finally,
one day when NAFTA was renegotiated, we thought we had achieved
some resolution of those dairy issues in the USMCA. Your
testimony, as I understand it, is that Canada may be attempting
to, or is attempting to, circumvent the agreement, particularly
as it relates to how Canada has handled the application of its
tariff rate quota commitments. Could you elaborate on that in a
little more detail?
Mr. Huttema. Yes, absolutely. When it comes to TRQs and
access into Canada, the way they administer the TRQs or the
access to Canada is mostly through processors who really do not
have any intent of importing product. Not only that, it really
leaves a lot of the low-value product coming into Canada, when
it was our intention to get branded product into Canada,
especially for Darigold with close proximity to the Canadian
border. We thought we could get higher-value products into
Canada.
Another bigger part, just as big a part though, is they are
continuing to export milk proteins all over the world. We see
them in markets. It is as big an issue from the exports we see
leaving Canada as it is access to their market when it comes to
the TRQs.
Senator Crapo. And I assume that if we can get those issues
resolved, the actual terms of the USMCA with regard to dairy,
for example, would result in significant benefits to American
dairy producers. Is that correct, and could you elaborate on
that a little bit?
Mr. Huttema. Absolutely. So getting products into Canada
would create more demand for our products, which in turn would
raise prices. The spirit of the agreement was great. We got
access; we got what we wanted. Canada got to keep some of the
markets they stole. In return, they gave us access to their
country, which was all good. But the spirit of the agreement is
not being upheld. It is definitely very advantageous for
American dairy farmers to access markets. When we are held out,
it hurts dairy farm families.
Senator Crapo. Thank you.
And, Dr. McMurry-Heath, as you have testified--and as I
indicated in my opening statement--Mexico has not approved an
application for biotech crops since 2018. The economic
environment for U.S. businesses seeking access to the Mexican
market deteriorated significantly, in my opinion, in the last
year. And their law requires that they approve these
applications within 6 months, correct?
Dr. McMurry-Heath. Correct.
Senator Crapo. So the question I have for you is, is there
a scientific basis behind Mexico's treatment of our biotech
crops?
Dr. McMurry-Heath. As a former regulator, I can assure you,
Ranking Member Crapo, that there is not. This is particularly
disturbing to not only our innovative agricultural businesses,
but also to the investors that really support their work and
make sure that the innovation continues.
The behavior of COFEPRIS is very unusual on the global
stage. Not only have they not approved an agricultural
technology in that time frame, but they have not approved a
biopharmaceutical product in that time frame as well, and that
backlog is numbering up around 100.
So this is incredibly disturbing. It disrupts the global
marketplace, and because Mexico is such an important trade
partner for us in our agricultural products, it hampers our
innovators from developing new technologies not just for use in
Mexico, but for use at home and for use around the world, and
their potential impact to help stem the tide of climate change
is being impacted by this slowdown. So we greatly appreciate
the committee's attention to this.
Senator Crapo. Well, thank you. And have we received any
indication from Mexico's regulator as to why they have not made
these approvals?
Dr. McMurry-Heath. No. We know that this behavior started
with the new presidential administration in Mexico. But our
companies have received mysterious silence from the Mexican
regulators since this backlog began.
Senator Crapo. And then one final question; I am running
out of time here. But I would just like you to state on the
record--my understanding is these technologies that we are
talking about are good both for the farmers and for the
environment.
This is not something where there is some kind of a
negative environmental impact that Mexico is trying to protect
against. What we are asking is that they approve applications
for products that would actually help us boost the economy and
strengthen the environment. Am I right?
Dr. McMurry-Heath. Absolutely. These crops bring undeniable
benefits to nutrition and to climate change, and they are
accepted here and around the world.
Senator Crapo. Thank you.
The Chairman. Thank you, Senator Crapo.
Senator Stabenow?
Senator Stabenow. Well, thank you, Mr. Chairman. And of
course, in listening to our leader's questions, I think you are
going to hear a pattern today of things that we are very
concerned about and issues that we share, and I appreciate all
of you being here today.
Mr. Davis, rather than a question, I just want to say
``amen'' to what you said, and I want to thank Chairman Wyden
and Senator Brown for leading our efforts to get us to a spot
where we can have a level playing field for workers. We
certainly need that in Michigan. We need that across the
country. I was listening very closely to your concerns about
the effectiveness and the funding needs of the contract
legitimation process. And so we need to be working together,
and, Mr. Chairman, I look forward to working with you to make
sure things are being done the way that we anticipated when
this passed.
Mr. Huttema, I also come from a dairy State. This is our
number one commodity in Michigan, and I very much appreciate
your comments about upholding both Canada's and Mexico's dairy
commitments. We fought very hard for that. That was a top
priority for me as a leader on the Agriculture Committee.
I am so glad that we are seeing a dispute settlement panel
that was put together in May, and I know how important the
dairy tariff rate quotas are. But I wonder if more broadly, in
addition to our focus there, which is critical, in terms of
export markets, when you look at the USMCA, what are some of
the most important pieces to replicate when we look at future
trade agreements?
Mr. Huttema. Yes; great question. So, when you look at it,
number one is market access, especially when it comes to
Mexico. The zero tariff on our imported products there was a
great thing to go after. Number two is, there is a resolution
process put in place, which we have, and we will see how that
plays out. Thirdly, I would say, when it comes to Mexico,
protecting cheese names, common cheese names. I mean, we got
side letters agreeing to that, and now it is just a matter of
staying on top of it and working with the Mexican Government to
make sure these things play out well.
So those three things, I think, are important moving
forward.
Senator Stabenow. Thank you very much.
And, Dr. McMurry-Heath, good to see you. Biotechnology
certainly has the potential to help us increase our
productivity while helping farmers address the climate crisis,
certainly. If we want to make the most of that potential and
provide certainty for farmers and consumers and trading
partners, I agree we need regulatory systems that are
effective, science-based, and transparent, both here and
abroad. I also agree that we need an Agricultural Negotiator as
soon as possible to help with this.
I have long raised concerns with China's opaque
biotechnology approval process, and it is now concerning to see
Mexico making decisions that do not seem to be grounded in
science and causing long delays in biotechnology approvals. So
I wonder if you might just speak a little bit more about the
real-world consequences that decisions like these by our
trading partners can have, and the impact on producers and
future innovation.
Dr. McMurry-Heath. Thank you so much, Senator Stabenow, and
thank you for your continued efforts to really demonstrate how
biotechnology can lead to improvements toward climate change
and pest resilience. So China's opaque trade practices have
been a very difficult path for our biotechnology companies for
quite some time. On average, it takes our companies 7 years to
get their products approved through China, and we estimate that
this has cost over $50 billion just in the 5-year period
recently for U.S. farmers. So this is incredibly important to
address, and we have every reason to believe that a similar
analysis that we are conducting now will show similar results
in Mexico.
So our innovators need certainty, and they need a path open
to science that is sound. That is all we are asking for, and we
think that will aid not just our farmers, but it will help us
address hunger and reduce climate change.
Senator Stabenow. Thank you. I agree.
The Chairman. Thank you, Senator Stabenow.
We are going to go at least through a reading of everyone,
and I believe we will be able to accommodate everyone quickly.
The next person is Senator Grassley. I believe he is not
available. After Senator Grassley, Senator Cantwell. I believe
she is not available now, which means Senator Cornyn, who is
available.
Senator Cornyn. Well, thank you, Mr. Chairman.
Mr. Huttema, when you say that, in farm country, a deal is
a deal, apparently that does not necessarily apply to
international trade agreements like the USMCA. I think we can
all agree about the importance that the chairman and others
have placed on enforcement, and certainly I would say that we
ought to ask the U.S. Trade Representative to prioritize all
these dispute resolutions and discussions with our Mexican and
Canadian counterparts, and not just rely on the USMCA, what it
says.
Former Justice Scalia used to point out that the Soviet
Union had one of the most highfalutin-sounding constitutions in
the world. But because they did not have an enforcement
mechanism through an independent judiciary, it did not really
mean much. So I agree with all my colleagues that we need to
get the USTR to emphasize the dispute resolution and
enforcement provisions.
I particularly want to state my concerns about how Mexico
is favoring state-owned oil companies, which eliminates really
the intent of the USMCA in dealing with these companies on a
level playing field. I was one of 19 Senators who wrote a
bipartisan letter to President Lopez-Obrador, and he basically
blew us off, which unfortunately reinforces what I said a
moment ago. We need these enforcement mechanisms rather than
just the rhetoric and language that people use when we pass
these trade agreements.
I also want to associate myself with the comments of
Senator Crapo when it came to the process by which the USMCA
passed into law. Basically the Senate Finance Committee, the
primary committee that was responsible for trade agreements in
Congress, was excluded from the process by the then-USTR. I
think that exclusion jeopardizes the integrity and future of
Trade Promotion Authority, which has delegated constitutional
authority.
So let me get to something more specific, Mr. Davis. I know
that labor had significant concerns that were addressed by
proposals made by the chairman and Senator Brown.
I was a party to an op-ed piece with Senator Carper--who is
the chairman of the Trade Subcommittee in the Finance
Committee--that encouraged the administration to revisit the
Trans-Pacific Partnership in some form. As everybody knows, our
competition with China looms large for our country, and one
thing we have that China does not have is friends.
I do believe that we would have more leverage dealing with
China if we worked with our friends and partners in the region.
But specifically what I wanted you to answer, Mr. Davis, is
what would it take for organized labor to support a
multilateral regional and comprehensive trade agreement in the
Asia-Pacific?
Mr. Davis. Thank you, Senator. I think, from labor's point
of view, we are a long way from there.
Senator Cornyn. Give me something specific on how we can
get closer.
Mr. Davis. We have the first steps of a worker-centered
trade policy, as Ambassador Tai frames it, and we are very
supportive of that approach. That is going to take very strong
enforcement, and frankly much stronger when we get outside of
places like Mexico, where we have long, historic relationships.
They are not always easy ones, but they are there. Where we get
into countries that have non-market economies that are hurting
American workers, countries that are dumping steel and aluminum
today into our market, we are going to have to have a lot more
enforcement, as has been mentioned a couple of times, and we
are going to have to have a much more critical approach to
folks who define themselves as our friends but then want to
take money out of our bank account.
Senator Cornyn. Well, I know when China became part of the
WTO, there was a hope that they would join the rules-based
international order and actually comply with their agreements.
Unfortunately, they have a history of not complying with their
agreements and stealing our intellectual property and
committing other violations of norms and laws.
Thank you very much.
The Chairman. Thank you very much, Senator Cornyn.
Senator Grassley?
Senator Grassley. Thank you, Mr. Chairman. A very important
hearing. We had a chance to discuss some of this last night
when a few of us met with the Ambassador from Canada in their
embassy downtown. I am going to start with Dr. McMurry-Heath.
Two months ago at the Finance Committee hearing, I asked
Ambassador Tai about Mexico's failure to adhere to the USMCA
commitments to issue broad biotech import approvals, and its
recent decree to phase out GMO corn. I was pleased to see
Ambassador Tai follow through with her commitment and raise the
issue in meetings earlier this month in Mexico City.
Unfortunately, it looks like Mexico will not work with the
U.S. in a good faith effort to resolve the issue and ensure
Iowa farmers full access to Mexican markets. What steps should
USTR take in regard to enforcement actions for Mexico's
treatment of agricultural biotechnology?
Dr. McMurry-Heath. Thank you, Senator Grassley, for the
question, and thank you so much for your leadership and your
urging to Ambassador Tai to address the issue. This was a very
important first step. However, as you know, more is needed.
And we really think it is time for the USTR to begin taking
enforcement action by appointing an Agricultural Negotiator. We
greatly appreciate Ambassador Tai's and Secretary Vilsack's
efforts to date to try to engage and address this issue with
the Mexican Government. However, an enforcement case would, at
the minimum, give us a framework and a timeline to resolve the
COFEPRIS-regulated delays in biotechnology approvals, and the
December 31, 2020 decree against biotech crops. So it is
incredibly important that we address this now with the
Government of Mexico, so that a bad problem does not go from
bad to worse.
Senator Grassley. Well, there is an Iowan, Dr. Norman
Borlaug, who passed away at age 95. But he did a lot of
agricultural biotech research, and he did a lot of it in
Mexico. He won the Nobel Peace Prize, presumably for his
research saving over a billion people from starvation.
For those who do not know much about agriculture, could you
share some other benefits of using genetically modified crops?
Dr. McMurry-Heath. Certainly. We are facing hunger and
nutritional shortages globally. Our technologies are able to
use biotech to create pest-resistant crops. This cuts down on
the need for pesticides. It increases crop yields. It makes
agriculture a lot more sensitive to impacting the climate, and
all of this helps us get more crops out to more people.
If you look at short stature corn, that is a crop that is
designed to resist windstorms and make the crops much more
high-yield when it comes to withstanding the weather changes
that we are witnessing to date. So these technologies are
incredibly important. We use science in almost every other
setting to improve our lives, and this is just another area
where science can lead to huge benefits.
Senator Grassley. Mr. Huttema, USMCA found a way to change
Canada's trade-distorting policies and reform Canada's dairy
pricing system, including by eliminating its Class 7 program.
However, we know that these changes only take place when they
are fully enforced.
I was glad to see that in May, USTR announced that the
agency will request a dispute settlement panel be established
to consider Canada's failure to comply with tariff rate quota
provisions. Does USMCA adequately protect American-made dairy
products?
Mr. Huttema. If the spirit of the trade deal is upheld, yes
it could. But the way the Canadian Government and industry up
there are behaving, it circumvents what we put in place. So as
of today, no. So enforcement is needed.
Senator Grassley. Also for you, are there other areas
besides Canada's dairy TRQ provisions where you would like to
see USTR take action?
Mr. Huttema. Absolutely. When it comes to exports of
product out of Canada--specifically milk protein isolates and
skim milk powders--action is needed there as well. There were
caps put in place, and they are creating products to circumvent
that agreement as well.
Senator Grassley. Yes.
Mr. Chairman, could I have one more question, please?
The Chairman. Sure.
Senator Grassley. Okay. To Mr. Davis, do you think closing
down the Enbridge Line 5 pipeline would do the same damage to
U.S.-Canadian relations and cause Americans to lose their jobs?
Mr. Davis. Yes sir. We very much support keeping that
pipeline open. Our members have been fighting hard for that.
Senator Grassley. Thank you. Thank you, Mr. Chairman.
The Chairman. Okay. I thank my colleague. The next three in
order are Senator Menendez, Senator Thune, and Senator Carper,
and then we have been joined by additional colleagues.
Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman.
If the United States is going to successfully diversify
away from China, we need to continue to deepen our trading
relationships with our neighbors in the western hemisphere.
When it comes to addressing the challenges of migration in
Central America, it is critical that we use all the tools at
our disposal, including trade and economic development.
So taking a fresh look at CAFTA-DR is a natural part of
both of those efforts, I believe. So, while we still need time
to judge the effectiveness of all the changes, are there any
USMCA provisions that you believe should be included or
expanded upon in an updated CAFTA-DR?
Mr. Davis. Thank you, Senator Menendez. It is a very
important question, and obviously a lot of people are thinking
about, is this a model? Is it the floor, is it the ceiling? We
think that USMCA, as we understand it right now, is a floor for
enforcement.
But certainly, the kinds of programs that are being talked
about for Central America should be addressing the serious
violations of worker rights that exist throughout that region.
So it does concern us a little bit, that sort of pitch to bring
in private investment, recognizing that Central American
countries have weak labor enforcement capacity and weak laws in
many cases. Those raise a lot of concerns about whether this is
really going to be effective in either improving living
standards or as any kind of deterrent to migration. We need a
lot more work.
Senator Menendez. Dr. McMurry-Heath?
Dr. McMurry-Heath. It is very important that we get CAFTA
to focus on provisions that enhance cooperation with biotech.
We really need to see our biotech innovations sent around the
globe and have open access to markets around the globe.
Senator Menendez. Let me ask you. As you may know,
Nicaragua is a CAFTA-DR country. In recent months, Nicaragua's
Ortega regime has arrested six presidential candidates and over
a dozen prominent leaders from the private sector and civil
society. We have not seen an authoritarian crackdown of this
nature in our hemisphere in decades.
When Congress passed CAFTA-DR, I do not think anyone
expected that it would end up with the United States extending
trade benefits to an authoritarian regime. So do any of you
believe that when we are faced with this kind of situation,
when we have a trade agreement partner that makes a sharp
authoritarian turn, they should continue to receive all the
benefits of that agreement?
Mr. Davis. Senator, I think any kind of violation of human
rights, including labor rights, is something that we have to
take very seriously. We have to look at the mechanisms, whether
that is Nicaragua or whether that is Guatemala or El Salvador,
where there have been very serious labor rights violations and
human rights violations as well, and Honduras, where human
rights defenders have been killed.
So that has to be the frame through which we look at all of
these agreements.
Senator Menendez. All of you, either from a labor or from a
business perspective, want to deal with countries that not only
observe the rule of law, but if there is a dispute on
intellectual property or a dispute on a contract, you can
believe that you have a good opportunity to actually have that
dispute fairly litigated in a court.
But when you have authoritarian rule, courts are not a
question of the due process and the rule of law. So I
personally believe the United States has to incorporate
standards into future trade agreements to safeguard against the
deterioration of democratic governance and the proliferation of
corruption and human rights abuses.
Dr. McMurry-Heath, I know your organization has been
closely watching the administration's work on the TRIPS waiver.
Details on the scope, time frame, and other factors are going
to be critical to make sure we get the outcome we all want:
more vaccines distributed to those who need them, but of course
with the appropriate safeguards. Can you describe your
interactions with the administration on this issue? Have you
been consulted as USTR develops their negotiating posture?
Dr. McMurry-Heath. Thank you, Senator. We have met with
USTR, but in doing so we made it clear that, while well-
intentioned, the TRIPS waiver actually will not solve the issue
of getting more COVID vaccines into more people around the
globe. We completely agree that it is a humanitarian priority,
an imperative that we do so, and no one is safe until everyone
is safe from COVID.
But IP is not the right limiting step. Rather, our global
SHARE initiative, which we can submit into the record, outlines
really pragmatic steps we can take today to not have the 3- to
5-year delay it would take to actually build new manufacturing
facilities that do not already exist.
But it would allow our companies to fully use the 70 global
manufacturing partnerships that they have in place today, and
give them the supplies and raw materials to manufacture really
compliant vaccines and safe vaccines for patients around the
globe tomorrow.
Senator Menendez. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Menendez.
Of the next two, Senator Thune is with us, and Senator
Carper will be online. The way the order is now, we have
Senator Thune, Senator Carper, Senator Toomey, Senator Brown,
Senator Cassidy, and what we are doing is just calling through
in order of appearance.
Senator Thune. I was here at gavel down.
The Chairman. You were here at gavel down. Well, this is in
order of appearance, but let me follow it up with you and let
us just keep moving, okay? All right.
Senator Thune then Senator Carper.
Senator Thune. Good morning. Thank you, Mr. Chairman, and
thank you for holding this important hearing.
While the focus of this hearing is on USMCA, I want to
reiterate my concern that it is almost August and there is
still not a nominee for Chief Ag Negotiator at USTR. It is an
issue I have raised with Ambassador Tai and more recently with
other USTR nominees. The lack of an Ag Negotiator is deeply
concerning to farmers and ranchers in South Dakota and across
the country. I strongly encourage the administration to fill
this role as soon as possible.
In that vein, I would like to ask you, Dr. McMurry-Heath,
can you tell us about the importance of having a Chief Ag
Negotiator to better engage with Mexico and Canada? And beyond
the USMCA, how would having a Chief Ag Negotiator benefit U.S.
workers and businesses?
Dr. McMurry-Heath. Well, it is very important that we hold
all of our trade partners to our trade agreements, and USMCA is
really setting the gold standard for science-based trade
policies and making sure that our regulators are paying
attention to the science, rather than misplaced concerns, when
judging our biotechnology crops.
An Ag Negotiator, 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. But even in the absence of a
USTR Chief Negotiator, it is an imperative that we act now to
try to right some of the missteps that we are seeing so far in
the implementation of USMCA.
Senator Thune. So, as a number of my colleagues I think
have mentioned, Trade Promotion Authority expired less than a
month ago. TPA is critical to opening markets and expanding
opportunities for American workers, businesses, farmers, and
consumers. TPA was instrumental in the successful passage of
USMCA, and it keeps the U.S. leading in trade, which is why its
renewal is so important.
Dr. McMurry-Heath, how significant is renewing TPA to your
industry and, more broadly, to our economy?
Dr. McMurry-Heath. It is critically important, and BIO is
fully supportive of renewing TPA. One of the things that we
desperately need in both our multilateral and bilateral trade
agreements is that we modernize U.S. trade policy and pay close
attention to intellectual property.
BIO represents a lot of small companies as well as large
companies, and for many of our small companies their
intellectual property, their ingenuity, is perhaps their most
valuable resource. Until our trade policies fully recognize and
protect that around the globe, then all of our businesses and
the investors that support them are at risk.
Senator Thune. There are a number of cheese producers in
South Dakota that rely on generic names like asiago and
parmesan to market their product, not only in Mexico and
Canada, but around the world. In a side letter to USMCA, there
was a list of common cheese names to be protected from the EU's
abuse of geographical indications.
Mr. Huttema, could you share insight into how the EU goes
about utilizing or seizing these common names and how much of a
concern this is to U.S. producers?
Mr. Huttema. Yes Senator, it is a very important issue for
American producers and processors. The EU goes about this not
only when it comes to cheese, but meat and wine and a host of
other products. They essentially do it to have the consumers in
those countries not be able to recognize what truly is a cheese
that is exactly the same.
So, when it comes to producers in South Dakota that export
some of these cheeses, they would have to relabel, remarket,
and consumers would be totally unaware of what they would be
buying. So the EU definitely does do this as a practice to try
to withhold us from certain markets.
In the case of USMCA and Mexico, those side letters were
very helpful.
Senator Thune. Thank you.
And finally, Dr. McMurry-Heath, Mexico was consistently the
top market for U.S. corn exports, valued at $3 billion last
year. Our farmers and ranchers were some of the strongest
advocates for passage of USMCA. However, farmers in my State
are concerned that Mexico is backsliding on its USMCA
commitments, because they have not approved any new biotech
crops since the treaty was ratified last year. In fact, Mexico
has not approved any biotech crop traits since May of 2018. So
can you speak to this issue and what impact it may have on U.S.
corn farmers when it comes to trade with Mexico?
Dr. McMurry-Heath. Certainly, Senator. This is an
incredibly important issue. To see the breakdown of an
important global regulator like COFEPRIS, to the point where
they are not approving, not only biotechnology agricultural
crops, but also biopharmaceutical products, is almost unheard
of, and it creates such uncertainty in this very interlinked
and interrelated global marketplace.
When we see a breakdown in our ability to innovate in corn
crops in the U.S. to export to Mexico, that also impacts our
ability to innovate for almost all other markets, including our
own. We need certainty and we need action to make sure these
innovations have a path forward, as long as they are proved
safe and effective.
Senator Thune. Thank you.
The Chairman. Our next three will be--Senator Carper will
go next and then Toomey, Brown, and Cassidy in order of
appearance.
Senator Carper?
Senator Carper. Before I ask questions, could I say a word
about Mike Enzi?
The Chairman. Of course.
Senator Carper. Yes. I remember well when I was a brand new
member of the Senate, oh gosh, 20 years or so ago, that I ended
up presiding over the Senate. One of the people who asked for
recognition was Mike Enzi, whom I really did not know.
He spoke for what I--he was the senior Republican on the
Health, Education, Labor, and Pensions Committee, and the
senior Democrat was Ted Kennedy. He talked that day about how
the two of them were able to get a lot done and accomplish a
lot by working together, and he mentioned--in his remarks, he
mentioned the 80-20 rule.
I did not know--I had heard of the 80-20 rule in other
contexts, but I did not know what he was talking about. So I
gave a note to a page and asked him to come and talk to me when
he finished, before he left the floor, and he did. And while
somebody else was speaking, I said, ``What is the 80-20 rule?''
And he said, ``It is the rule that guides Ted Kennedy and me.''
I said, ``Well, what is it?''
He said, ``Ted and I agree on about 80 percent of the stuff
before our committee, and we disagree on maybe 20 percent of
the stuff. What we decided to do is focus on the 80 percent
where we agree, and the 20 percent where we disagree, we will
come back and deal with that another day.'' When I mourn, along
with our colleagues, seeing the people who are mourning the
passing of Mike Enzi, I always think about the 80-20 rule. It
is something that has guided me for, oh, the past 20 years. It
is something that, as we try to come to a conclusion and a good
resolution with respect to infrastructure, different kinds of
proposals that are put forth, maybe we should remember Mike
Enzi and that 80-20 rule. So thank you. Thank you for letting
me say that.
The Chairman. Thank you.
Senator Carper. I want to thank our witnesses today for
joining us. About a year since the USMCA treaty went into
force, as chairman of the Environment and Public Works
Committee today, protecting the air, protecting the water, the
land that we all share is of the utmost priority to me and the
members of our committee, and I think the members of the
Senate.
I was proud to work with many of our colleagues in the
House and Senate to help develop the environmental provisions
in the USMCA, which are the most comprehensive of any U.S.
trade agreement and which, I think, will serve as a model for
negotiations on other trade agreements as we go forward.
I believe trade policy is one of the best tools to protect
our environment and work with our allies on shared
environmental goals. However, in order for these environmental
provisions to be more than just words on a piece of paper, they
must be enforced.
Ms. Lowell, could you take a moment to share with us some
of the areas of progress between the U.S., Canada, and Mexico
when it comes to addressing these environmental commitments,
please?
Ms. Lowell. Sure. Well, we were certainly happy to see
environment have its own chapter in the USMCA, and really
believe that enforcement of trade measures is important
because, without enforcement, we just have a wish list of what
we would like to see rather than what is a binding commitment
to real change happening, either on the water, on land, or with
the environment.
So, just some items that have happened since the USMCA has
been implemented for the past year. There have been two places
where the public has actually raised a submission to the
committee. The USMCA provides a mechanism for the general
public to take action if they believe an environmental law is
not being effectively enforced by the U.S., Canada, or Mexico.
And so anyone can file a submission on enforcement matters
when they see something that is not happening. So just a couple
of examples that have happened since 2020--there have been two
submissions following this process.
The first was in Mexico, highlighting where the Mexican
Government was not following its rules to protect loggerhead
sea turtles in the Atlantic and Pacific. So that is an example
of someone raising, ``You need to do more, Mexican
Government.'' Secondly in Canada, there was a submission
regarding the port authority, that they were not following
their process similar to our NEPA process, the Canadian
Environmental Assessment Act, on taking in the impacts of
expanding a port in British Columbia.
So I think both of these examples show that the mechanisms
can work, where the general public can raise areas where they
see that the countries need to do better.
I really encourage the Senate Finance Committee and others
in the Senate and in Congress to really help push the U.S. to
do better in our own areas, as well as identify ways that we
can push our trade partners to ensure that they are enforcing
our laws because, again, we do not want the environmental
chapter just to be a wish list of things that would be nice to
do but actual commitments, binding commitments that the
countries are doing.
Senator Carper. Thank you. Thank you for that response.
Just a quick follow-up if I could, Ms. Lowell. The USMCA
Implementation Act included significant funding, as you will
recall, for environmental monitoring and enforcement. However,
some stakeholders have raised concerns about transparency on
the use of these funds.
Could you just take a moment and discuss what additional
transparency is needed, to give us recommendations on where we
should enhance our focus when it comes to the use of these
funds?
Ms. Lowell. Sure. So specifically for NOAA, with that money
for implementation of the Seafood Import Monitoring Program and
addressing IUU provisions, we have yet to see how that money
has been spent. So we would love to have NOAA report to you all
and the public on how they have used those resources toward
implementation of the USMCA's IUU provisions, and including the
money to build capacity in Mexico as well.
The resources were definitely needed. NOAA outlines in its
own report in June that it was limited in resources on the
implementation of that program to help keep illegal product out
of the U.S. So we feel like that $8 million should have given
them a significant investment in the infrastructure to make the
program successful, but we have not seen to date how that has
been spent.
Senator Carper. Okay, and one more quick one. Mr. Davis,
would you please share with us thoughts on how the labor and
environmental reporting mechanisms have functioned since the
USMCA entered into force, as well as the opportunity for their
continued improvement, please? Just briefly.
Mr. Davis. Yes. It is a big improvement. I would say we are
still having difficulty getting data on a lot of metrics from
Mexico, and that is a concern that the Board raised in its
report. So we need to do some more work in that area.
Senator Carper. Okay. And, Ms. Lowell, I will follow up
with you with a question for the record on the same question,
if I could. Thanks a lot; very, very much. This is important
stuff, and we are grateful. Thank you.
The Chairman. Thank you, Senator Carper.
Senator Cassidy?
Senator Cassidy. Mr. Davis, I am going to ask you a couple
of questions that may seem far afield and are questions I do
not have the answer to, which will make it more interesting. I
read that there was a problem of China sending steel and
aluminum through Mexico, as if it was being made in Mexico, but
merely it was a pass-through to our Nation circumventing, if
you will, the rules. Did I remember that correctly?
Mr. Davis. Yes sir.
Senator Cassidy. And how does USMCA address that?
Mr. Davis. Actually, we have been trying to address that
through a number of pieces of legislation which have been
proposed, and through the government's enforcement of current
anti-dumping and circumvention rules. We are very pleased that
the administration has been with us fighting steel dumping,
aluminum dumping, which affects our members directly, affects
members in other manufacturing unions and our critical supply
chains.
Senator Cassidy. Can I ask you, is there any evidence of
complicity in the Mexico Government, that they would be turning
a blind eye towards Chinese aluminum and steel being dumped
into our Nation passing through Mexico? Or are they cooperating
in determining this?
Mr. Davis. I am not sure I have the details to give you a
direct answer to that.
Senator Cassidy. Okay.
The other thing--again this seems far afield, and I may ask
Ms. Lowell this as well--we speak of Mexico's compliance with
labor laws and with environmental regulations. There is a
certain cost associated with that. We know that; that is okay.
But China does not enforce such regulations. The absence of
enforcement therefore results in, effectively, a subsidy given
to people who wish to locate their manufacturing plants there.
Again, they do not have the cost of compliance with labor or
environmental laws.
But in turn, China seems to violate both with seeming
impunity. Any thoughts on that?
Mr. Davis. We do not have a level playing field with non-
market economies, and we have supported legislation that would
address that more directly.
Senator Cassidy. How can we address the absence of
environmental enforcement and/or labor law enforcement in
China, again thereby giving the playing field an advantage
tilted towards them vis-a-vis Mexico, us, and others?
Mr. Davis. We have to keep those, those subsidies, direct
and indirect, from filtering into our market, sometimes through
our legitimate trading partners. But we cannot, cannot let
China get away with that.
Senator Cassidy. Ms. Lowell, any thoughts on that which I
just asked Mr. Davis?
Ms. Lowell. Yes, absolutely. I mean, I think China is
really putting our U.S. fishermen at a disadvantage, and it
comes down to putting import controls in place that ensure that
any seafood coming into the U.S. is legally caught and produced
legally, which means not using forced labor or other human
rights abuses.
Oceana strongly believes that more transparency and
documentation on seafood products coming in can help just
ensure that an import is legal. So the Seafood Import
Monitoring Program right now only applies to 13 types of
seafood, which are not some of the ones that are also----
Senator Cassidy. Let me stop--let me stop you.
Ms. Lowell. Sure.
