Background

International agricultural trade has been described as inexplicable, exasperating, and the most distorted segment of the global economy. Nevertheless, its importance grows as the agriculture market becomes increasingly globalized. The U.S. Department of Agriculture’s (USDA’s) Foreign Agricultural Service (FAS) reports that the United States is one of the world’s largest agricultural exporters, with more than 20% of domestic agriculture production volume being exported each year. International agricultural trade involves many different areas of international and domestic law, including international treaties and agreements, domestic trade laws, and general policy decisions. This overview focuses on these broad concepts in the large, intricate subject area of international agricultural trade.

International Treaties and Agreements

Introduction to International Trade Agreements

International trade is the exchange of goods and services between countries. There are two extreme views regarding the level of control placed on international trade: free trade and protectionism. Free trade is a market model in which trade in goods and services between or within countries flows without any restrictions imposed by government. Restrictions to trade include taxes and other measures, such as tariff and non-tariff trade barriers. In contrast, protectionism attempts to protect domestic businesses and living wages. The most common forms of protectionism are tariffs on imported goods, subsidies, and quotas.

The result of these competing views on international trade are different types of trade blocs. Trading blocs are types of intergovernmental agreements that are used to reduce or eliminate barriers to trade between member states. The first types of trade blocs are Preferential Trade Agreements (PTAs) or Regional Trade Agreements (RTAs). These exist when countries within a geographical region agree to reduce or eliminate tariff barriers on selected goods from member countries. Almost all countries are part of at least one RTA.

Another common type of trade bloc is Freed Trade Agreements (FTAs), which are a more specific type of a PTA or RTA. FTAs are created when two or more member countries in a region agree to eliminate barriers to trade on all goods coming from other members. The first major agreement involving the United States was the North American Free Trade Agreement (NAFTA) with Canada and Mexico in 1994, which was replaced by the United States-Mexico-Canada Agreement (USMCA) in 2020. PTAs really began to grow in number and scope after NAFTA and as of October 2021 there were 350 such agreements in place involving nearly all countries in the WTO.

Another type of trade bloc is a Customs Union (CU). A CU is a type of trade bloc that establishes a free trade area between members, plus a common external tariff for non-members. Essentially, participating countries will enter into a free trade agreement and apply a common external tariff schedule to imports from nonmember countries. An example is the Eurasian Customs Union, formed in 2010, and consists of the Russian Federation, Kazakhstan, Belarus, Kyrgyzstan, and Armenia.

Common Markets, also referred to as Single Markets, are yet another form of a trade bloc. A common market results when the integration of a group of national economies is taken beyond the stage of a customs union by the adoption of common economic policies and the facilitation of free movement of capital and labor. Essentially, all member countries trade freely in all economic resources, rather than limiting free trade to goods and services. Members countries may also adopt common policies affecting key industries, such as the Common Agricultural Policy (CAP). A primary example of a common market is the European Union single market. Other examples of common markets are the 12 Caribbean Nations that make up CAPRICOM, and the 10 members of the ASEAN Economic Community.

General Agreement on Tariffs and Trade (GATT)and the World Trade Organization (WTO)

Following World War II, the General Agreement on Tariffs and Trade (GATT), which was adopted in 1948, created a multilateral trading system that established rules among participating nations to assure the smooth and predictable international trade of goods. It also fostered the liberalization of trade through the reduction of protectionist policies. Countries that were members of GATT had been developing an international trade system through a series of trade negotiations, or rounds. The last GATT round of negotiations was the 1994 GATT, established during the Uruguay Round. In 1995, GATT was absorbed by, and became a component of the agreement establishing the World Trade Organization (WTO). WTO became a successor of GATT and assumed control of the multilateral trading system in 1995. Thus, GATT is still used by the WTO as the principal source of rules and agreements for its trading system.

Other WTO rules and agreements that provide the legal framework for international trade were also generated by negotiations between the member nations of the WTO. Generally, all WTO agreements on trade in goods apply to agriculture, however, where there is tension between these agreements, the Agreement on Agriculture will prevail. The Uruguay Final Act of 1994 also included such agreements related to agriculture such as the Agreement on Agriculture (AA), the Agreement on Sanitary and Phytosanitary Measures (SPS), and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The WTO also provides a forum for resolving trade disputes between nations. The AA established a Committee on Agriculture that oversees implementation of the AA and consults with members on any matter relating to implementing commitments under the AA. The Committee is made up of all WTO members and usually meets three or four times per year.

WTO Agreement on Agriculture

The GATT originally applied to the sale of goods, including agricultural products. However, many exceptions and exemptions for agriculture allowed protectionist policies to continue in the agricultural sector. As a result, international agricultural trade became distorted through the use of policy tools, such as import quotas and export subsidies. The AA was created by GATT member-states in an attempt to reduce trade distortion in the agricultural sector and entered into force in 1995.

