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 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 the six types of trade blocs. The first type of trade bloc is the Preferential Trade Areas (PTAs). These exist when countries within a geographical region agree to reduce or eliminate tariff barriers on selected goods from member countries. This type of trade bloc does not address how member countries will treat imports from non-member countries. Currently, this type of agreement is disfavored by the international community unless the formation of a PTA will eventually lead to free trade among the countries.
The second type of agreements are Free Trade Agreements (FTAs). These agreements are created when two or more countries in a region agree to reduce or eliminate barriers to trade for all goods among member countries. The North American Free Trade Agreement (NAFTA) is an example of this type of agreement.
Third, there are customs unions (CU). A CU is a type of trade bloc that establishes a free trade area, 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. The EU-Turkey Customs Union is an example of this type of trade bloc
Next, there are common market. 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 (EU), which, due to its advanced integration, including the removal of physical borders, is often referred to as a single market. Other examples of common markets are the Southern African Customs Union (SACU), the Southern Common Market (MERCOSUR), and the EU-Turkey Customs Union.
Finally, there are full economic integration markets. Primary example is the United States of America.
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 as the Agreement on Agriculture (AA), the Agreement on Sanitary and Phytosanitary Measures (SPS), Decision on Measures Concerning the Possible Negative Effects on the Reform Programme on Least-developed and Net Food-importing Developing Countries,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.
The AA focuses on market access, domestic support, and export subsidies. 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. Currently, WTO members are engaging in the “Doha Round” of negotiations in part to determine whether limits should be set for specific products or to continue implementing the AMS limits.
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.
The agreement prohibits export subsidies unless they are listed by the member nation in the member’s list of commitments. The listed subsidies must be phased out over agreed upon time periods. Developed countries must reduce their export subsidies by the greatest amount over the shortest period of time, followed by developing countries, and no reductions are required of LDCs. Certain instances of highly subsidized exports in the form of food aid to poor nations are permitted.
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 higher standards, 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. Intellectual property issues were also raised in the beginning of the Doha Round. Specifically, some states have called for clarity in the WTO rules as applied to products of new technologies. However, Doha negotiations showed little progress on issues related to biodiversity. 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 a number of 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 a significant impact on agriculture. Two of the most impactful decisions include the Bali Package and the Nairobi Package.
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 NAFTA undertakings. 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 tha address specific issues of products such as lumber, poultry, or rice.
The North american Free Trade Agreement (NAFTA) is a well-known example of a regional free trade agreement. Its implementation began on January 1, 1994. This agreement removes most barriers to trade between the United States, Canada, and Mexico. Between the United States and Mexico, all non-tariff barriers to agricultural trade were eliminated and many tariffs were immediately eliminated, with a gradual reduction of other tariffs to be accomplished over different periods of tome, up to 15 years for some tariffs. Between the United States and Canada, the agricultural provisions of the United States-Canada Free Trade Agreement were incorporated into NAFTA. With only a few exceptions, all tariffs affecting agricultural trade were removed. Between Mexico and Canada most agriculture-related tariffs were removed immediately or over a period of years; however, tariffs on dairy, poultry, eggs, and sugar will remain.
Other U.S. regional free trade agreements and negotiations include the Free Trade Area of the Americas, the Central American-Dominican Republic Free Trade Agreement, the United States-Southern African Customs Union, the Middle East Free Trade Area Initiative, and the Asia-Pacific Economic Cooperation. The United States has entered bilateral free trade agreements and negotiations with Australia, Panama, Chile, Colombia, Peru, Israel, South Korea, Singapore, Thailand, and other countries.
At the 2013 Ministerial Conference in Bali, Indonesia, ministers agreed on a package, including four decisions on agriculture:
- 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 securiry provided certain conditions are met.
- 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.
- 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.
- 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 decision:
- First, members decided to eliminate agricultural export subsidies and set disciplines on export measures that have and 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.
- Additionally, WOT members agreed to find a permanent solution to developing countries’ use of public stockholding programs for food security purposes.
- 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.
- 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.
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. I mediation and consultation fail to resolve the issue, the next step is the empanelling 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 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 has to 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 act as arbitrator.
NAFTA Dispute Resolution System
Depending on the nature of a case and the parties involved, the NAFTA dispute resolution system provides five dispute settlement mechanisms covering: (1) investment disputes, (2) disputes regarding antidumping and countervailing duties, (3) general disputes, (4) environmental enforcement disputes, and (5) enforcement of labor law disputes. Enforcement of law disputes is beyond the scope of this overview, so will not be discussed as a category. Notably, NAFTA provides little for private party dispute resolution.