Senator Cassidy. Because I think we are in total agreement
on most things. I represent a bunch of shrimpers in Louisiana.
Now one thing I will say though, practically speaking, shrimp
is what, 80 percent of what we import.
If we are going to put in systems--and you initially aspire
to do everything--it seems like you are going to overwhelm your
system, as opposed to starting with that which is highest
volume/most problematic and then growing in capability. Would
you agree or disagree?
Ms. Lowell. I disagree with that. I think the information
flow should apply to everything, and when you target
resources----
Senator Cassidy. Yes, but it is not that we should not. It
is just--do we have the capability to start and immediately go
to scale on everything?
Ms. Lowell. That information allows you to target the
shipments at the highest----
Senator Cassidy. You are missing my point. The question is,
how rapidly can we scale? Not that ideally we would not do it,
but rather--I will move on, just because I am not sure it is
worth belaboring.
Dr. McMurry-Heath, I am not sure that--you have probably
already been asked this. I apologize; I have been in another
committee hearing. How has Mexico complied with respecting IP
vis-a-vis our biologics, if you will, pharmaceuticals?
Dr. McMurry-Heath. I wish I had the answer to that
question, Senator, but because they have not so far actually
approved our agricultural biotech crops, it has been difficult
to see with really some of our cutting-edge innovations. So
far, that is an area of concern, and we keep watching it.
But we would love to see more innovations going into Mexico
so that we can then safeguard the intellectual property.
Senator Cassidy. But under the terms of the treaty, they
are supposed to approve that; correct?
Dr. McMurry-Heath. Yes.
Senator Cassidy. Okay. With that, I yield back. Thank you.
The Chairman. I thank my colleague. The next two are
Senator Bennet and then Senator Young, who I believe is online,
and then Senator Casey.
Senator Young, are you online?
Senator Young. I am, Mr. Chairman. Thank you.
The Chairman. Go ahead.
Senator Young. Well, I welcome our panelists. The USMCA is
a landmark agreement, critical to our economic success in the
State of Indiana. We are the most manufacturing-intensive State
in the country, and also one of the Nation's top 10 States for
ag exports.
In looking at corn and soybean production, 87 percent of
this year's corn acreage was planted with biotech varieties in
Indiana, and 91 percent of soybean acres were planted using
biotech varieties. Ultimately, Mexico has taken steps that
threaten the market reliability for ag products.
No biotech approvals have been issued in over 2 years.
Executive decrees also attempt to phase out the use of
genetically engineered foods, and in case anyone is in need of
a reminder, biotech allows crops to withstand drought, pests,
flooding, all while increasing yields and therefore reducing
the prices of these important commodities and reducing the need
for herbicide application. So it leads to a healthier
environment and also a healthier product.
Dr. McMurry-Heath, given what the science says about the
benefits of biotech, what is at stake for our farmers and
innovators should Mexico's decrees be implemented?
Dr. McMurry-Heath. Thank you so much, Senator, for the
question, and yes, there is a lot at stake. Biotechnology
really allows our agricultural innovators to develop new crops
that can withstand the global warming that we see to date and
prevent future global warming going forward.
We have seen so far that there has been impact from this
kind of uncertainty, in terms of trying to get the investment
needed to really speed those innovations--and those innovations
are critical. We have a company called Benson Hill that is
trying to use CRISPR, a technology that just won the Nobel
Prize in science, to engineer very specific, high-nutrition
crops that can be grown in almost any hydroponics setting in
any small neighborhood or low-
income area.
This could allow us to address hunger. It could allow us to
get more nutritious foods to inner-city and poor communities in
the U.S. But the hampering of this technology at the
international trade level is also hampering our domestic
ability to use these technologies to help Americans and others
around the globe.
Senator Young. Well, that is incredibly compelling
testimony at a time when there is much discussion here in
Washington, across the country, and back home in Indiana about
the price of our food. Inflation is among the greatest concerns
for my constituents, and we are talking about something that
actually could increase the cost of food--is increasing the
cost of food.
How might these delays be impacting--we will move beyond
the consumer level to the ag sector more generally. How are the
delays impacting the ag sector, particularly for States in the
Corn Belt?
Dr. McMurry-Heath. Yes, so we started to look deeply into
this question with Mexico, but we can use China as an example.
In 2018, BIO and our international partners conducted an
extensive economic analysis on the impact of regulatory delays
in China, where it takes an average 7 years for our new
agricultural crops to get approved. This has cost the U.S.
nearly 34,000 jobs between 2011 and 2016.
So we can see that these trade agreements have a real-world
impact on Americans' earning capabilities and job
opportunities, not to mention global warming, nutrition, and
hunger.
Senator Young. And hunger, something that is being
exacerbated by the COVID pandemic, with supply chain challenges
and even some challenges at the production level. We see the
number of people across the world on the verge of starvation
spiking.
How can Congress be helpful to Ambassador Tai, in her role
over at USTR, in seeking a resolution to this issue before
irreversible harm is caused?
Dr. McMurry-Heath. We appreciate the bipartisan efforts to
really support Ambassador Tai in her efforts to try to
negotiate with the Mexican Government. But it is critically
important that we see movements like the appointment of a Chief
Agricultural Negotiator for USTR, so that we can enhance our
efforts and show the Mexican Government that we are serious
about these concerns, and that they must be addressed urgently.
Senator Young. Thank you, Doctor. I am out of time.
The Chairman. I thank my colleague.
We are going to try and see if we can get Senator Casey,
Senator Whitehouse, Senator Hassan, and Senator Cortez Masto in
before we have to go vote.
Senator Casey?
Senator Casey. Mr. Chairman, thanks very much. I want to
join a lot of our colleagues across the Senate in noting the
passing of Senator Mike Enzi. I had a longer commentary in the
HELP Committee just a few minutes ago, but I did want to say
how saddened we were about the accident that he suffered and
then the terrible and tragic passing of Mike Enzi.
Probably the best way to describe Mike Enzi is, he was a
paragon of decency in a town where that quality is in short
supply. We are just thinking of his family and praying for
Mike. We will miss him more, I guess, as a human being than
anything else, but of course as a colleague as well.
I also want to commend the chairman for, not only calling
this hearing to focus on USMCA and its implementation, but also
to commend Chairman Wyden's work to get this agreement done. I
realize it was work done by the previous administration, but
that agreement would be well short of what I could have
supported were it not for the work of Chairman Wyden and
Senator Brown and others in the House and the Senate. So I want
to commend them.
Mr. Davis, I will start with you. I will be introducing
soon the Market Economy Sourcing Act, and that will be with
Senators Brown and Warren. This legislation establishes a
supplemental rule of origin for non-market economies like China
that can ensure that countries like China cannot free ride on
trade agreements.
As you know, half of all content under existing rules of
origin can come from countries outside of those participating
in a trade agreement. This means a significant share of content
for goods receiving preferential market access under a trade
agreement can come from Communist countries like China, half of
the content. That is not only counterproductive but it can
further enmesh our supply chains, including critical supply
chains, with those of the Chinese Communist Party.
So, Mr. Davis, my question for you is, can you discuss how
implementation of policy like that embedded in the bill I am
introducing will help, number one, secure critical supply
chains, and number two, contribute to high standards, and
number three, curb free-riding from Communist countries on
trade agreements?
Mr. Davis. Thank you, Senator. And the Steelworkers are
very proud to have endorsed this legislation that you are
sponsoring. In fact, I think under TPP, it would actually have
allowed up to 60 percent of an automobile's content to come
from outside member countries, including non-market economies,
as you stated.
So this is really fundamental towards reinvesting in the
American workforce and in our critical supply chains, so that
we are prepared for the next pandemic or the next ship shortage
or all the things that are really weighing down on the growth
of our economy and the possibility of expanding the income of
our workers at this point.
Senator Casey. I want to thank you, and thanks for your
work on this and your scholarship in this area, as well as your
service to the country. Also, the last thing I wanted to ask
you about was if you could discuss how you are working to
ensure that the work you are doing in the context of both labor
and labor rights is being employed to support all workers,
including women and historically disadvantaged communities?
How are you ensuring that women are included at the table
from the outset with regard to both the engagement and
consultation process? Senator Cortez Masto and I have worked on
this with a number of our colleagues, and I just wanted to get
your comments on that, and I will be done after that.
Mr. Davis. Thank you, Senator. That is a fundamental issue.
That is something that the whole labor movement is 100-percent
behind, and I think in the USMCA case specifically, there are
some interesting things.
For example, Mexican labor law now requires that there be a
gender proportionality in the elected leadership of trade
unions. That is more progressive than what we have in the U.S.,
although we are trying to get there on our own.
Making sure that there is compliance with that and making
sure that other legislation that prohibits pregnancy testing,
particularly in the Maquiladoras--this is a problem that has
been going on for decades. It is well-documented, but we know
it is still happening, and we look forward to using this
mechanism to push back on that.
Senator Casey. Thanks very much.
Thanks, Mr. Chairman.
The Chairman. Thank you, Senator Casey, and I remember
coming to Pennsylvania to listen to working families on these
issues, and you and Senator Cortez Masto both have been
wonderful advocates.
Here is where we are. We are going to try to get everybody
in and still make this vote. I think Senator Whitehouse may be
online, is that right? Okay. Senator Hassan, are you online?
Senator Cortez Masto is here. And, colleagues, what we are
going to do for those who are here and were listening, Senator
Crapo should be arriving soon. Then I will go vote, and we will
just keep it going.
Senator Cortez Masto?
Senator Cortez Masto. Thank you, Mr. Chair, and thank you
to the panelists. Thank you for being here today.
Mr. Huttema--did I pronounce that right? Close enough; all
right. Farming and ranching is the lifeblood of--I mentioned
the rural economy in my home State of Nevada. It is actually
responsible for about $1.5 billion in economic output and over
8,000 jobs across the State of Nevada. It is critical that we
ensure that our USMCA partners adhere to the dairy provisions
they agreed to, as USTR did in initiating a dispute settlement
over Canada's tariff rate quotas.
My question to you is, what additional steps should we take
to work with USTR to ensure that Canada is abiding by the
protections for U.S. dairy farmers provided for in the USMCA?
Mr. Huttema. Yes, thank you, Senator. So a big part of what
needs to be done is just oversight and monitoring. So, when it
comes to them skirting issues, I do not believe that will ever
stop. So organizations like National Milk Producers, IDFA, are
in that arena and see what is going on.
So it is a matter of constant monitoring of what is going
on. So USTR is a small group. They do not have a large
workforce that can go out and do this. I think we have to count
on the organizations in place to provide that information.
Senator Cortez Masto. Okay; thank you.
Mr. Davis, you mentioned in your testimony that the
Independent Mexico Labor Expert Board's July 7th report on the
USMCA implementation raised concerns about four areas:
transparency, the contract legitimation process, budgeting and
staffing of Mexico's new labor institutions, and U.S. technical
cooperation.
I am curious. Of these four concerns, which would you say
is the most crucial to focus on in order to facilitate the
shift which you have identified from protection unions towards
democratic labor organizations?
Mr. Davis. It is a really hard question, Senator, so let me
try to answer it this way. I think there are three key things
that we need. We need strong enforcement, and Brown-Wyden sets
the floor. We need to be going up from that floor and making
sure that that works effectively. 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, because a
democratic labor movement in Mexico has been repressed for 50
years at least.
You know, they do not just come out--there are some great
folks, but they do not come out overnight with the ability to
come and use the rapid response mechanism and other tools or
even the domestic laws. So I cannot really say which one is
more important than the other because if we do not do all
three, it is going to be an unbalanced stool, and it is going
to fall over. But I am confident that we can do all three
things.
Senator Cortez Masto. Thank you. Again, thank you to the
panel members. I appreciate the conversation today. I yield the
remainder of my time.
The Chairman. I thank my colleague.
So, calling again in order of appearance: Senator Sasse,
Senator Scott--and Senator Warren is here. Senator Warren, you
and I both have to vote. Where is Senator Brown? All right.
Senator Brown, have you voted? All right.
What I will do is, Senator Warren is going to go next. Let
us have Senator Warren go next for 5 minutes, then Senator
Brown, and I will meanwhile go vote and get back so my
colleagues can vote.
Senator Warren, and then Senator Brown.
Senator Warren. Thank you, Mr. Chairman. So, for too long
our trade rules have undercut workers, promoting offshoring and
a global race to the bottom in labor and environmental
standards. Rules get written this way because our trade process
is rigged in favor of corporate interests. But it is not just
the negotiation of new deals that puts corporate profits ahead
of workers; it is also the enforcement of existing rules.
Mr. Davis, our trade officials have not bothered to put
many enforceable labor protections in our trade agreements, but
they also do not have a good track record of enforcing the few
labor standards that we do have. The U.S. Trade Rep and the
Department of Labor--the agencies that share responsibility
here--have historically been very slow and very hesitant to
bring any labor cases. So let me start with this, Mr. Davis. I
want to focus for a minute on the track record prior to the
USMCA, the trade deal that we are discussing today.
Before the USMCA, how many times had the U.S. brought a
labor violation case under a trade agreement?
Mr. Davis. Once.
Senator Warren. One. Only one labor case ever among the
hundred-plus trade disputes that the U.S. has ever initiated,
and that one labor case happened more than 2 years after the
AFL-CIO complaint was filed in 2008. It then took another 5
years after the case was finally brought to get a final ruling
which, by the way, was that the union and the workers were
right all those years ago. Guatemala had failed to enforce its
labor law, but it could get away with it on a technicality.
Mr. Davis, I think it is fair to say that this is a very,
very poor rate of enforcement actions. Is it because there are
not many complaints about labor violations in the first place--
is that the reason that we have such a bad record here?
Mr. Davis. No.
Senator Warren. No. So numerous labor issues have
languished for years, with only one enforcement action. Which
brings me to the USMCA. A key improvement, secured with
leadership from Chairman Wyden and Senator Brown, is the rapid
response labor mechanism, which ensures that workers get relief
in months, not years or never. Under this mechanism, when the
U.S. Government receives a complaint that workers' rights are
being violated, in a Mexican factory for example, it has 30
days to determine whether there is sufficient, credible
evidence of a violation. If there is, USTR must initiate a
complaint with Mexico.
USTR has already done this once, so they have already
matched the standard of the previous years under the earlier
trade agreement, and it has done this based on a complaint from
American and Mexican unions. This piece of USMCA is a step in
the right direction. But enforcing the rules should not be
limited to just one part of one trade deal.
So, Mr. Davis, would it help if the U.S. Government
committed to reviewing and acting upon any complaint that a
trading partner is violating any labor commitment, within say,
months instead of years or never?
Mr. Davis. Senator, I think that is certainly the direction
that we would like to see. I would just say we could go further
in the case of Xinjiang, you know. We are using withhold
release orders. That is for forced labor, and forced labor
clearly has to be immediately addressed.
But why is violation of freedom of association, firing
hundreds or thousands of workers, or gender discrimination--I
think forced labor is worse, but that does not mean that those
others do not deserve a similarly rapid and effective response.
Senator Warren. Well, I appreciate that very much, Mr.
Davis. You know, any future trade agreements must include
strong protections with automatic enforcement and automatic
deadlines. But USTR and the Labor Department could decide right
now to update their own rules, to make sure that the Labor
Department is responsive and fair in how they handle all labor
complaints, not just those under the USMCA. If we want trade
policy to actually start working for workers, we need to make
the structural changes that ensure that workers' concerns are
addressed.
So thank you very much. Thank you, Mr. Acting Chairman.
Senator Crapo [presiding]. Thank you, Senator.
Senator Brown?
Senator Brown. Thank you, Senator Crapo, and thanks to you
and Senator Wyden for holding this hearing. Senator Warren,
thank you for the comments that you made. Thanks all of you for
shining a light on the Brown-Wyden rapid response mechanism
that many on this committee in both parties worked on, one step
to reforming our country's approach to trade policy, a
departure from where we have been. We are now looking at trade
as worker-centered--and Mr. Huttema might say farmer-centered--
rather than corporate-centered trade policy, and that is
important.
Ohioans know that in my entire career, I never voted for a
single trade agreement until USMCA. Since NAFTA was enacted,
thousands of workers, Dayton to Lordstown, Lorraine to Fremont
to Mansfield, where I grew up, saw $30-an-hour manufacturing
jobs move to Mexico, where workers made no more than a couple
of dollars an hour for the same work.
Independent economists at the Economic Policy Institute
noted that in the first 11 years of the agreement, we lost 1
million jobs across the country. Mr. Davis certainly knows,
studies have confirmed the agreement had only a modest impact
overall on GDP.
The Mexican media pays attention to this hearing. We know
that. I want to speak directly to workers there and in the U.S.
The Brown-Wyden rapid response mechanism labor enforcement
provisions were put in place to empower all workers to exercise
their right to form a union, to alert us of any interference or
strong-arm tactics of their labor rights. We frankly have seen
that in both countries. And in the United States--and maybe in
a bigger way in Mexico--every worker should have a copy of
their union contract. The success of this agreement depends on
enforcement and implementation.
So, Mr. Davis, my question is to you, and I enjoyed meeting
you early, briefly this morning. You raised concerns about
implementation. Can you elaborate on the Independent Mexico
Labor Expert Board's recommendations and what will need to take
place to address them?
Mr. Davis. Senator, I would answer it this way, to do it
quickly. You remember that we had a problem with Goodyear, and
workers were fired for trying to start an independent union.
They have not gotten their jobs back, although some of them are
still trying.
The same protection union that was at that Goodyear plant
is the protection union that is at the General Motors plant in
Silao. And it may be that the workers, despite the company
having 4 months and then the union having a 4-month period to
carry out this legitimation vote, they might still vote that
contract down.
But it is going to be really hard. They do not have a
union, so even if they vote the contract down, Medina or
another CTM union can come back the next day and try and get
it. So this is--we are making progress here, but we have to do
a lot more to push back on the protection union czars like
Medina and some others, who still control the Mexican labor
force.
Senator Brown. Thank you, Mr. Davis. I want to make clear,
as we continue--and as Senator Menendez said, building on his
comment/question, most of us on this committee see USMCA as the
minimum standard for trade agreements going forward, especially
with countries we do not have a longstanding relationship with.
We will need more, we will need much more robust
enforcement of labor rights. Brown-Wyden is the basic position.
It is so important. Speak to why this committee, Mr. Davis,
should view USMCA as the floor not the ceiling for trade
agreements around the world.
Mr. Davis. Just because of the risks that workers face on a
daily basis: firing, blacklisting, a black list, pregnancy
discrimination--which we mentioned--threats, beatings, murder.
In Mexico, there are still nine cases of trade unionists who
have been killed, including an American, that are unresolved,
some of these going back 10 or 15 years.
Employers, whether it is in the U.S. or Mexico, know that
it is quicker and cheaper to fire the union leaders and drag
out the legal process rather than agreeing. And we want to
change that balance. There are a lot of workers--not just in
Mexico but in Central America, Colombia, another place with a
terrible labor rights record--who share that vision and that
ideal. Until now, they have not had the tools to do it. We
think that we are starting to get some of those tools, and we
want to get to work and build on it.
Senator Brown. Thank you. One final point, Senator Crapo.
It is vital to my State. Our trade policy only works for
American industries if we take enforcement of dumping and over-
capacity issues seriously. That is why I have introduced our
bipartisan bill Leveling the Playing Field 2.0 to update our
trade remedy laws, to make sure we are enforcing our trade laws
against trade cheats around the world, including those who try
to get around our laws.
Senator Cassidy brought up this point earlier. I thank the
United Steelworkers for endorsing this bill. Thank you, sir.
Senator Crapo. Thank you, Senator Brown. Next we have
Senator Toomey with us remotely, I believe.
Senator Toomey?
Senator Toomey. That is right. Thank you, Senator Crapo.
The hearing today is about USMCA enforcement 1 year in, and
several witnesses have alluded to the importance of what the
Biden administration calls ``worker-centered trade policy.''
So let us take a look at the impact of this new USMCA and
enforcement upon workers. USMCA's and NAFTA's biggest benefit
to workers clearly comes from its trade liberalizing
provisions. The American economy and the American workforce
indisputably benefited enormously from NAFTA. U.S. exports to
Mexico grew five-fold. Under NAFTA, the U.S. consistently set
new records year after year as the world's number one
manufacturer. Currently, 14 million U.S. jobs rely on trade
with Canada and Mexico. There are over 500,000 such jobs in
Pennsylvania alone.
These jobs pay on average 15 to 20 percent more than jobs
that were lost. NAFTA already substantively liberalized almost
all North American trade. There was complete reciprocity. We
had zero tariff on 100 percent of manufactured goods, zero
tariff on 97.5 percent of agricultural goods.
Now USMCA contains some narrow improvements upon NAFTA like
improved digital trade provisions and a very slightly expanded
access to the Canadian dairy markets. But most of the USMCA's
new provisions moved us away from free trade and towards
managed trade instead.
Hundreds of millions of dollars of U.S. taxpayer money are
set to be spent in Mexico to monitor their environmental and
labor practices. This is an egregious misuse of hard-earned
taxpayer funds, footing the bill for a foreign country's
enforcement of its own domestic laws. Now for all this
investment, what has been the impact? Well, the jobs impact
that is projected is basically negligible. In 2019, the ITC
report projecting the impacts of USMCA stated that on balance,
if we put aside, leave out the positive effects of the digital
trade provisions that increase certainty, the rest of the USMCA
will restrict trade and cause employment in the United States
to decline by 54,000 jobs.
The primary reason for negotiating NAFTA was to reduce our
trade deficit with Mexico by restricting free trade in autos.
USMCA represents a misguided attempt to diminish Mexico's
comparative advantage in some categories of auto production. So
are auto manufacturers flocking back to the U.S. after USMCA
passed? Not really, and the U.S. trade deficit in goods with
Mexico has gone up since USMCA passed. An ITC report written
this year on the impact of the trade agreement finds that on
balance, there is simply no clear evidence of USMCA causing any
overall shift in auto production in the U.S., and that is
despite an extremely aggressive interpretation of the enhanced
auto rules of origin and new ``labor value content'' provisions
designed specifically to shift production to the U.S.
Are any U.S. jobs gained from the rapid response labor
mechanism or the environmental provisions? Not yet, unless you
include the bureaucrats hired by the government for
enforcement. In fact, the rapid response labor mechanism's only
confirmed impact on American workers thus far is arguably
negative. In my State, constituent jobs are at stake as an
investigation continues into one of my constituent's Mexican
subsidiary. The firm is given no details about the
investigation and no recourse to defend themselves, caught up
in a fight between the Mexican and U.S. Governments in which
they face substantial financial impact if the mechanism allows
the U.S. to block their components at the border.
Outside of the digital trade provisions, there is really
very little evidence that USMCA's new provisions will be good
for U.S. workers. What we do know is that trade liberalization
helps workers. It creates high-paying jobs. It gives high-
quality low-cost choices to consumers. If the Biden
administration wants to truly pursue a work-centered trade
policy, they should focus on pursuing new FTAs, lowering tariff
and non-tariff barriers to trade, and expanding export markets.
These are the policies that demonstrably increase high-quality
job opportunities for U.S. workers.
Free trade is the best mechanism that we know of to give
the highest standard of living for the largest number of
people. Over 39 million U.S. jobs, one out of every five, exist
thanks to foreign trade. The Biden administration should seek
to expand that number by pursuing new trade liberalizing
policies.
Thank you, Mr. Chairman.
The Chairman. All right.
Senator Whitehouse, I believe, is online. Is that correct?
Senator Whitehouse. Yes, I am here and online, and my
questions are for Beth Lowell. So we are having a double online
here: online Senator and online witness. I am very happy that
Oceana is a part of this hearing, and I want to particularly
thank Chairman Wyden for making sure that Oceana was a part of
this hearing.
Very often--in fact, almost without exception--on occasions
in which we get environmental conditions into trade agreements,
the enforcement somehow manages never to appear. I think the
focus of this committee on the oceans provisions of the USMCA
is very helpful, and I am grateful to the chairman for doing
that and grateful to you, Ms. Lowell, for testifying today.
Your testimony focuses primarily on fisheries, and I would
like to get to that in a moment. But the USMCA also has a
provision on marine litter, which is the language for marine
plastic waste. By the way, I gather Paulita Bennet-Martin has
just moved up to a plastics position at Oceana, which I am very
happy about, so, congratulations.
In Oceana's view, what has actually been accomplished
pursuant to the marine litter provisions of the USMCA? Is there
a place where we can identify a reduced pound of marine plastic
waste as a result of this agreement and the enforcement
provisions of it, or is most of that work ahead of us?
Ms. Lowell. Thanks; it is good to see you today. I would
say that we are very thankful for the investments that the
USMCA implementing language had on marine debris, an investment
of $8 million to help address the problem. We hope that Canada
and Mexico are mirroring that with additional investments in
their own countries. As we know, marine debris, marine litter,
is a huge problem. The flow of plastics into our oceans is just
creating a storm out there.
You know, we have not--the latest studies that we have seen
on some of the clean-ups have been since 2019. So I really
cannot see what happened in 2020, but in 2019 from the coastal
clean-ups around the world, the most prominent items on the
beach, the top ten found were things like single use plastics
like chip wrappers, bottle caps, stirrers, straws, lids,
plates.
That type of single use plastic is really something that
our countries could focus on to reduce the flow of pollution in
the water. We really need to reduce the production and use of
single use plastics. And you know, the provisions in the USMCA
do not require that, but it is something our countries could
work on collaboratively to address a problem that impacts not
only our countries, but the health of the oceans.
Senator Whitehouse. Yes. Well, thank you. I think it is
good that the USMCA mentioned marine litter, and it is good
that there is funding, but I do not think we are at a point yet
where we can identify a single pound of plastic that has been
kept out of the oceans as a result of anything that has been
done yet. So I think we continue to have a call to action as
our oceans fill more and more and more with plastic waste that
tends not to biodegrade.
So over to your issue of fisheries. We have been focusing
in the National Defense Authorization Act on trying to improve
the information flow to those who are trying to combat IUU
fishing, and we are having, I would say, only moderate success.
The Navy was not interested at all. The Coast Guard is somewhat
interested.
But as you know, there is quite a robust, private, and non-
governmental network out there, led in many respects by Vulcan,
to help provide information to people who are doing IUU
enforcement. We would like to do what we can to strengthen
that, if you have any advice on that.
Second, we see China as a very significant abuser of
fisheries all around the world. I traveled a lot with Senator
McCain, and we went at various times to the Philippines,
Indonesia, Vietnam, Thailand, and in every one of those
countries, when we raised the issue of fishing, they were very
upset at the way Chinese fishing vessels were behaving in their
fishing waters, and the extent to which Chinese military and
Coast Guard vessels provided physical protection for vessels
that were fishing illegally--and that there were actually
encounters between their sovereign vessels and Chinese
sovereign vessels trying to interfere with enforcement in their
waters. There are other countries like East Timor that have
communicated with us those same concerns.
Could you comment a little bit on what we need to do next
on IUU fishing?
Ms. Lowell. Yes. So really I think transparency and
documentation of fish products is primary. We really need to
get, for every fish coming into the U.S., reporting on who
caught it, where they caught it, how they caught it, their
authorization, to ensure that legality is a condition of
import. And then also transparency, so that we can see where
those vessels are, verify the information that comes in, that
only fish that is legally caught and produced without using
forced labor or other human rights abuses actually makes it
into the U.S.
And you know, on the China issue, I really do think fishery
subsidies are a way to get to the Chinese fleet as well. We
were happy to see the subsidies language in the USMCA, and
really encourage the U.S. to continue negotiations at the WTO
to put stronger disciplines on fishery subsidies.
That is really driving the over-capacity of the distant
water fishing fleets that are fishing right outside of coastal
nations that do not have the ability to enforce their own
waters. Some are IUU fishing, and it really undermines U.S.
fishermen that are very heavily regulated, that have some of
the strongest management measures in the world, to have to
compete in a marketplace with IUU fishing and the subsidized
distant water fishing fleets.
Senator Whitehouse. Yes, it is just not fair. Thank you
very much.
Thank you Mr. Chairman.
The Chairman. I thank my colleagues.
Senator Hassan is here.
Senator Hassan. Thank you, Senator Wyden.
The Chairman. I want to tell all our guests, this has been
a hectic day, even by Senate standards.
Senator Hassan, you voted, so you can----
Senator Hassan. Actually I have not voted, but I had two
other hearings. So I am going to quickly go, and then we are
going to go vote.
The Chairman. Go; great.
Senator Hassan. So I appreciate all of you very much, and I
wanted to start with a couple of questions to you, Mr. Huttema.
The USMCA expanded New Hampshire dairy farmers' access to the
Canadian market by reforming its milk supply management system
and dairy trade policies. In implementing this agreement, the
U.S. also needs to monitor whether Canada responds to increased
U.S. exports by selling below-cost milk into other markets,
which would undercut competition. How do you expect Canada to
respond to increased U.S. dairy exports, especially given the
issues you raised in your testimony about Canadian progress in
implementing dairy reforms?
Mr. Huttema. History repeats itself. I would expect them to
just continue to continue to export. I do not believe that the
dairy system in Canada is very regulated, and we are not
against Canadian dairy farmers per se. We are more about just
maintaining their market and not interfering with ours. But
they have had a history of trying to push more product.
Senator Hassan. Thank you. In addition to increasing access
to the Canadian dairy market, New Hampshire dairy farmers have
also highlighted the importance of the USMCA for boosting U.S.
dairy exports to Mexico. Before the USMCA, trade tensions and
retaliatory cheese tariffs from Mexico were costing U.S. dairy
jobs and making it harder for our dairy farmers to compete.
How did the passage of the USMCA and deescalation of trade
tensions help U.S. dairy exports to Mexico, and how have the
concerning trade restrictions you mentioned in your testimony
affected U.S. dairy exports since passage of the deal?
Mr. Huttema. So the trade tensions before the deal were
definitely hindering our exports and hurting our farmers. Since
then, with the implementation of USMCA, it has definitely
helped and helped raise prices as well. I think when it comes
to Mexico, we can get a handle on it. We just have to be
proactive and make sure that it happens.
Senator Hassan. I would look forward to working with you on
that.
And then, Ms. Lowell, I just have one additional question,
kind of building on what Senator Whitehouse was just talking
about. Marine debris is a critical issue for humans, for
wildlife.
I too live in a coastal State, where organizations like the
Blue Ocean Society for Marine Conservation collected more than
6,000 pounds of litter from New Hampshire's beaches in 2019
alone. I will just note that we have about 18 miles of
coastline. So that is 6,000 pounds of litter from 18 miles of
coastline in 2019.
I am grateful to Senators Whitehouse and Carper as
champions of addressing this issue, and I am glad that there
was additional funding in the USMCA Implementation Act to
support efforts to prevent, reduce, and remove marine debris
across the country. But are there things in addition to what
you talked about in your answer to Senator Whitehouse, things
we can do, efforts to encourage cooperation with our partners
like Canada, to ensure that we are adequately addressing marine
debris in New Hampshire and all across the country?
Ms. Lowell. Yes; thanks for that question. I really think
the way to address plastics and marine debris in our oceans is,
we really need to turn off the tap and slow the flow of single
use plastic production and use. From those coastal clean-ups,
as I mentioned before, you know the top ten items found were
food wrappers, so candy and chip bags, cigarette butts, plastic
beverage bottles, plastic bottle caps, straws and stirrers,
plastic cups and plates, plastic grocery bags, plastic takeout
containers, and other plastic bags and lids.