The AA focuses on market access, domestic support, and export competition. Market access is addressed by “tariffication” which is a “tariffs only” approach to trade. Tariffication is the process of replacing import restrictions such as quotas and non-tariff measures with substantially equivalent tariffs. The agreement then calls for the reduction of tariff rates, to be phased in over a period of years. Developed countries must reduce their tariffs more quickly and to a greater degree than developing countries, and Least-Developed Countries (LDCs) are not required to reduce their tariffs. Special safeguards are also in place to protect countries from imports that fall below a set price and sudden surges in imports.

The AA also addresses domestic support policies that distort trade, such as subsidies. Trade distortion is defined as higher or lower prices and higher or lower quantities of goods being produced, bought, or sold than would exist in a competitive market. The AA distinguishes support programs that stimulate production directly, therefore distorting trade, from those that have no direct effect on trade by a categorical box system. Depending on whether policies affect trade and to what degree, they are often categorized as amber box, blue box, or green box policies.

The Amber box is defined in Article 6 of the AA as all domestic supports except those in the blue and green boxes. Amber box policies (a reference to the amber color of traffic lights signaling cars to slow down) have a direct impact on production, causing trade distortion, and are required to be reduced. The reduction is based on the total aggregate measure of support (AMS) that is calculated from each country’s level of support to agriculture in 1986-1988. The amber box category also exempts payments of up to 10% of output value, which are regarded as too small to warrant control (de minimis). Developed countries agreed to reduce their AMS by 20% over six years, starting in 1995.

Blue box policies, included in paragraph 5 of Article 6, are direct domestic support programs that require farmers to limit production. The main distinction between the Blue and Amber box policies is the production incentive to farmers. Amber box policies are domestic support programs that encourage increased production, while Blue box policies are direct payments to farmers to limit production. Additionally, blue box policies include payments for agricultural or rural development and a de minimis payment support that is 5% or less for developed countries and 10% or less for developing countries of the total value of the product being supported. Currently, there is no limit on spending for blue box subsidies. The Uruguay Round framework agreement defined overall trade-distorting domestic subsidies as the sum of amber box, blue box, and de minimis subsidies.

Green box policies, defined in Annex 2, are domestic support programs that only have a small impact on trade, if at all, and can be used without restraint. To qualify for this box, policies must be government funded rather than funded by charging consumers higher prices, and must not involve price support. These programs often include research, infrastructure development, and direct payments to farmers that do not increase production (also called “decoupled payments”), such as environmental payments or certain income support. The current round of negotiations includes discussion of direct payments to producers (paragraph 5), including decoupled income support (paragraph 6), and government financial support for income insurance and income safety-net programs (paragraph 7), to name a few.

In 2015, as part of the Nairobi Package Agreement, agricultural export subsidies were eliminated. The listed subsidies must be phased out over agreed upon time periods. Developed countries had to immediately eliminate any remaining scheduled export subsidy entitlements, developing countries had until 2018, and LDCs and net food-importing countries have until the end of 2030 to continue to benefit from the original provision which allowed export subsidies.

Agreement on Sanitary and Phytosanitary Measures

Another agreement that is important to international agricultural trade is the Agreement on Sanitary and Phytosanitary Measures (SPS). This agreement recognizes the importance of a nation’s right to protect food safety, animal health, and plant health; however, the agreement attempts to ensure that these laws are applied to protect health and safety rather than as trade barriers. The agreement attempts to use international standards if possible, and where such standards do not exist or when a member desires a higher standard, the standards that are used must be based on scientific justifications and risk assessments under procedures outlined within the SPS. One of the most acknowledged set of international standards applied in the SPS is Codex Alimentarius, which consists of food standards, guidelines, and related texts. For more information about Codex Alimentarius and other international agricultural standards, please visit the International Law and Organizations Reading Room.

Agreement on Trade-Related Aspects of Intellectual Property Rights

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) also has implications for agriculture. TRIPS is intended to regulate ideas and knowledge as part of trade and to provide society with benefits received from encouraging invention, innovation, and research. This WTO agreement mandates that members protect intellectual property either through patents or the development of other intellectual property rights protection systems. Intellectual property rights are especially important for agriculture in the areas of biotechnology, conventional species breeding, and agricultural input products such as pesticides and mechanical equipment. For a discussion of agricultural biotechnology issues, please visit the Biotechnology Reading Room.

