[Senate Hearing 117-676]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-676

                 IMPLEMENTATION AND ENFORCEMENT OF THE
                 UNITED STATES-MEXICO-CANADA AGREEMENT:
                    ONE YEAR AFTER ENTRY INTO FORCE

=======================================================================

                                HEARING

                               BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 27, 2021

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                     
                                     

            Printed for the use of the Committee on Finance

                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
52-334-PDF                 WASHINGTON : 2023                    
          
-----------------------------------------------------------------------------------     

                          COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman

DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         RICHARD BURR, North Carolina
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania   TIM SCOTT, South Carolina
MARK R. WARNER, Virginia             BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island     JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire         STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada       TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts      BEN SASSE, Nebraska
                                     JOHN BARRASSO, Wyoming

                    Joshua Sheinkman, Staff Director

                Gregg Richard, Republican Staff Director

                                  (II)
                                  
                                  
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee 
  on Finance.....................................................     6
Crapo, Hon. Mike, a U.S. Senator from Idaho......................     7
.................................................................

                               WITNESSES

Davis, Benjamin, director of international affairs, United 
  Steelworkers, Pittsburgh, PA...................................    10
Huttema, Allan, chair, board of directors, Darigold and Northwest 
  Dairy Association, Parma, ID...................................    12
McMurry-Heath, Michelle, M.D., Ph.D., president and CEO, 
  Biotechnology Innovation Organization, Washington, DC..........    13
Lowell, Beth, deputy vice president, U.S. Campaigns, Oceana, 
  Washington, DC.................................................    15

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Crapo, Hon. Mike:
    Opening statement............................................     7
    Prepared statement...........................................    45
Davis, Benjamin:
    Testimony....................................................    10
    Prepared statement...........................................    46
    Responses to questions from committee members................    49
Huttema, Allan:
    Testimony....................................................    12
    Prepared statement...........................................    51
    Responses to questions from committee members................    57
Lowell, Beth:
    Testimony....................................................    15
    Prepared statement...........................................    58
    Responses to questions from committee members................    67
McMurry-Heath, Michelle, M.D., Ph.D.:
    Testimony....................................................    13
    Prepared statement...........................................    73
    Responses to questions from committee members................    77
Wyden, Hon. Ron:
    Opening statement............................................     6
    Prepared statement...........................................    80

                             Communications

American Farm Bureau Federation..................................    83
Cato Institute...................................................    84
Center for Fiscal Equity.........................................    89
CropLife America.................................................    90
National Automobile Dealers Association, National Independent 
  Automobile Dealers Association, and National Association of 
  Auto Auctions..................................................    92
Ranchers Cattlemen Action Legal Fund United Stockgrowers of 
  America........................................................    94

 
                   IMPLEMENTATION AND ENFORCEMENT OF
                    THE UNITED STATES-MEXICO-CANADA
                       AGREEMENT: ONE YEAR AFTER
                            ENTRY INTO FORCE

                              ----------                              


                         TUESDAY, JULY 27, 2021

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 9:41 a.m., 
via Webex, in Room SD-215, Dirksen Senate Office Building, Hon. 
Ron Wyden (chairman of the committee) presiding.
    Present: Senators Stabenow, Cantwell, Menendez, Carper, 
Brown, Bennet, Casey, Whitehouse, Hassan, Cortez Masto, Warren, 
Crapo, Grassley, Cornyn, Thune, Toomey, Cassidy, Young, and 
Sasse.
    Also present: Democratic staff: Sally Laing, Senior 
International Trade Counsel; and Joshua Sheinkman, Staff 
Director. Republican staff: John O'Hara, Trade Policy Director 
and Counsel; Mayur Patel, Chief International Trade Counsel; 
Gregg Richard, Staff Director; and Jeffrey Wrase, Deputy Staff 
Director and Chief Economist.