So these are the items that are making up the bulk of
marine litter on beaches around the world. So really, one of
the keys to reduce the flow of plastics into our oceans is to
reduce the use of single use plastic, reduce the production of
that, and transition into more sustainable products that can
both protect our oceans and reduce waste so you do not need a
beach clean-up on your beaches. That is a crazy amount of
litter in just a small New Hampshire-sized coastline.
Senator Hassan. Well, thank you for that, and thank you,
Mr. Chair. It is something we can work on with our partners
globally too. Thanks.
The Chairman. All right. I thank my colleague, and let me
just tell our guests we so appreciate your coming, because as
we said something like 3 hours ago, this was a chance to really
review where we are with respect to USMCA at 1 year old.
And the reality--and I see this in my home State, because
we are so trade-sensitive and the trade jobs often pay better
than do the non-trade jobs. The very first thing people say is,
``Hey, you talk about new trade agreements. How about enforcing
the laws that are on the books today?'' And that is what caused
Senator Brown and I to write the rapid response provision.
Mr. Davis, we thank you. We are going to be looking for, as
I asked in my questions, your suggestions on how to take a
strong provision and strengthen it, because the failure to
enforce trade rules has real consequences.
And in particular, the point that you made, Dr. McMurry-
Heath, is, when they basically said let's go ahead with this
new agreement without really getting these new obligations in
place, to use your words, that had real consequences for
innovators in terms of agriculture and health care, biotech and
technology.
So I think the message that the three of you have given
us--and of course, as Mr. Huttema knows, dairy is hugely
important in my State, where we share many of the concerns that
you have outlined today. It just doubles our effort now with an
administration that really wants to tackle these problems in an
aggressive way to get at it.
You have given us a lot of good, good suggestions, and I
particularly appreciate your outlining the real-world
consequences of the failure to have aggressive trade law
enforcement. Coming from my State which is, of course, nearly
always thinking about trade as it relates to Asia, to have
citizens in Oregon say the first thing that Washington has to
do is enforce the laws on the books, the trade laws on the
books, it sends a very powerful message which you all have
helped--the word of the day--to reinforce. So, thank you all.
And for members, the questions for the record are due
August 3rd.
And with that, the Finance Committee is adjourned.
[Whereupon, at 12:11 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Hon. Mike Crapo,
a U.S. Senator From Idaho
Thank you, Mr. Chairman. Returning to our work as Mike would have
wanted, I appreciate our witnesses taking the time to discuss issues
critically important to the work of our committee.
Welcome to Allan Huttema, chairman of the Northwest Dairy
Association and Darigold board of directors, who is joining us from
Parma, ID. Thank you for taking the time to discuss how these issues
are important to our State.
Today's hearing marks the 1-year anniversary of the United States-
Mexico-
Canada Agreement, or USMCA, coming into force. Mexico and Canada are
two of our most important trading partners. We cannot take these
relationships for granted. To take one example, the United States
exported $1.4 billion and $731 million worth of dairy products to
Mexico and Canada, respectively, in 2018. But just a generation ago,
nearly all of the dairy products produced in the United States stayed
in the United States.
Today, the Idaho dairy industry--which represents 6 percent of the
State's GDP--produces more than 15 times the production necessary for
the State's needs. Opening markets has fed our neighbors and created
jobs at home. However, our dairy industry faces a number of new
barriers, including attempts by trading partners to prevent our farmers
from using common cheese names by claiming they are geographic
indications.
The potato industry has also faced its share of challenges, with
the Mexican Supreme Court only recently ruling that potato growers can
sell fresh potatoes into all of Mexico, consistent with its obligations
under the USMCA. However, I will not consider the matter finished until
Idaho's farmers are able to sell high-quality potatoes to every family
in Mexico.
Likewise, when the North American Free Trade Agreement, or NAFTA,
was negotiated, we did not fully appreciate the potential of digital
trade, which now contributes over $2 trillion to annual GDP. That is
why I support a number of USMCA innovations to help us meet the
challenges of the 21st-century economy and drive economic prosperity in
North America. These include Canada allocating new tariff rate quotas
for dairy products, Mexico agreeing to protect 33 common cheese names,
a cutting-edge digital trade chapter, and better protection for
copyright.
This committee had a role in developing them, and it is appropriate
to examine whether these innovations are delivering. That cannot be
said for last-minute changes added through a USMCA Protocol of
Amendment at the behest of the House Democrat Working Group. This
committee had no opportunity to vet those changes, or even see the text
of those changes before they were finalized.
I am concerned that some of our Democrat House colleagues now want
to push their changes--that allegedly strengthen labor and environment
standards, but most certainly weaken our intellectual property rights--
into new agreements before we even have a complete understanding of
their full implications. I will not accept that. That is why this
hearing is so important. If we are going to unlock the promise of
USMCA, and also understand its shortcomings, we need to press for
effective implementation and enforcement.
To date, the administration's efforts on that front are fairly
disappointing. I will highlight three examples. First, USMCA contains
commitments that should facilitate cooperation on agricultural
biotechnology, including that decisions regarding the approval of such
technology be based on science. This technology not only increases
farmers' yields but allows them to grow crops more sustainably,
including by using less pesticide and reduced tillage. Unfortunately,
Mexico has refused to approve any biotechnology food or feed products
since May 2018. Despite the clear economic and environmental benefits,
the administration has yet to take any enforcement action on this
important issue.
Second, Mexico is proceeding with new discriminatory actions, such
as measures favoring its state-owned electricity and petroleum
companies. Mexico previously prioritized dispatch on its electrical
grid on the basis of cost, which allowed private producers, including
wind and solar energy providers, to compete. Instead, Mexico intends to
give preference to its state-owned electricity company. The
administration needs to be engaged now before barriers like this are
fully in place.
Finally, where the administration is taking enforcement actions, it
fails to do so transparently, or in appropriate consultation with
Congress. I am referring to the use of the USMCA rapid response labor
mechanism. As I noted at our hearing on the President's trade agenda, I
am committed to ensuring our workers can compete on a level playing
field. That effort requires transparency. Otherwise, how would
Congress, the affected parties, and civil society know if the mechanism
is being used appropriately and effectively?
Accordingly, USTR must explain what potential actions, in its view,
may or may not constitute a denial of rights. USTR has failed to do so
with respect to its recent use of the mechanism with respect to
Tridonex's facility in Mexico. This hearing is a good opportunity for
the committee to examine whether USMCA's commitments are delivering on
their promise. This discussion will also help in developing a future
trade agenda. I look forward to hearing what our knowledgeable
witnesses have to say to help us in this effort.
Mr. Chairman, thank you again for organizing this hearing, and
thank you again to our witnesses for appearing today.
______
Prepared Statement of Benjamin Davis, Director of
International Affairs, United Steelworkers
Chairman Wyden, Ranking Member Crapo, members of the committee,
thank you very much for the opportunity to testify on the
implementation of the USMCA, and specifically the labor provisions
which are so important to workers in the U.S., Canada, and Mexico.
I am Benjamin Davis, director of international affairs for the
United Steelworkers, and also the chair of the Independent Mexico Labor
Expert Board, an entity created by the USMCA implementing bill passed
by this committee and signed into law.
NAFTA, and the generation of trade agreements that followed it, did
tremendous damage to the American middle class and, in many ways, sowed
the seeds of our current political crisis. The argument that trade
improves the general welfare, without taking account of its
differential impact across all sectors of the population--particularly,
manufacturing workers--has been questioned in theory and clearly
refuted in reality.
In order to effectively assess the value of a good or a service, we
must analyze not only its price, but the conditions under which it was
produced--specifically, whether technology and skills are subject to
democratic regulation, and whether the fundamental rights of workers
are respected in the production process. The failure to address these
issues effectively and systematically has done tremendous damage to
workers--both here and abroad--and to industries and supply chains that
are critical to our national security.
As the Chair of the International Trade Commission recently noted
in a comprehensive report on ``Economic Impact of Trade Agreements
Implemented under Trade Authorities Procedures'':
trade agreements today do not simply reduce or eliminate
(``liberalize'') trade barriers and expand trade, and not every
domestic rule or regulation should be viewed as an
``unnecessary obstacle to trade.'' Trade policymakers today are
often just as interested in negotiating provisions that require
trading partners to adopt and implement rules and regulations
concerning, for example, intellectual property rights, consumer
protections on the Internet, labor standards, and environmental
protections. All of these rules can create winners and losers
in our economy. But the distributional effects of trade
agreements are not fully accounted for in most models,
particularly when economies are not fully employed (and
economies are rarely fully employed).\1\
---------------------------------------------------------------------------
\1\ United States International Trade Commission, Economic Impact
of Trade Agreements Implemented under Trade Authorities Procedures,
2021 Report, p. 219.
In the specific case of NAFTA, ``the ever-present threat of
offshoring production to Mexico in the absence of enforceable labor
provisions combined with tariff reductions on Mexican imports likely
weakened U.S. manufacturing workers' ability to bargain for higher
wages; but standard models cannot account for that.''\2\ The Report
pointed to evidence that Mexico's labor costs in key export industries
were declining prior to USMCA, leading to an increase in the wage gap
in motor vehicles, for example, of nearly 60 percent (see table
below).\3\
---------------------------------------------------------------------------
\2\ Id., p. 220.
\3\ Id., p. 152. We are concerned that the International Labor
Comparisons program, which was a major source of data for the ITC
study, was discontinued by the Bureau of Labor Statistics in 2013 and,
although a successor program is maintained by The Conference Board, key
data on hourly compensation costs in manufacturing have not been
updated since 2016. The lack of current information complicates efforts
to measure the effectiveness of USMCA enforcement measures. See
Information Technology and Innovation Foundation, Federal Statistical
Needs for a National Advanced Industry and Technology Strategy (July
2021), p. 3; Josh Wright, ``Why Jobs Reports Are Less Useful for
Business,'' Fortune, May 6, 2016.
Table 4.2 Hourly Compensation Costs in Three Major Industries in the
United States and Mexico, 2008 and 2016
------------------------------------------------------------------------
2008 2016 CAGR, 2008-
Industy Country (U.S.$) (U.S.$) 2016 (%)
------------------------------------------------------------------------
Computer, United 45.42 54.28 2.3
electronic, and States
optical products
Computer, Mexico 5.11 4.13 -2.6
electronic, and
optical products
Motor vehicle and United 41.91 48.97 2.0
other States
transportation
equipment
Motor vehicle and Mexico 6.39 4.68 -3.8
other
transportation
equipment
Primary and United 30.21 35.87 2.2
fabricated metals States
Primary and Mexico 5.04 4.17 -2.3
fabricated metals
------------------------------------------------------------------------
Source: The Conference Board, International Labor Comparisons program,
April 2018.
CAGR = compound annual growth rate.
The ITC report also provides an update on the impact of automotive
rules of origin in USMCA. This analysis shows some relocation of global
production towards the North American region. Whether production within
the region will shift towards the U.S. remains to be seen.\4\ The
agreement has only been in effect for a year and is still in its
infancy; moreover, recent decisions call this shift into question.\5\
But there is no doubt that such a shift cannot be sustained without
strong enforcement of the automotive rules of origin provisions of
USMCA. Reported recent attempts by Canada and Mexico to weaken these
provisions threaten to roll back a commitment made to U.S. autoworkers
and must be rejected.\6\
---------------------------------------------------------------------------
\4\ United States International Trade Commission, Economic Impact
of Trade Agreements Implemented under Trade Authorities Procedures,
2021 Report, p. 125.
\5\ `` `Slap in the face' UAW says of GM's move to build EVs in
Mexico,'' Detroit Free Press, April 21, 2021.
\6\ ``U.S., Mexico fail to resolve dispute on trade rules for
cars,'' The Spokesman-Review, July 23, 2021.
Likewise, the continuing drumbeat of plant closings and relocations
to Mexico \7\ underscores the urgent need for reauthorization of Trade
Adjustment Assistance \8\ as well as reform of the WARN Act.
---------------------------------------------------------------------------
\7\ ``Wisconsin workers fight factory move to Mexico: `Anxiety is
through the roof,' '' Guardian, July 18, 2021; ``FreightCar America got
a $10 million PPP loan, then closed its plant and moved manufacturing
jobs to Mexico,'' Roanoke Times, July 17, 2021; ``Fair Lawn Nabisco
Plant to Bake Last Cookies Friday. What's Next?'', Patch, July 15,
2021.
\8\ Tom Conway, A Life-Saving Program, July 16, 2021.
The USMCA passed Congress with a large bipartisan majority. The
Steelworkers, along with the AFL-CIO, supported the final agreement
after Congress improved upon the text negotiated by the prior
administration. We pushed for changes in rules of origin for steel. We
advocated for changes to provisions that would limit patients' access
to medicines. Environmental provisions needed to be enhanced. All of
the provisions of the Agreement require oversight to ensure their
---------------------------------------------------------------------------
proper implementation, monitoring and enforcement.
Most critical to our support was the emphasis on labor rights
improvements in Mexican law, backed up by the rapid response mechanism
initially developed by you, Chairman Wyden, and Senator Brown.
The focus of the labor law changes was to disrupt the protection
union system in Mexico under which most workers have had no real voice
in choosing their union representatives and often have no knowledge of
the contract that determines their wages and working conditions. This
system has maintained artificially low wages: for example, at the GM
Silao plant--the subject of a USTR-initiated filing under the rapid
response mechanism--the starting wage is $1.35 per hour.
Workers' rights to secure democratic unions and collective
bargaining have been denied in Mexico for many years and the jury is
still out as to whether Mexico's new laws and the USCMA will make a
difference.
Let me briefly summarize the key conclusions and recommendations of
the Board's report of July 7th, which is included as an attachment to
this testimony. While there has been significant progress on USMCA
implementation in some areas, the Board raised concerns about (1)
transparency, (2) the contract legitimation process, (3) budget and
staffing of Mexico's new labor institutions, and (4) U.S. technical
cooperation.
transparency
Almost 27 months after Mexico's labor law reform was approved, most
workers covered by a union contract still don't have a copy of their
contract or their union statutes--including the workers at Tridonex in
Matamoros, which is the subject of a rapid response mechanism case
under the USMCA. The 2019 labor law requires employers and unions to
give workers copies of their contracts, but these provisions won't be
fully implemented for several years. Online access--which is already
available for contracts in some jurisdictions--should be accelerated
and should not require workers to submit individual requests.
contract legitimation
The Board raised significant concerns about the effectiveness of
the contract legitimation process. As of today, Mexico reports that
1,378 legitimation votes have been held, covering 797,587 workers
(about 18 percent of the estimated unionized workforce). Government
officials have stated that they ultimately expect at least 80,000
contracts to be voted on. This would require about 120 legitimation
votes per day, every day, from now until May 1, 2023. That clearly
exceeds the capacity of the government institutions, and may require
them to rely on private notaries hired by the incumbent unions. As we
have seen in the GM Silao case, putting the incumbent union in charge
of the vote creates an inherent conflict of interest and potentially
disastrous consequences.
budget and staffing
The Board raised concerns about staff shortages at the Labor
Secretariat and the Federal Center for Conciliation and Labor
Registration, which have faced a huge challenge of implementing the
reforms under pandemic conditions. For example, the Federal Center
currently has only 29 staff responsible for monitoring contract
legitimation votes. Clearly, there is not enough money to support
timely and effective implementation of the reforms. The Inter-American
Development Bank gave Mexico an $800-million unsecured loan to support
the labor reform, but it appears that none of those funds have been
used for this purpose.
u.s. technical assistance
Finally, the Board raised significant concerns about the pace and
focus of U.S. technical assistance to support Mexico's labor reforms.
Of the $180 million appropriated by Congress, only $50 million has been
allocated, and only $10 million of that directly supports efforts by
Mexican workers to establish democratic unions. Strangely, this initial
allocation of USMCA funds excluded the auto and auto parts sector from
labor capacity building.
The Board referenced the recommendation of Ways and Means Democrats
that ``ILAB should spend at least $30 million annually of USMCA
Appropriated Funds on worker organizing and union capacity building in
Mexico,'' and I believe this funding is the minimum level needed to
achieve our goals.
Without a fundamental shift from protection unions like the ones at
GM and Tridonex towards democratic labor organizations, no amount of
government oversight will result in a trade union movement that can
organize and bargain for higher wages for Mexican workers to address
the structural inequality in the USMCA region that drives both
migration and loss of good manufacturing jobs.
Thank you, and I will be happy to answer any questions.
Attachment 1--July 7, 2021 report of the Independent Mexico Labor
Expert Board and Separate Statement of Members Fortson et al., https://
www.maquilasolidarity.org/sites/default/files/attachment/
IMLEB%20Report%20and%20Separate%20Stmt%20of%20Members%20Fortson
%20et%20al.%202021.07.7.pdf.
______
Questions Submitted for the Record to Benjamin Davis
Question Submitted by Hon. Ron Wyden
Question. One of the game changers in the USMCA was the rapid
response mechanism. It presents an opportunity to respond quickly and
efficiently to facility level violations, and has the potential to turn
the tide for workers in Mexico and the United States. USTR has now
twice engaged the rapid response mechanism to address facility-level
labor violations.
Recognizing that the USMCA parties are still working to understand
what role the rapid response mechanism can and will play in labor
obligation enforcement, what aspects of the rapid response mechanism
should we as the Finance Committee pay attention to when thinking about
how to make the mechanism as effective as possible or how it may need
to be improved in the future?
Answer. The rapid response mechanism (RRM) is a critical element of
USMCA enforcement that should be incorporated--with improvements--into
other trade agreements. To fulfill its potential as a means of
empowering Mexican workers to democratize their unions and increase
their wages, it is essential that the RRM be used regularly and
effectively, and that it be complemented by capacity building for
workers and government institutions.
In the initial cases, we have seen the need for extensive
documentation of worker rights violations. But in Mexico, currently
only about 1 percent of the workforce is represented by democratic
unions, and these unions in most cases have limited resources and
capacity to document violations. In addition, there are only a small
number of labor lawyers who represent democratic unions, and in many
parts of the country it can be difficult or impossible for workers to
find representation. Capacity building to enable workers to exercise
their rights to organize and bargain is therefore essential. The IMLEB
report of July 7, 2021 recommended that ``ILAB should immediately
direct at least $100 million of the unallocated USMCA funding to
building worker capacity for organizing and bargaining, including legal
and research support.''
The capacity of Mexican government institutions, including the STPS
and the CFCRL, also needs reinforcement. As the IMLEB report points
out, these institutions face both immediate challenges, including a
backlog of at least 80,000 contract legitimation votes and the
requirement to ensure workers' access to their union contracts and
other documents, as well as a long-term need to recruit, train and
deploy inspectors to enforce the new labor laws. While Mexico has
invested significant resources in creating and staffing these
institutions, they will likely require both political and financial
support to become truly effective.
The early cases under the RRM will help us understand what is
working, and what needs improvement. The entrenched protection union
system in Mexico will seek to protect its interests and continue to
degrade workers' rights. We must be willing to update and reform the
mechanism if need be.
______
Questions Submitted by Hon. Maria Cantwell
Question. During consideration of the U.S.-Mexico-Canada Agreement
(USMCA), I pushed for $240 million in U.S. technical assistance for
capacity building through the U.S. Department of Labor to support
reforms of the Mexican labor justice system, worker-focused capacity
building, and efforts to reduce child labor, forced labor, and human
trafficking in Mexico.
This assistance was aimed at educating Mexican judges and labor
officials about worker rights, digitizing and reviewing collective
bargaining agreements, and strengthening mechanism for monitoring and
enforcement.
Capacity building and enforcement go hand in hand. The COVID
pandemic has slowed everything down around the world, but efforts to
improve labor law and labor rights in Mexico must continue.
From your perspective, where do we stand on U.S. assistance to
improve Mexican labor conditions and protection of labor rights?
Answer. Of the $130 million appropriated by Congress for USMCA
implementation, only $50 million has been allocated and only $10
million of that goes directly to increase workers' capacity to use the
new laws and mechanisms. Given the challenges noted in the IMLEB
report, the disbursement of the remaining funds should be stepped up
and focused on worker capacity building. While ILAB has issued
additional notifications in the past month,\1\ none of these appears to
be focused on building worker capacity to achieve union democracy and
genuine collective bargaining.
---------------------------------------------------------------------------
\1\ See FOA-ILAB-21-09, July 16, 2021; NOI-ILAB-21-13, July 30,
2021; NOI-ILAB-21-14, July 30, 2021; NOI-ILAB-21-15, August 5, 2021.
Question. How much has the COVID-19 pandemic slowed down efforts to
---------------------------------------------------------------------------
implement labor law reforms in Mexico?
Answer. The pandemic has had a severe impact on employment and
wages, with the greatest effect on informal and contingent workers. In
terms of labor reform implementation, there have been multiple delays
of the deadline for unions to reform their statutes to comply with the
democracy and transparency requirements of the law. Contract
legitimation votes may also have been affected. And it has hampered the
ability to collect facts at a number of facilities where there have
been allegations of workers' rights violations.
Question. What should the Biden administration be doing now to help
the Mexican Government stay on track to follow through on reforms and
efforts to improve workers' rights? What should the priority areas of
focus be?
Answer. Priority areas should be:
1. Reform of the contract legitimation process.
2. Ensure that workers have access to their collective bargaining
agreements, union statutes, and financial reports as quickly as
possible.
3. Hire and train additional enforcement personnel.
4. End the widespread and legal practice of employer payments to
officials of protection unions and consider adopting a requirement that
any U.S. employer or contractor operating in Mexico publicly disclose
payments to officials of protection unions.
Question. In 2020, ALCOA idled its Intalco aluminum plant in
Ferndale, WA, costing about 700 jobs. The U.S. has had to compete with
global overcapacity and subsidized steel and aluminum for many years,
putting extreme pressure on U.S. producers.
In June, President Biden agreed with the European Union to try to
resolve differences on steel and aluminum by the end of the year. USTR
Ambassador Tai is in the process of holding talks to try to reach an
agreement.
Should the United States bring Canada into any agreement with the
European Union on steel and aluminum?
Answer. There are unique considerations between Canada and U.S.
related to defense and a preexisting agreement. U.S. negotiators will
have their hands full focusing on the importance of maintaining
domestic employment and production capabilities of the domestic
industry to ensure our national defense and critical infrastructure,
which should be priority in negotiations with the EU.
Question. Could an agreement among allies on steel and aluminum
help to bring them together to address overcapacity and subsidies in
other countries like Russia, India, and China?
Answer. For the union a focus on maintaining domestic employment is
a priority in any agreement between countries to address overcapacity
in steel and aluminum. Russia, India, and China have compounded
overcapacity issues and we should work with our allies to contain
overcapacity or subsidies but will need to carefully navigate economic
competition even with our allies. So far, efforts to limit global
overcapacity (e.g., Global Forum on Steel Excess Capacity, OECD steel
committee) have not produced results, because many of our trading
partners refused to really work for a solution. Strong, multilateral
enforceable disciplines are the goal, but we must not unilaterally
disarm and jeopardize our national and economic security interests in
the interim.
______
Prepared Statement of Allan Huttema, Chair, Board of Directors,
Darigold and Northwest Dairy Association
Chairman Wyden, Ranking Member Crapo, and members of the committee,
thank you for inviting me to testify on ``Implementation and
Enforcement of the United States-Mexico-Canada Agreement: One Year
After Entry Into Force.'' My name is Allan Huttema, and I am a dairy
farmer from Parma, ID. My dairy career started in 1991 in Chilliwack,
British Columbia under the Canadian supply management system. I moved
to Everson, WA in 2003, where I started a 500-cow dairy, and then to
our current location in Parma in 2010. Together with my wife Mary Jo
and two sons, Christopher and Jeremy, we operate an 800-cow dairy and
crop approximately 500 acres of corn and triticale for silage. I
currently serve as chair of the Darigold and Northwest Dairy
Association board, as well as board member for the National Milk
Producers Federation (NMPF), the latter of which develops and carries
out policies that advance the well-being of dairy producers like myself
and the cooperatives we own.
NMPF's member cooperatives produce the majority of the U.S. milk
supply, making NMPF the voice of more than 32,000 dairy producers on
national issues. International trade is one of those issues and in
recent years it has been one of the most important to our industry.
NMPF works closely on international trade issues with the U.S. Dairy
Export Council whose partnership between producers, proprietary
companies, trading companies and others interested in supporting U.S.
dairy exports has contributed greatly to the success of the industry
and the thousands of workers who are supported by dairy exports
throughout the supply chain.
testimony summary
Maintaining our trade relationships and expanding market access for
U.S. dairy products is vital to the strength of the domestic dairy
industry and the economic health of rural America. USMCA made
tremendous strides to modernize trade rules and facilitate the smooth
flow of U.S. dairy products throughout North America, but the benefits
of USMCA will only flow if Canada and Mexico properly implement the
agreement. This will require proactive monitoring and enforcement of
USMCA implementation, including through enforcement actions such as
that taken against Canada's administration of its tariff rate quotas
for dairy products.
While the U.S. Trade Representative's recent initiation of USMCA
dispute settlement proceedings over Canada's allocation of dairy
tariff-rate quotas (TRQs) 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 (GIs).
USMCA's GI provisions can and should serve as a valuable foundation
to respond to the threat posed by the EU's efforts in various markets
to restrict U.S. dairy competition by denying U.S. producers the right
to use common food names.
While USMCA represents an important step in maintaining and
expanding export opportunities for U.S. dairy, it should be followed by
active negotiation of additional trade agreements with key export
markets and aggressive efforts to level the playing for dairy exports.
usmca
The U.S.-Mexico-Canada Agreement builds on the most important trade
agreement--the North America Free Trade Agreement (NAFTA)--for
America's dairy farmers and businesses. NAFTA resulted in U.S.
agriculture's strongest and most important trade relationship, growing
to over $40 billion in exports, including $1.9 billion in U.S. dairy
exports. Canada and Mexico now take 27 percent of all U.S. agricultural
exports and over 30 percent of U.S. dairy exports, providing critical
farm income to America's farmers and ranchers.
In 2017, the prior administration threatened to withdraw from
NAFTA, putting at significant risk the economic viability of U.S.
agricultural and dairy exports. That threat, which resulted in a public
outcry from U.S. agriculture, was able to be turned into a negotiation
to improve on NAFTA and to address remaining market access barriers.
For example, NAFTA had failed to provide preferential access for
U.S. dairy exports into Canada. Dairy is the most protected and one of
the politically strongest sectors in Canada. In the USMCA, the United
States prioritized getting improved access for U.S. dairy into Canada
and to fixing distortions in Canada's milk pricing policies that
undermined U.S. dairy exports to Canada and other countries. The
results included Canada establishing tariff rate quotas (TRQs) solely
for U.S. exports, worth an estimated $300 million as well as important
changes to Canada's distortions in its milk class pricing system. This
was the first time U.S. dairy exports received preferential access into
the Canadian market.
Mexico was also negotiating with the European Union in 2017, which
could have completely prohibited certain cheese sales into Mexico. The
EU was demanding that Mexico protect certain geographical indications
for cheeses even though U.S. exporters sold those cheeses (e.g.,
``feta,'' ``parmesan,'' etc.) into Mexico. The United States used its
leverage in USMCA negotiations to minimize the negative impact of any
EU-Mexico agreement on GIs, obtaining Mexico's commitment to allow
certain common cheese names to continue to be used in the Mexican
market.
Negotiations with Mexico and Canada on dairy were some of the
hardest issues to tackle. The close coordination between the U.S. dairy
industry and U.S. negotiators enabled outcomes that benefit America's
dairy farmers and exporters. While the results may not be everything
that the U.S. dairy industry sought, USMCA's improvements over NAFTA
are important, providing opportunities for new markets in Canada and
protecting U.S. access into Mexico. The U.S. dairy industry welcomes
the hard work of U.S. negotiators and the broad bipartisan support from
Congress in supporting U.S. dairy interests and passing USMCA.
importance of trade to u.s. dairy
America's dairy industry is an economic force that employs nearly 1
million Americans, contributes more than $64 billion in tax revenue,
and adds about $620 billion to the U.S. economy.\1\
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\1\ https://medium.com/dairy-exports-mean-jobs.
Trade is essential to the health of the dairy industry. America's
dairy farmers and processors have established themselves as the world's
preeminent suppliers of high-quality dairy products, exporting more
than $6.5 billion in dairy products in 2020 to customers around the
world. Approximately 16 percent of U.S. milk production last year was
exported overseas in the form of a wide variety of dairy products from
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cheese to ice cream to milk powder.
Our industry manufactures high-quality Made-in-America products
that are beloved by consumers across the globe. In fact, in 2019, a
cheese from the U.S. won ``Best in the World'' at the World Cheese
Awards for the first time ever. It is clear that our dairy products can
compete toe-to-toe and win against any country.
Importantly, these exports drive growth across the U.S. economy.
Dairy exports alone create more than 85,000 U.S. jobs and have a nearly
$12 billion economic impact.\1\
Unfortunately, trade disputes and uncertainty in the global
marketplace have exacerbated the prolonged rural recession that has
gripped the heartland and America's dairy industry has been among the
hardest hit. Dairy farmers and processors have found their livelihoods
under threat and the communities and economies that depend on these
producers are at risk. The U.S. Department of Agriculture reports that
the U.S. lost more than 6,000 dairy farms from 2017 to 2019,
representing a 15-percent decline in dairy farm numbers over that
period.\2\
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\2\ USDA's National Agricultural Statistics Service reports there
were 40,199 licensed dairy herds in 2017 and 34,187 in 2019. The
average 2-year loss rate prior to 2017 was less than 8 percent,
starting in 2003.
When our exports increase, all dairy producers benefit. And when
our exports are impeded or we give up market share, the effect is
---------------------------------------------------------------------------
ultimately felt by the farmer in the prices they receive.
Free trade agreements have played an indispensable role in
increasing U.S. exports. For example, before NAFTA was implemented in
1993, the United States exported just $618 million worth of dairy
products, less than 10 percent of the current figure. Dairy product
exports to countries with which we have an FTA have grown by $2.14
billion in total since their respective implementations. In terms of
volume, that is equivalent to 1.4 billion gallons of milk, greater than
what Michigan, the 6th largest U.S. milk producing State, produces in 1
year.
USMCA built on this success, making tremendous strides to modernize
trade rules and facilitate the smooth flow of U.S. dairy products
throughout North America. America's dairy farmers, manufacturers and
exporters are grateful for this new agreement that we hope will bring
increased certainty to the U.S. dairy industry by preserving access to
our largest export market (Mexico), addressing Canada's discriminatory
Class 7 dairy pricing policy, expanding critical market access, and
defending common cheese names, among other accomplishments.
If Canada and Mexico implement USMCA in keeping with the
expectations established during negotiations, it will strengthen
exports of high-quality U.S. dairy products and secure real benefits
for our industry. Under USMCA, U.S. dairy exports will ultimately
increase by more than $314 million a year, according to the U.S.
International Trade Commission. These dairy sales will have a positive
effect on American farmers, bolstering dairy farm revenue by an
additional $548 million over the first 6 years of implementation.
However, these benefits will only be fully realized if our trading
partners adhere faithfully not just to the letter of their commitments
under USMCA, but to their spirit as well.
canada
In this regard, NMPF and USDEC applaud U.S. Trade Representative
Katherine Tai's May 25th decision to initiate USMCA dispute settlement
proceedings over Canada's dairy TRQ administration. We also wish to
express our appreciation to the Finance Committee for its support of
this critically important step.
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. Canada's TRQ system discourages full
utilization and valuation of agreed upon quantities. For example, the
system allocates up to 85 percent 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 percent 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.
The decision to pursue dispute settlement also delivers a strong
message against the erection of future barriers in Canada and other
markets as well. Our trading partners need to know that failure to meet
their agricultural trade commitments with the United States will result
in robust action to defend U.S. rights.