WTO Agriculture Negotiations

WTO members started conducting negotiations, per Article 20 of the AA, to reform agricultural trade beginning in early 2000, and became part of the “Doha Round” at the 2011 Doha Ministerial Conference. As part of the Doha Round, members established a list of trade issues that must be overcome. The efforts to resolve this list of issues through negotiations now resembles lobbying in the United States because several countries have formed coalitions within the WTO to vote and speck together using a single coordinator or negotiating team.  The United States is listed as being a member of the following coalitions: Asian-Pacific Economic Cooperation forum (APEC), Friends of Ambition (NAMA), Friends of Fish (FOF), and Joint Proposal (in intellectual property).

Under Article 20 of the AA, these agriculture negotiations are part of an on-going commitment to reform agricultural trade. Thus, several important decisions have been made since 2000 that have had a significant impact on agriculture. Four of the most impactful decisions include the Bali Package, the Nairobi Package, the Buenos Aires Package, and the Geneva Package.

Bali Package: At the 2013 Ministerial Conference in Bali, Indonesia, ministers agreed on a package, including four decisions on agriculture:

1. The Ministers reached an agreement to negotiate a permanent solution to public stockholding for food security purposes. Until the permanent solution is reached, members are directed to refrain from using the WTO Dispute Settlement Mechanism to challenge a developing member’s compliance of its obligations in relation to trade. For example, members shall refrain from challenging breaches of domestic support commitments resulting from developing countries’ public stockholding programs for food security provided certain conditions are met.
2. The package also called for more transparency in tariff (or tariff-rate) quota administration to prevent governments from creating trade barriers by changing how they distribute quotas among importers.
3. The Package instituted an expansion of the list of “General Services” that qualify for Green Box support. These services now include spending on land use, land reform, water management, and other poverty-reduction programs.
4. Finally, the Package established a declaration to reduce all forms of export subsidies and to enhance transparency and monitoring.

Nairobi Package: At the 2015 WTO Nairobi Ministerial Conference, WTO members reached many decisions:

1. First, members decided to eliminate agricultural export subsidies and set disciplines on export measures that have an equivalent impact on trade. Developed countries are required to eliminate export subsidies as soon as possible, except for a few agriculture products. Developing countries were given a longer time, but are also required to eliminate export subsidies. This decision was aimed at achieving the sustainable Development Goal on Zero Hunger.
2. Additionally, WTO members agreed to find a permanent solution to developing countries’ use of public stockholding programs for food security purposes.
3. Under this Package, Ministers also agreed to continue negotiations on a special safeguard mechanism that would allow developing countries to temporarily raise tariffs on agriculture products in cases of import surges or price falls.
4. Cotton played an especially important role, with the Nairobi Ministerial Decision on Cotton including provisions on improving market access for least-developed countries, reforming domestic support and eliminating export subsidies.

Buenos Aires Package: At the 2017 WTO Buenos Aires Ministerial Conference, WTO members continued negotiations on several provisions related to agriculture discussed at prior Minsterial Conferences:

1. Members continued to work on proposals related to public stockholding programs. At the Ministerial Conference, four proposals were on the table. Two of the proposals suggest exempting public stockholding from trade-distorting domestic support. The other two proposals follow the decision made in the Bali Ministerial Conference.
2. Members continued negotiations on reducing domestic subsidies. None of the proposals suggested at the Ministerial Conference had enough support to become a permanent solution.
3. Members continued negotiations on domestic support for cotton and improvements in cotton development assistance.
4. Members agreed to come to a decision on fisheries subsidies by the 2019 Ministerial Conference. The negotiations should work toward prohibiting certain forms of fisheries subsidies. Members also recommitted to implementing notifications requirements to other members of subsidy programs under Article 25.3 of the Agreement on Subsidies and Countervailing Measures.

Geneva Package: At the 2022 WTO Geneva Ministerial Conference, ministers agreed on a package addressing food insecurity, fisheries subsidies, and sanitary and phytosanitary measures:

1. Members agreed to exempt the World Food Programme food purchasing program for humanitarian purposes from export prohibitions and restrictions.
2. Members adopted a ministerial declaration on the emergency response to food insecurity to ensure that food insecurity is addressed while also keeping trade open and transparent.
3. Members adopted a new agreement on fisheries subsidies applying to marine wild capture fishing and fishing related activities at sea. The agreement prohibits subsidies contributing to illegal, unreported, and unregulated fishing, or subsidies regarding overstocked fish.
4. Members agreed to a work programme to assess the implementation and application of sanitary and phytosanitary measures agreement. The committee will report the findings at the next Ministerial Conference.

International Dispute Resolution

WTO Dispute Resolution System

The WTO provides a forum for dispute resolution when disagreements inevitably arise between trading nations. Often agricultural trade issues center upon alleged trade-distorting subsidies. The WTO attempts to provide fast, equitable, and mutually acceptable resolutions to disputes between trading nations. Countries are encouraged to settle disputes between themselves and are permitted to do so during any portion of the formal dispute resolution process. Only the member governments of the WTO can participate in disputes as parties or as third parties. The formal process has specific deadlines, but these may be changed by agreement of the parties. The process is designed to take one year without appeal or one year and three months with appeal.

