2016 Packed With Trade Priorities - and Potential Challenges

The presidential election season, a long list of priorities for the Obama Administration’s final year and uncertainty in the global trade community could pose challenges for several major trade issues that are otherwise poised for action in 2016.

Following the successful conclusion of the Trans-Pacific Partnership (TPP) negotiations last October, the Obama Administration has announced its intention to sign the agreement in February, and Congress has started its review process.

While support for the 21st Century agreement has been strong from the business and agricultural communities, there are areas of concern like autos, pharmaceutical patents and tobacco that could jeopardize its passage. In addition, opposition from presidential candidates in both parties casts a further shadow on when the agreement will be addressed in Congress.

Unless the administration works with Congress to ameliorate the impacts of these concerns and exerts political capital to get a Congressional vote this spring or early summer, the agreement may not be considered until after the elections, either in a lame duck session or under a new administration in 2017.

The U.S. Grains Council supports the agreement, which would enhance market access for U.S. grains and co-products; enhance science-based rules to address sanitary and phytosanitary (SPS) non-tariff barriers; and be the first trade agreement to include language to promote timely authorization of products that use modern biotechnology.

Likewise, a significant amount of political effort will be needed to conclude the ongoing U.S.-European Union Transatlantic Trade and Investment Partnership (T-TIP) negotiations by the end of 2016. Initiated in 2013 and with 12 negotiating rounds completed, a final agreement is not in sight.

Both the United States and EU have reaffirmed their goal of trying to complete the negotiations before the end of the Obama Administration. However, it remains to be seen if major progress can be made over the next few months. Most observers believe that if the agreement is not concluded by the end of 2016, there could be a lull of six months to a year while a new U.S. presidential administration gets its house in order. The next formal round of negotiations will occur in Brussels in late February.

T-TIP has the potential to provide an opportunity to address the challenges of asynchronous biotechnology approvals; establish a workable low-level presence (LLP) policy; and provide for a more transparent biotech approval process in the EU, all goals of the Council and its members. 

Further uncertainty has come about within the World Trade Organization (WTO) following a ministerial meeting last month in Nairobi, Kenya, particularly surrounding the future of the Doha Development Round of negotiations, which were first started in 2001.

The round was not formally ended, but participants did make clear there is disagreement among WTO members on whether to continue to negotiate even while there is a strong commitment to continue talks on the remaining Doha issues.

The ministers did reach an agreement on an export competition package that covered a prohibition on the use of export subsidies, new disciplines on the use of export credits, food aid, and state trading enterprises. However, concessions were made for developing countries to allow unlimited use of certain kinds of export subsidies covering transportation, handling and processing costs until 2023 based on a previously expired exemption. 

The elimination of export subsidies, particularly by developing countries will counter the impacts of displaced of U.S. grains and co-products in international markets. Export credits will be limited to 18 months, matching current limits under the U.S. Department of Agriculture’s export credit guarantee program (GSM-102) program. However, the potential use of transportation and handling subsidies by developing country competitors could displace U.S. grain and co-product exports in key markets.

On the positive side, the U.S. Congress included in end-of-year legislation a full repeal of the U.S. country of origin labeling (COOL) requirements for meat, avoiding trade retaliation by Canada and Mexico. In December, the WTO had authorized Canada to retaliate against the COOL law in the amount of $781 million and Mexico in the amount of $227 million.

Both countries were prepared to impose retaliation in the event Congress failed to fully repeal the COOL requirements, and both are awaiting a formal rule change by the U.S. Department of Agriculture before they take retaliation fully off the table. Had retaliation been taken, the U.S. grain industry would have likely felt the effects, with corn and ethanol on the list of products likely to be targeted by Canada