In this connection, we urge Congress to work proactively with USTR
and USDA as they 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. Here as well, Canada's actions have given cause for
concern. Canadian exports of milk protein isolates (MPI) and certain
skim milk blends manufactured under the new Class 4a have been
increasing in a manner that seems designed to evade USMCA disciplines.
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.
mexico
Vigilant monitoring and aggressive enforcement will also be
necessary with our other USMCA partner, Mexico. Mexico is the largest
export market for U.S. dairy products, and the U.S. trade relationship
with Mexico is of the utmost importance. Unfortunately, of late there
has been a proliferation of poorly designed Mexican regulations that
have been disrupting trade, eroding the U.S.'s role as a reliable
supplier.
For example, Mexico has introduced new standards for milk powder
(NOM-222) and cheese (NOM-223) in January 2020. Despite being in force
for less than a year, a rule making process to amend these regulations
will begin later this year for both. From the outset, an update of
these regulations so close to their entry into force with the purpose
of adding additional obligations for the industry is against the good
regulatory practices provided for under the USMCA.
There are many concerns with the proposed amendments to the milk
powder standard (NOM-222), which has a huge potential to disrupt trade.
A prohibition on using milk powder as raw material for fluid milk, as
well as limitations on a certain class of milk powder for production of
dairy products (e.g., yogurt, cream, or cheese) will not only make
dairy products extremely expensive for Mexican consumers but will
discourage significant number of exports into Mexico. Additionally, the
proposal includes new requirements for additional information not
related to the product discriminates against U.S. product.
Similarly, there are a number of concerns with proposed amendments
to the cheese standard (NOM-223) that not only will make imports of
cheese from the United States more difficult but will also create an
issue with national treatment since our products will be treated
differently than the Mexican products.
The U.S. should pursue discussions with Mexico treating this surge
in regulatory and customs enforcement issues as a collective concern,
and not simply as one-off issues. We need to restore smooth and
predictable trading conditions with Mexico to ensure that the U.S. and
Mexico remain an integrated market and the promise of USMCA is
fulfilled.
Another area bearing close monitoring and, if necessary,
enforcement is Mexico's implementation of USMCA provisions on common
cheese names and geographical indications (GIs). Regrettably, Mexico
has acceded to the European demands to prevent the use of common food
names through the imposition of illegitimate GIs. Living in Idaho, I
recognize the importance of defending the rights of specific regions
like Idaho to protect compound names like ``Idaho potatoes.'' However,
common cheese names like ``parmesan,'' in addition to certain meat and
wine terms that indicate a type or method of production, have been in
the public domain for centuries and are considered as generic. GIs were
not meant to restrict the generic names by which millions of consumers
recognize some of their favorite foods; use of GIs to create this
result must be firmly rejected as the protectionist and anti-trade
policy that it is.
Mexico undertook important commitments to the United States through
USMCA side letters on cheese common names \3\ and prior users,\4\ to
protect from the abusive and illegitimate actions from the European
Union during the Mexico-EU free trade agreement negotiations. We need
to ensure that Mexico implements these provisions in a manner that
fulfills and recognizes the market access gains in NAFTA and USMCA.
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\3\ https://ustr.gov/sites/default/files/files/agreements/FTA/
USMCA/Text/MX-US_Side_Let
ter_on_Cheeses.pdf.
\4\ https://ustr.gov/sites/default/files/files/agreements/FTA/
USMCA/Text/MX-US_Side_Let
ter_on_Prior_Users.pdf.
---------------------------------------------------------------------------
misusing geographical indications to erect barriers to trade
To provide some perspective, I live in Parma, ID. According to the
EU Commission, I could never call anything Parma despite that my town
has had that name since 1904 when it was incorporated. The United
States needs to stop Mexico's deteriorating approach to GIs. It is
symptomatic of broader efforts that the EU has been pursuing for some
time to limit U.S. competition through imposition of GI provisions in
EU FTAs with U.S. trading partners. As stated above, the U.S. dairy
industry does not object to the protection of proper GIs, such as
``Parmigiano Reggiano.'' However, the EU has been aggressively seeking
to confiscate generic terms that derive from part of the protected name
or are otherwise in common usage--such as ``parmesan,'' ``feta,'' and
``asiago.'' The threat to common food names is not constrained to dairy
but extends to other products as well, such as generic meat terms like
``black forest ham'' and ``bologna,'' as well as common descriptive
terms for wine such as ``vintage'' and ``chateau,'' or the use of
common wine grape varietal terms.
The EU's GI campaign is as deliberate as it is destructive. If the
EU is successful in blocking U.S. exports of common food names, U.S.
food producers will be severely harmed, and consumers will no longer
recognize familiar products. We appreciate the actions the U.S. has
taken so far to protect American jobs as well as the legitimate rights
of our food manufacturers, farmers, and exporters; however, combating
the EU will require continued vigilance, a coordinated U.S. interagency
effort focused on preserving U.S. market access opportunities, and a
pragmatic, results-
oriented approach to combating the EU's trade-distorting approach to
this topic.
The USMCA side letters on common names and prior users offer a
potential bulwark against EU efforts by listing specific cheese names
that the United States will be permitted to continue to use and by
ensuring that U.S. companies will be recognized as ``prior users'' of
common food names and therefore entitled to continue to use them. The
U.S. government must make it a policy objective to further expand upon
this successful framework in other trade negotiations to ensure that
safeguards for American-made common food name products are
strengthened, cloaked barriers to trade are rejected, and legitimate IP
protections preserved. The alternative would be continued erosion of
U.S. market access as the EU continues efforts to erect barriers to our
products in third markets.
building on usmca in key markets
While USMCA is a significant step forward towards continued dairy
export growth, by itself it cannot achieve this goal. That will require
a forward-leaning posture by the U.S. Government and active negotiation
of additional trade agreements with key export markets, both to level
the playing field for American dairy products and to allow our industry
to grow exports and invest in expanding dairy jobs. The United Kingdom,
Southeast Asia, Japan, and even China present valuable opportunities.
united kingdom
The UK dairy market is a prosperous one with a significant segment
of its dairy consumption coming from imports, representing strong
potential to expand U.S. market share. However, numerous tariff and
non-tariff barriers imposed by the EU have long hindered U.S. dairy
exports to the UK. These include bans on the use of several common
cheese names due to EU geographical indication policies and
certification-related challenges that overly complicate our industry's
ability to ship product consistently and simply to Europe. The UK's
exit from the EU presents an opportunity to move beyond the EU's
complex trade policies which act as major disincentives to U.S.
exports.
southeast asia
U.S. dairy producers and businesses have worked hard to make
advancements in Southeast Asia and believe increased sales throughout
Asia are key to the industry's future success.
Unfortunately, America's biggest dairy export competitors--Europe,
New Zealand, and Australia--have negotiated FTAs with partners in
Southeast Asia or are in the process of doing so, leaving the U.S. as
the only major supplier that will be left without an FTA. The tariff
advantages provided by these FTAs may in some cases price alternate
suppliers out of the market, including the U.S. This has put the U.S.
dairy industry at a distinct disadvantage, and we are at risk of seeing
our competitiveness erode in this important market region, particularly
as our tariff disadvantage exacerbates with ongoing dairy tariff phase-
outs our competitors enjoy.
U.S. focus would be most effectively invested in expanding American
inroads into key and growing markets throughout Southeast Asia,
particularly Vietnam. Vietnam was the 8th largest U.S. dairy export
destination in 2019. A developing economy and changing food trends in
Vietnam have fueled a demand for dairy that cannot be met by their
domestic industry alone.
japan
U.S. dairy farmers applauded the strides made for dairy in the
Phase One U.S.-Japan Trade Agreement as they will help stem the erosion
of U.S. market share in this key market, especially for cheese, whey,
and lactose products. However, more remains to be done to maximize
opportunities in this top five U.S. dairy export market for U.S. dairy
farmers and processors. The dairy industry is urging U.S. trade
negotiators to build upon the Phase One deal and deliver the complete
range of market access opening and assurances necessary to ensure that
U.S. dairy products can best compete. A 2019 U.S. Dairy Export Council
study found that if the U.S. has at least the same market access as its
competitors, the U.S. could roughly double its share of the Japanese
market over the next 10 years.
china
China is the world's second largest importer of dairy products and
a critical market for the U.S. dairy industry. The Phase One trade
agreement with China made important advances on nontariff issues and
regulatory restrictions harming U.S. dairy trade.\5\ However, the U.S.
Government's work with China is not complete until the retaliatory
tariffs against all U.S. dairy exports are fully lifted.
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\5\ Summary of dairy-related results: https://ustr.gov/sites/
default/files/files/agreements/phase%20one%20agreement/
Phase_One_Agreement-Commodity_Fact_Sheet-Dairy_and_Infant_
Formula.pdf.
Prior to the imposition of retaliatory tariffs, the U.S. had been
expanding its market share of China's rapidly growing import market,
growing by 10 percent a year over the past decade. Although the dairy
market in China continues a strong trajectory of growth with tremendous
potential, recent gains for U.S. dairy exports have been reversed by
the waves of retaliatory tariffs imposed by China. Once hard-earned
market access is lost, it will be difficult to recover or find another
market as pivotal for U.S. dairy exports as China. We therefore urge
that Congress work with the administration to press for removal of all
retaliatory tariffs on dairy.
enforcement
Just as new trade agreements will be critical to expanding export
opportunities and jobs for U.S. dairy farmers, insisting on a level
playing field across the board, including through enforcement of
existing agreements, will be essential to securing and maintaining
market access for U.S. dairy. The decision to pursue dispute settlement
with Canada over its TRQ administration sends exactly the right
message, but other trading partners need to get that message as well.
Notably, the EU's misuse of GIs is just one of the many barriers the EU
is constantly erecting to our products, all while benefitting from
wide-open market access here in the United States. This imbalance of
opportunities is not right, and it cannot continue.
conclusion
The U.S. dairy industry recognizes the importance of expanding
overseas market opportunities in order to bolster our farmers,
processors, and manufacturers here at home. We have worked hard to
establish the U.S. as a reliable supplier of safe and nutritious
products to meet growing foreign demand for high-quality American dairy
products, and we want to be able to capitalize on these extensive
efforts through improved access to these markets.
USMCA represents an indispensable step towards maintaining and
expanding export opportunities for U.S. dairy, albeit one requiring
vigilant monitoring and aggressive enforcement. USMCA also represents a
foundation that should be built upon through efforts to pursue
additional trade agreements in key markets and to dismantle trade
barriers including GIs, in order to ensure continued growth and
economic security for the domestic dairy industry and, in turn, my
family business.
I appreciate the opportunity to provide comments on these important
issues to this committee. Thank you.
______
Questions Submitted for the Record to Allan Huttema
Question Submitted by Hon. Ron Wyden
Question. Dairy producers have faced significant issues getting
their products into the Canadian market, and even greater issues
competing with underpriced dairy ingredients in Canada and third
markets. Essentially, Canada's supply management system is distorting
the dairy market at home and abroad.
I was pleased to see that USTR initiated dispute resolution on
Canada's tariff rate quota (TRQ) system. But what other issues should
we be watching with regard to Canada's dairy obligations? In
particular, do you think Canada has fully eliminated the Class 6 and 7
ingredient prices that were distorting the market for dairy
ingredients?
Answer. While Canada has eliminated Class 6 and 7 pricing
categories in accordance with the USMCA, there are outstanding concerns
that it may be attempting to circumvent export surcharges imposed on
dairy protein exports, including skim milk powder (SMP), milk protein
concentrate (MPC) and infant formula. The fundamental problem with
Class 7 was Canada's use of global markets to export increasingly large
volumes of its dairy protein at artificially low prices--an issue that
was addressed in the agreement. However, Canadian exports of milk
protein isolates (MPI) and certain SMP blends manufactured under the
new Class 4a have been increasing in a manner that seems designed to
evade these USMCA disciplines.
We ask that Congress and USTR closely monitor these milk protein
exports and move quickly to deploy the dairy consultation tools laid
out in USMCA's Agriculture Chapter to address this concern, as these
attempts to circumvent export caps are inconsistent with the spirit of
the agreement.
______
Questions Submitted by Hon. Maria Cantwell
Question. The dairy industry is important to the economy of
Washington State and that of the Pacific Northwest. In Washington
alone, there are around 400 dairy farms that support more than 50,000
jobs. Dairy exports alone contributed almost $170 million to my home
State's economy last year.
Given its strategic location, Washington State is a significant
dairy exporter, supplying customers all over the world.
However, the dairy industry continues to face challenges when it
comes to trading with our U.S.-Mexico-Canada Agreement (USMCA)
partners. Canada has been holding back U.S. dairy imports through its
unfair allocation of dairy tariff-rate quotas. Mexico, the United
States' top market for dairy exports, has proposed several costly
regulations on dairy imports that are contrary to our agreement as
outlined by the USMCA.
The main purpose of the USMCA is to promote trade while reducing
barriers and other regulatory burdens. We must press Canada and Mexico
to adhere to these principles and hold them accountable to their trade
commitments.
From your perspective, why do we continue to have challenges with
Canada on dairy? What is behind these challenges? What will it take to
get the Canadians to live up to their commitments and to remove
barriers to U.S. dairy imports?
Answer. Having operated a dairy farm under the supply management
system in British Columbia, I can attest to Canada's long history of
undermining its market access commitments to protect its tightly
controlled dairy market. Consequently, it is not surprising that we are
now seeing Canada's attempts to circumvent its obligations under the
USMCA regarding dairy TRQ allocations and the diversion of milk protein
production to avoid export surcharges. The Canadian dairy supply
management system has not been challenged in the past, largely due to
the sizable support supply management groups receive from their own
government. Persistent intervention from the United States will send
the message that it takes the issue seriously and will continue to
press for changes, which, at the very least, will deter new investment
by Canadian processors.
To that end, close monitoring and strong enforcement is necessary
to ensure Canada adheres to its commitments in the agreement. We were
pleased to see Ambassador Tai initiate formal dispute settlement
proceedings over Canada's dairy TRQ allocations that discourage imports
from the United States. Further enforcement is necessary to ensure that
Canadian milk protein exports do not violate the spirit of the
agreement and replicate the issues associated with Class 7 and the
offloading of dairy proteins on the global market. Left unchecked, I am
certain Canada will not hesitate to recreate the same issues that
persisted prior to the USMCA. We appreciate your attention to this
important issue and encourage careful scrutiny of Canada's
implementation of all its dairy provisions in the trade deal.
Question. Thank you for noting the issues with the side letters
with Mexico pertaining to common cheese names and prior users. Could
you elaborate on how the implementation of these provisions benefits
Washington State and your cooperative?
You mentioned that there are regulatory issues cropping up in that
market that appear to be politically driven. Could you talk a bit more
about the impacts that these regulations have on your farm?
Answer. Mexico is the U.S. dairy industry's largest export market,
so trade disruptions with Mexico ripple throughout the industry on down
to the farm level. If we're unable to send our dairy products to
Mexico, the repercussions for milk pricing in the U.S. would be
devastating for the producers in my co-op and around the country. With
feed prices competitive now due to rising commodity prices, it is key
for dairy farmers that the U.S. maintains and expands its export
markets, especially Mexico. We ask Congress and the administration to
pursue discussions with Mexico to maintain a cordial relationship and
manage the trade barrier issues surging in the regulatory and Customs
enforcement area.
______
Prepared Statement of Beth Lowell,
Deputy Vice President, U.S. Campaigns, Oceana
My name is Beth Lowell, deputy vice president for U.S. Campaigns at
Oceana. Oceana is an international ocean conservation organization
dedicated to protecting the world's oceans. We work in North, Central,
and South America; the European Union; and the Philippines to promote
responsible fisheries management and thereby save the oceans and feed
the world.
Oceana thanks the committee for the invitation to testify on these
matters. After one year in force, Oceana has some outstanding questions
and recommendations on how to improve implementation of the United
States-Mexico-Canada Agreement (USMCA). While the environment chapter
addresses a wide range of issues, my testimony today is focused on
fisheries issues.
Seafood is the most highly traded food commodity internationally
with vastly complex and often opaque supply chains, requiring
governments to use a number of tools to improve fisheries conservation
and management, combat IUU fishing, protect those most vulnerable and
level the playing field for legal fishermen and trade. The United
States should advance a one-government approach, especially in
addressing illegal, unreported and unregulated (IUU) fishing, that uses
all its tools, including trade agreements like the USMCA.
The USMCA must be paired with other agency-driven actions like the
National Oceanic and Atmospheric Administration's Seafood Import
Monitoring Program, other international trade programs, and Custom and
Border Protection's enforcement of the Tariff Act, especially with
respect to IUU fishing and forced labor. Working also with the State
Department, Department of Defense, Labor, and other agencies, the
United States government can forge a unified, coordinated effort to
become a global leader in the fight against IUU fishing, forced labor
and other human rights abuses. These illegal practices undermine U.S.
fishermen, unfairly disadvantage legal fishers who follow the rules,
and put seafood tainted by forced labor on the plates of American
consumers.
Trade measures, such as the USMCA, can drive positive change for
ocean conservation and fisheries management in both importing and
source countries. As discussed in this testimony, Oceana in Mexico
identified ways that the Mexican government must improve management of
their fisheries by adopting documentation and traceability to comply
with the requirements of the USMCA as well as other U.S. import
requirements like Seafood Important Monitoring Program and bycatch
reductions measures.
Overall, the White House, Federal agencies and Congress should work
together to advance polices to ensure that all seafood is safe, legally
caught, responsibly sourced and honestly labeled. Setting the minimum
standard that seafood must meet to enter and be sold in the U.S. market
will level the playing field for legal fishermen and help drive change
in both source and market states.
fisheries subsidies
The environment chapter of the USMCA commendably includes a
provision intended to reduce fisheries subsidies. Article 24.20 opens
with this statement:
The Parties recognize that the implementation of a fisheries
management system that is designed to prevent overfishing and
overcapacity and to promote the recovery of overfished stocks
must include the control, reduction, and eventual elimination
of all subsidies that contribute to overfishing and
overcapacity.
This provision takes a step in the right direction toward reducing
harmful fisheries subsidies in the United States, Mexico, and Canada
and establishes a floor for disciplining these subsidies in future
trade agreements.
Many fisheries subsidies--such as tax breaks and fuel subsidies--
are concerning from a sustainability perspective because they
artificially increase profits and encourage more fishing. These
payments are known as harmful subsidies, to distinguish them from
government spending on beneficial or ambiguous programs, such as
fisheries management or vessel buybacks.
A recent report \1\ released by Oceana shows that the world's top
industrial fishing nations are providing subsidies that make distant-
water fishing more profitable, drive overcapacity, and shift the risk
of overfishing to the waters of other countries. For the first time,
harmful subsidies worth billions of dollars from wealthy nations can
now be tracked to destinations around the world, including to least
developed countries (LDCs) and the high seas.
---------------------------------------------------------------------------
\1\ Skerritt, Daniel J. and Sumaila, U. Rashid. (2021) Assessing
the spatial burden of harmful fisheries. Oceana, https://oceana.org/
reports/tracking-harmful-fisheries-subsidies/.
Distant-water fishing fleets often receive subsidies worth 20 to 40
percent of the catch's value, making it highly probable that they would
not be profitable without fisheries subsidies and unfettered access to
waters of other nations, including LDCs that can least afford it and
where management capacity is often most lacking. The top 10 providers
of harmful fisheries subsidies in 2018 are China, Japan, Korea, Russia,
the United States, Thailand, Taiwan, Spain, Indonesia and Norway, for a
total of $15.4 billion. Of that total, these nations spent more than
$5.3 billion per year in harmful subsidies for fishing in the waters of
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116 other nations.
The United States ranked fifth in the world in 2018, providing $1.1
billion in harmful fisheries subsidies. These findings show that our
country has work to do to comply with the spirit and letter of our
commitments in the USMCA on fisheries subsidies. While Oceana's recent
report did not include Canada and Mexico, research is underway to
analyze subsidies from other maritime nations.
The USMCA requires the parties to notify each other of their
fisheries subsidies--within 1 year of the date of entry into force and
every 2 years thereafter--and specifies the information to be provided
regarding the subsidies. To the extent that notification under the WTO
Subsidies and Countervailing Measures Agreement partially meets this
USMCA requirement,\2\ the United States and Canada reported some of the
required information on fisheries subsidies as of July 2021; however,
the last notification from Mexico is from September 2019.\3\ The USMCA
also requires the parties to notify each other on an annual basis of
any list of vessels and operators engaged in IUU fishing. Since the
USMCA entered into force on July 1, 2020, complete information on
fisheries subsidies and IUU fishing appears to be overdue; Oceana would
like to know whether the parties have submitted the information and
when it will be available to the public.
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\2\ WTO. Subsidies and countervailing measures, https://
www.wto.org/english/tratop_e/scm
_e/scm_e.htm#dol.
\3\ From the WTO website, the latest notification on subsidies from
the United States as of July 14, 2021: https://docs.wto.org/dol2fe/
Pages/SS/directdoc.aspx?filename=q:/G/SCM/N372
USA.pdf&Open=True. From Canada as of July 8, 2021: https://
docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/SCM/
N372CAN.pdf&Open=True. From Mexico as of September 24, 2019: https://
docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/SCM/N315
MEX.pdf&Open=True.
The USMCA also states, ``The Parties shall work in the WTO towards
strengthening international rules on the provision of subsidies to the
fisheries sector and enhancing the transparency of fishing subsidies.''
It is discouraging that the negotiations in the WTO on fisheries
subsidies have lingered for more than 20 years without resolution.
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Oceana urges the U.S. government to push on the WTO negotiations to:
Prohibit harmful subsidies to all fishing and related support
activities outside of each member state's own jurisdiction;
Call on the largest providers of subsidies to take the largest
share of responsibility to eliminate and redirect harmful subsidies
into beneficial areas;
Develop a framework to mitigate harmful fisheries subsidies
that is transparent, time bound, performance-based, and has clear
standards for reporting data across member states.
the crisis of illegal, unreported, and unregulated (iuu) fishing
The world's oceans face a dire threat: illegal, unreported, and
unregulated fishing. Across the globe, IUU fishing depletes marine
resources, destroys habitats, undermines food security, and frequently
drives forced labor and human rights abuses. IUU fishing is off the
books and outside the rule of law, compromising responsible and
effective fisheries management. IUU fishing hides in the shadows and
beyond the horizon, and it thrives on a lack of transparency, limited
enforcement, and a complex global supply chain. IUU fishing costs the
global seafood industry as much as $26 billion to $50 billion every
year.
IUU fishing includes fishing without authorization, ignoring
quotas, fishing in closed areas or with prohibited gear, catching
unmanaged species or failure to report catch to proper authorities. The
potential for IUU fishing is especially great on the high seas where
fisheries management and enforcement are often insufficient and
sometimes inconsistent.\4\, \5\ The same conditions that
make the high seas vulnerable to IUU fishing also make it susceptible
to other forms of transnational organized crime. IUU fishing has been
linked to a range of illicit activities, including document forgery;
money laundering; forced labor; and human, drug and wildlife
trafficking.\6\, \7\
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\4\ National Intelligence Council. (2016) Global Implications of
Illegal, Unreported, and Unregulated Fishing.
\5\ Bondaroff P. (2015) The illegal fishing and organized crime
nexus: Illegal fishing as transnational organized crime. The Global
Initiative Against Transnational Organized Crime.
\6\ Ibid.
\7\ Haenlein C. (2017) Below the Surface. How Illegal, Unreported
and Unregulated Fishing Threatens our Security. Royal United Services
Institute.
IUU fishing vessels are already evading laws, regulations and
oversight to gain higher profits and, in some cases, are more willing
to further drive down costs by exploiting workers through forced
labor.\8\, \9\ The seafood supply chain is complex, opaque
and difficult to trace. It starts at sea and follows a winding path
from fishing vessel to reefer, from reefer to reefer, from vessel to
factories, from factories to processing, out to market, and then onward
for global distribution. Human trafficking and forced labor can occur
at every step in the supply chain. Human trafficking in fisheries
entails the transfer and containment of persons on board vessels, where
they are forced to work as crew by means of violence, threat or debt.
Human trafficking is the fastest growing transnational criminal
enterprise in the world, generating $150 billion dollars annually and
enslaving an estimated 21.9 million people.\10\ IUU fishing practices
threaten food security, compromise the health of the oceans and
fisheries, and undermine fishermen and seafood businesses that play by
the rules. Until the government takes stronger measures to keep IUU
products out of the United States, our dollars will continue to support
the pillaging of the ocean through the seafood we buy. All seafood
should be safe, legally caught, responsibly sourced, and honestly
labeled.
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\8\ United Nations Office on Drugs and Crime. (2011) Transnational
Organized Crime in the Fishing Industry.
\9\ Environmental Justice Foundation. (2010) All at Sea--The Abuse
of Human Rights Aboard Illegal Fishing Vessels. London.
\10\ International Labour Organization. (2014) Profits and poverty:
The economics of forced labour.
In February of this year, the U.S. International Trade Commission
(ITC) issued an important report on IUU fishing.\11\ The ITC economists
analyzed the amount of seafood obtained via IUU fishing that is
imported into the U.S. and estimated the economic impact of those
imports on U.S. commercial fisheries.
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\11\ United States International Trade Commission. (2021) Seafood
Obtained via Illegal, Unreported, and Unregulated Fishing: U.S. Imports
and Economic Impact on U.S. Commercial Fisheries, Publication Number
5168, Investigation Number 332-575, https://www.usitc.gov/publications/
332/pub5168.pdf.
The ITC report found that the U.S. imported an estimated $2.4
billion worth of seafood derived from IUU fishing in 2019--which is
almost 11 percent of total U.S. seafood imports and more than 13
percent of U.S. imports caught at sea (``wild caught''). Confirming
that IUU imports are undermining U.S. fishers, the analysis found that
preventing IUU imports from entering the U.S. market ``would have a
positive effect on U.S. commercial fishers, with estimated increases in
U.S. prices, landings (catches of fish), and operating income.''\12\
The ITC's figures include not only wild caught seafood but also catch
that is used as feed in aquaculture operations. The ITC used a
definition of IUU that includes labor violations as well as factors
relating to fisheries management and conservation.\13\
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\12\ United States International Trade Commission. (2021) News
Release: Illegal, Unreported, and Unregulated Fishing Accounts for More
Than $2 billion of U.S. Seafood Imports, Reports USITC, News Release
21-040.
\13\ United States International Trade Commission. (2021) February
2021, USITC, Seafood Obtained via Illegal, Unreported, and Unregulated
Fishing: U.S. Imports and Economic Impact on U.S. Commercial Fisheries,
p. 17.
Regarding our partners in the USMCA, the analysis identified Mexico
as one of the countries with relatively substantial exports of wild
caught IUU seafood to the U.S.\14\ The ITC estimated that 25.1 percent
of seafood imports from Mexico to the U.S. were products of IUU
fishing. Canada, on the other hand, had one of the lowest estimated IUU
shares of imports into the U.S. at 3.4 percent (wild caught
seafood).\15\
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\14\ ITC report, p. 15.
\15\ ITC report, p. 17.
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seafood fraud undermines responsible fisheries management and u.s.
fishers
Seafood fraud further undermines U.S. fishermen, hinders ocean
conservation efforts and cheats consumers. Seafood fraud comes in
different forms, including species substitution, improper labeling,
hiding the true origin of the product to avoid tariffs, or other forms
of economic fraud like adding extra breading, water or glazing to the
product.
Species substitution is found around the world. In a review of more
than 200 seafood fraud studies by non-government organizations,
governments, academic institutions, and journalists, overall one in
five fish of the more than 25,000 samples tested worldwide were
mislabeled.\16\ The reviewed studies found seafood mislabeling in every
sector of the seafood supply chain: retail, wholesale distribution,
import/
export, packaging/processing and landing.\17\
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\16\ Warner K, Mustain P, Lowell B, Geren S, Talmage S. (2016)
Deceptive dishes: Seafood swaps found worldwide. Oceana.
\17\ Ibid.
Oceana investigated seafood fraud in the United States, and overall
approximately one-third of the more than 1900 seafood samples that we
tested were mislabeled. We often found farmed seafood sold as wild
caught, imported fish sold as local favorites, less sustainable fish
sold as more sustainable options and cheaper fish sold as more
expensive selections. For example, Oceana found farmed shrimp sold as
wild Gulf shrimp in the Gulf of Mexico region, Asian imported crab
inside crab cakes sold as local Chesapeake Bay blue crab and fish
imported from Asia and Europe sold as local Great Lakes favorites, like
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walleye and lake perch.
In Oceana's 2013 nationwide survey, we tested 120 samples of red
snapper, and only seven were actually red snapper. That means that U.S.
fishermen are selling their red snapper in a market flooded with
imposters. They should be getting more for their catch, and consumers
are getting ripped off when buying a cheaper substitute like tilapia
for red snapper prices.
Seafood fraud can happen anywhere in the seafood supply chain.
While Oceana tested at the retail level, the Food and Drug
Administration (FDA) found 15 percent of the 174 lots tested at the
wholesale level were mislabeled, and the Department of Justice has
convicted over a dozen U.S. businesses of importing and distributing 10
million pounds of mislabeled Asian catfish to defraud consumers and
avoid tariffs. More recently, a Virginia supplier was convicted of
selling millions of dollars of expired foreign crab as fresh local blue
crab, putting honest businesses and consumer's health at risk.
IUU fishing and seafood fraud are complex problems that cut across
many Federal agencies with no clear indication of leadership.
Recognizing the need to coordinate the Federal Government response, the
Task Force on Combating IUU Fishing and Seafood Fraud was established
in 2014, bringing together 11 Federal agencies to develop
recommendations to address these issues. The 15 recommendations
included international, national, state and local measures, including a
traceability program to track seafood from the point of catch to entry
into U.S. commerce.
The Seafood Import Monitoring Program (SIMP) requires some imported
seafood at risk of illegal fishing and seafood fraud to be accompanied
by catch documentation that provides key information about the fish,
including who caught it, where it was caught, how it was caught and
what specific species it is. This information is used to establish that
it was caught in a legal fishery. The seafood must also have
documentation that allows it to be traced back to the original point of
catch or farm if requested.
The SIMP allowed the United States to enact import controls to help
ensure that seafood imported into the United States was legally caught
and properly labeled. However, this risk-based program only includes 13
species and species groups--abalone, Atlantic cod, blue crab
(Atlantic), dolphinfish (mahi mahi), grouper, king crab (red), Pacific
cod, red snapper, sea cucumber, sharks, shrimp, swordfish, tunas
(albacore, bigeye, skipjack, yellowfin, and bluefin)--and stops at the
U.S. border. Seafood mislabeling can happen to all types of seafood and
can occur at any stage from the point of catch to the final consumer.
To truly stop seafood fraud, all seafood must be traced from boat to
plate.
the u.s. needs stronger mechanisms to motivate
other countries to address iuu fishing
The Magnuson-Stevens Fishery Conservation and Management Act (MSA)
is the primary law governing Federal fisheries management in the United
States. When properly and fully implemented, the MSA is one of the most
effective fishery laws in the world today. Since it was first passed in
1976, and through subsequent reauthorizations in 1996 and 2006, the law
has helped stop overfishing, protect essential fish habitats and
rebuild depleted stocks.
In addition to the domestic fisheries management provisions, the
High Seas Driftnet Fishing Moratorium Protection Act (HSDFMPA) outlines
international actions specifically on IUU fishing, bycatch of protected
living marine resources and sharks. Under the HSDMPA, NOAA identifies
nations with problematic practices in the biennial report to Congress.