Settlement of any dispute goes through several stages. The first stage is consultation and mediation between the disputing countries. If mediation and consultation fail to resolve the issue, the next step is the empaneling of a group of experts to review the dispute and prepare a report for the Dispute Settlement Body (DSB), which is the full membership of the WTO. The panel reviews each country’s case in writing and then a series of hearings is held. After the hearings, a first draft of the panel’s report, including the facts and arguments, is submitted to the parties for comment. Next, an interim report is prepared that includes facts, arguments, findings, and conclusions for review by the parties. After review, a final report is submitted to the parties, and three weeks later it is submitted to the entire body of the WTO. Unless rejected by a consensus of the DSB, a report becomes a ruling automatically after 60 days.

Both parties to a dispute may appeal a report. Appeals must be based on legal issues and cannot open new issues or review existing evidence. The appeal is heard before three members of the seven-member Appellate Body. The Appellate Body consists of individuals with legal or international trade backgrounds who are not affiliated with any government. The members of the Appellate Body serve four-year terms. The Appellate Body’s report will affirm, modify, or reverse the legal findings and conclusions of the panel’s report. The DSB must then accept or reject the report.

If a country loses a dispute, it is expected to change its laws or policies rapidly to conform to WTO agreements and the dispute ruling. If the appropriate changes are not adopted within a reasonable time period, the complainant may request negotiations for compensation. It is generally understood that compensation is to be offered to all the members of the WTO, not only to the winning party. Usually, compensation involves the lifting of trade barriers (e.g., tariff reduction, increase of import quotas) by the losing party. Nevertheless, compensation is a rare event because the prevailing party must agree to be compensated and to the amount thereof.

If satisfactory compensation is not agreed upon within 20 days after the expiration of the reasonable time period, the complaining party may request countermeasures. Retaliation is limited at first to the same sector. If the complaining party considers the retaliation insufficient, it may seek retaliation across sectors. The DSB “shall grant authorization to suspend concessions or other obligations within thirty days of the expiry of the reasonable time unless the DSB decides by consensus to reject the request.” The defendant may object to the level of suspension proposed. “The original panel, if members are available, or an arbitrator appointed by the director-general” may conduct arbitration.

The WTO’s last resort-countermeasure for enforcement has been used several times in agricultural dispute cases.  In many such cases, arbitration is requested on the level of suspension, and the original panel acts as arbitrator.

USMCA Dispute Resolution System

The principal dispute settlement mechanisms of the USMCA are found in Chapter 10, Chapter 14, and Chapter 31.

Chapter 10: Antidumping and Countervailing Duty Determinations

Article 10.12 establishes a mechanism to provide an alternative to judicial review by domestic courts of final determinations in antidumping and countervailing duty cases, with review by independent binational panels. A Panel is established when a Request for Panel Review is filed with the Secretariat by an industry asking for a review of an investigating authority’s decision involving imports from a Party to the Agreement. In the United States, the investigating authority is the International Trade Administration which makes dumping and subsidy determinations, while the United States International Trade Commission conducts injury inquiries.

Although Chapter 10 panel decisions are binding, there is one level of review of binational panel decisions that a Party to the Agreement may initiate in extraordinary circumstances. This is known as the Extraordinary Challenge Committee (ECC) procedure. The challenge is not an appeal of right but a safeguard to preserve the integrity of the panel process. If either government believes that a decision has been materially affected, by either a panel member having a serious conflict of interest, or the panel having departed from a fundamental rule of procedure or having exceeded its authority under the Agreement, either government may invoke review by a three-person, binational Extraordinary Challenge Committee, comprised of judges and former judges. ECC decisions, like Chapter 10 binational panel decisions, are binding as to the particular matter addressed. Article 10.13 provides a mechanism for safeguarding the panel review system. Under this article, a three-member special committee may be established to, among others, review allegations of one Party that the application of another Party’s domestic law has interfered with the proper functioning of the panel system.

Chapter 14: Settlement of Disputes Between a Party and an Investor of Another Party

Annex 14-C addresses the transition between NAFTA to USMCA regarding “Legacy Investment Claims and Pending Claims.” Under NAFTA, a NAFTA investor who alleged that a host government had breached its investment obligations under Chapter 11 could, at its option, have had recourse to one of several multilateral arbitral mechanisms. Under the USMCA, investor-State arbitration is limited to the United States and Mexico. Because there are no other investment agreements with investor State dispute settlement (ISDS) provisions in force between the United States and Canada, investors from Canada or the United States will not have access to investor-State dispute resolution against those countries. Access to ISDS for disputes between Canadian or Mexican investors and Mexico or Canada, respectively, will be possible under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the “CPTPP”), which entered into force on December 30, 2018, but not under the USMCA.