    The Chairman. The Senate Committee on Finance will come to 
order, and we have obviously had horrible news in the last 24 
hours. A member of the Finance family has passed.
    You just could not find a more decent and caring person on 
earth than Mike Enzi. And he had policy ideas; he always talked 
about the 80-percent rule getting everybody together. Early 
this morning, I was looking at a text he sent me earlier this 
year, inviting the Wyden family to Wyoming and all the great 
places that we would go.
    This is going to be a very, very hard day. I am going to 
let colleagues speak, and I know the Senator from Idaho would 
like to speak. He and I were both so fond of Mike. And then I 
will recognize colleagues and go to our hearing when colleagues 
have had a chance to talk about Mike and their stories.
    I was just reminded, the Enzis always brought Christmas 
cookies for the staff, and we all enjoyed them. We just so 
appreciated them. So, at the end of colleagues' remarks, we 
will have a moment of silence.
    Senator Crapo?
    Senator Crapo. Well, thank you, Mr. Chairman. I also do 
want to say a few words about the passing of our good friend 
Mike Enzi. He was a long-time valued member of this committee, 
as you know, and all of us have our own personal stories with 
regard to him. I know we have all been praying for him in the 
last couple of days since his accident.
    You know, I got to--actually, just to show the character of 
Mike Enzi, I got an email from him a couple of weeks ago, 
telling me that he was praying for us because of the very 
difficult issues that we are working on right now. What a 
thoughtful thing for Mike, from Wyoming, to share those words.
    For over 2 decades, Senator Enzi passionately served the 
people of Wyoming as a thoughtful conservative leader. He 
brought his experience as an accountant and small businessman 
to Washington, to tirelessly fight for the Federal Government's 
broken budget process, and he never wavered in those efforts.
    We had a shared philosophy when it comes to compromise, 
which is to focus on the things you can agree on and worry 
about the rest later. And I valued Mike's judgment and 
friendship, and I will close with this. He said that he tried 
to live by his mother's advice: ``Do what is right, do your 
best, treat others as they want to be treated.'' And he 
certainly did that. We will miss him.
    The Chairman. Thank you, friend.
    Senator Stabenow?
    Senator Stabenow. Thank you, Mr. Chairman, Ranking Member. 
In walking in this morning, I looked up. We have a large 
picture of the Finance Committee members from last session, and 
in the front row is Mike Enzi. A big smile--and I have worked, 
I worked with Mike for 20 years since coming to the Senate, 
both on the Finance Committee and also on the Budget Committee.
    I loved his sense of humor, and I loved his fairness. I 
will never forget a couple of years ago when he was working to 
make major changes in the budget resolution process and he 
called me, knowing actually he was going to be showing me 
something that he knew I did not agree with.
    But he called me anyway. He called me--it was in August. He 
called me, he walked through everything and listened to my 
concerns and was very respectful, and he said, ``I look forward 
to working with you when we get back into session in 
September.''
    So, he was a gentleman. He loved the Senate. He was 
somebody who cared deeply about being fair to everyone, and I 
am just so deeply saddened and sending a lot of prayers for his 
family.
    The Chairman. Senator Cornyn?
    Senator Cornyn. Well, thank you, Mr. Chairman. I too have 
many memories of serving with Mike Enzi, and it is not possible 
to think--I cannot think of a nicer human being whom I served 
with in the Senate.
    When I first got here, he worked on the HELP Committee with 
Teddy Kennedy, and Mike was one of the most conservative 
members of the Senate, as you know. But he and Senator Kennedy 
were enormously productive on the HELP Committee as chairman 
and ranking member. They switched that out from time to time, 
and I asked Mike about it.
    He said, ``Well, it seems it is the 80-20 rule.'' He said 
you can agree on the 80 percent you can agree on; you leave the 
20 percent you cannot for another day and another fight. It 
seemed so obvious, but that was his attitude, and that was one 
reason why he was so productive.
    There are a lot of other things I could say, and I will 
not. I am going to talk about Mike a little bit on the floor. 
But the other thing I remember about Mike is just his attitude 
was always so positive. He was a little bit of an introvert, as 
we all know, and he blamed that on his being an accountant.
    He said, ``An extroverted accountant, I think, is somebody 
who does not look you in the eye but stares at his shoes,'' or 
something along that line. I will get that right.
    But he talked about having an attitude of gratitude, and 
how important attitude is in framing the way we live our lives 
and how we think about the world we live in. So I will, we will 
all say our prayers for Diana and the family as we remember a 
great human being and a great Senator.
    The Chairman. Senator Cantwell?
    Senator Cantwell. I too want to make some comments about 
our colleague and his amiable attitude towards working together 
on legislation, and his representation of Wyoming. I worked 
with him on several health-care issues, several tax policy 
issues, several workforce issues.
    At one point in time he said to me, ``You know, I actually 
wrote software code.'' I thought, ``You know, you are the 
original high-tech guy here in the Senate.'' It was that part 
of him that we all loved, because he looked at policy issues 
kind of straight up from how he looked at them. He did not add 
an over-layer of politics on top of it.
    If he could be with you, he told you, and if he could not, 
he told you, and he told you why. But I loved the way Mike Enzi 
got around in his State. We talked about this, and he said, ``I 
just call somebody in a county and I tell them I am coming, and 
then they tell all the people to come over and bring the food. 
We have a potluck, and we just sit here and talk about the 
issues.''
    I thought, ``What a great way to really communicate to your 
constituents.'' I think that is what Mike boiled it down to: 
just the simplicity of the process.
    I worry sometimes that the art of this is being lost, that 
just that basic communication with our friends and neighbors 
and people that we love is getting all stripped away and 
sanitized down to an Internet meme or something, when in 
reality, the face-to-face contact is really very important.
    And I will just add this last point. We had a major 
breakthrough on STELAR legislation, which is all about how we 
reach our rural neighbors and communication, and the fact that 