NOAA then enters a two-year consultation process with the Nation to
address the issues for which it was identified. At the end of the 2
years, a Nation is either negatively or positively certified. A
positive certification indicates that the Nation has addressed the
issue. A negative certification may result in import restrictions or
denial of port access for fishing vessels.
In the 2019 Biennial Report to Congress,\18\ NOAA identified Mexico
for having vessels fishing illegally in the Gulf of Mexico. Mexico was
also identified for this same issue in 2015 and 2017. Despite being
repeatedly identified in the biennial reports, Mexico yet to resolve
IUU fishing activity by Mexican vessels. Mexico is a key example of how
the HSDMPA does not have the teeth that it needs to lead to real,
systematic improvement to a country's management regime.
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\18\ NOAA Fisheries. (2019) Improving International Fisheries
Management. Report to Congress.
In contrast, the European Union's IUU regulations empower
authorities to issue warnings (yellow cards) that can lead to sanctions
(red cards) including banning seafood imports. This rigorous system has
improved fisheries management and enforcement \19\ in several
countries, including South Korea and the Philippines.\20\ To be
successful, the U.S. must be willing to use sanctions to drive change.
The USMCA offers another mechanism for the U.S. to engage with Mexico
to compel the government to address IUU fishing in the Gulf of Mexico
and in other fisheries.
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\19\ IUU Watch. (2015) EU Regulation to combat illegal fishing:
Third country carding process.
\20\ IUU Watch, EU Carding Decisions, http://www.iuuwatch.eu/map-
of-eu-carding-deci
sions/, accessed July 25, 2021.
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oceana report on usmca implementation in mexico
Oceana in Mexico released a report earlier this month outlining
USMCA implementation in Mexico. Oceana recommended that Mexico
prioritize and execute the necessary changes to the legal framework and
implement the necessary tools to ensure compliance with commitments
made at the international level to guarantee a sustainable and
competitive fishing sector with practices in accordance with the law.
Since signing the USMCA, the U.S. has imposed measures restricting
imports of fish caught in Mexico by Mexican flagged vessels. The first
measure was imposed in March 2021, restricting the importation of
certain fishery products from the Upper Gulf of California by
determining that comparability requirements are absent in contrast to
those implemented by the United States to ensure protection of
endangered species during fishing activities, specifically the vaquita
porpoise, a species endemic to the Upper Gulf.\21\
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\21\ Oceana Mexico, El T-MEC Y La Pesca: Reporte Sobre el
Cumplemiento de las Obligaciones que Asume el Estado Mexicano en
Materia Pesquera at 3, n. 2, n. 3 (July 1, 2021), https://
mx.oceana.org/sites/default/files/la_pesca_y_el_t-mec.pdf (The USMCA
and Fishing: Report on Compliance with Obligations Assumed by the
Mexican State in Fishing-Related Matters; English translation available
upon request) [hereinafter ``Oceana Mexico USMCA and Fishing Report''].
The second trade restriction imposed after the entry into force of
the USMCA was also by the United States and applies to the export of
wild shrimp from Mexico. This measure was ordered on April 1, 2021. The
United States determined that provisions to protect sea turtles in
shrimp fisheries, and their enforcement, are not comparable to those
applicable in the United States, since an inspection carried out by the
U.S. government found numerous shrimp fishing vessels that were not
using Turtle Excluder Devices (TEDs). Therefore, for the time being,
Mexico has lost its certification to export wild shrimp to the United
States.\22\
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\22\ Oceana Mexico USMCA and Fishing Report at 4, n. 5, n. 6.
In addition to the U.S. shrimp export requirement of using TEDs,
the use of such devices is also mandatory under rule NOM-061-SAGPESC/
SEMARNAT-2016. The Mexican government has announced measures to regain
certification for shrimp exports, including training in the use of TEDs
and the use of the Satellite Monitoring System for Fishing Vessels
(SISMEP) to concentrate inspection and surveillance actions.\23\
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\23\ Oceana Mexico USMCA and Fishing Report at 4, n. 7.
Despite the measures announced by the Mexican government to
eliminate restrictions on the export of fish species, it is important
to strengthen inspection and surveillance actions carried out by
Mexican authorities to ensure compliance with conservation measures for
endangered species. Likewise, the Mexican government must ensure that
the fishing sector that complies with conservation measures has the
necessary tools to continue marketing its products. In Article 24.17,
the parties undertake the obligation to promote and facilitate trade in
sustainably managed and legally harvested fish and fish products.
Mexico must enforce traceability as its main tool to comply with this
provision and prevent trade restrictions from extending to sustainable
and legal products. A traceability standard providing information about
each stage of the value chain, from vessel to the final point of sale,
would allow verification of which fishery products effectively comply
with provisions of species conservation and exclude from the market
only those that violate these provisions. Thus, the objective of
promoting commercialization of legal and sustainable fishing is
achieved.\24\
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\24\ Oceana Mexico USMCA and Fishing Report at 5.
Lastly, Article 2 of the Environment Cooperation and Customs
Verification Agreement commits the parties to trade, import and export
only goods and services produced in compliance with Chapter 24.
Therefore, Mexico, the United States and Canada must ensure that the
products they trade comply with conservation efforts for vulnerable and
endangered species, as well as fishery products that are not derived
from illegal fishing.\25\
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\25\ Oceana Mexico USMCA and Fishing Report at 5.
To verify this, Mexico must implement a traceability system for
fishery products that collects and provides information along the whole
value chain, from capture to commercialization. Today, Mexico lacks
this tool even though Article 119 Bis 9 of the General Law of
Sustainable Fisheries and Aquaculture (LGPAS) mandates implementation
of a traceability system for fishery resources for human consumption,
from point of origin to the final destination.\26\
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\26\ Oceana Mexico USMCA and Fishing Report at 5.
Oceana outlined specific measures that the Mexican government must
adopt to allow for continued trade with the U.S. and avoid of
commercial sanctions, such as the one imposed on the Upper Gulf of
California and on Mexican shrimp. Among these measures is the adoption
of traceability standards providing information about each stage of the
value chain, from vessel to the ultimate selling point. This would
allow verification of which fishery products effectively comply with
provisions of species conservation and exclude from the market only
those that violate these provisions. Thus, the objective of promoting
commercialization of legal and sustainable fishing is achieved and
prevents trade restrictions from extending to sustainable and legal
products.\27\
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\27\ Oceana Mexico USMCA and Fishing Report at 5.
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Specifically, to fully comply with the USMCA, Mexico should:
Approve a traceability standard that allows government
authorities and the fishing sector to verify the legal origin of
products and prevent market entry to illegal fishing, caught in
violation of the rules for protection of vulnerable species, without a
permit or in prohibited areas.
Promote transparency of fishing vessel data as a tool to
combat illegal fishing, so that the data are understandable and
publicly accessible through Global Fishing Watch.
Have updated, public, and coincident information and data on
fishing vessels that have fishing permits and carry out such
activities.
Sign and ratify the Agreement on Port State Measures or
incorporate into the regulatory framework provisions that incorporate
the obligations set forth in the PSMA to combat illegal fishing.
Reform the General Law of Fisheries and Aquaculture
integrating provisions that contemplate restoration of overexploited
fisheries and require the fishing authority to implement actions for
conservation and restoration of fish species.
Ensure that subsidies granted to the fishing sector do not
contribute to the overexploitation of fisheries or are directed to
vessels that have engaged in illegal fishing activities. Also, direct
the subsidies granted to strengthen the fishing sector, encourage
sustainable fishing practices and adequate management of existing
fisheries.
Conduct an evidence-based analysis of percentages in fisheries
where this practice represents a risk, establish maximum bycatch
percentages, as well as ensure the use of fishing gear and devices that
minimize bycatch of endangered species.\28\
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\28\ Oceana Mexico USMCA and Fishing Report at 16.
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putting the usmca agreement to work
The Environment Chapter of the USMCA includes articles on Marine
Wild Capture Fisheries; Sustainable Fisheries Management; Conservation
of Marine Species; Fisheries Subsidies; Illegal, Unreported, and
Unregulated (IUU) Fishing; and Conservation and Trade. Together these
provisions, if fully implemented, would improve fisheries management
systems to prevent overfishing and overcapacity, reduce bycatch of non-
target species and marine wildlife, and protect habitat. The agreement
also outlines that the U.S., Mexico, and Canada shall adopt or maintain
measures to prohibit the practice of shark finning. The agreement
prevents subsidies to IUU fishing vessels or for fishing on an
overfished stock.
The IUU fishing provisions includes requirements to implement port
state measures; support monitoring, control, surveillance and
enforcement including deterring nationals and flagged vessels from
engaging in IUU fishing and addressing transshipments. Each Party shall
maintain a vessel documentation scheme and promote the use of
International Maritime Organization numbers or comparable unique vessel
identifiers for vessels operating outside of its national waters to
enhance transparency of fleets and traceability of fishing vessels. The
U.S., Canada, and Mexico are also to develop and maintain publicly
available an easily accessibly registry data of vessels flying its flag
and support a Global Registry of Vessels, among other measures.
The USMCA provides a mechanism for the general public to take
action if they believe an environmental law is not being effectively
enforced by the United States, Mexico, or Canada. The USMCA includes
provisions (Articles 24.27 and 24.28) allowing anyone in one of the
three countries to file a Submission on Enforcement Matters with the
Secretariat of the Commission for Environmental Cooperation.\29\ While
this mechanism existed under NAFTA, under the USMCA, the time frames
for the process have been shortened, the scope of environmental laws
has been narrowed to those enacted, promulgated, or enforced by the
central level of government (so, state, provincial, or local laws are
not included), and the scope of eligible submitters is no longer
limited to residents or NGOs in the territory of one of the three
countries; instead, anyone in any of the three countries can file a
Submission on Enforcement Matters.
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\29\ SMCA, arts. 24.27 and 24.28.
If adequately substantiated, Submissions on Enforcement Matters
about government failures to enforce environmental laws require
responses from relevant government agencies and can result in a factual
record that government representatives from all three countries must
review and consider. Such Submissions under NAFTA have proven
successful in getting governments to take necessary actions to protect
the environment.\30\ Since the USMCA went into effect on July 1, 2020,
two submissions have been made: the first, filed in December 2020,
asserts that the Mexican Ministry of Environment and Natural Resources
and other environmental agencies are failing to effectively enforce
provisions to protect loggerhead turtles in both the Atlantic and
Pacific oceans,\31\ and the second, filed in February 2021, asserts
that a Port Authority in Canada failed to effectively enforce the
Canadian Environmental Assessment Act when considering expansion of a
marine port on the Pacific Coast of British Columbia.\32\ As these
examples demonstrate, this USMCA mechanism offers the public a viable
way to gain leverage to advance policies for protecting marine life and
our oceans.
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\30\ See, e.g., Sumidero Canyon II Submission on Enforcement
Matters, http://www.cec.org/submissions-on-enforcement/registry-of-
submissions/sumidero-canyon-ii/ (resulting in the closure of a
limestone quarry damaging the Sumidero Canyon National Park in Chiapas,
Mexico); BC Mining Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/bc-
mining/ (resulting in greater public participation and transparency
regarding the protection of fish and fish habitat from the impacts of
mining in British Columbia).
\31\ Loggerhead Turtle Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/
loggerhead-turtle/.
\32\ Fairview Terminal Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/
fairview-terminal/.
Oceana is considering how we can use this process to ensure the
United States, Mexico and Canada are enforcing their own environmental
laws.
funding for noaa for usmca implementation
As part of the USMCA Supplemental Appropriations Act, NOAA received
an additional $16 million to implement the agreement. Specifically,
NOAA was provided $8 million for engagement with the Government of
Mexico to combat illegal, unreported and unregulated fishing and to
enhance implementation of the Seafood Import Monitoring Program. The
other $8 million was to carry out section 3 of the Marine Debris Act.
The funds for both are available until September 30, 2023. Oceana
recommends that there be more reporting and transparency in how that
money has been spent to date and how NOAA plans to spend the remaining
funds.
In June, NOAA issued a report on the implementation of SIMP and
outlined limited progress with the program and highlighted limited
investment of resources and dedicated staff for the program. Oceana
remains concerned that NOAA is not building the SIMP program
effectively and efficiently to allow the U.S. to stop imports of
illegal seafood. It is not clear how NOAA has spent the $8 million
dedicated to enhance implementation of SIMP or increase engagement with
the Government of Mexico. If money remains, NOAA should prioritize
expanding SIMP to all seafood and ensuring the information collection
by SIMP is the right information in a format that allows for data
analysis to identify shipments of high risk of IUU fishing, seafood
fraud, forced labor and other human rights abuses to guide risk-based
targeting for inspections, audits, and enforcement.
collaboration and capacity building
The United States established via regulations the Seafood Import
Monitoring Program in 2016. SIMP requires catch documentation and
traceability requirements for some species at risk of IUU fishing and
seafood fraud. Since SIMP, both Canada and Mexico have begun work on
establishing similar documentation and traceability requirements for
seafood. As parties to the agreement and major seafood producing and
importing nations, the USMCA should incentivize all three governments
to work together to harmonize requirements for catch documentation and
traceability. The United States could help advise Mexico and Canada on
how best to establish their programs and provide lessons learned from
the creation of SIMP. And the United States, Mexico, and Canada should
work with other major market states to align programs and harmonize
requirements. For example, the USMCA countries should harmonize our
programs with the European Union's IUU regulation that requires catch
documentation and traceability for all seafood and has been in force
for over a decade. Japan recently passed legislation and is working to
develop their IUU programs as well.
u.s. government action on iuu fishing
The transparency provisions, specifically on developing a publicly
available registry, requiring IMO or other unique vessel numbers and
supporting a Global Record of Vessels, is an area where the U.S. has
made little progress. NOAA should push to advance transparency in our
own vessel registries, including by requiring that U.S. vessels secure
IMO numbers when available, so we can then ask our trading partners to
do the same.
Technology tools provide additional cost-effective measures to
improve monitoring and transparency of fishing vessels. The U.S.,
Canada and Mexico should increase transparency by requiring fishing
vessels to carry and continuously transmit Automatic Identification
System (AIS) devices. AIS provides vessel identity, location and course
data that allows for greater maritime domain awareness and visibility
in behavior at sea. AIS data allows for management authorities to use
the data in verification of catch documentation and for identifying
shipments at high risk of IUU fishing, forced labor and other human
rights abuses for further inspections, audits, and enforcement.
The USMCA is one tool that the U.S. government can use to combat
IUU fishing and USTR is one agency. The Biden administration should
take a one-government approach on IUU fishing, building upon a
foundation of the SIMP and other measures to ensure that all seafood
sold in the U.S. is safe, legally caught, responsibly sourced and
honestly labeled. This requires:
Expanding SIMP to all species so that all seafood entering the
U.S. provides catch documentation and can be traced back to a legal
source.
Extending traceability requirement through the full supply
chain. This can be accomplished by finalizing the Food and Drug
Administration's pending rule on food traceability that includes almost
all seafood.
Increasing transparency requirements for fishing vessels and
making transparency a condition of import.
Using the information collected via the various trade
programs, including SIMP, more efficiently and effectively to better
target shipments with the highest risk for screening, audits and
enforcement and close our market to illegal products.
Improving coordination, collaboration and information-sharing
across the Federal agencies to better target countries and shipments
with the highest risk of illegal fishing, seafood fraud and forced
labor.
Building into the programs that address IUU fishing measures
to allow the U.S. to also identify and block shipments of products
produced using forced labor and other human rights abuses.
Reduce harmful fishing subsidies in the U.S., discipline
fisheries subsidies in all future trade agreements, and push for an
agreement in the WTO to end harmful fishery subsidies.
conclusion
After 1 year, there has been some progress in the implementation of
the USMCA, but more needs to be done. USMCA countries should take a
hard look to ensure that we are all implementing the agreement. For
example, Mexico can improve documentation and traceability of fisheries
to both comply with the SIMP and improve market access. Canada can
advance their seafood traceability requirements.
Trade agreements like the USMCA and trade programs like SIMP help
level the playing field for U.S. fishermen. The United States must
ensure that legality is a condition of import. SIMP is first step in
that direction, but more needs to be done to close loopholes in that
program and integrate other efforts within the Federal Government.
The Biden administration and Congress have an opportunity to craft
a one-
government approach to combating IUU fishing which includes trade
agreements, import controls--including requiring catch documentation
and traceability for all seafood, expanded transparency of fishing,
enhancing our nation-based efforts to drive change and building in
tools that allow the U.S. to identify shipments produced using forced
labor. Overall, these programs can help ensure that all seafood sold in
the U.S. is safe, legally caught, responsibly sourced, and honestly
labeled.
______
Questions Submitted for the Record to Beth Lowell
Question Submitted by Hon. Ron Wyden
Question. One of the biggest reasons why the original NAFTA hurt
American workers and did little to protect our environment was that its
enforcement system was ineffective, and it pushed labor and
environmental protection off into unenforceable side letters.
USMCA included improvements on both counts. Labor and environment
were moved from unenforceable side letters straight into the core
agreement. They are also subject to the full dispute settlement
mechanism that Democrats worked to include in the agreement.
Can you speak to why this enforceability is critical for
environmental provisions? What tools does this give parties and the
environmental community to demand compliance with the environmental
rules set out in USMCA?
Answer. Environmental provisions without enforcement merely create
a bunch of text that sounds good on paper, but without enforcement is
meaningless. The ability to hold a country accountable to their
environmental commitments in the USMCA is a key improvement over NAFTA.
Two separate mechanisms give the public/
environmental community and State Parties the ability to demand
compliance with national environmental laws and regulations and the
environmental rules in the USMCA. Each is addressed below.
mechanism for the public/environmental community to demand compliance,
implementation, and/or enforcement of national environmental laws and
regulations
The Environment Chapter of the USMCA provides a mechanism for the
general public, including the environmental community, to take action
if they believe a national environmental law or regulation is not being
effectively enforced by the United States, Mexico, or Canada. The USMCA
includes provisions (Articles 24.27 and 24.28) allowing anyone in one
of the three countries to file a Submission on Enforcement Matters with
the Secretariat of the Commission for Environmental Cooperation.\1\
While this mechanism existed under NAFTA, under the USMCA, the
timeframes for the process have been shortened, the scope of
environmental laws has been narrowed to those enacted, promulgated, or
enforced by the central level of government (so, State, provincial, or
local laws are not included), and the scope of eligible submitters is
no longer limited to residents or NGOs in the territory of one of the
three countries; instead, anyone in any of the three countries can file
a Submission on Enforcement Matters.
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\1\ USMCA, arts. 24.27 and 24.28.
If adequately substantiated, Submissions on Enforcement Matters
about government failures to enforce environmental laws require
responses from relevant government agencies and can result in a Factual
Record that government representatives from all three countries must
review and consider. Such Submissions under NAFTA have proven
successful in getting governments to take necessary actions to protect
the environment.\2\ Since the USMCA went into effect on July 1, 2020,
three Submissions have been made: the first, filed in December 2020,
asserts that the Mexican Ministry of Environment and Natural Resources
and other environmental agencies are failing to effectively enforce
provisions to protect loggerhead turtles in both the Atlantic and
Pacific oceans;\3\ the second, filed in February 2021, asserts that a
Port Authority in Canada failed to effectively enforce the Canadian
Environmental Assessment Act when considering expansion of a marine
port on the Pacific Coast of British Columbia;\4\ and the third, filed
in August 2021, alleges that the Mexican government has failed to
effectively enforce its laws to protect the endangered vaquita
porpoise.\5\ As these examples demonstrate, this USMCA mechanism offers
the public a viable way to gain leverage to advance policies for
protecting marine life and our oceans.
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\2\ See, e.g., Sumidero Canyon II Submission on Enforcement
Matters, http://www.cec.org/submissions-on-enforcement/registry-of-
submissions/sumidero-canyon-ii/ (resulting in the closure of a
limestone quarry damaging the Sumidero Canyon National Park in Chiapas,
Mexico); BC Mining Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/bc-
mining/ (resulting in greater public participation and transparency
regarding the protection of fish and fish habitat from the impacts of
mining in British Columbia).
\3\ Loggerhead Turtle Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/
loggerhead-turtle/.
\4\ Fairview Terminal Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/
fairview-terminal/.
\5\ Center for Biological Diversity, USMCA Commission Urged to
Investigate Mexico's Failure to Protect Vaquita Porpoise (August 11,
2021), https://biologicaldiversity.org/w/news/press-releases/usmca-
commission-urged-to-investigate-mexicos-failure-to-protect-vaquita-
porpoise-2021-08-11/.
---------------------------------------------------------------------------
mechanism for usmca state parties to hold each other accountable for
compliance with environmental commitments in the agreement
The Environment Chapter also provides a mechanism that allows any
of the three State Parties to hold each other accountable for complying
with environmental commitments in the USMCA. The first phase is
consultations, which must escalate through three tiers;\6\ failing
resolution via consultations, the next phase is dispute resolution
before a State-to-State arbitral panel.\7\ In the consultation phase,
one State Party requests consultations with another regarding any
matter arising under the Environment Chapter; a third State Party with
a substantial interest in the matter may participate. Consultations
must begin within 30 days of the receipt of the request. If initial
consultations do not resolve the matter, consultations among the USMCA
Environment Committee Senior Representatives \8\ may be requested.\9\
Failing resolution at this second level of consultations, the State
Party may escalate the matter once more to relevant Ministers of the
State Parties for resolution.\10\ Failing resolution via the three
tiers of consultations within 30 days of receipt of the request, the
requesting State Party may then move to the next phase to request
establishment of a panel of arbitrators to resolve the issue in
accordance with procedures set out in the Chapter 31 for dispute
resolution under the USMCA.\11\
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\6\ USMCA, arts. 24.29, 24, 30, 24.31.
\7\ USMCA, art. 24.32.
\8\ USMCA, art. 24.26 (laying out how the Environment Committee is
to be established and its purpose).
\9\ USMCA, art. 24.30.
\10\ USMCA, art. 24.31.
\11\ USMCA, art. 24.32; see generally USMCA Chapter 31.
Since the USMCA went into effect on July 1, 2020, Oceana is not
aware of any State Party consultations or dispute resolution
proceedings related to non-
compliance with provisions of the Environment Chapter. We are aware,
however, of a recent petition filed on August 11, 2021 by several
environmental groups requesting that the United States Trade
Representative and other members of the Interagency Environment
Committee for Monitoring and Enforcement initiate State-to-State
consultations with Mexico under the USMCA due to failures of
enforcement of environmental provisions leading to the near extinction
of the vaquita porpoise.\12\
---------------------------------------------------------------------------
\12\ Center for Biological Diversity, USMCA Commission Urged to
Investigate Mexico's Failure to Protect Vaquita Porpoise (August 11,
2021), https://biologicaldiversity.org/w/news/press-releases/usmca-
commission-urged-to-investigate-mexicos-failure-to-protect-vaquita-
porpoise-2021-08-11/.
Transparency is lacking for this State-to-State mechanism.
Unfortunately, neither the fact that consultations or dispute
resolution is occurring nor any documentation is made public, nor is
public participation allowed;\13\ as a result, the public may not be
apprised until a final report is issued by an arbitral panel.\14\ While
certain periodic reporting to Congress is required (annually until 2025
and biennially thereafter),\15\ more frequent congressional inquiry
with relevant executive branch agency stakeholders (e.g., the
Interagency Environment Committee for Monitoring and Enforcement) to
specifically inquire about consultations and/or dispute resolution
related to environmental matters may shed further light on this
important topic. Should the opportunity present itself, provisions
requiring greater public transparency in the State-to-State
environmental accountability processes would be important additions to
the text of the USMCA and/or the implementing legislation.\16\
---------------------------------------------------------------------------
\13\ USMCA, arts. 24.29, 24, 30, 24.31; see generally USMCA Chapter
31.
\14\ USMCA, art. 31.17(6).
\15\ 19 U.S.C. Sec. 4716 (requiring regular reports (annually for
first 5 years and biennially thereafter) to Congress on ``efforts of
the USMCA countries to implement their environmental obligations''; and
``additional efforts to be taken with respect to USMCA countries that
are failing to implement their environmental obligations.'') At a
minimum, it would be most helpful if these reports to Congress were
made publicly available.
\16\ 19 U.S.C. Sec. 4501 et seq.
______
Questions Submitted by Hon. Maria Cantwell
Question. The USMCA Environment Chapter outlined what each country
must do to ensure sustainable management of fisheries. Mexican poaching
of red snapper in U.S. waters in the Gulf of Mexico is a significant
challenge that impacts the livelihood of American fishermen, as well as
harming red snapper stocks and damaging the marine ecosystem. The red
snapper fishery is an important economic engine in the Gulf of Mexico
and is currently overfished.
In the USMCA, Congress directed $8 million to NOAA for cooperating
with Mexico to combat illegal, unreported, and unregulated fishing.
In your view, has this funding and the USMCA reduced illegal
fishing by Mexico?
Are these provisions improving sustainable fisheries management in
the Gulf of Mexico and other regions?
Answer. Oceana appreciates the funding the Congress provided to
NOAA for combating illegal, unreported, and unregulated fishing. This
money was intended both for implementation of the Seafood Import
Monitoring Program and to work with Mexico on compliance with SIMP.
Oceana remains concerned that NOAA has not outlined how it has spent or
will spend the balance of these funds to enhance implementation of SIMP
or increase engagement with the Government of Mexico. If money remains,
NOAA should prioritize expanding SIMP to all seafood and ensuring the
information collection by SIMP is the right information in a format
that allows for data analysis to identify shipments of high risk of IUU
fishing, seafood fraud, forced labor and other human rights abuses to
guide risk-based targeting for inspections, audits, and enforcement.
The USMCA's impact in Mexico is still a work in progress. Oceana in
Mexico has pointed out that the government is still far from complying
with the obligations established in fishing matters in the USMCA,
including that of combating IUU fishing. To this day there is no public
tool to ensure the legal origin of fishing products all along the
supply chain. Traceability of fishery products and transparency of
fishing activities are also tools that benefit a lawful fishing sector.
By only allowing marketing, importing, and exporting of products whose
legal origin can be proven and providing the necessary mechanisms to
make this verification possible, the Mexican State can close the door
to illegal fishing, while encouraging, favoring, and strengthening the
fishing sector's compliance with national and international standards.
For this, it is fundamental for the Mexican Government to approve a
traceability standard that allows government authorities and the
fishing sector to verify the legal origin of products and prevent
market entry to IUU products, caught in violation of the rules for the
protection of vulnerable species, without a permit or in prohibited
areas.
Overall, the USMCA provides tools and a framework to improve
sustainable fisheries management in the Gulf of Mexico and other
regions, but implementation needs to improve. The Environment Chapter
of the USMCA includes articles on Marine Wild Capture Fisheries;
Sustainable Fisheries Management; Conservation of Marine Species;
Fisheries Subsidies; Illegal, Unreported, and Unregulated (IUU)
Fishing; and Conservation and Trade. Together these provisions, if
fully implemented, would improve fisheries management systems to
prevent overfishing and overcapacity, reduce bycatch of non-target
species and marine wildlife, and protect habitat. The agreement also
outlines that the U.S., Mexico, and Canada shall adopt or maintain
measures to prohibit the practice of shark finning. The agreement
prevents subsidies to IUU fishing vessels or for fishing on an
overfished stock.
The IUU fishing provisions includes requirements to implement Port
State measures; support monitoring, control, surveillance and
enforcement including deterring nationals and flagged vessels from
engaging in IUU fishing and addressing transshipments. Each Party shall
maintain a vessel documentation scheme and promote the use of
International Maritime Organization numbers or comparable unique vessel
identifiers for vessels operating outside of its national waters to
enhance transparency of fleets and traceability of fishing vessels. The
U.S., Canada, and Mexico are also to develop and maintain publicly
available an easily accessibly registry data of vessels flying its flag
and support a Global Registry of Vessels, among other measures. We have
yet to see most of these provisions implemented by the U.S., Canada, or
Mexico.
The transparency provisions, specifically on developing a publicly
available registry, requiring IMO or other unique vessel numbers and
supporting a Global Record of Vessels, is an area where the U.S. has
made little progress. NOAA should push to advance transparency in our
own vessel registries, including by requiring that US vessels secure
IMO numbers when available, so we can then ask our trading partners to
do the same.
Technology tools provide additional cost-effective measures to
improve monitoring and transparency of fishing vessels. The U.S.,
Canada, and Mexico should increase transparency by requiring fishing
vessels to carry and continuously transmit Automatic Identification
System (AIS) devices. AIS provides vessel identity, location and course
data that allows for greater maritime domain awareness and visibility
in behavior at sea. AIS data allows for management authorities to use
the data in verification of catch documentation and for identifying
shipments at high risk of IUU fishing, forced labor and other human
rights abuses for further inspections, audits and enforcement.
In addition to the Environment Chapter, the Labor Chapter requires
the U.S., Canada, and Mexico to take measures to prohibit the
importation of goods produced by forced labor, among other provisions.
In the U.S., section 307 of the Tariff Act already prohibits
importation of goods produced by forced labor. It would be good for the
U.S. to get a report from Canada and Mexico on whether they have
equivalent prohibitions and if not, their plan to prohibit such goods.
Strong prohibitions across North America are needed to ensure we are
not continuing to import products that put workers at risk and
undermine basic human rights.
The USMCA is one tool that the US government can use to combat IUU
fishing and USTR is one agency. The Biden administration should take a
one-government approach on IUU fishing, building upon a foundation of
the SIMP and other measures to ensure that all seafood sold in the U.S.
is safe, legally caught, responsibly sourced and honestly labeled. This
requires:
Expanding SIMP to all species so that all seafood entering the
U.S. provides catch documentation and can be traced back to a legal
source.
Extending traceability requirement through the full supply
chain. This can be accomplished by finalizing the Food and Drug
Administration's pending rule on food traceability that includes almost
all seafood.
Increasing transparency requirements for fishing vessels and
making transparency a condition of import.
Using the information collected via the various trade
programs, including SIMP, more efficiently and effectively to better
target shipments with the highest risk for screening, audits and
enforcement and close our market to illegal products.
Improving coordination, collaboration and information-sharing
across the Federal agencies to better target countries and shipments
with the highest risk of illegal fishing, seafood fraud, and forced
labor.
Building into the programs that address IUU fishing measures
to allow the U.S. to also identify and block shipments of products
produced using forced labor and other human rights abuses.
Reduce harmful fishing subsidies in the U.S., discipline
fisheries subsidies in all future trade agreements, and push for an
agreement in the WTO to end harmful fishery subsidies.
______
Questions Submitted by Hon. Thomas R. Carper
Question. The USMCA includes new enforcement tools to give labor
and environmental stakeholders a direct role in trade enforcement
matters. These new tools ensure that the obligations in this trade
agreement are enforced and that those who break the rules can be held
accountable.
Would you please share some thoughts on how the environmental
reporting mechanisms have functioned since the USMCA entered into
force, as well as some opportunities for their continued improvement?
Answer. The USMCA requires the parties to notify each other of
their fisheries subsidies--within 1 year of the date of entry into
force and every 2 years thereafter--and specifies the information to be
provided regarding the subsidies.\17\ Specifically, Article 24.20(5)-
(7) of the USMCA States:
---------------------------------------------------------------------------
\17\ USMCA, art. 24.20(5)-(7).
5. Each Party shall notify the other Parties, within 1 year of
the date of entry into force of this agreement and every 2 years
thereafter, of any subsidy within the meaning of Article 1.1 of the SCM
Agreement that is specific within the meaning of Article 2 of the SCM
Agreement, that the Party grants or maintains to persons engaged in
---------------------------------------------------------------------------
fishing or fishing related activities.