Under the USMCA a privileged regime applies to foreign investors that are “party to a covered government contract” and belong to five “covered sectors”: (i) oil and gas; (ii) power generation; (iii) telecommunications; (iv) transportation; and (v) infrastructure. Investors under this privileged regime can enforce substantially the same investment protections available under NAFTA through the USMCA’s ISDS procedures. Likewise, largely the same jurisdictional hurdles and waiting periods that applied under NAFTA will apply under the USMCA to privileged disputes. A less favorable regime applies to all other foreign investors under the USMCA.

Nonprivileged investors can only access the USMCA’s ISDS system to enforce claims for (i) direct expropriation and (ii) national treatment and most favored nation treatment (principle of nondiscrimination), with the broad exception of claims on “the establishment or acquisition of an investment.” Claims for indirect expropriation (substantial interference without a direct taking of property) and minimum standard of treatment—which includes fair and equitable treatment and full protection and security—have to be advanced by the investor’s home State using the USMCA’s State-to-State dispute settlement mechanism or directly brought by the investor before the host State’s courts. Nonprivileged investors must first obtain a final decision from the local courts of final appeal or defend their claims in local courts for 30 months before initiating arbitration, unless such action would be “obviously futile.” Nonprivileged investors must submit their claims to arbitration within four years of having acquired either actual or constructive knowledge of the host State’s breach and the loss or damage incurred. Given the 30-month requirement to litigate before local courts, in practice this limitation means that investors who are not part of the privileged regime have only 18 months to submit their claims to national courts.

The USMCA will not affect ongoing NAFTA arbitrations. In addition, investors will be able to file new NAFTA claims within three years of NAFTA’s termination, provided the dispute arises out of “legacy investments”—that is, investments that were “established or acquired” when NAFTA was still in force and that remained “in existence” on the date the USMCA entered into force. As noted, after the three-year window for NAFTA-protected legacy investments expires, there will no longer be an ISDS system between Canada and the United States.

Chapter 31: Institutional Arrangements and Dispute Settlement Procedures

The dispute settlement provisions of Chapter 31 are applicable to disputes (with certain exclusions) regarding: the interpretation or application of the Agreement; a Party’s failure to carry out an obligation under the Agreement; an actual or proposed measure of a Party that another Party believes is or would be inconsistent with an obligation under the Agreement; and the nullification or impairment of benefits that a Party could reasonably have expected under the Agreement. The steps set out in Chapter 31 are intended to resolve disputes by agreement, if at all possible. The process begins with government-to-government (the Parties) consultations. If the dispute is not resolved, a Party may request the establishment of a five-member panel. The disputing Parties may also agree to a panel comprised of three members.

Pursuant to the Agreement, the Parties have established several rosters of individuals from which panelists are appointed to settle disputes. Currently, there are Agreement rosters (one per country) for Chapter 10 (Antidumping and Countervailing Duty Matters and Extraordinary Challenge Procedure) and Chapter 31 (for General State to State, for the Rapid Response Labor Mechanism).

When a binational dispute arises under Chapter 10, a panel of five members is selected by the involved governments. Each government in the dispute (through its trade minister) appoints two panelists, in consultation with the other involved government (Chapter 10 panels are always binational in composition). The involved Parties normally shall appoint panelists from the roster, but are not required to do so. The fifth panelist is to be chosen by agreement between the governments, but failing this the government that gets to select the fifth panelist is determined by lot (such as a coin toss). On appointment of the fifth panelist, the panelists shall promptly appoint a chair from among the lawyers on the panel by majority vote of the panelists. If there is no majority vote, the chair shall be appointed by lot from among the lawyers on the panel. In the case of an ECC or Special Committee procedure, each involved Party shall select one member from the roster established under Annex 10-B.3(1) and the involved Parties shall decide by lot which of them shall select the third member from this roster.

For a general State-to-State dispute under Chapter 31, the disputing Parties shall endeavor to agree on the chair of the panel within 15 days of the delivery of the request to establish a panel. The chair may be a citizen of a USMCA Party or any other country. If the disputing Parties are unable to agree on a chair, there is a process set out in Chapter 31 to do so. For general State-to-State disputes with two disputing Parties, each disputing Party must select two panelists who are citizens of the other disputing Party. For general State-to-State disputes with more than two disputing Parties, the responding Party must select one panelist who is a citizen of one complaining Party and a second who is a citizen of the other complaining Party. The complaining Parties must select two panelists who are citizens of the responding Party. If a disputing Party fails to elect its panelists within 15 days of the selection of the chair, there is a process set out in Chapter 31 to do so.