The NAFTA mechanism for the settlement of investment disputes assures both equal treatment among NAFTA parties’ investors in accordance with the principle of international reciprocity and due process before an impartial tribunal. Parties to the investment disputes are private persons who take action against states. Accordingly, a NAFTA investor who alleges that a host government has breached its investment obligations under Chapter 11 may, at its option, have recourse to one of several multilateral arbitral mechanisms (e.g., the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID), ICSID’s Additional Facility Rules, and the rules of the United Nations Commission for International Trade Law (UNCITRAL)). The investor may also choose the remedies available in the host country’s domestic courts as an alternative to international mechanisms.
Anti-dumping and Countervailing Duty Disputes
NAFTA also establishes a mechanism to provide an alternative to judicial review by domestic courts of final determinations in antidumping and countervailing duty disputes, with review by independent binational panels. A panel is established when a Request for Panel Review is filed with the NAFTA Secretariat by an industry asking for a review of an investigating authority’s decision involving imports from a NAFTA country. This NAFTA mechanism allows a government, as well as a private party, to challenge a countervailing duty decision rendered by the competing government. A panel decision is to be issued within 315 days of the filing of the appeal, and most remands are issued within three months of the panel decision. However, in recent cases panel process has been delayed. For instance, in the case of Imports of High Fructose Corn Syrup Originating in the United States of America, Mexico failed to name panelists for almost two years.
NAFTA general dispute settlement is applicable to all disputes regarding the interpretation of the application of NAFTA, and is intended to resolve disputes by agreement if possible. Parties in such settlements are NAFTA states. The process starts with government-to-government consultations, and can then proceed to a meeting of the ministerial level Free Trade Commission, and finally to the creation of a five-member arbitral panel, if necessary. Consultations can take from 15 to 45 days from the day of request for consultation, unless parties agree to some other term. Consultations on matters regarding perishable agricultural goods must commence within 15 days of the date of delivery of the request. The panel’s final decision takes another 150 days. Several difficult agricultural cases have been resolved through consultations (e.g., sugar in 1995, tomatoes in 1996, and avocados in 1996-1997). A very small number of cases have been taken all the way to a formal panel, including the United States’ complaints concerning Canada’s poultry and dairy practices.
Environmental Enforcement Disputes
NAFTA’s side agreement on environmental enforcement suggests a “citizens’ submissions” process and party-to-party dispute settlement. Citizens’ submissions allow any interested citizen or non-governmental organization to file a complaint that a national government is not effectively enforcing its own environmental laws, while party-to-party dispute settlement allows one government to accuse and litigate against another over allegations that it is systematically not enforcing its own environmental laws. Party-to-party environmental settlements involve consultations, and arbitration procedures are established in case the matter cannot be resolved within 60 days. Final award of sanctions should be rendered within 240 days after creation of a panel. If the accused government is found guilty in the party-to-party dispute, fines defined in domestic courts and trade sanctions can be imposed.
Private Party Disputes
With regard to disputes involving only private parties, NAFTA incorporates a very limited commitment by governments to take steps that may facilitate alternative resolution of commercial and agricultural disputes among private parties in the future. According to NAFTA, each party is required, “to the maximum extent possible, [to] encourage and facilitate the use of arbitration and other means of alternative dispute resolution for the settlement of international commercial disputes between private parties in the free trade area.”
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 ganizations 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.
IFor 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 NAFTA undertakings. 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 North American Free Trade Agreement (NAFTA) is a well-known example of a regional free trade agreement. Its implementation began on January 1, 1994. This agreement removes most barriers to trade between the United States, Canada, and Mexico. Between the United States and Mexico, all non-tariff barriers to agricultural trade were eliminated and many tariffs were immediately eliminated, with a gradual reduction of other tariffs to be accomplished over different periods of time, up to 15 years for some tariffs. Between the United States and Canada, the agricultural provisions of the United States-Canada Free Trade Agreement were incorporated into NAFTA. With only a few exceptions, all tariffs affecting agricultural trade were removed. Between Mexico and Canada most agriculture-related tariffs were removed immediately or over a period of years; however, tariffs on dairy, poultry, eggs, and sugar will remain.
Other U.S. regional free trade agreements and negotiations include the Free Trade Area of the Americas, the Central America-Dominican Republic Free Trade Agreement, the United States-Southern African Customs Union, the Middle East Free Trade Area Initiative, and the Asia-Pacific Economic Cooperation. The United States has entered bilateral free trade agreements and negotiations with Australia, Panama, Chile, Colombia, Peru, Israel, South Korea, Singapore, Thailand, and other countries.
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 with the exception of 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 also 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 in order 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 amount 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. trade policy decisions can have both protectionist and free-trade characteristics. Protectionist policies in agriculture are often used to ensure that the country’s food demands can be met domestically, to protect producers from the uncertainties of weather and world price, and to promote rural development. On the other hand, free-trade policies promote the unrestricted flow of goods and services with certain countries, which can increase the amount of money available to producers. These policy decisions have a strong effect on international agricultural trade. Subsidies affect commodities’ world prices, and policies may limit or promote producers’ access to export markets in other countries.
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 decision.
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.