6. These notifications shall cover subsidies provided within the
previous 2-year period and shall include the information required under
Article 25.3 of the SCM Agreement and, to the extent possible, the
following information:\23\
(a) program name;
(b) legal authority for the program;
(c) catch data by species in the fishery for which the
subsidy is provided;
(d) status, whether overfished, fully fished, or
underfished, of the fish stocks in the fishery for which the subsidy is
provided;
(e) fleet capacity in the fishery for which the subsidy is
provided;
(f) conservation and management measures in place for the
relevant fish stock; and
(g) total imports and exports per species.
7. Each Party shall also provide, to the extent possible,
information in relation to other subsidies that the Party grants or
maintains to persons engaged in fishing or fishing related activities
that are not covered by paragraph 1, in particular fuel subsidies.
To the extent that notification under the WTO Subsidies and
Countervailing Measures Agreement partially meets this USMCA
requirement,\18\ the United States and Canada reported some, but not
all, of the required information on fisheries subsidies as of July
2021; however, the last notification from Mexico to the WTO is from
September 2019.\19\ Notifications regarding fisheries subsidies from
each of the State Parties with the full list of information required
under Article 24.20(5)-(7) should be made publicly available.
---------------------------------------------------------------------------
\18\ WTO. Subsidies and countervailing measures, https://
www.wto.org/english/tratop_e/scm_e
/scm_e.htm#dol.
\19\ From the WTO website, the latest notification on subsidies
from the United States as of July 14, 2021: https://docs.wto.org/
dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/SCM/N372USA.pdf&Open=True.
From Canada as of July 8, 2021: https://docs.wto.org/dol2fe/Pages/SS/
directdoc.aspx?filename=q:/G/SCM/N372CAN.pdf&Open=True. From Mexico as
of September 24, 2019: https://docs.wto.org/dol2fe/Pages/SS/
directdoc.aspx?filename=q:/G/SCM/N315MEX.pdf&Open=True.
The USMCA also requires the parties to notify each other on an
annual basis of any list of vessels and operators engaged in IUU
fishing.\20\ Article 24.20(10) states:
---------------------------------------------------------------------------
\20\ USMCA, art. 24.20(9).
10. Each Party shall notify the other Parties on an annual basis
of any list of vessels and operators identified as having engaged in
---------------------------------------------------------------------------
IUU fishing.
It is unclear whether this notification has occurred. If it has,
then the information should be made publicly available.
In addition, the USMCA requires the State Parties to develop and
maintain a publicly available and easily accessible registry data of
fishing vessels flying its flag. Article 24.21(2)(f) includes this
obligation:
2. In support of international efforts to combat IUU fishing and
to help deter trade in products from IUU fishing, each Party shall: . .
(f) develop and maintain publicly available and easily
accessible registry data of fishing vessels flying its flag; promote
efforts by non-Parties to develop and maintain publicly available and
easily accessible registry data of such vessels flying its flag; and
support efforts to complete a Global Record of Fishing Vessels,
Refrigerated Transport Vessels, and Supply Vessels; and
In short, since the USMCA entered into force on July 1, 2020,
complete information on fisheries subsidies and IUU fishing appears to
be overdue; Oceana would like to know whether the parties have
submitted the information and when it will be available to the public.
In addition, Oceana would like to know when the registry of fishing
vessels flying each State's flag will be made publicly available.
Question. It is my hope that future U.S. agreements will build upon
much of the progress in the USMCA, including its environmental
provisions.
With that said, I've long believed that if it isn't perfect that we
should work to make it better. I certainly believe this approach
applies to U.S. trade policy.
What are one or two key issues of importance that Congress should
focus on in the months and years ahead when it comes to overseeing the
enforcement of the USMCA's environmental provisions?
Answer. When it comes to overseeing the enforcement of the USMCA's
environmental provisions, in the months and years ahead, Congress
should make regular inquiries with relevant Federal Government agency
stakeholders and ensure public transparency about State-to-State
consultations and dispute resolution related to environmental matters.
Should the opportunity present itself, provisions requiring greater
public transparency about the State-to-State environmental
accountability processes would be important additions to the text of
the USMCA and/or the implementing legislation.
To better ensure enforcement of environmental provisions, in the
public mechanism outlined in USMCA Articles 24.27 and 24.28, Congress
should significantly reduce the time frames for review and response to
public submissions, remove opportunities for State Parties to thwart or
stall the review process, require that all Factual Records be
published, and outline repercussions for State Parties found in a
Factual Record to have failed to effectively enforce national
environmental laws and regulations that will serve as true deterrents.
In the State-to-State mechanism outlined at USMCA Articles 24.29-32 and
in Chapter 31, Congress should reduce the three-tier consultation
process to, at most, one consultation phase followed by referral to a
dispute resolution panel to allow failures to enforce environmental
provisions to move more quickly to resolution. Better yet, akin to the
highly effective rapid response mechanism for labor enforcement issues
in the USMCA, Congress should consider developing a rapid response
mechanism for environmental enforcement issues in the USMCA as well as
in other existing and future free trade agreements. Congress should
also insist that the State-to-State dispute resolution process for
environmental matters allow for timely public review of government
submissions, citizen submissions (akin to amicus briefs), and
webcasting of arbitral panel hearings.
Last but certainly not least, Congress should consider amending the
USMCA and other existing as well as future free trade agreements to
ensure that more provisions in the Environment Chapter are binding
obligations rather than hortatory statements.\21\ One binding
obligation that is completely missing from the USMCA Environment
Chapter is the obligation to address climate change. At a bare minimum,
among the Multilateral Environmental Agreements (MEAs) that should be
added to Article 24.8(4) of the USMCA Environment Chapter are the
United Nations Framework Convention on Climate Change and the Paris
Agreement. Current language in the USMCA allows the State Parties to
amend the agreement to add any other relevant environmental or
conservation agreement to the list of MEAs that must be adopted,
maintained, and implemented.\22\ Congress should insist on this
amendment. As the Intergovernmental Panel on Climate Change's recent
Sixth Assessment Report makes abundantly clear, human activities are
responsible for climate change impacts, including the warming,
acidification and rise of our oceans--to the detriment of marines
species and coastal communities.\23\ Governments must take action
immediately to mitigate as well as to adapt to climate change.\24\ In
light of the urgent need for government action, provisions that address
climate change in free trade agreements are an excellent addition to
Congress's legislative toolbox to tackle this major existential crisis
facing humanity and our blue planet.
---------------------------------------------------------------------------
\21\ See, e.g., USMCA, art. 24.11 (Air Quality); art. 24.15 (Trade
and Biodiversity); art. 24.16 (Invasive Alien Species).
\22\ USMCA, art. 24.8(5); art. 34.3.
\23\ IPCC, Sixth Assessment Report--Summary for Policy Makers,
https://www.ipcc.ch/report/ar6/wg1/#SPM.
\24\ IPCC, Sixth Assessment Report--Summary for Policy Makers,
https://www.ipcc.ch/report/ar6/wg1/#SPM.
______
Prepared Statement of Michelle McMurry-Heath, M.D., Ph.D.,
President and CEO, Biotechnology Innovation Organization
Chairman Wyden, Ranking Member Crapo, members of the committee, my
name is Dr. Michelle McMurry-Heath. I am the president and CEO of the
Biotechnology Innovation Organization (BIO). I am honored to testify
before you for today's hearing, ``Implementation and Enforcement of the
United States-Mexico-Canada Agreement: One Year After Entry Into
Force,'' and address our industry's concerns around the implementation
of the agricultural biotechnology provisions of the United States-
Mexico-Canada Agreement or USMCA.
introduction
BIO \1\ represents 1,000 members in a biotech ecosystem with a
central mission--to advance public policy that supports a wide range of
companies and academic research centers that are working to apply
biology and technology in the energy, agriculture, manufacturing, and
health sectors to improve the lives of people and the health of the
planet. BIO is committed to speaking up for the millions of families
around the globe who depend upon our success. We will drive a
revolution that aims to cure patients, protect our climate, and nourish
humanity.
---------------------------------------------------------------------------
\1\ https://www.bio.org/.
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biotech and trade policy
United States leadership in biotech innovation represents the
cornerstone of the U.S. economy. Our industry is vital to U.S. national
security, climate policy, pandemic preparedness, and provides a
platform from which to exercise global leadership on key issues.
As the U.S. biotechnology industry has demonstrated in our response
to COVID-19, the U.S. can lead the world in developing technologies
that will solve health and economic crises. In record time, the U.S.
biotechnology industry and its global partners launched highly
effective vaccines and therapeutics to help the world begin to turn the
corner on the pandemic. Like with COVID, American innovation in
biosciences, coupled with the U.S. Government's leadership, can
similarly be unleashed to help address several other crises, including
climate change and malnutrition.
Executing thoughtful and creative trade strategies is among the
most effective means to enhance global science-based collaboration
while growing the U.S. bioeconomy. An open, global trading and
investment system benefits innovators, researchers, patients, farmers,
and consumers everywhere by establishing a level playing field for all.
Trade agreements help to establish science-based regulatory systems
that can promote the development of and access to disruptive and
transformative biotechnologies that will be required to effectively
confront serious public health, environmental, and nutritional
challenges.
The U.S. must reassert its influence within the global trading
system by leading efforts to place science and technology at the core
of its global economic and strategic interests. This will require
maintaining long-standing U.S. trade policy commitments to intellectual
property (IP), which is critical to risk-taking and investment in pre-
profit companies, who are at the heart of BIO's membership. It will
also require modernizing U.S. trade policy to address novel issues such
as the need to ensure enforceable digital trade rules that minimize
restrictions on cross-border data flows and enable the international
transfer of data needed to advance global biotechnology R&D efforts. It
is also essential that we enhance our ability to proactively confront
regulatory barriers in other countries that stifle the trade of
transformative biotech innovations--barriers that not only do a
disservice to global society by delaying their adoption but also have a
chilling effect on future biotechnology investment.
Leveraging U.S. leadership in global trade to address these
concerns will boost the American bioeconomy revolution, creating high-
quality jobs and better position the United States to effectively
confront and lead on big global challenges. We have an obligation--
industry and government--to leverage American strengths and work
collectively to remove barriers that restrict the development of the
global biotech ecosystem.
agricultural biotechnology in the united states
The United States is the world's largest producer of biotechnology
crops. With over 90 percent of corn, soybean, and cotton acres produced
with biotechnology crops,\2\ this technology is ubiquitous in American
agriculture. The United States is also a major exporter of these crops.
In the case of corn, Mexico is the United States largest international
market, representing nearly 30 percent of total U.S. corn exports in
2020. If Mexico does not approve a new corn biotechnology product, U.S.
corn farmers are reluctant to plant the product for fear of disrupting
trade to Mexico. This means, in effect, that Mexico determines which
technology U.S. farmers can use.
---------------------------------------------------------------------------
\2\ https://www.ers.usda.gov/data-products/adoption-of-genetically-
engineered-crops-in-the-us
.aspx.
Biotechnology companies plan their commercial launches years in
advance, preparing regulatory submissions in export markets, and
consulting with value chain customers. When regulatory authorities in
export destinations cease to function and shut off communication with
companies, as in the current case of Mexico, it is impossible to
predict with certainty when to launch a product in the United States.
As a result, biotechnology companies often delay, affecting investments
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and future R&D.
In 2018, BIO and international partners conducted an extensive
economic analysis of the impact of regulatory delays in China.\3\ Like
Mexico, China is a major importer of U.S. soybeans and corn. Without
Chinese approval, the same scenario applies. 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. Today China remains a major
challenge, with approvals delayed by 7 years on average, but through
the U.S.-China Phase One agreement there are continued efforts to
address these systemic challenges.
---------------------------------------------------------------------------
\3\ https://croplife.org/wp-content/uploads/2018/05/Impact-of-
Delays-in-Chinese-Approvals-of-Biotech-Crops-05-18-FINAL-1.pdf.
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usmca
For agricultural biotechnology, USMCA represented a significant
improvement on NAFTA for the agricultural biotechnology industry and
the constituents it seeks to serve. Enhanced provisions for
agricultural biotechnology set it apart from previous trade agreements.
For these reasons BIO applauded the USMCA as a major step forward and
as the basis for future agreements. Over the past year, however, we
have noted both practical barriers to seamless implementation of USMCA
as well as missed opportunities that stemmed from the process leading
to U.S. approval of the agreement. Today, I hope to highlight these
barriers and missed opportunities for your consideration in future
discussions with our allies.
With respect to agricultural biotechnology, what exists on paper is
a far cry from reality. USMCA is the first agreement to address
agricultural biotechnology specifically. All three parties confirmed
the importance of encouraging agricultural innovation and facilitating
trade in products of agricultural biotechnology.\4\ The provisions
focus on ensuring trading partners have functional regulatory systems
that promote transparency and cooperation. The intent of the provisions
is to supplement the requirements of the Sanitary and Phytosanitary
(SPS) Agreement, facilitate trade, and to proactively avoid unnecessary
and costly trade disruption that can occur when regulatory approvals
are delayed. Furthermore, the agreement established a committee to
enhance cooperation and regulatory consistency on current and emerging
agricultural biotechnologies, including genome editing. Unfortunately,
the Government of Mexico's treatment of agricultural biotechnology is a
stark example of how it has strayed in a matter of 3 years and how
trade barriers actively restrict the development of new technologies.
---------------------------------------------------------------------------
\4\ https://ustr.gov/sites/default/files/files/agreements/FTA/
USMCA/Text/03_Agriculture.
pdf.
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regulatory challenges for innovative agricultural
biotechnology products in mexico
Failure to Issue Biotech Import Approvals
Even before USMCA negotiations were completed, problems began to
emerge. 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 6 months. The process was largely transparent, science-based,
and predictable. Since the election of President Andres Manuel Lopez
Obrador, however, COFEPRIS has effectively shut down and Mexico's
regulatory system has become nonfunctional.
For agricultural biotechnology specifically, Mexico has not granted
a single approval since May 2018; meanwhile, the backlog of pending
approvals has grown to 23. This affects all of BIO's agricultural
members, covering a wide range of commodities: apples, canola, corn,
cotton, potatoes, and soybeans. Twenty of these have now exceeded the
6-month statutory time limit for COFEPRIS to determine whether to issue
a biotech import approval. During this time, Mexican regulators have
provided no substantive communications with companies on the delays. It
is also important to highlight that the products pending approval in
Mexico are legal to grow in the United States as well as many other
countries.
It is worth noting, these challenges are not unique to agricultural
biotechnology. Similarly, for biopharmaceutical products, COFEPRIS has
not issued a new approval since early 2019. The queue of pending
approvals for new treatments and formulations, as well as pending
applications to initiate clinical studies, number in the hundreds.
There are dozens of new drugs that have been favorably reviewed by the
New Molecules Committee and are awaiting approval. These pending
applications have also exceeded the statutory time limit for COFEPRIS
to issue a decision. Likewise, companies are still unable to meet
directly with the regulator.
Decree to Ban Biotech Corn
Compounding the uncertainty caused by COFEPRIS's failure to issue a
biotech import approval in over 3 years, the Government of Mexico
published a decree on December 31, 2020, announcing the intention to
phase-out the use of important agricultural technologies, including use
of biotech corn for human consumption by 2024. In 2020, the U.S.
exported $2.7 billion of corn to Mexico. As a result, this decree could
have a major impact on the U.S. agriculture industry and producers
across the country. It is another unfortunate example of Mexico's
waning adherence to our trade agreements.
Further, the decree raises the potential for existing biotech
authorizations to be revoked and signals the government's intention to
not grant approvals for future biotech corn products. The announcements
of these policy changes, which have far-reaching implications for North
American agriculture, were issued with neither industry or trading
partner consultation nor any demonstrable scientific rationale. They
also incorrectly allege that biotech corn and modern agricultural
practices harm the environment.
Economic impacts from the decree would not stop at the U.S. border.
To date, the decree's application to imports of biotech corn for use as
animal feed remains ambiguous. While the decree does not specify if the
ban will apply to imports for animal feed, Mexican officials have
issued competing statements. Regardless, the practicality of separating
corn for feed from corn for human consumption is costly and creates
supply chain challenges, not to mention increased risk of shipment
rejections. Such uncertainty risks longstanding cross-border commercial
relationships between suppliers in the United States and Mexican
livestock producers who have mounting questions about their supply
chains, economic well-being, and future of their domestic industries.
What is more, enactment of the decree will be in direct violation of
Mexico's commitments under USMCA and the World Trade Organization
(WTO), as the decree is neither science nor risk-based and is out of
step with international standards and norms.
Mexico's Lack of Regulatory Framework for Gene Edited Products
As existing biotechnology products await action in Mexico, we are
highly concerned about the implications for emerging biotechnologies
such as genome editing and synthetic biology. BIO members are actively
leveraging genome editing techniques to help plants, animals, and
microbes become more resilient to pests, diseases, and extreme weather,
and reduce usage of agricultural inputs. While the global regulatory
landscape is emerging, several agricultural producing countries,
including most of the Western Hemisphere, have established regulatory
pathways for products derived through genome editing. Mexico stands out
as the major exception.
USMCA's goal to enhance cooperation in emerging technologies among
the three parties aimed to facilitate commercial availability and
acceptance of biotech products. Lack of progress by Mexico is forcing
biotechnology companies with robust pipelines of gene-edited products
to make unenviable decisions move forward with product development
without the benefit of regulatory clarity in Mexico, or cease
developing gene edited products that may be produced in, or traded
with, Mexico.
Impact on Addressing Global Challenges
Mexico's actions are impeding global research and development,
jeopardizing the potential of biotechnology to address myriad
challenges related to climate change, sustainability, human nutrition,
animal welfare, and worker safety. What was intended in USMCA to
invigorate investment in, and development of these technologies, is now
threatened by the obstruction of one of its key signatories.
Biotechnology crops positively impact food security, sustainability,
and climate change solutions. For example, biotechnology crops:
Reduced carbon dioxide emissions in 2016 by 27.1 billion kg,
equivalent to taking 16.7 million cars off the road for one year.\5\
---------------------------------------------------------------------------
\5\ https://www.isaaa.org/resources/publications/briefs/54/
executivesummary/default.asp.
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Maintain yields in the face of drought, which has a direct
bearing on improved food security and poverty alleviation.
Combat global hunger and malnutrition by increasing the
vitamin and mineral contents of plants. They also address the lack of
fresh fruits and vegetables in food deserts in urban and rural
communities. (Additional information available in the New York Times
Magazine article, ``Learning to Love GMOs.''\6\)
---------------------------------------------------------------------------
\6\ https://www.nytimes.com/2021/07/20/magazine/gmos.html.
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Extend the shelf life of produce, cutting down on food waste,
which creates 8 percent of all global emissions.\7\
---------------------------------------------------------------------------
\7\ http://www.fao.org/fileadmin/templates/nr/
sustainability_pathways/docs/FWF_and_cli
mate_change.pdf.
To learn more about how biotechnology can enable agriculture to be
solution to climate change please see BIO's Biotech Solutions for
Climate Report (https://www.bio.org/sites/default/files/2021-04/
Climate%20Report_FINAL.pdf) and BIO's response to U.S. Department of
Agriculture's (USDA) Request for Public Comment on the Executive Order
on Tackling the Climate Crisis at Home and Abroad.\8\
---------------------------------------------------------------------------
\8\ https://www.federalregister.gov/documents/2021/03/16/2021-
05287/notice-of-request-for-public-comment-on-the-executive-order-on-
tackling-the-climate-crisis-at-home.
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resolving mexico's ag biotech regulatory challenges
Mexico's failure to perform scientific regulatory assessments in
over 3 years, its disregard for due process and transparency, and its
decree to arbitrarily ban key technologies is a direct violation of
both the letter and spirit of USMCA and commitments to the WTO. These
actions require a strong response from the U.S. Government.
Mexico must resume the approval process for all agricultural
biotechnology products and implement a science-based and predictable
regulatory process going forward. It must immediately rescind its anti-
USMCA decree banning the import of biotech corn and begin creating a
gene editing framework that conforms with international norms and trade
agreement commitments.
BIO appreciates the work of the U.S. Trade Representative (USTR)
and USDA to date. Specifically, USTR Ambassador Katherine Tai calling
for the immediate resumption of agricultural biotechnology product
approvals in Mexico in her recent meetings with Mexico's Secretary of
Economy, Tatiana Clouthier and Secretary of Agriculture and Rural
Development, Victor Villalobos, and for USDA Secretary Tom Vilsack's
efforts to engage and reinforce this message. This engagement builds on
numerous attempts by former USTR Ambassador Robert Lighthizer and USDA
Secretary Sonny Perdue.
However, with little indication from Mexico that it will adhere to
its USMCA commitments, BIO strongly urges USTR to begin taking
enforcement action on Mexico's treatment of agriculture biotechnology.
An enforcement case would at a minimum provide a framework and timeline
to resolve the COFEPRIS-related delays in biotechnology approvals and
the December 31, 2020, decree. Without a process, BIO and its members
fear the Government of Mexico will continue the status quo, and
possibly broaden the scope of the decree to additional agricultural
products, which would compound the impact on U.S. trade and future
innovation.
More broadly, if the United States does not enforce against
Mexico's practices, BIO is concerned about the message this sends to
current and future trading partners. The biotech sector has faced a
host of challenges with Europe and China. Each time the U.S. government
has aggressively engaged to protect American interests in advancing
this critical technology. Taking enforcement action with Mexico on this
issue is critical to protect economic growth and job creation and
ensure science and American innovation can continue to thrive to solve
society's biggest and most pressing challenges.
missed opportunity for biopharmaceutical innovation incentives in usmca
As negotiated, the USMCA represented a significant step towards
advancing rules for intellectual property rights to support the modern
biotechnology sector. However, while the final text advanced helpful
rules for trade secrets, copyrights, and trademarks generally,
important IP provisions for biopharmaceuticals that had been agreed to
by Canada and Mexico were ultimately stripped from the agreement at the
insistence of U.S. lawmakers.
Specifically, the removal of the agreement on 10 years of
Regulatory Data Protection, as well as the elimination of patent and
regulatory incentives for the study of important product improvements
to existing medicines, represents an important, even historic lost
opportunity to raise IP standards in key markets and create high-
quality U.S. jobs at no cost to North American patients and consumers.
More importantly, stripping these provisions sent a global signal that
the U.S. Government no longer appears willing to protect leading
American innovation in the biopharmaceutical sector against
appropriation by foreign competitors.
A more recent manifestation of such misguided antagonism to
biopharmaceutical IP is the U.S. government's support for a global
waiver of intellectual property rights relating to COVID-19 vaccines,
which, however well-intentioned, will only serve as a harmful
distraction from the urgent work that must be done to ameliorate global
vaccine inequity.
BIO urges the U.S. Government to rethink its support for the
proposed global waiver of IP rights that is currently pending in the
WTO, and to increase its focus on effective policies to maximize the
global availability and equitable distribution of COVID-19 vaccines and
therapeutics. BIO's COVID Global Strategy for Harnessing Access
Reaching Everyone (SHARE) Program (https://www.bio.org/letters-
testimony-comments/bio-outlines-share-blueprint-global-cooperation) and
a Declaration from members of the World's Biotechnology Sector (https:/
/www.bio.org/letters-testimony-comments/declaration-members-worlds-
biotechnology-sector-global-access-covid) provide solutions to ensure
vaccines and treatments get to the patients in the world who most need
them without undermining innovation.
conclusion
In closing, a year after the United States, Mexico, and Canada
confirmed their commitment to North American trade, the biotech sector
is faced with tremendous uncertainty. Companies are making decisions
today about whether to proceed with launch plans or delay, potentially
costing technology companies billions of dollars in foregone revenue
and future investment. Similarly, U.S. farmers are facing increasing
challenges related to climate change and sustainability, potentially
without cutting edge biotechnology tools.
The U.S. Government has been a consistent champion for this
technology, defending against scientifically unjustified regulatory
practices in Europe and China for decades. As one of the United States
longest and most significant export markets, Mexico's dramatic policy
reversal creates significant risk to the trade of U.S. agricultural
products and the ability to leverage biotechnology going forward.
______
Questions Submitted for the Record to
Michelle McMurry-Heath, M.D., Ph.D.
Question Submitted by Hon. Ron Wyden
Question. One of the achievements of USMCA was to bring NAFTA into
the 21st century. Neither digital trade, nor the products of
biotechnology were contemplated by the original agreement and both are
now critical parts of our trading relationship.
It can be difficult to understand what something like the sanitary
and phytosanitary chapter or the customs facilitation chapters
described in your testimony mean for people on the ground in the United
States or Mexico and how that translates into jobs.
Can you describe how operating from a framework of increased
transparency and a principle of science-based decision as required by
the SPS Chapter of USMCA could--if fully implemented--increase trade
and support good-paying jobs in the United States, Mexico, and Canada?
Answer. As crafted, USMCA's provision on agricultural biotechnology
was intended to supplement the SPS Agreement, with the goal of
facilitating trade, and to proactively avoid unnecessary and costly
trade disruptions that can occur when regulatory approvals are delayed.
Unfortunately, despite these provisions within USMCA, Mexico has
moved forward with actions that are neither science-based, nor risk-
based. As a result U.S. farmers are reluctant to plant a product for
fear of disrupting trade to Mexico. This means, in effect, that Mexico
determines which technology U.S. farmers can use. If these barriers are
left unaddressed, we risk longstanding cross-border commercial
relationships and the economic well-being U.S. farmers and technology
producers.
Full implementation of the SPS commitments, specifically
transparency and science-based decision making, will provide the
necessary predictability to enable biotechnology companies and U.S.
farmers to plan for the introduction of a new biotechnology product in
a manner that does not disrupt trade. Timely and predictable regulatory
decisions in Mexico enables biotechnology companies to continue to
invest in innovative technologies which supports job growth and enables
trade to flow between the United States and Mexico.
______
Question Submitted by Hon. Thomas R. Carper
Question. I understand from your testimony that Mexico's barriers
to biotechnology could impede innovations in agriculture that help
reduce greenhouse gas emissions and adapt crops to climate change.
Could you provide examples of how these barriers are preventing
producers from sustainably increasing production and adapting to
climate change?
Answer. Biotech crops have already allowed farmers to reduce
greenhouse gas emissions in their production practices. For example,
the use of ag biotech has led to greater adoption of no-till farming
practices, which reduce the amount of carbon released from the soil
during planting, while also curtailing emissions from farm equipment.
The development and deployment of new technology will play a vital role
in making crops and livestock more resilient to pests, disease, and
extreme weather variabilities caused by climate change.
Unfortunately, Mexico's practices will ultimately limit what
technology will be available for U.S. producers.
One of the cotton applications pending for approval in Mexico has
an insect resistant trait, which could reduce greenhouse gas emissions
with producers needing to us less insecticide and in turn making fewer
trips across the field.
Another example is how last summer's derecho flattened corn crops
across the Midwest.
Developers are already developing a short stature corn which could
help farmers be more resilient to future extreme weather events brought
on by climate change.
Because short stature corn grows lower to the ground, it is
sturdier and less likely to break in high winds than traditional corn.
Short stature corn varieties can potentially better withstand drought.
Multiple varieties of short stature corn leveraging the latest
innovations in biology--including biotech and gene editing--are
currently under development.
However, Mexico's delays in import approvals and the potential
decree phasing out the import of biotech corn could keep this
technology from coming to market.
______
Questions Submitted by Hon. Todd Young
Question. The digital trade chapter within USMCA contains a number
of provisions that promote integrity, hold bad actors accountable, and
facilitate robust e-commerce. These provisions are crucial to combat
localization requirements and favoritism to state-owned enterprises
that we frequently see with China.
The purpose of trade agreements, generally, is to promote the free
movement of goods, not to prop up bureaucracy and act as a bank for
communist governments. As such, these groundbreaking chapters on state
owned enterprises are absolutely critical to allowing our businesses to
operate on a level playing field with our closest neighbors.
How are the digital trade provisions with USMCA helping us combat
the rising influence of China globally, and particularly closest to
American soil?
How will these digital trade provisions continue to support
businesses and consumers in the future?
Answer. The digital trade provisions of the USMCA are critical to
promoting U.S. innovation and competitiveness across a range of
sectors, including biotech.
Life science researchers around the world require a robust and
reliable global ecosystem for data, an ecosystem that allows for timely
and efficient cross-border transfers of information.
Restrictions on the flow of data and policies requiring
localization of data hampers biotech R&D, which is increasingly
globalized and heavily data driven. The USMCA provisions on cross-
border data flows and data localization address these key issues.
However, more can be done, and in terms of responding to China's
influence. We need to ensure that we have a strong relationship with
our allies, like the European Union.
Strengthening the transatlantic data relationship and the data
flows on both sides of the Atlantic is in the interest of U.S. biotech
researchers and more broadly is for the benefit of science and the
global biotech research community.
______
Questions Submitted by Hon. Ben Sasse
Question. Mexico is consistently the top market for U.S. corn
exports, valued at $3 billion last year. Our farmers and ranchers were
one of the loudest advocates for passage of USMCA. However, farmers in
Nebraska are concerned that Mexico is backsliding on its USMCA
commitments because they have not approved any new applications for
biotech crops since May 2018. Then most recently in December the
Mexican President issued a decree banning glyphosate and biotech corn
in Mexican diets--both by 2024.
Can you speak to this issue further and what impact it may have on
U.S. and Nebraska corn farmers when it comes to trade with Mexico?
Answer. The United States is the world's largest producer of
biotechnology crops. With over 90 percent of corn, soybean and cotton
acres produced with biotechnology crops, this technology is ubiquitous
in American agriculture.
The United States is also a major exporter of these crops. In the
case of corn, Mexico is the United States largest international market,
representing nearly 30 percent of total U.S. corn exports in 2020.
If Mexico does not approve a new corn biotechnology product, U.S.
corn farmers are reluctant to plant the product for fear of disrupting
trade to Mexico. This means, in effect, that Mexico determines which
technology U.S. farmers can use.
Further, biotechnology companies plan their commercial launches
years in advance, preparing regulatory submissions in export markets,
and consulting with value chain customers.
When regulatory authorities in export destinations cease to
function and shut off communication with companies, as in the current
case of Mexico, it is impossible to predict with certainty when to
launch a product in the United States. As a result, biotechnology
companies often delay, affecting investments and future R&D.
Question. President Lopez Obrador's recent decree, more
specifically, would phase-out the use of biotech corn for human
consumption no later than January 31, 2024. Most of Nebraska's corn
exports to Mexico are used in livestock feed but there is concern an
expansion of this decree could create additional trade barriers for
farmers.
Can you please expand on the likelihood that Mexico will expand
this decree to include GMO corn used for livestock feed?
How would such a change impact agriculture in places like my home
state of Nebraska?
Answer. Mexico's decree compounds the uncertainty caused by
COFEPRIS's failure to issue a biotech import approval in over 3 years.
As a result, this decree further erodes the trading relationship
between the United States and Mexico and if implemented will reduce
U.S. exports.
To date, the decree's application to imports of biotech corn for
use as animal feed remains ambiguous. While the decree does not specify
if the ban will apply to imports for animal feed, Mexican officials
have issued competing statements.
Regardless, the practicality of separating corn for feed from corn
for human consumption is costly and creates supply chain challenges,
not to mention increased risk of shipment rejections.
Such uncertainty risks longstanding cross-border commercial
relationships between suppliers in Nebraska and throughout the United
States and Mexican livestock producers who have mounting questions
about their supply chains, economic well-being, and future of their
domestic industries.