For disputes under Chapter 31’s Canada-Mexico Facility-Specific Rapid Response Labor Mechanism or United States-Mexico Facility-Specific Response Labor Mechanism, the Secretariat selects by lot one panelist from the complainant Party list, one from the respondent Party list, and one from the Joint List, within three business days from the date of a request to establish a panel. Prior to being nominated to a panel, candidates must complete an availability and a Disclosure Statement. The Code of Conduct is fundamental to the panel process. A governing principle is that candidates, panelists, and their assistants and staff must disclose any interest, relationship or matter that is likely to affect their independence or impartiality or that might create an appearance of impropriety or bias. Agreement panelists and committee members are not permanent arbitrators, but are appointed on an ad hoc basis.

Chapter 10 panels review final antidumping (AD) and countervailing duty (CVD) determinations solely to determine, based on the administrative record, whether the relevant administrative agency applied its national AD/CVD laws correctly. The panels will employ the same standard of review and the same general legal principles, as would a domestic court in the country where the determination was made.  The decision of a panel under Chapter 10 is binding. In its decision, a panel may do one of two things. It may uphold the final determination, or it may remand it to the investigating authority. If remanded, the panel may issue a second decision on the agency’s determination on remand. A panel report under Chapter 31 contains: (a) findings of fact; (b) determinations of whether: the measure at issue is or would be inconsistent with a Party’s obligations under the Agreement or nullifies or impairs benefits that a complaining Party or Parties could reasonably have expected under the Agreement; or that a Party has otherwise failed to carry out its obligations under the Agreement; (c) any recommendations the panel might offer to resolve the dispute, if the disputing Parties have jointly requested them; and (d) the reasons for the panel’s findings and determinations.

International Arbitral Mechanisms and Alternative Dispute Resolution

Dispute settlement between private parties is usually referred to alternative dispute resolution (ADR). International ADR mechanisms are available to private parties of any country if the parties have a specific ADR clause in their private contracts or explicitly agree to use international ADR mechanisms to settle their dispute. The two most commonly used forms of ADR are mediation and arbitration.

Mediation is a dispute settlement, typically in a private and confidential forum, with an impartial third party, a mediator, who facilitates communication between the parties. In mediation, the parties themselves are the decision-makers, while the mediator’s role is to assist them in achieving a settlement of the dispute. The mediator seeks to focus the parties on the critical issues in dispute and on the interests of each party in order to achieve a settlement. The mediator may propose settlement options for the parties to consider, but the recommendations of the mediator are not binding on the parties. Mediation settlement becomes binding only after all the parties to mediation sign the final settlement agreement.

Unlike mediation, arbitration results in an award that is binding on the parties. Depending on the arbitration mechanism and the provisions of the arbitration clause, the decision may be rendered by one or three arbitrators. If a losing party does not comply with the arbitration award, generally the award can be enforced by the domestic courts that have jurisdiction over that party. Enforcement of international arbitrations is also ensured by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), which was widely adopted by many countries.

International law recognizes institutional arbitrations (conducted by permanent organizations) and ad hoc arbitrations (not based on any institution and fully dependent on parties and their attorneys). Some institutional arbitrations involve states as parties to arbitration along with private parties, such as the Permanent Court of Arbitration (PCA) in The Hague and the International Center for the Settlement of Investment Disputes (ICSID). Other institutions include organizations that address arbitrations in a particular industry or concerning a particular topic, such as the World Intellectual Property Organization (WIPO) Arbitration and Mediation Center. Other arbitration institutions include the International Chamber of Commerce (ICC) in Paris, the London Court of International Arbitration (LCIA), and the American Arbitration Association (AAA).

For ad hoc arbitrations, when the parties are willing to arbitrate without the use of any international institution, the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules were adopted in 1976. In 1985, the UNCITRAL also drafted the UNCITRAL model law, which serves as the basis of many countries’ arbitration legislation. For instance, at least five states in the United States (including California, Connecticut, Illinois, Oregon and Texas) have based their arbitration laws on the model law.

For more information on alternative dispute resolution in both domestic and international contexts, please see the Alternative Dispute Resolution Reading Room.

United States Trade

U.S. Regional and Bilateral Trade Agreements

The United States has trade agreements with individual countries and multiple countries within a region, in addition to broad agreements from the WTO and GATT negotiations and the USMCA. These agreements may be free trade agreements that eliminate tariff and non-tariff barriers affecting trade between the parties to the agreement, or they may be agreements that address specific issues or products such as lumber, poultry, or rice.

