There are several issues on the 2023 US trade agenda for feed industry professionals to watch, according to Gina Tumbarello, Senior Director of International Policy & Trade for the American Feed Industry Association (AFIA).
Tumbarello was speaking at the International Poultry and Processing Expo (IPPE) in Atlanta, Georgia.
The two-year term of the 117th Congress of the United States has ended. As America enters 2023 and the first months of the new 118th Congress, one of the challenges is that bills from the last session have automatically expired, and they need to be re-introduced, a time-consuming process. In addition, President Biden, for the first time in his tenure, faces a chamber in Congress controlled by his opposing party.
Expired Generalized System of Preferences and Miscellaneous Tariff Bills
One is the expiration of the Generalized System of Preferences (GSP) as well as the Miscellaneous Tariff Bills (MTBs), both of which expired in January 2021.
US trade preference programs such as the GSP provide opportunities for many of the world’s poorest countries to use trade to grow their economies and climb out of poverty.
“The GSP promotes economic development, and it does that by eliminating tariffs on products from certain countries. So, it allows those developing countries better access to our market to help support their economies,” Tumbarello said. “And what that ultimately allows us to do is if we are importing goods or inputs in the products that we're making, and those developing countries have those products that we need, that allows us to obtain them at a lower tariff. We don't have that anymore.”
Established by the Trade Act of 1974, GSP promotes economic development by eliminating duties on thousands of products when imported from one of 119 designated beneficiary countries and territories.
"India now falls under that category which has been a big deal for some purchasing managers in the feed industry and the products they get from there," Tumbarello said.
The MTB is similar, but specific to products, not countries.
Miscellaneous Tariff Bills (MTBs) enact the temporary reduction or suspension of duties on certain imports or other technical corrections to the US Harmonized Tariff System.
"MTB’s identify certain product routes or product categories where the tariff would be reduced, regardless of where it's coming from, to really ensure that the US has good access to those inputs that we need in order to produce the products that we need or or to have access to products that we cannot produce domestically,” Tumbarello explained.
“These have an impact on the ability of developing countries to access the US market as well as the cost of importing certain goods,” Tumbarello said.
Trade Tensions with China
Another concern is growing trade tensions with China, as the new US Congress and administration continues to push back on issues such as forced labor, intellectual property, and attempts to circumvent anti-dumping and countervailing duties, Tumbarello said.
This has led to a trade standoff, with tariffs on both sides, and the question of how to reshape the relationship and address China's growing global influence, she explained.
“For a number of years now we've had challenges with China both politically, socially, and on the trade front and I don't envision this subsiding,” Tumbarello said. “The previous administration started the trade war. Tariffs were put on products, and it’s a standoff right now.”
Tarrif hikes in 2018 on US imports from China have raised direct and indirect costs for companies and prices for consumers, according to a recent retail study, Supply Chain Dive reported. Direct costs from the tariffs amounted to more than $1 billion annually each for apparel and furniture imports, as well as nearly $800 million in 2022 for travel goods and over $450 million in 2022 for footwear.
“How do we make sure we don’t fall in the shadow of China because they do have great influence globally. They are starting to negotiate their new trade and trade agreements. They want to get involved in trade agreements where we once were part of the negotiation and that we have pulled out,” Tumbarello explained.
Political tensions with China can have a significant impact on trade relations. The South China Sea and Taiwan are two key areas where tensions have been high in recent years.
“These tensions can lead to economic retaliation from China, such as targeting specific industries, like agriculture, for trade restrictions. It is important to keep in mind that trade and politics are closely interconnected, and that political tensions can have a direct impact on trade relations. Additionally, it's also important to consider that trade relationship with China is a two-way street, and any actions the US takes to restrict trade with China may also have a negative impact on US businesses and consumers,” Tumbarello said.
US Inflation Reduction Act
An issue causing tension between the United States and Europe is the US Inflation Reduction Act, which has triggered criticism that the United States’ subsidies to promote green energy is discriminating against European companies.
“This is $369 million in production and consumption subsidies and some Europeans believe that these subsidies are going to be at the expense of their ability to have market access to their consumers here in the US,” Tumbarello said.
Additionally, there needs to be a focus on trade agreements, not just for market access but also to set the tone for good trading practices and expectations, Tumbarello said.
The last time the US negotiated a free trade agreement was the Columbia, Panama, Korea agreement more than 10 years ago.
“They were signed under the Obama administration, but they weren't negotiated in the previous administration and trade agreements take a long time to happen. And that is a long time for other countries and competitors to negotiate their own trade agreements where we are no longer involved,” Tumbarello said. “And what that means is that our competitors get greater market access to our customers than we do.”
There are several key changes happening in the world of trade policy and trade agreements to make this look different now.
“The new Congress is looking at the free trade agreements and wants to see inclusion of additional things like environmental, climate, and sustainability initiatives as well as workforce and labor treatment, that that were not traditionally in the scope of free trade agreements, Tumbarello said.
A key change is a shift towards a more consumer- and worker-centric approach, which includes concepts like Friend-shoring and the prioritization of fair labor practices and environmental considerations when sourcing products.
Another change is a decrease in focus on trade by the current administration, as demonstrated by the limited mention of trade in the Biden-Harris economic blueprint and the lack of action on trade agreements, Tumbarello said.
Additionally, there is a push for reform of the World Trade Organization (WTO) to address issues such as subsidies and the functioning of the appellate body. The US is also playing a key role in this push for reform, as it is currently blocking the appointment of new members to the appellate body.
“These changes demonstrate a shift in the priorities and approach to trade policy and agreements, and it will be important to continue to monitor how these developments shape the future of trade,” Tumbarello said.