Canada, Mexico Under Fire at Senate Finance Committee Hearing on USMCA Implementation

North American Complication (Rubik's Cube w/ CA, MX, US Flags)

Trade Update • August 6, 2021

Canada and Mexico were the focus of sharp criticism from U.S. industry representatives and lawmakers at Senate finance Committee hearing last week addressing implementation and enforcement of the United States-Mexico-Canada Agreement since taking effect just over a year ago.

During the hearing, Senators heard testimony from organized labor, the dairy and biotech sectors, and other stakeholders about a range of trade irritants including Mexico’s biotech approval process and the ongoing dispute with Canada over dairy access.

“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,” said Committee Chairman Ron Wyden (D-OR) in his opening remarks.

Mexican Agricultural Biotechnology Commitments

USMCA contains provisions intended to facilitate cooperation on agricultural biotechnology, including that decisions regarding the approval of such technology be based on science. However, for largely ideological reasons, Mexico has refused to approve any biotechnology food or feed products since 2018 and last year issued a decree that would phase out the use of biotech in the food chain and prohibit imports of genetically modified corn by 2024.

According to testimony by Michelle McMurry-Heath, President and CEO of the Biotechnology Innovation Organization, since the election of President Andrés Manuel López Obrador in 2018, Mexico’s food and drug regulatory authority (COFEPRIS) has effectively shut down and the country’s regulatory system has become nonfunctional.

McMurray-Heath said that COFEPRIS’ lack of approval creates uncertainty for U.S. farmers and agricultural biotech companies and warned that continuation of the policy will result in a breakdown of the ability to innovate and export farm products to Mexico. She urged lawmakers to keep pressuring the U.S. Trade Representative to nominate a chief agricultural negotiator that would prioritize the issue and “show the Mexican government that we’re serious about these concerns.”

Dairy Concerns

Idaho dairy farmer and National Milk Producers Federation Executive Committee Chair Allan Huttema testified on the importance of holding Canada and Mexico accountable for their dairy market commitments under USMCA.

Huttema applauded the USTR’s recent decision to initiate the dispute settlement process with Canada, a move that “delivers a strong message against the erection of future barriers in Canada and other markets as well.” However, U.S. dairy producers remain concerned that Canada may be creating products, such as milk protein isolates and skim milk blends, to undermine its market commitments, he said.

Huttema urged lawmakers and the administration to step up monitoring and enforcement efforts regarding the implementation of Canada’s commitments on Class 7 pricing and export surcharges on dairy protein exports like skim milk powder, milk protein concentrate, and infant formula.

The Mexican government also came under fire for a recent “proliferation of poorly designed… regulations that have been disrupting trade.” Huttema cited the case of new standards for milk powder and cheese that are set to be further amended “with the purpose of adding additional obligations for the industry.”

U.S. producers are also concerned about Mexico’s “deteriorating approach” to geographic indicators. According to Huttema, Mexico’s misuse of GIs to create barriers to trade is symptomatic of broader efforts by the European Union to limit U.S. competition through the imposition of GI provisions in free trade agreements with U.S. trading partners, such as Canada and Mexico.

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