The United States-Mexico-Canada Agreement (USMCA) is a free trade agreement between the United States, Mexico, and Canada. The USMCA is essentially an updated version of the North America Free Trade Agreement (NAFTA). NAFTA was a free trade agreement between the United States, Canada, and Mexico that removed most of the barriers to trade between the three countries. This was done through various measures, such as granting most-favored-nation status to all signers. That means that each country must be treated equally regarding the terms of trade between trading partners. NAFTA also essentially eliminated or reduced many tariffs on exports and imports between the three countries. Tariffs are taxes used to make foreign goods more expensive. NAFTA ensured duty-free and reduced duty access for a vast range of commodities, such as agricultural goods, automobiles, and clothing.

The USMCA is a renegotiation of NAFTA, adopting most of the original free trade agreement, deviating in only a few areas. The adoption of the USMCA by all three countries guarantees that markets in Mexico and Canada will remain free from tariffs and other trade barriers for famers in the United States. Under the USMCA, all agricultural products that had the zero-tariff treatment continue to have zero tariffs. NAFTA did not eliminate all tariffs on agricultural trade between the United States and Canada and the USMCA provides new market access opportunities for both countries. There are several new and modified key provisions that are important to those involved in agriculture. These provisions include biotechnology, geographical indications, sanitary and phytosanitary measures, dairy, poultry and eggs, wheat, and labor.

The United States has entered into free trade agreements with 20 countries, including, Australia, Panama, Chile, Colombia, Peru, Israel, Korea, Singapore, Bahrain, and a group of smaller developing countries under the Dominican Republic-Central America Free Trade Agreement.

Domestic Trade Laws

Many domestic trade laws impact international agricultural trade. When goods are imported into a country, the goods must generally meet all legal requirements of the importing country to gain entrance to that country. These laws fall into many categories including labeling, packaging, chemical residue tolerances, food safety laws, quotas, and tariffs. WTO member countries generally structure their domestic laws to meet their international obligations.

Under the U.S. Constitution’s Commerce Clause, Congress has exclusive power to regulate international trade. International agricultural trade is regulated by many federal laws. One Federal law that can have the greatest impact on agricultural trade is the Farm Bill, which is supposed to be revised and renewed every 5 years. For example, the 2002 Farm Bill caused an uproar by creating the country-of-origin labeling (COOL) requirement that certain imported agricultural commodities must bear a label at the retail level indicating their source country. A provision to require country of origin labeling for meat, fish, fruits, vegetables, and other products was also included in the 2008 Farm Bill. For a discussion of country-of-origin labeling, please visit the Country of Origin Labeling Reading Room.

Generally, agricultural products imported into the United States are subject to the same requirements as domestic agricultural products, except for import duties, some grade and quality standards, and health restrictions. The U.S. Department of Homeland Security’s Bureau of Customs and Border Protection (CBP) works with domestic agencies such as the Food and Drug Administration (FDA) and the USDA to enforce regulations covering imported agricultural products.

Under federal legislation, the FDA is responsible for food safety except for meat, poultry, and eggs. The FDA protects consumers from food that is impure, unsafe, or fraudulently labeled. The USDA’s Animal and Plant Health Inspection Service (APHIS), Food Safety Inspection Service (FSIS), Grain Inspection Packers and Stockyards Administration (GIPSA), Federal Grain Inspection Service (FGIS), and Agricultural Marketing Service (AMS) regulate imported agricultural products under the authority of federal laws.

APHIS regulates animal and plant health. Imported agricultural products are examined for potential quarantine, humane treatment, and control of pests and diseases. The FSIS ensures that meat and poultry products are safe, wholesome, and accurately labeled. GIPSA and the FGIS develop and maintain standards and inspections for domestic and export grain and work to increase international marketing of U.S. grain. The AMS helps to maintain a quality food supply through application of quality standards, grading, and certification. Some imported fresh foods such as fruits, vegetables, and specialty crops must meet certain standards and grades to be sold in the United States.

The Environmental Protection Agency (EPA) also impacts international agricultural trade through pesticide regulation. New pesticide safety regulations and allowable pesticide residue levels in food are established by the EPA and then enforced by the FDA. U.S. Customs and Border Protection (CBP) assists the other agencies with enforcement of the relevant laws on imported products at the port of entry. It also assesses and collects the necessary tariffs on imported goods.

Other domestic agricultural laws may impact trade indirectly. For example, domestic commodity price support programs and export subsidies for agricultural commodities can distort trade. These laws can cause commodity prices to be lower on the world market than they would be without subsidies. WTO member nations are restricted in the type and number of subsidies that they may use.

U.S. Trade Policy Decisions

Government policy plays a key role in international agricultural trade. The U.S. Congress’s role is to pass trade legislation, which includes establishing import barriers, export restrictions, export promotion programs, and ratification of U.S. treaties, among other things. The main duty of the executive branch is to implement the laws and regulations of the United States, administer the functions of the government, and conduct foreign relations and make treaties with foreign nations. Thus, the executive branch plays an important role in policy decision-making by implementing trade laws passed by Congress as well as negotiating international trade arrangements. A number of government agencies at the executive level have jurisdiction over some aspect of international trade, including the U.S. Trade Representative (USTR), the Department of Commerce, the Food and Drug Administration, U.S. Customs and Border protection, the Department of Agriculture, the Department of State’s Bureau of Economic and Business Affairs, the Federal Trade Commission, the International Trade Commission, and the Consumer Product Safety Commission.