Question. USMCA modernized our trade relationships with Mexico and
Canada and increased business for Nebraska agriculture. The United
States should build on the benefits of this multilateral agreement but
also apply the lessons learned from implementation and enforcement when
pursuing new trade agreements.
As we look towards future trade agreement frameworks, what
preemptive steps can Congress take to prevent some of the current
issues regarding enforcement--specifically regarding biotechnology?
Answer. For agricultural biotechnology, USMCA represented a
significant improvement on NAFTA for the agricultural biotechnology
industry and the constituents it seeks to serve. Enhanced provisions
for agricultural biotechnology set it apart from previous trade
agreements.
USMCA is the first agreement to address agricultural biotechnology
specifically. All three parties confirmed the importance of encouraging
agricultural innovation and facilitating trade in products of
agricultural biotechnology.
This provision supplements the requirements of SPS Agreement to
facilitate trade, and to proactively avoid unnecessary and costly trade
disruption that can occur when regulatory approvals are delayed.
Furthermore, the agreement established a committee to enhance
cooperation and regulatory consistency on current and emerging
agricultural biotechnologies, including genome editing.
However, given that Mexico had ceased approval of agricultural
biotechnology products back in May of 2018, it would have been prudent
for the U.S. to have sought some specific commitments from the
Government of Mexico on how they would come into compliance prior to
certifying the agreement.
Looking forward, the biotechnology and SPS provisions of USMCA
provide a good framework to facility the trade of innovative
technologies. Although the USMCA does not mandate the approval of
products, it assures trading partners that a regulatory system is in
place and process to cooperate exists. Prior to certifying the
agreement, an assessment should have been conducted to ensure the
regulatory process was functional, and to address any issues and secure
commitments to ensure compliance with USMCA's SPS and biotechnology
provisions.
As for Mexico and USMCA, moving forward USTR can and should use all
the tools afforded to it under USMCA to get Mexico to resume the
approval process for all agricultural biotechnology products and
implement a science-based and predictable regulatory process going
forward.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
Colleagues, we got some tragic news last night. Former Senator
Enzi, who served on the Finance Committee with many of us, passed away
yesterday. When he served with us in the Senate, Mike Enzi advocated
for what he called the 80-percent rule, which urged Senators to find
common ground on the 80 percent of the issues we agreed on and not the
20 percent we disagreed on. It's sound advice, and I hope we'll
remember Mike's 80-percent rule as we work together on this committee
and in the Senate for the American people. I would like to offer my
sincere condolences to Mike's family and friends, Senator Barrasso, and
his colleagues in the Wyoming delegation.
When a youngster turns one, they get a birthday party. When a trade
agreement turns one, it gets an oversight hearing in the Senate Finance
Committee. The committee meets to discuss USMCA today.
I'll begin with the timeline of the USMCA. Three years ago, the
Trump administration agreed to a NAFTA rewrite that was too weak on key
issues to pass. Democrats got down to work improving it.
USMCA became the strongest trade agreement ever for worker rights,
for environmental protections, and for enforcement overall. Congress
passed it in early 2020. Then it was up to the Trump administration to
implement the agreement--and enforce, enforce, enforce--because
countries don't comply with trade agreements by osmosis. You have to
hold them to their commitments. You ought to do that when the U.S.
holds the most leverage, which is before an agreement enters into
effect.
That's why Senator Grassley and I strongly urged the Trump
administration not to rush the process, but the Trump administration
just would not listen. It was the middle of an election year, and they
decided the cake was baked before it was ready to come out of the oven.
Only a few months were given to implement the agreement--not nearly
enough time to protect American workers and businesses by holding
Canada and Mexico to their commitments.
Now it's up to the Biden administration to clean up the messes the
Trump administration left behind. For example, Canada has unfairly
blocked American dairy products for decades. Under USMCA, Canada agreed
to give our dairy products more access to the Canadian market.
Canada then undermined that commitment with new regulatory barriers
before USMCA went officially into effect last July. The Trump
administration barely lifted a finger to do anything about it. Now the
Biden administration will have to work to make sure our dairy farmers
have the access they were promised.
Another example: Mexico made commitments to improve the rights and
conditions for its workers, but it's moving too slowly on the
implementation of key reforms to its labor laws. To enforce some of
those commitments, the Biden administration has had to act using what's
called the new rapid response mechanism that Senator Brown and I
created. That's an important tool, but the previous administration
should have done more to push Mexico to raise the bar for labor rights
prior to last summer. That would have helped to protect more American
workers.
With the Trump administration looking weak on trade enforcement,
it's no surprise that Canada and Mexico issued new laws and regulations
that were inconsistent with USMCA, even walking back some of their core
commitments. For instance, Mexico is refusing to approve innovative
American agricultural products, including corn and soybeans, without
any scientific justification.
It's also threatening to ban agricultural products that have
previously been approved. Ambassador Tai and the administration are
working to knock down those barriers as soon as possible.
Another example: Canada is joining a list of countries that are
unfairly targeting and discriminating against innovative American
employers with digital services taxes. These taxes are unfair digital
daggers that are knifing American firms. It's a big setback to our
trade relationship with Canada that goes against the spirit of USMCA
and the global minimum tax agreement that's in the works. I hope the
Canadian Government changes course on this issue, otherwise the U.S.
will need to consider all options for its response.
So there's a lot for the committee to talk about today regarding
USMCA. I come from a State where one out of four jobs revolves around
international trade. Oregonians know how to grow things and design
things, add value to them, and ship them to Oregon lovers around the
world.
In Oregon, we talk about getting trade done right as a way to
protect our workers and create high-wage, high-skill jobs. It means
raising the bar on issues like labor and environmental protections. It
means vigorous enforcement. It means never cutting corners the way the
previous administration did on USMCA. Fortunately, the Biden
administration has already begun addressing all these outstanding
issues so that USMCA lives up to its promise.
There are still a lot of challenges ahead. I want to thank our
witness panel for joining the committee today, and I look forward to
Q&A.
______
Communications
----------
American Farm Bureau Federation
600 Maryland Avenue, SW, Suite 1000W
Washington, DC 20024
p. 202-406-3600
f. 202-406-3606
https://www.fb.org/
Statement of Zippy Duvall, President
The American Farm Bureau Federation, the nation's largest general
farm organization, submits this statement for the Senate Finance
Committee hearing on the enforcement of the U.S.-Mexico-Canada
Agreement (USMCA). Trade is critically important to the current welfare
and future prosperity of U.S. agriculture. America's farmers and
ranchers depend on stable export markets and expanded opportunities for
the success of their businesses.
Enforcement of trade agreements is necessary to ensure all the
benefits that were agreed to at the negotiating table. The dispute
settlement mechanisms included in trade agreements are critical for the
future success of any agreement, including USMCA, which went into force
on July 1, 2020.
Canada and Mexico are two of our nation's most important food and
agriculture trade partners, thanks to achievements first seen through
the North American Free Trade Agreement (NAFTA), and the USMCA promises
to build upon those gains. Farmers continue to face several unresolved
issues with both Canada and Mexico, however, and these matters need
continued attention by the U.S. government through the USMCA.
The implementation of expanded access for U.S. dairy products by
Canada through negotiated tariff-rate quotas (TRQ) is of importance and
concern to our dairy producers and needs to be resolved. Canada is
limiting access to the dairy TRQ's which impacts the exports of U.S.
dairy products. On May 25, 2021, the U.S. Trade Representative started
a proceeding challenging Canada's administration of its dairy TRQ's.
This is the first dispute settlement case brought under USMCA.
On December 31, 2020, the Mexican government issued a Presidential
Decree stating the intention to phase out the use of glyphosate and use
of genetically modified (GM) corn for human consumption. While the
standing of the Decree is unclear and the scope is vague, the Decree
creates a significant risk and uncertainty to exports of corn and corn
products. Mexico is the largest importer of corn and corn products from
the U.S., and the Decree has the potential to negatively impact a
significant portion of U.S. agricultural exports.
The Government of Mexico has created significant uncertainty for
agricultural biotechnology, ceasing review and approval of any
biotechnology applications since May 2018. As a result, Mexico has
become a significant barrier to launching new biotechnology products
within North America, potentially restricting U.S. farmer access to new
technologies that help us achieve sustainability goals.
In 2002, the U.S. and Mexican governments announced that both sides
would resolve two longstanding market access issues: the U.S. agreed to
expand market access for Mexican avocados and Mexico agreed to open
their market for U.S. fresh potatoes. Today, the U.S. imports $2
billion worth of Mexican avocados while Mexico remains almost entirely
closed to U.S. fresh potatoes. In 2014, after losing several
phytosanitary rulings before international bodies, the Mexican
government agreed to allow U.S. fresh potatoes full market access. The
Mexican Supreme Court has recently decided that U.S. fresh potatoes can
be sold in Mexico. Now it is time for action on the nearly decade-old
promise.
Seasonal produce imports from Mexico have a direct impact on U.S.
growers. Monitoring investigations by the International Trade
Commission continue regarding imports of strawberries, bell peppers,
squash and cucumbers.
Trade agreements can create a level playing field for U.S. farmers
and ranchers by reducing and eliminating tariffs and addressing non-
tariff barriers. Those benefits can only be realized across North
America, however, when the U.S.-Mexico- Canada Agreement is fully
enforced. We look forward to a focused effort by all three countries to
ensure USMCA achieves its full potential.
______
Cato Institute
1000 Massachusetts Ave., NW
Washington, DC 20001
Statement of Dr. Inu Manak, Research Fellow
Chairman Wyden, Ranking Member Crapo, I appreciate the opportunity to
share my thoughts for this hearing on the implementation and
enforcement of the United States-Mexico-Canada Agreement (USMCA). We
are just over a year into the implementation of the USMCA, and the
three countries have faced unique circumstances as we each try to
address the pandemic brought on by COVID-19. This context should not be
downplayed, and the resultant delays and challenges met with patience.
Despite the hardships we have faced over the course of the last year,
we have still managed to work towards implementation of the USMCA. Of
course, this should not come as a great surprise, as the content of
USMCA is very close to its predecessor, the North American Free Trade
Agreement (NAFTA).
But not everything stayed the same. There were some areas in which we
saw adjustments from NAFTA to USMCA. Some of these areas warrant
additional scrutiny, if not concern, surrounding how they are being
implemented, or what the overall goals are, or the form that
implementation or enforcement takes. To that end, I lay out some
lingering issues that I hope the Committee will take up in this hearing
and continue to monitor in the coming years. I think it is fair to say
that we all want a robust and competitive North American trading
relationship that is equipped to deal with both current and future
challenges. The USMCA is the focal institution in that relationship,
and we must ensure that it is fit for purpose if we are to meet our
shared goals.
IMPLEMENTATION
As I have previously noted, the greatest benefit of USMCA is that it
mostly continued rules that already existed under NAFTA. The impact
from the changes in the agreement are small. The overall effect of
these changes, including more stringent rules of origin on automobiles,
is negative: a -0.12% decrease in real GDP, or approximately a loss of
US$22.6 billion, according to estimates put forward by the U.S.
International Trade Commission (USITC).\1\ Analysis from others
corroborates this finding.\2\ The topline positive figures put forward
by the USITC are mainly due to ``reduced uncertainty'' from the
inclusion of new rules on digital trade, but as I and others have
noted, this modeling choice raises more questions than answers, and the
baseline model does not address the fact that Canada and Mexico have
already implemented many of those rules through their participation in
the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP)
agreement, from which the United States withdrew.\3\
---------------------------------------------------------------------------
\1\ U.S International Trade Commission, ``U.S.-Mexico-Canada Trade
Agreement: Likely Impact on the U.S. Economy and on Specific Industry
Sectors,'' Publication Number: 4889 (April 2019), https://
www.usitc.gov/publications/332/pub4889.pdf.
\2\ Ciuriak, Dan, Ali Dadkhah, and Jingliang Xiao. ``Quantifying
CUSMA: The Economic Consequences of the New North American Trade
Regime.'' Trade and International Policy Working Paper, CD Howe
Institute 21 (2020), https://www.cdhowe.org/sites/default/files/
attachments/research_papers/mixed/WorkingPaper_Ciuriak-Dadkhah-
Xiao_2020_0.pdf.
\3\ Inu Manak, ``Canada Evaluates USMCA, Raises More Questions than
Answers,'' Cato Institute Blog (February 28, 2020), https://
www.cato.org/blog/canada-evaluates-usmca-raises-more-questions-answers;
Jeffrey J. Schott, ``Five Flaws in the USMCA and How to Fix Them,''
Peterson Institute for International Economics (August 6, 2019),
https://www.piie.com/blogs/trade-and-investment-policy-watch/five-
flaws-usmca-and-how-fix-them.
Since most of the rules from NAFTA carried over to USMCA,
implementation has proceeded swiftly, despite a pandemic, and far
beyond what could be reasonably expected for any trade agreement that
created an entirely new set of rules. Trade between Canada, Mexico, and
the United States has been fairly resilient in the face of the numerous
challenges we faced over the last year. However, the pandemic did
reveal that the same institutional deficits \4\ surrounding governance
and cooperation that were identified during the NAFTA continue to be a
problem under the USMCA.
---------------------------------------------------------------------------
\4\ Simon Lester and Inu Manak, ``Fixing NAFTA's Institutional
Deficit,'' International Centre for Trade and Sustainable Development
(March 7, 2018), https://www.cato.org/commentary/fixing-naftas-
institutional-deficit.
---------------------------------------------------------------------------
Institutional Gaps
For instance, consultations on border crossing were woefully lacking at
the start of the pandemic, leading to confusion and delays. Subsequent
decisions on border restrictions have been ad hoc, adding to the
already large cloud of uncertainty hanging over people's lives. We
should have learned from the border closures that occurred after 9/11
that communication, coordination, and clear and consistent guidelines
for safe and efficient crossings are necessary to maintain the flow of
trade. And it's not just things that cross our borders, but people.
People whose lives exist on both sides of that border, most clearly
seen in our border communities, such as Point Roberts, WA.\5\ These
communities rely on a predictable border infrastructure, which has been
lacking. And even as Canada has recently announced that it is opening
its borders to American tourists, the United States has not
reciprocated with either Canada or Mexico. These announcements should
be coordinated, as our tourism industries continue to struggle,
impacting countless workers in each of our countries.
---------------------------------------------------------------------------
\5\ Alexander Panetta, ``How border restrictions have left a U.S.
community stranded and surrounded by Canada,'' CBC News (July 8, 2021),
https://www.cbc.ca/amp/1.6093133.
The institutional deficit carried over from NAFTA could persist in
other ways that impact our trading relationship as well. As Andrew
Rudman and Christopher Sands from the Wilson Center explain, the work
of the numerous committees created by the USMCA to oversee the
implementation of the agreement will be critical to its success and
growth over time.\6\ Under NAFTA, the committees quickly became
defunct, not least because there was a lack of high level guidance and
interest from the executive branch. It is this day to day work by civil
servants working on the technical issues related to our trading
relationship that is vital and requires support.
---------------------------------------------------------------------------
\6\ Andrew Rudman and Christopher Sands, ``A Winning Bet: USMCA at
Year One,'' Wilson Center (2021), https://www.wilsoncenter.org/sites/
default/files/media/uploads/documents/WWC_USMCA_Winning%20Bet.pdf.
Another of the major lessons from NAFTA was assuring that there was
active stakeholder engagement on cross-border issues so that
initiatives could be better targeted to address real, on the ground
problems. Amb. Earl Anthony Wayne, former career Ambassador to
Afghanistan, Argentina and Mexico, now at the Wilson Center, writes
that ``an effective stakeholder process could increase public
understanding of the value of trade across North America and would
surface valuable ideas for improvements and problem solving.''\7\ One
avenue for doing this is through the Competitiveness Committee created
in Chapter 26, which could serve as a forum for discussion about North
American competitiveness, including addressing issues surrounding
supply chains, bottlenecks, and regulatory challenges. The committee's
mandate is broad: ``The Competitiveness Committee shall discuss and
develop cooperative activities in support of a strong economic
environment that incentivizes production in North America, facilitates
regional trade and investment, enhances a predictable and transparent
regulatory environment, encourages the swift movement of goods and the
provision of services throughout the region, and responds to market
developments and emerging technologies.''\8\ Our experience throughout
the pandemic should reinforce the importance of such a committee to
identify policy areas in need of development. The knowledge of
businesses on the ground is indispensable in crafting smart responses
to shared trade challenges, as the pandemic has well shown.\9\
---------------------------------------------------------------------------
\7\ Earl Anthony Wayne, ``USMCA and North America: Year One,''
Wilson Center (July 2021), https://www.wilsoncenter.org/sites/default/
files/media/uploads/documents/USMCA%20and%
20North%20America-%20Year%20One.pdf.
\8\ USMCA Article 26.4.
\9\ Scott Lincicome, ``The Pandemic Does Not Demand Government
Micromanagement of Global Supply Chains,'' Pandemics and Policy, Cato
Institute (February 24, 2021), https://www.cato.
org/pandemics-policy/pandemic-does-not-demand-government-
micromanagement-global-supply-chains#summary.
An area where input from business would be particularly useful is in
the automotive sector, which has faced substantive rule changes in the
USMCA as compared to NAFTA. In the USMCA, the rules of origin for autos
(our most integrated supply chain) were made more stringent. Rules of
origin are the rules that determine whether a product can cross duty
free across the border. In NAFTA, passenger vehicles were required to
have 62.5% North American content, and in the USMCA that has been
increased to 75%. This means that auto producers will need to source
more components from the region, in addition to ensuring that 70% of
the steel and aluminum used in production also comes from Canada,
Mexico or the United States. On top of this--a first ever in a trade
agreement--a new labor value content requirement was added that
requires auto makers to have 40-45% of their auto content made by
---------------------------------------------------------------------------
workers making at least $16 an hour.
There is currently a disagreement about how the auto rules of origin
are calculated, which was raised by Canada and Mexico at the first
meeting of the USMCA Free Trade Commission in May 2021.\10\ As reported
by Maria Curi at Inside U.S. Trade, ``Auto industry representatives in
all three countries, as well as the governments of Canada and Mexico,
agree that the Office of the U.S. Trade Representative and CBP under
the Trump administration interpreted a USMCA auto rule of origin
differently than what was originally negotiated.''\11\ The Biden
administration has so far indicated support for the Trump
administration's more stringent interpretation, which could have
serious economic repercussion for the auto industry. As Curi explains:
---------------------------------------------------------------------------
\10\ Jose Avila, ``Los temas controversiales del TMEC resurgen,
tras reunion de ministras,'' Expansion (May 18, 2021), https://
expansion.mx/economia/2021/05/18/mexico-eu-se-comprometen-cumplir-
conjunta-t-mec.
\11\ Maria Curi, ``CBP official: USMCA auto rules will be enforced
amid confusion over interpretation,'' Inside U.S. Trade (March 30,
2021), https://insidetrade.com/daily-news/cbp-official-usmca-auto-
rules-will-be-enforced-amid-confusion-over-interpretation.
At issue is a so-called ``roll-up provision'' designed to
incentivize increased regional content. USMCA requires that 75
percent of a car's core parts, like engines, be regionally
sourced for that vehicle to qualify for duty-free treatment.
``Principal'' parts, like tires, are subjected to a 70 percent
---------------------------------------------------------------------------
regional content rule.
If a part meets the regional content threshold and is
incorporated into a larger car component, 100 percent of the
initial part will count as originating, according to the
industry's interpretation.
However, USTR and CBP say that if the initial part contains any
foreign content, it must be subtracted from the regional-value
content calculation. The U.S. agencies' approach makes it more
difficult for automakers to get components to the threshold
needed for duty-free treatment, according to the auto
industry.\12\
---------------------------------------------------------------------------
\12\ Maria Curi, ``Clouthier: Mexico, U.S. working to mesh USMCA
auto rule interpretations,'' Inside U.S. Trade (May 21, 2021), https://
insidetrade.com/daily-news/clouthier-mexico-us-working-mesh-usmca-auto-
rule-interpretations.
As Eric Martin and Keith Laing recently reported in Bloomberg, Flavio
Volpe, president of Canada's Automotive Parts Manufacturers'
Association suggested that tighter rules of origin requirements could
make preferential treatment under USMCA ``irrelevant,'' and lead to
automakers simply paying MFN tariffs instead, which would raise
costs.\13\ Furthermore, they report that after a meeting between U.S.
Trade Representative Katherine Tai and Mexican Economy Minister Tatiana
Clouthier on July 22, 2021, the Mexican Economy Ministry released a
statement, which on the U.S. position on rules of origin says that
``Not abiding by USMCA rules may potentially disrupt the operations of
the North America automotive industry.''
---------------------------------------------------------------------------
\13\ Eric Martin and Keith Laing, ``U.S., Mexico Fail to Resolve
Dispute on Trade Rules for Cars,'' Bloomberg (July 23, 2021), https://
www.bloomberg.com/news/articles/2021-07-23/u-s-and-mexico-fail-to-
resolve-dispute-on-trade-rules-for-cars?sref=EROITBzT.
Congress should request an explanation from the Biden administration as
to why it supports the same, more stringent interpretation of the auto
rules as the previous administration, and what the economic costs of
that interpretation are compared to how the auto industry, Canada and
Mexico see it. The auto industry could offer insight into this issue
through the Competitiveness Committee, for instance. Congress could
also request that USTR provide an update on the impact of changes made
on the auto rules through USMCA to the North American auto sector,
which would help with an assessment of whether further rule changes may
be required once USMCA is up for review.
Transparency
Since the USMCA includes a sunset clause that requires the review of
the agreement within six years, transparency on the day to day
implementation is essential. This will allow us to identify problems
early, and correct them when the review process begins, and avoid the
biggest pitfall of NAFTA, which was to lock in rules that quickly
became out of date. For USMCA to avoid this, it must learn to adapt.
Congress should request that the U.S. Trade Representative regularly
provide an update on the work of the committees, and the challenges
they identify with regard to implementation, as well as other trade
issues that arise. Reports on the committee work will not only help
Congress keep on top of North American trade issues, but also help
researchers that study this to reflect on how we can improve the
institutional design of trade agreements in this case, and more
broadly.
A further concern with transparency involves the newly created ``Rapid
Response Mechanism'' for labor enforcement, which was put into place to
ensure remediation of a denial of collective bargaining rights. As
Kathleen Claussen, Associate Professor of Law at the University of
Miami School of Law explains, ``the RRM is not so much a claims process
but rather a quick way to deal with a `belief' by a government that
there is some denial of rights underway.''\14\ As an untested
mechanism, we must proceed with utmost caution and ensure that the
process by which complaints are raised through the RRM are transparent
and provide the firms affected adequate time to respond. The RRM is a
complex process, best summarized by a recent flowchart created by the
U.S. Chamber of Commerce.\15\
---------------------------------------------------------------------------
\14\ Kathleen Claussen, ``A First Look at the New Labor Provisions
in the USMCA Protocol of Amendment,'' International Economic Law and
Policy Blog (December 12, 2019), https://ielp.worldtradelaw.net/2019/
12/a-first-look-at-the-new-labor-provisions-in-the-usmca-protocol.
html.
\15\ USMCA Rapid Response Labor Mechanism Flow Chart, https://
www.uschamber.com/sites/default/files/final_rrlm_flow_chart.pdf.
Further complicating it is the fact that the final procedural
guidelines for petitions to the USMCA have not yet been published
(interim guidelines were released in June 2020). Despite this, labor
disputes have already begun. This not only creates a lot of uncertainty
surrounding how this new mechanism is supposed to function, but also
raises serious questions about due process. The U.S. Chamber of
Commerce has stated ``The Labor Committee should not be acting on
petitions without the final procedural guidance being published,'' and
also that ``the Labor Committee is acting on petitions that allege a
denial of rights occurred, in part, before July 1, 2020,'' which is
before the USMCA entered into force.\16\ We must be cognizant of the
fact that the procedural guidelines need to be published before further
actions are taken, otherwise the executive branch could use broad
discretion in their interpretation and application, which could further
serve to harm already strained relations between the United States and
Mexico. Also, the final guidelines should take comments and concerns
from the relevant stakeholders into account.
---------------------------------------------------------------------------
\16\ U.S. Chamber of Commerce, Comments on USMCA Interagency Labor
Committee for Monitoring and Enforcement Interim Procedural Guidelines
for Petitions (June 22, 2021), https://www.uschamber.com/comment/
comments-usmca-interagency-labor-committee-monitoring-and-enforcement-
interim-procedural.
Relatedly, clarity should be provided on the content of discussions in
the Interagency Labor Committee, with documents available online, to
the public. Some light should also be shed on the interactions between
stakeholders, the Interagency Labor Committee and the executive branch
---------------------------------------------------------------------------
more broadly.
Another issue is that the RRM is unbalanced in its focus. As Desiree
LeClercq, Proskauer Employment and Labor Law Assistant Professor at the
ILR school at Cornell writes, ``Specifically, the Rapid Response
Mechanism requires respect for U.S. domestic processes (i.e., after an
enforced order) but allows the U.S. to interfere with ongoing domestic
processes in other countries. More generally, the disparate scope of
the Rapid Response Mechanism makes it possible for facilities like GM
to be held accountable when they are located across from Brownsville,
Texas but shields those facilities when they are located in
Brownsville, Texas.''\17\ In regard to the specific concern raised by
LeClercq, it should be emphasized that Mexico must be allowed the time
necessary to complete its labor reforms (a domestic process that was
already underway before USMCA went into effect), and the United States
should offer assistance, if requested, in the form of technical
capacity. However, the United States has begun parallel efforts under
the RRM, perhaps under the hope that this will ``speed up'' the reforms
in Mexico or nudge them along.\18\ But this is a precarious gamble. As
LeClercq elaborates, ``USTR is invoking the Rapid Response Mechanism
process before Mexico's domestic processes have been exhausted, leading
to potential fragmentation.'' This should be of concern to those
interested in the success of Mexico's domestic reform efforts.
---------------------------------------------------------------------------
\17\ Desiree LeClercq, ``Biden's Worker-Centered Trade Policy:
Whose Workers?'', International Economic Law and Policy Blog (May 16,
2021), https://ielp.worldtradelaw.net/2021/05/bidens-worker-centered-
trade-policy-whose-workers.html.
\18\ In fact, Esteban Martinez Mejia, Head of the Liaison Unit for
the Reform of the Labor Justice System in Mexico, stated in the public
virtual session of the USMCA Labor Council on June 29, 2021 that Mexico
wouldn't be speeding up its timeline for reform because the schedule
was originally laid out to give every state ample time to plan for
implementation with the federal government, and moving states ahead of
schedule would disrupt those plans.
On a broader point, the inclusion of the Rapid Response Mechanism
raises serious questions about the role of the United States in
actively interfering with labor issues in other countries. There is
ample debate over whether we should be doing this at all. If the United
States thinks it should have a role to play here through trade
agreements, then it should invite reciprocal scrutiny of its own
domestic labor practices as well.
ENFORCEMENT
Enforcing international agreements is critical to securing the outcomes
of what was agreed among the parties. Yet, enforcement is often
incorrectly made synonymous with litigation. While trade disputes
garner a lot of media attention, and policy makers pursue disputes in
order to signal to their own public that they are taking some kind of
action, or to compel another party to adjust its behavior, disputes on
their own are an escalation of matters where diplomacy has either
failed, or not been tried. It is, in fact, the regular, day to day work
of implementation that can avoid the escalation of conflicts into
disputes.
Energy should therefore be spent on dispute avoidance and prevention
not only because disputes are costly and take many years to resolve,
but also because they can disrupt trust and amicable relations between
trading partners. The rhetoric of enforcement must therefore be used
cautiously and surgically. As the last four years of the previous
administration has shown us, treating your allies like your rivals only
serves to diminish our relationships and reduce the United States'
image in the world. To the extent that we can cooperate on solutions
diplomatically instead of racing to ``enforce'' through legal means can
therefore serve to neutralize tensions and produce mutually beneficial
outcomes.
As noted above, the Labor chapter's Rapid Response Mechanism should be
utilized with caution, and should also be carefully scrutinized by
Congress to ensure that it meets the goals laid out in Trade Promotion
Authority. This could assist Congress in crafting new guidelines in any
future Trade Promotion Authority bill.
There are also two disputes under Chapter 31, the state-to-state
dispute settlement chapter. The first is a dispute raised by the United
States (consultations began under the previous administration) on the
allocation of Canada's tariff rate quotas (TRQ) for dairy. Canada and
the United States should work to resolve this issue as soon as
possible, and Canada should ensure that its implementation of the dairy
TRQ is not in violation of the USMCA. The second is a dispute raised by
Canada against the United States regarding actions by the Trump
administration to levy safeguard tariffs of 18% under Section 201of the
Trade Act of 1974 on imports of crystalline silicon photovoltaic cells
and modules. Given the Biden administration's commitment to green
energy, it would be puzzling if tariffs on imports of solar products
from our closest ally would continue to be imposed, considering that
tariffs are born by consumers, and increasing the price of solar
products will simply decrease Americans' access to these technologies.
On the latter dispute, Congress should encourage the Biden
administration to lift the tariffs on Canada and to look for
opportunities to further integrate the North American energy market so
that it can become globally competitive.
Contact: [email protected].
______
Center for Fiscal Equity
14448 Parkvale Road, Suite 6
Rockville, MD 20853
[email protected]
July 27, 2021
Hon. Ron Wyden
Chair
Hon. Mike Crapo
Ranking Member
U.S. Senate
Committee on Finance
Washington, DC 20210
Regarding: Implementation and Enforcement of the United States-Mexico-
Canada Agreement: One Year After Entry Into Force--Comment for the
record
Dear Senators:
Just a quick note to remind you that Mexico and Canada have consumption
taxes and the United States does not. This complicates our trade policy
and makes such agreements a complicated mess favoring some industries
over others. Please see our usual analysis on consumption taxes and
trade.
Regarding Mexico, if we had the same arrangements with Canada on
temporary visas, agricultural workers could come in easily, send money
home and eventually return (as many do). These visas should also have
an overt path to residency after three renewals.
Best wishes,
Michael G. Bindner
Principal Consultant
Attachment--Trade Policy and Value-Added Taxes
Consumption taxes could have a big impact on workers, industry and
consumers. Enacting an I-VAT is far superior to a tariff. The more
government costs are loaded onto an I-VAT the better.
If the employer portion of Old-Age and Survivors Insurance, as well as
all of disability and hospital insurance are decoupled from income and
credited equally and personal retirement accounts are not used, there
is no reason not to load them onto an I-VAT. This tax is zero rated at
export and fully burdens imports.
Seen another way, to not put as much taxation into VAT as possible is
to enact an unconstitutional export tax. Adopting an I-VAT is superior
to it's weak sister, the Destination Based Cash Flow Tax that was
contemplated for inclusion in the TCJA. It would have run afoul of WTO
rules on taxing corporate income. I-VAT, which taxes both labor and
profit, does not.
The second tax applicable to trade is a Subtraction VAT or S-VAT. This
tax is designed to benefit the families of workers through direct
subsidies, such as an enlarged child tax credit, or indirect subsidies
used by employers to provide health insurance or tuition reimbursement,
even including direct medical care and elementary school tuition. As
such, S-VAT cannot be border adjustable. Doing so would take away
needed family benefits. As such, it is really part of compensation.
While we could run all compensation through the public sector.
The S-VAT could have a huge impact on long term trade policy, probably
much more than trade treaties, if one of the deductions from the tax is
purchase of employer voting stock (in equal dollar amounts for each
worker). Over a fairly short period of time, much of American industry,
if not employee-owned outright (and there are other policies to
accelerate this, like ESOP conversion) will give workers enough of a
share to greatly impact wages, management hiring and compensation and
dealing with overseas subsidiaries and the supply chain--as well as
impacting certain legal provisions that limit the fiduciary impact of
management decision to improving short-term profitability (at least
that is the excuse managers give for not privileging job retention).
