USGC To USTR, ITC: Japan, EU Negotiations Should Win New Market Access

Trade negotiations with Japan and the European Union (EU) should address long-time market access challenges for U.S. grains and ethanol including tariff rates, regulatory synchronization and technical barriers, the U.S. Grains Council told the Office of the U.S. Trade Representative (USTR) and the International Trade Commission (ITC) in recently-submitted testimony and at hearings to prepare for the coming trade talks.

USGC Director of Trade Policy and Biotechnology Floyd Gaibler testified Monday at a USTR panel on priorities for the Japan talks, which will bring to the table the overall second largest buyer of U.S. feed grains in all forms and a country in which the Council has worked actively since the 1960s.

Gaibler said the coming negotiations with Japan should build on this deep relationship as well as the achievements of the Trans-Pacific Partnership (TPP) negotiations and the recently-signed U.S.-Mexico-Canada Agreement (USMCA).

First and foremost, the new U.S.-Japan agreement should ensure that U.S. feed grains and ethanol have full market access by countering preferential treatment from other regional and bilateral agreements Japan already has in place. For example, a new Japan-EU agreement offers lower tariffs on barley and sorghum from EU countries than on those commodities from the United States.

TPP included a strong sanitary and phytosanitary chapter that should be included in a new agreement, Gaibler told USTR panelists, as well as the first-ever biotechnology chapter in a U.S. trade agreement, which was subsequently improved upon by the USMCA text.

“Matching or exceeding market access from competing regional and bilateral agreements must be a key negotiating priority in the U.S.-Japan agreement,” he said. “At the outset, the negotiations should aim to eliminate or phase out all existing tariffs and tariff-rate quotas, and market access provisions with Japan should match or exceed those achieved under TPP.”

By volume, Japan is now the second largest overall buyer of U.S. corn and U.S. sorghum, the third largest buyer of U.S. barley and the ninth largest buyer of U.S. distiller’s dried grains with solubles (DDGS). Importantly, the country also recently modified its biofuels policy to allow U.S. ethanol to be used more widely as a feedstock for ETBE, a gasoline additive.

Gaibler is scheduled to testify at a USTR hearing on Friday and an ITC hearing on Monday on the coming EU talks, telling officials it is “fundamental” that food and agriculture issues be addressed in any new agreement, and that the product of those negotiations should build on understandings included in the former Transatlantic Trade and Investment Partnership (T-TIP) text and achievements in the USMCA.

“The U.S. and the EU need to reconsider a systematic approach to normalize trade,” he is slated to say, referencing regulatory barriers and legal challenges marring the grains trading relationship between the two markets. “Agriculture has to be included in these negotiations to meet that objective.”

Gaibler will tell USTR and ITC leaders the U.S. government should push the EU to eliminate the price reference system and commit to maintaining zero duties on U.S. corn, barley, sorghum, DDGS and other co-products. The negotiations should also seek to address the existing asynchronous approval process for biotech events and other regulatory challenges.

Sales of grains in all forms to EU countries jumped significantly in 2017/2018 to 4.47 million metric tons (176 million bushels), the most imports since 2010/2011. The European Union ranked as the largest market for U.S. corn gluten feed/meal, fourth largest buyer of both U.S. ethanol and U.S. sorghum, the seventh largest market for U.S. DDGS and the eighth largest buyer of U.S. corn.

To read the full testimony from the USTR hearing on Japan negotiations, click here. To read the full testimony from the ITC hearing on the EU talks, click here, as well as here for similar testimony submitted to USTR.