U.S. International Trade Commission

The United States International Trade Commission (USITC) is an independent, quasi-judicial federal agency with broad investigative responsibilities on matters of trade. The agency investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations. The Commission also adjudicates cases involving alleged infringement by imports of intellectual property rights. Through such proceedings, the agency facilitates a rules-based international trading system. Major responsibilities of the USITC are to (1) administer U.S. trade remedy laws within its mandate in a fair and objective manner; (2) provide the President, the USTR, and Congress with independent analysis, information, and support on matters of tariffs, international trade, and U.S. competitiveness; and (3) maintain the Harmonized Tariff Schedule of the United States (HTS). One example of an ongoing USITC investigation is “Global Beef Trade: Effects of Animal Health, Sanitary, Food Safety, and Other Measures on U.S. Beef Exports,” instituted in September, 2007. For more information, please see the official USITC website.

U.S. Trade Representative’s Office

The Office of the U.S. Trade Representative (USTR) is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries. It is headed by the U.S. Trade Representative, a Cabinet member who serves as the President’s principal trade advisor, negotiator, and spokesperson on trade issues. The USTR is part of the Executive Office of the President. The USTR’s primary responsibilities include coordinating trade policy, resolving disagreements, and framing issues for presidential decisions.

The USTR consults with other government agencies on trade policy matters through the Trade Policy Review Group (TPRG) and the Trade Policy Staff Committee (TPSC). These groups, administered and chaired by the USTR and composed of 19 Federal agencies and offices, make up the subcabinet level mechanism for developing and coordinating U.S. government positions on international trade and trade-related investment issues.

The final tier of the interagency trade policy mechanism is the National Economic Council (NEC), chaired by the President. The NEC Deputies’ Committee considers memoranda from the TPRG, as well as important or controversial trade-related issues.

There is also an outside advisory committee system, which consists of three tiers: the President’s Advisory Committee for Trade Policy and Negotiations (ACTPN), which considers trade policy issues in the context of the overall national interest; four policy advisory committees, including the Agricultural Policy Advisory Committee (APAC), the Labor Advisory Committee (LAC), the Trade and Environment Policy Advisory Committee (TEPAC), and the Intergovernmental Policy Advisory Committee (IGPAC); and 22 technical and sectoral advisory committees, which are organized into two areas-industry and agriculture.

The USTR has offices in Washington, D.C. and in Geneva, Switzerland. The USTR’s Geneva Office is organized to cover general WTO affairs, Non-Tariff Agreements, Agricultural Policy, Commodity Policy, and the Harmonized Code System. For more information, please see the official USTR website.

Foreign Agricultural Service

The Foreign Agricultural Service (FAS) is an agency within the USDA that works to improve United States agricultural exports. The FAS pursues market development, negotiates trade agreements, collects statistics, administers some agricultural foreign assistance programs, and provides contacts to the international community and organizations.

The FAS employs agricultural counselors, attachés, trade officers, analysts, and negotiators worldwide. The FAS works with the USTR’s office to help reduce foreign trade barriers and other policies that hinder U.S. agricultural trade. The FAS, as the inquiry point for sanitary and phytosanitary issues and technical barriers to trade with the WTO, provides official notification regarding these issues. FAS personnel collect market data on production, trade, and trade policy. This information is used to assist in the formulation of trade policy and negotiations and to assist exporters of agricultural products with business decisions. The FAS also carries out promotional activities to assist the development of markets for U.S. products. Financing is also provided to exporters through the Commodity Credit Corporation (CCC) to protect exporters from possible problems with foreign banks.

In addition to assisting with commercial transactions, the FAS works with the U.S. Agency for International Development (USAID) in the administration of foreign food aid programs. Food aid is provided primarily from four programs: the Food for Progress Program provides for the donation or credit sale of U.S. commodities to developing countries and emerging democracies to support democracy and an expansion of private enterprise; the McGovern-Dole International Food for Education and Child Nutrition Program provides for donations of U.S. agricultural products, as well as financial and technical assistance, for school feeding and maternal and child nutrition projects in low-income, food-deficit countries that are committed to universal education; the Public Law 480 Title II program provides for the donation of U.S. agricultural commodities to meet emergency and nonemergency food needs in other countries, including support for food security goals; and the Section 416(b) program provides for overseas donations of surplus commodities acquired by the CCC. See the FAS Food Aid Fact Sheet for more information.