Employee owners will find it in their own interest to give their
overseas subsidiaries and their supply chain's employees the same deal
that they get as far as employee ownership plus an equivalent standard
of living. The same pay is not necessary, currency markets will adjust
once worker standards of living rise.
Over time, ownership will change the economies of the nations we trade
with, as working in employee-owned companies will become the market
preference and force other firms to adopt similar policies (in much the
same way that, even without a tax benefit for purchasing stock,
employee-owned companies that become more democratic or even more
socialistic, will force all other employers to adopt similar measures
to compete for the best workers and professionals).
In the long run, trade will no longer be an issue. Internal company
dynamics will replace the need for trade agreements as capitalists lose
the ability to pit the interest of one nation's workers against the
others. This approach is also the most effective way to deal with the
advance of robotics. If the workers own the robots, wages are swapped
for profits with the profits going where they will enhance consumption
without such devices as a guaranteed income.
______
CropLife America
4201 Wilson Boulevard, Suite 700
Arlington, VA 22203
202.296.1585 phone
202.463.0474 fax
https://www.croplifeamerica.org/
Statement of Chris Novak, President and CEO
Thank you for the opportunity to provide written testimony to the
Senate Committee on Finance's hearing on ``Implementation and
Enforcement of the United States-Mexico-Canada Agreement: One Year
After Entry Into Force.'' CropLife America (CLA) represents the
manufacturers, formulators, and distributors of pesticides in the
United States. Our member companies produce, sell, and distribute
virtually all the vital and necessary crop protection products used by
farmers, ranchers, and landowners in every state. Our mission is to
help ensure growers and consumers have the technologies they need to
protect crops, communities, and ecosystems from the threat of pests,
weeds, and diseases in an environmentally sustainable way to support
healthy food, healthy people, and a healthy planet.
American farmers utilize pesticides to grow healthy and safe row crops,
tree nuts, fruits, and vegetables that are used as food, as well as
other farm products, including animal feed, fibers, lumber, and fuel
for Americans and consumers around the world. Without today's pesticide
technology, insect pests, weeds, and crop diseases would devastate crop
yields and quality, directly impacting the ability to feed consumers in
the U.S. and around the world. Moreover, pesticides protect public
health by helping control harmful insects such as rodents, mosquitos
and ticks.
Pesticides, in combination with tillage management and other
conservation practices, are necessary to meet our nation's nutritional
goals while simultaneously sequestering carbon and reducing greenhouse
gas emissions. We support a strong, science-based risk/benefit
regulatory system that ensures access to safe and effective tools while
also preserving and promoting biodiversity in the landscape.
USMCA
In 2019, Mexico was the second largest overall export destination for
U.S. agricultural products. It is a top-three export destination for
corn, soybeans, wheat, rice, dried beans, fruits, peanuts, sorghum,
vegetables, and crop seed. The previous North American Free Trade
Agreement (NAFTA) eliminated tariff barriers and allowed market access
with Canada and Mexico for U.S. agricultural goods. The United States-
Mexico-Canada Agreement (USMCA) created an opportunity to update the
25-year-old agreement, making important improvements to sanitary and
phytosanitary (SPS) measures, dispute settlement mechanisms, and other
areas impacting agriculture. Before and since the signing of USMCA,
however, we have seen a fundamental shift in the regulation of
pesticides in Mexico.
The Mexican government has moved away from a science- and risk-based
regulatory approach, invoked the precautionary principle as
justification for lack of scientific analysis, and ignored commitments
to their trading partners and the concerns of Mexico growers. It is our
belief that Mexico's actions violate both the letter and the intent of
the USMCA agreement.
Registration and Re-Registration of Pesticide Products
The Federal Commission for Protection against Sanitary Risk, known as
COFEPRIS, is the agency responsible for pesticide registrations in
Mexico. Over the past several years, even pre-dating USMCA
negotiations, the processing of applications for registration of new
pesticide products and renewal of existing registrations has virtually
ceased, causing serious disruptions. There are currently more than
2,000 applications pending. These delays have impacted the ability for
new innovations to be registered, directly impacting growers in Mexico,
and have cost CLA member companies a projected $492 million from 2015
through March of 2020. This is prejudicial to potential markets in
Mexico for crop protection innovations developed by U.S. companies and
delays or prevents the introduction of new lower risk products.
While some of the more recent delays can be attributed in-part to
understaffing and a focus on COVID response, there are indications that
many of the problems at COFEPRIS are further evidence of a fundamental
shift in Mexico's regulatory approach. Following a recent executive
decree in Mexico, discussed below, the agency has a lack of clarity
regarding the Lopez Obrador Administration's policy principles for the
regulatory process. In addition, a government reorganization in 2020
placed the former independent agency COFEPRIS under the supervision of
the Undersecretary of Prevention and Health Promotion in the Health
Ministry. This move heightens concerns that the agency's scientific
work could be further politicized.
Mexico Decree
In addition to these concerning shifts in the COFEPRIS registration
processes, the Mexican government has taken further action to move away
from a science and risk-based regulatory approach. In November 2019,
the Mexican Ministry of Environment and Natural Resources, known as
SEMARNAT, began denying import permits for the herbicide glyphosate.
SEMARNAT cited the precautionary principle, but offered no new
scientific evidence that would justify this de facto ban. In August
2020, the Mexican government requested comment on a draft presidential
decree that would mandate a four-year study of glyphosate. Ultimately,
however, the final presidential decree promulgated December 31, 2020
bans the importation, distribution, and use of glyphosate on a timeline
that is phased in by early 2024. The concept of a study and any further
scientific justification were abandoned in the final rule. This action
sets a dangerous precedent and leaves many unanswered questions
regarding implementation of the final decree.
The decree's use of the precautionary principle as justification for
the action is troubling and disregards Mexico's Sanitary and
Phytosanitary and Technical Barriers to Trade commitments under both
the USMCA and the WTO. The risk-based regulatory system that has been a
foundation for trade between the U.S., Mexico, and Canada relies upon
an understanding of how a product will be used in the environment. This
system is predicated on the idea that exposure, or the lack thereof, to
a product is just as critical in determining the safe use of this
product as any potential hazard associated with that product (e.g., the
toxicity of a chemical substance). The European Union's use of a
hazard-based approach is central to ongoing trade disputes between the
U.S. and the EU. Similar steps by Mexico could significantly imperil
exports of U.S. agricultural products to Mexico through unwarranted and
unjustified restrictions on allowable pesticide residues.
The decree asserts that ``different scientific investigations'' have
warned of harmful effects, yet only specifically mentions the 2015
monograph of the International Agency for Research on Cancer (IARC)
that designates glyphosate a ``probable carcinogen.'' The Mexican
government has not performed any new comprehensive risk assessment to
justify its import ban and glyphosate continues to be registered for
domestic sale and use in Mexico. The decree is not only contrary to the
reviews of Mexico's own regulatory body, but ignores the clear weight
of scientific evidence from regulatory bodies around the world,
including USMCA trading partners (Canada and United States), the
European Union, and others. In formulating the final decree, the
Mexican government ignored public comments from the Mexican grower
community describing the devastating impact on agriculture and food
production in Mexico that would result from a ban on glyphosate. The
decree not only threatens this important trading partnership, but also
undermines the integrity of scientific standards as the foundation of
the USMCA and as a foundation for global trade.
Other Concerns
Our concerns go beyond just this one chemical. As the former Secretary
of SEMARNAT stepped down from his position in 2020, his final speech
foreshadowed another decree that would ban imports of another 80
unspecified pesticides. While this potential decree has yet to appear,
we are concerned that the actions taken against glyphosate could be
used as a model for restricting other chemicals. SEMARNAT officials
have cited a list of 183 ``highly hazardous pesticides'' compiled by
the Pesticide Action Network as a likely list of the products to be
banned. That list includes many compounds that are commonly used by
U.S. producers, such as atrazine, 2,4D, neonic insecticides, pyrethroid
insecticides and triaconazole fungicides. The crop protection industry
is continually innovating and improving the safety of our products.
Innovative products approved through a risk-based regulation processes
should be available to producers in all the markets that supply U.S.
grocers and families, to support continuous improvements in food safety
and food security.
The decree raises several other concerns around worker safety,
environmental safety, and human health. In justifying the decree, the
President of Mexico suggested that farmers could hire more field
laborers to battle weeds with machetes, rather than rely on glyphosate.
This response not only demonstrates a profound disrespect for
farmworker safety, but also a lack of serious thought on the part of
Mexican authorities regarding viable alternatives for controlling pests
and protecting the health and safety of Mexico's food crops.
Another unintended consequence of removing regulated pesticide products
from farmers could be the aiding and abetting of counterfeit markets
for these pesticide products. In other markets that have banned
pesticides, such as the European Union, an illegal counterfeit market
has developed that is creating serious problems. For example, in Italy,
several regulated pesticide products were banned in 2009. Since then,
organized crime has moved in to fill the void with illegal counterfeit
products that are in use on some farms and have been seized by
authorities.
In Mexico this illegal activity is already taking place with certain
goods and services. According to a U.S. State Department report,\1\
``the involvement of transnational criminal organizations, which
control the piracy and counterfeiting markets in parts of Mexico and
engage in trade-based money laundering by importing counterfeit goods,
continue to impede federal government efforts to improve Intellectual
Property Rights enforcement.'' The potential for counterfeit pesticide
products of unknown content and quality to replace glyphosate or other
regulated chemistries would risk the health and safety of workers and
farmers in Mexico. Equally important, the potential use of counterfeit
products could jeopardize the safety of agricultural goods flowing from
Mexico into the U.S. The U.S. and Mexico should have a common interest
in ensuring food safety, worker safety, fair trade, and sound
regulatory policy. Mexico's actions not only undermine progress
promised under USMCA but jeopardize real progress in all of these
crucial areas.
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\1\ U.S. State Department, 2021 Investment Climate Statements:
Mexico, Section 5. Protection of Property Rights.
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Summary
The radical shifts in regulatory approach by Mexican authorities should
be concerning to the U.S., Canada and other countries who support
innovation in agriculture. If these issues go unchallenged, we fear it
will not only disrupt trade in agricultural chemicals, but could lead
to new restrictions on imports of agricultural products treated with
the banned substances. By moving away from a risk-based regulatory
system, innovation in agriculture is stifled--reducing farmer yields,
contributing to food loss, and impacting food security. This would also
impact the U.S. jobs that develop and manufacture innovative high-
quality agricultural inputs that support agricultural production at
home and around the world.
For a successful USMCA implementation, Mexico needs to be held
accountable to their trade commitments. We believe these recent actions
violate terms of the USMCA and WTO agreements and we are hopeful that
these issues will be resolved before going even farther in the
direction of similar policies that we've seen negatively impact U.S.
agriculture exports.
Thank you for this opportunity to comment on USMCA implementation and
enforcement.
______
National Automobile Dealers Association, National Independent
Automobile Dealers Association, and National Association of Auto
Auctions
The National Automobile Dealers Association (NADA), the National
Independent Automobile Dealers Association (NIADA) and the National
Association of Auto Auctions (NAAA) appreciate the opportunity to
provide this written testimony to supplement the record of the Finance
Committee's hearing to examine the implementation and enforcement of
the United States-Mexico-Canada Agreement (USMCA) and to highlight an
issue of interpretation that is disrupting used motor vehicle commerce
to the detriment of consumers in the United States.
NADA,\1\ NIADA,\2\ and NAAA \3\ are uniquely positioned to speak
definitively about used motor vehicle commerce in the United States.
NADA represents approximately 90 percent of the nation's 18,144
franchised new car and truck dealerships, which retail both new and
used motor vehicles and engage in motor vehicle service, repair and
parts sales. NADA's members collectively employ more than one million
individuals and in 2020 sold or leased 14.87 million new vehicles and
13.93 million used vehicles. NIADA represents approximately 14,000 of
the nation's independent used vehicle dealers. The independent dealers
retailed approximately 13.2 million used vehicles in 2020. NAAA's
membership consists of approximately 350 domestic and international
auctions with combined sales of 9.9 million vehicles and wholesale
revenue of more than $107 billion annually. New and used automobile
dealers, manufacturers, fleet operators, companies and financial
institutions all buy and sell at NAAA member auctions worldwide.
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\1\ National Automobile Dealers Association, 8484 Westpark Dr.,
Suite 500, Tysons, VA 22102.
\2\ National Independent Automobile Dealers Association, 4621 S.
Cooper St., Suite 131-524, Arlington, TX 76017.
\3\ National Auto Auction Association, 5320 Spectrum Drive, Suite
D, Frederick, MD 21703.
NADA, NIADA, and NAAA commend the Finance Committee for conducting an
oversight hearing on the implementation of USMCA and wish to highlight
an unwarranted interpretation that is resulting in the unexpected and
problematic broad-based imposition of tariffs on certain used motor
vehicle imports. In general, the following tariffs are imposed on
imported new vehicles: 2.5% on light-duty passenger vehicles, 25% on
light-duty trucks, and 4% on commercial vehicles. Prior to the USMCA
entry-into-force date, a used motor vehicle that was manufactured in
North America received tariff-free treatment under the North American
Free Trade Agreement (NAFTA) so long as it complied with the rules of
origin (ROOs) and other requirements in NAFTA when first produced and
---------------------------------------------------------------------------
sold as a new vehicle.
The implementation of USMCA has drastically changed the treatment of
imported used vehicles. The U.S. Trade Representative (USTR) and
Customs and Border Protection (CBP) are refusing to recognize the duty-
free treatment of NAFTA-compliant imported used vehicles. Instead, USTR
and CBP are interpreting USMCA to require the assessment of tariffs on
used vehicles manufactured before July 1, 2020, unless those vehicles
meet the new and significantly increased requirements of the USMCA.
This interpretation conflicts with the proper application of USMCA's
rules of origin and labor content value rules, which were clearly
designed to apply to only newly manufactured motor vehicles. Moreover,
there is no evidence to suggest that the parties to the agreement
intended to apply the USMCA rules to vehicles manufactured before and
imported after July 1, 2020. This improper interpretation is resulting
in an untenable, retroactive enforcement policy that defies the plain
meaning of USMCA.
Additionally, in practice, USTR's and CBP's retroactive application of
this purported standard is literally impossible to meet. Compliance
with ROOs under a trade agreement is a document-intensive process that,
of necessity, requires the prospective application of a standard. The
ROOs of NAFTA dictated the document production and record retention
regime that governed the import and export of vehicles while NAFTA was
in force, and the NAFTA ROOs differ significantly from the ROOs imposed
under USMCA. In addition to heightening the standards for ROO
compliance, the USMCA added novel requirements for labor value content
and regional metal which did not exist under NAFTA. As a result, the
documentation importers relied upon to comply with NAFTA is virtually
useless to comply with USMCA.
Under NAFTA, an importer could determine the duty status of a used car
by referring to the Vehicle Identification Number (VIN) to demonstrate
that the vehicle was manufactured in North America, but importers are
powerless to show that these NAFTA-compliant vehicles also comply with
the tariff preferences of USMCA. The necessary information simply does
not exist anywhere today and would be virtually impossible to create.
When NAFTA was in force, manufacturers used many second and third tier
suppliers that certified compliance with the then-current NAFTA ROOs,
but it is completely unrealistic to assume that even the manufacturers
could obtain an accurate, retroactive certification to the
significantly altered ROOs of USMCA that did not exist when the
vehicles were manufactured. The drafters of the USMCA could not
possibly have intended for motor vehicle manufacturers or third-party
importers to retroactively create records to demonstrate that NAFTA-
compliant used vehicles manufactured before July 1, 2020, are also
compliant with USMCA.
This unexpected and illogical interpretation is impacting the time-
honored used vehicle commerce between the United States, Mexico, and
Canada which has been a valuable source of supply for American
consumers. Historically, hundreds of thousands of used motor vehicles
manufactured in North America for the North American marketplace have
been imported or exported to the United States, Canada, and Mexico each
year. Applying tariffs on pre-USMCA, NAFTA-compliant used motor
vehicles will unnecessarily constrain legitimate importation and
unfortunately subject U.S. consumers to higher used motor vehicle
prices when the market for new and used motor vehicles already is
significantly supply constrained. Importantly, since many imported used
motor vehicles are purchased by lower income customers, the adverse
impact of these tariffs is unduly regressive.
To resolve this matter, USTR should be encouraged to expeditiously
reach an understanding with Canada for the tariff-free importation of
used motor vehicles manufactured in North America in compliance with
NAFTA before July 1, 2020. Alternatively, the USTR should be encouraged
to work with CBP to adopt a reasonable interpretation that, with
respect to used motor vehicles, the USMCA allows the dutiable status of
these vehicles to be determined based on only the ROOs and other
requirements that were in force as of the date they were manufactured.
Either result would eliminate the threat to consumers of exacerbated
supply constraints or increased prices.
Thank you for your consideration of our views on this important issue.
______
Ranchers Cattlemen Action Legal Fund
United Stockgrowers of America
P.O. Box 30715
Billings, MT 59107
406-670-8157
https://www.r-calfusa.com/
[email protected]
U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200
Dear Chairman Ron Wyden, Ranking Member Mike Crapo, and Members of the
Committee:
The Ranchers Cattlemen Action Legal Fund United Stockgrowers of America
(R-CALF USA) appreciates this opportunity to present this statement to
the U.S. Senate Committee on Finance regarding its July 27, 2021
hearing on Implementation and Enforcement of the United States-Mexico-
Canada Agreement: One Year After Entry Into Force.
R-CALF USA is the largest U.S. trade association that exclusively
represents United States cattle farmers and ranchers within the multi-
segmented beef supply chain. Its thousands of members reside in 45
states and include cow-calf operators, cattle backgrounders and
stockers, and feedlot owners. R-CALF USA also represents U.S. sheep
producers.
While several sectors of the U.S. economy report benefits arising from
the renegotiated U.S.-Mexico-Canada Agreement (USMCA), the agreement
has failed the United States cattle industry. More than any other
multilateral free trade agreement, the USMCA and its North American
Free Trade Agreement (NAFTA) predecessor have severely weakened the
United States' single largest segment of American agriculture--
America's family farm and ranch system of cattle raising.\1\
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\1\ See Annual cash receipts by commodity, U.S. and States, 2008-
2021F, Farm Income and Wealth Statistics, U.S. Department of
Agriculture (USDA) Economic Research Service (ERS), available at
https://data.ers.usda.gov/reports.aspx?ID=17845 (cash receipts from
cattle and calves ($66 billion in 2019) are higher than any other
single commodity).
The manifest proof of this claim is revealed by the three charts below.
Chart 1 shows the United States' value-based trade deficit in the trade
of cattle, beef, beef variety meat and processed beef with Mexico and
Canada.\2\ The U.S. value-based trade deficit has worsened considerably
since NAFTA, with the cumulative deficit since 1994 now at $40.1
billion. During the past seven years, while the relationship between
the value of domestic cattle and the value of retail beef has severed,
causing severe strain on U.S. cattle producers, the U.S. trade deficit
with Mexico and Canada increased to historically high levels. Since
2014, the U.S. sold on average less than $2 billion in cattle and beef
to Canada and Mexico, while it purchased over $4.4 billion on average
of the very same products from those two countries. In other words, the
U.S. imports from Canada and Mexico about two and one-half times the
value of beef and cattle that it exports to those countries.
---------------------------------------------------------------------------
\2\ Charts 1 and 2 were produced using the USDA Foreign Agriculture
Service's (FAS's) Global Agriculture Trade System (GATS) data
incorporating the six-digit harmonized tariff code subheadings
identified by the U.S. International Trade Commission (USITC) as
accounting for trade in beef, and subheadings for live cattle were then
added to this list. See Global Beef Trade: Effects of Animal Heath,
Sanitary, Food Safety, and Other Measures on U.S. Beef Exports, USITC
Publication 4033, September 2008, at 1-4, 1-5.
---------------------------------------------------------------------------
Chart 1
[GRAPHIC] [TIFF OMITTED] T2721.001
.epsChart 2 below depicts volume-based trade with Mexico and Canada
using the same cattle and beef commodities contained in Chart 1 above.
Chart 2 likewise reveals a horrendous volume-based deficit in the trade
of cattle and beef with Canada and Mexico, amounting to a cumulative
48.2-billion-pound deficit since NAFTA and a marked worsening during
the past several years. It shows that during the past seven years the
U.S. imported on average 2.7 billion pounds of cattle and beef from
Canada and Mexico while exporting less than 1 billion pounds of the
same products to those countries. In other words, the U.S. imports from
Canada and Mexico about three and one-half times the quantity of beef
and cattle that it exports to those countries.
Chart 2
[GRAPHIC] [TIFF OMITTED] T2721.002
.epsFrom 2012 to 2016, Australia was the largest exporter of beef and
veal to the United States, but from 2017 to the present, Canada
surpassed Australia as the largest exporter of beef and veal to the
United States.\3\ This means the United States' largest beef importer
is now a country that produces beef of comparable quality to U.S.-
produced beef--grain fed beef--which is a direct and indistinguishable
substitute for U.S.-produced beef.
---------------------------------------------------------------------------
\3\ See Beef and veal: Annual and cumulative year-to-date U.S.
trade (carcass weight, 1,000 pounds), USDA-ERS, available at https://
www.ers.usda.gov/data-products/livestock-and-meat-international-trade-
data/.
The trade in cattle and beef under the USMCA is so out of balance that
the United States cattle industry cannot benefit from beef exports to
Asia or other parts of the world. This is because the United States'
world beef and cattle exports are insufficient in both value and volume
to overcome the horrendous USMCA trade deficit. As depicted in Chart 3
below, the United States' world beef trade merely helps to mitigate
(i.e., reduce) the USMCA deficit, but does not overcome it.
Chart 3
[GRAPHIC] [TIFF OMITTED] T2721.003
.epsUsing 2020 as a comparative example, Chart 3 above reveals the
United States' volume-based world trade balance was a negative 1.5
billion pounds. But Chart 2 above reveals that the United States'
volume based USMCA trade balance alone was a negative 2.2 billion
pounds. Thus, the United States is unable to overcome its USMCA-based
trade deficit by trading with the rest of the world. This means, at
best, the United States engages in beef and cattle trade with the rest
of the world to help mitigate its USMCA trade deficit.
Also using 2020 as a comparative example, but this time to determine if
the USMCA's value-based trade deficit likewise surpasses the value of
the United States' world beef trade, data generated by the U.S.
Department of Agriculture Foreign Agricultural Service's Global
Agricultural Trade System show the United States' value-based world
trade balance was a negative $1.1 billion in 2020. But, again, as
revealed above in Chart 1, the United States' value based USMCA trade
balance alone that year was a negative $3.3 billion. Thus, in 2020 the
United States merely reduced its $3.3 billion USMCA trade deficit to a
$1.1 billion world trade deficit by trading with the rest of the world.
The U.S. live cattle supply chain--consisting of America's three-
quarters of a million family cattle farmers and ranchers--cannot be
expected to prosper when multinational beef packers, processors and
importers continually source greater quantities of undifferentiated
beef and cattle from Mexico and Canada. Yes, the multinational beef
packers, processors and importers are benefiting greatly from sourcing
more and more cattle and undifferentiated beef from Mexico and Canada--
as those imports are direct substitutes for U.S. cattle and beef and
act to leverage down domestic cattle prices. Thus, the multinational
companies' benefits come at considerable expense to United States
cattle producers.
Due to the cattle industry's inability to respond quickly to changes in
supply--a direct function of cattle having the longest biological cycle
of any farmed animal \4\ and the perishable nature of both fed cattle
and beef itself--imports of both beef and cattle effectively increase
supplies in the domestic market (and are direct, undifferentiated
substitutes for domestic production) and have a lasting impact on
domestic herd size, production potential, and economic opportunities
for participants in the domestic live cattle supply chain (i.e., for
independent cattle farmers and ranchers).
---------------------------------------------------------------------------
\4\ Economic Models of Cattle Prices, How USDA Can Act to Improve
Models to Explain Cattle Prices, U.S. Government Accountability Office
(formally the General Accounting Office) (GAO-020246, March 2002), at
30.
That undifferentiated beef and cattle imports from Canada and Mexico
function as direct substitutes for U.S. cattle and beef and cause the
exodus of U.S. beef cattle operations, shrinkage of the U.S. cattle
herd, and elimination of opportunities for aspiring cattle farmers and
ranchers was evidenced in the 2018 U.S. International Trade Commission
---------------------------------------------------------------------------
(USITC) investigation into the USMCA.
During the investigation, the North American Meat Institute (NAMI)
testified that, ``The Northwest region imports 227,000 head of Canadian
fat cattle per year representing approximately 19 percent of processing
capacity in the region. Additionally, another 55,000 of Canadian feeder
cattle are imported annually into Oregon, Washington, and Idaho,
representing 8 percent of the one-time [packing] capacity [in that
region].''\5\
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\5\ United States-Mexico-Canada Agreement: Likely Impact on the
U.S. Economy and on Specific Industry Sectors, November 16, 2018,
Investigation No. TPA-105-003, United States International Trade
Commission, Hearing Transcript, at 499-500.
The National Cattlemen's Beef Association (NCBA) testified that
``especially in the Pacific Northwest,'' imports of Canadian and
Mexican cattle ``have supplemented seasonal shortages in our herd and
helped our feed yards and packing facilities run at optimal
levels.''\6\
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\6\ Id., at 504.
Data show the number of beef cattle operations in the states of
Washington, Oregon, and Idaho (the Pacific Northwest or Northwest),
declined from 38,500 beef cattle farms in 1994, the year NAFTA was
implemented,\7\ to just 28,992 beef cattle farms by 2017, the latest
available census data.\8\ This represents a 25% decline in the number
of Pacific Northwest beef cattle farms and ranches under NAFTA.
---------------------------------------------------------------------------
\7\ See Cattle, USDA-National Agricultural Statistics Service
(NASS), February 1995, at 13, available at https://
downloads.usda.library.cornell.edu/usda-esmis/files/h702q636h/wm117r
357/bc386m73s/Catt-02-03-1995.pdf.
\8\ See Table 12, Cattle and Calves--Inventory, 2017 and 2012,
State Level Data, available for WA, OR, and ID, at https://
www.nass.usda.gov/Publications/AgCensus/2017/Full_Report/
Census_by_State/index.php.
Data also show the total number of beef cows in those same states
declined from 1.46 million head in 1994 \9\ to only 1.22 million head
in 2021,\10\ representing a 16% decline in the number of beef cows in
the states of Washington, Oregon, and Idaho under NAFTA.
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\9\ See Cattle, USDA-National Agricultural Statistics Service
(NASS), February 1995, at 5, available at https://
downloads.usda.library.cornell.edu/usda-esmis/files/h702q636h/wm117r
357/bc386m73s/Catt-02-03-1995.pdf.
\10\ See Cattle, USDA-NASS, January 2021, at 6, available at
https://downloads.usda.library.
cornell.edu/usda-esmis/files/h702q636h/n009ww19g/9880wj45t/
catl0121.pdf.
Thus, while the U.S. was importing 282,000 head of both fat cattle and
feeder cattle from Canada and/or Mexico into the Pacific Northwest
(this according to the NAMI testimony cited above), and producing
undifferentiated beef from those imported cattle, the domestic beef cow
herd in the Pacific Northwest shrank by about 240,000 head of cattle
and over 9,500 beef cattle farms and ranches exited the U.S. cattle
---------------------------------------------------------------------------
supply chain.
These data and admissions by both the NAMI and NCBA fully support R-
CALF USA's position that increased imports of cattle from which
undifferentiated beef is produced has substantively harmed the U.S.
cattle supply chain by displacing U.S. cattle operations and U.S.
cattle. While these empirical data provide specific evidence for the
Pacific Northwest, nationwide evidence of the shrinking numbers of
cattle farms and ranches and the declining number of cattle in the U.S.
herd provides every indication that this same import-related harm is
being exacted in every state.
This outcome of the USMCA--an agreement that facilitates unlimited and
undifferentiated imports of beef and cattle from Canada and Mexico--is
opposite of what needs to occur to strengthen the United States beef
supply chain. Only by making meaningful reforms to the USMCA can the
United States expect to begin rebuilding its continually shrinking U.S.
cattle and beef supply chain.
The imbalanced trade with Canada and Mexico under the USMCA is
contributing significantly to the inability of U.S. cattle producers to
expand production, or to remain profitable even in the wake of
increasing domestic beef demand, increasing beef consumption, and
increasing wholesale and retail beef prices. As a direct result, U.S.
cattle producers, their domestic live cattle supply chain, and the
rural communities they support are being irreparably harmed.
More recently--soon after the March 2020 outset of the COVID-19
pandemic--U.S. cattle producers, with perishable, slaughter-ready
cattle that needed to be marketed, could not get a bid for their cattle
from domestic beef packers for as long as seven weeks.\11\ Meanwhile,
the multinational beef packers continued importing tens of thousands of
head of slaughter-ready cattle from Canada,\12\ prompting R-CALF USA to
issue the warning that imports are displacing U.S. cattle producers'
access to their own domestic markets.\13\
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\11\ See We're fighting for a way of life: Pandemic causes Iowa
cattle farmers to lose money while consumers pay more, Donnelle Eller,
Des Moines Register (November 12, 2020), available at https://
www.desmoinesregister.com/story/money/business/2020/11/12/covid-19-
exposes-
dysfunction-cattle-industry-why-cattle-producers-losing-money-when-
consumers-paying/6076820002/.
\12\ Canadian cattle imported into the U.S. for immediate slaughter
at U.S. beef packing plants after the March 2020 onset of COVID-19
included 41.9 thousand in April, 47.7 thousand in May, 46.5 thousand in
June, 36 thousand in July, 32.3 thousand in August, 41.8 thousand in
September, and 47.4 thousand in October. See Cattle: Monthly U.S. trade
(head), Data Set, USDA ERS, available at https://www.ers.usda.gov/data-
products/livestock-and-meat-international-trade-data/livestock-and-
meat-international-trade-data/#Monthly%20U.S.%20Livestock
%20and%20Meat%20Trade%20by%20Country.
\13\ R-CALF USA: Imports Are Displacing U.S. Cattle Producers'
Access to American Markets, R-CALF USA, Tri-State Livestock News (April
25, 2020), available at https://www.tsln.com/news/r-calf-usa-imports-
are-displacing-u-s-cattle-producers-access-to-american-markets/#::text
=While%20widespread%20reports%20abound%20of%20American%20cattle%20produc
ers,cattle
%20producers%E2%80%99%20access%20to%20their%20own%20domestic%20market.
But issuing warnings do little for America's cattle producers unless
decision makers respond, which has not yet been the case. R-CALF USA
urges the U.S. Senate Committee on Finance to take decisive action to
rebalance the untenable cattle and beef trade imbalance memorialized
under the USMCA. At the very least, and as a first step, we urge you to
take steps to assist America's cattle farmers and ranchers by giving
them the ability to compete in their own domestic market by
differentiating their USA-produced beef from foreign beef and beef from
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foreign cattle.
Congress should move quickly and decisively to accomplish this by
introducing and passing new mandatory country-of-origin labeling
(mCOOL) legislation to require all beef in U.S. commerce to be
conspicuously labeled as to where the animal from which the beef was
derived was born, raised, and harvested.
Again, thank you for this opportunity and please let me know what
additional information you might need as you investigate this systemic
failure of the USMCA.
Sincerely,
Bill Bullard, CEO
[all]