Mike Enzi and several of his colleagues were adamant about not 
moving forward until we fixed it really gave us the impetus to 
fix that last year. So I am really, really thankful for him.
    My heart goes out to his family and the people who worked 
with him so closely. This is not what we wanted for a colleague 
who went into retirement to enjoy a little down time. This is 
not, but our prayers are with all of them, and thank you for 
giving us all this time to remember somebody who contributed so 
much--in a very quiet way--but was a very, very big contributor 
to this committee. Thank you, Mr. Chairman.
    The Chairman. Senator Cassidy?
    Senator Cassidy. You know, Mike loved to serve. He loved to 
serve, and of course you know how he served our country. But I 
once had a conversation with him. He had gone to Africa, and he 
had seen how AIDS was devastating Africa.
    Not an issue you would expect a fellow from Wyoming to be 
interested in, but he saw the death. He recognized, frankly, 
this is an opportunity for the U.S. to do something really 
good, and that there would the chance to extend U.S. influence. 
But his primary motivation was people dying of AIDS.
    He worked with George W. Bush for the PEPFAR program, and 
of course, in typical fashion, did it in a financially 
responsible way, saved millions of lives, turned the corner for 
the continent of Africa, and it is one of the things that may 
not be mentioned in his obituary, but is one of the things that 
he was most proud of.
    And two more things that just come to mind of a fellow who 
was all about service. He was supposed to be HELP chair last 
year. He actually had the seniority over Lamar Alexander. But 
he thought Lamar was so capable, and he just thought Lamar 
should be chair even though he, Mike Enzi, would have been, by 
years. I keep on hoping that my two senior members feel that 
about me on Finance. [Laughter.]
    And then lastly, I said, ``Mike, why are you leaving, man, 
because you still have a lot to offer?'' He said, ``You know, I 
can do it next year. I am not sure I can do it for 6. It is 
important to have somebody here who can do it for 6.'' I just 
join you all in our prayers for Diana and our great memories of 
Mike.
    The Chairman. Thank you, Senator Cassidy. This is going to 
be a very hard day.
    Senator Hassan?
    Senator Hassan. Yes, it sure is, because my heart is heavy 
this morning, as all of ours are. I got to know Mike a little 
bit, first in our kind of get-to-know-you conversation just 
after I got here, and I was just remarking to Catherine that 
our staff actually had to break us up after an hour. You know, 
they were like, ``You do not have time to sit here and just 
keep talking.''
    But we did, and we discovered a number of things in common. 
My grandfather was a shoe salesman and Mike had owned a shoe 
store, and we talked about the shoe business. But we also had a 
couple of other things in common, one of which was having 
children who had very difficult starts in life: his daughter, 
my son.
    There was never really a time when Mike did not see me 
where he did not ask after Ben, after the family, after how we 
were managing, having shared the experience of welcoming a 
child into the world in really harrowing circumstances. Mike 
never forgot how fragile things can be, but how great the 
possibilities of inclusion are.
    He was just always kind of giving me an ``atta girl'' when 
things were going rough at home with Ben. And a couple of other 
things. One is that Mike also is--was the prayer breakfast 
pinch hitter. When somebody could not speak at prayer breakfast 
at the eleventh hour, Mike had always told the organizers, 
``You can call on me,'' because he always had something to 
share about attitude.
    More than anything, prayer and faith are about attitude, I 
think, from Mike Enzi's point of view, and he really spoke 
about that beautifully and movingly and gave us kind of ``how-
tos'' on days when things might be rough.
    He was just on Zoom at a prayer breakfast last week, and we 
were all just reveling in the fact that one of the gifts of 
Zoom was that we could still see our retired colleagues and 
they could join us. He was one of the kindest people I know. He 
and I were trying to get this bill through to change the 
composition of our coins so we could save about $10 million, so 
I will just leave that out there.
    I think Mike would want us to keep pushing on that, because 
it was a very practical, common-sense thing that we could all 
agree on and get done. And my thoughts too go to Diana and the 
family. They were such a part of Mike's service, and he never 
failed to mention them either.
    So my thanks go to them, and my heart goes out to them.
    The Chairman. Thanks.
    My colleague, Senator Cortez Masto.
    Senator Cortez Masto. Thank you. Similarly--as you can see, 
there is a common theme here about who Mike really was, his 
values, his principles, his priorities for his family, his love 
of his family, but also his love of this process. I do not 
think any of us have a different story. I do not care how long 
you had worked with him or how new you were to the Senate.
    To me, that says a lot about Mike, because when I first got 
here, he treated me with respect. I think one of my second 
opportunities to really get to know him--we traveled back to my 
home State, to Las Vegas, to Nellis Air Force Base. It was a 
codel. John, you were with us, and I think I was the only 
Democrat on the codel at the time.
    I have to tell you, he was just so gracious and, as western 
Senators, we really had the opportunity to sit and talk to one 
another, get to know one another, and just really understood 
his commitment, most everything that you all have said.
    And then after we got back, I was able to work with him on 
legislation and really figure out how we could move the ball 
forward on some of the issues that were important for this 
country and the public. So I echo everything that everyone has 
said.
    My heart goes out to his family. He will be missed. I, as 
someone who lost my father early in retirement, I think we were 
all hoping he would enjoy his retirement with his family and 
get the time finally to do just that.
    So I am thinking of him. Like Maggie, my heart is sad 
today, and I will not forget my opportunity just to get to know 
him in the short time that I was able to work with him here in 
the Senate.
    The Chairman. This is going to be a day of swapping Mike 
Enzi stories, whether it is shoe stores or the love of beef; 
the list is going to go on and on. I like to think his 
graciousness and thoughtfulness are going to continue to be 
expressed in this room in the days ahead.
    Let us have a moment of silence, and then we will go on. A 
moment of silence for our special friend Mike Enzi.
    [Moment of silence.]

   OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM 
             OREGON, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. Thank you all very much, and the business of 
this morning is the U.S.-Mexico-Canada trade agreement. And we 
welcome our guests, and I wish they were here on a day that was 
not so sad.
    When a child turns one, you give them a birthday party. 
When a trade agreement turns one, it seems appropriate to have 
an oversight hearing in the committee. So today we will discuss 
USMCA, which of course is the lingo for the U.S.-Mexico-Canada 
Agreement. The timeline is pretty clear. Three years ago, the 
Trump administration agreed to a rewrite of the North American 
Free Trade Agreement, and the feeling up here was that it was 
too weak on key issues to pass.
    The Democrats got down to work improving it, and as a 
result of those efforts, the text of it was the strongest trade 
agreement ever for worker rights, environmental protections, 
and particularly for trade law enforcement.
    The Congress passed it, and it was up to the Trump 
administration to carry it out early in 2020. Now you have to 
have strong trade enforcement, because countries do not comply 
with trade agreements by osmosis. They have to be held to their 
commitments. They have to be held to their commitments.
    And what is critical--and not much understood about all 
this--is the time when you have the most leverage is before an 
agreement goes into effect. So that is why Senator Grassley and 
I, on a bipartisan basis, strongly urged the Trump 
administration not to rush the process.
    Unfortunately, the administration would not listen. It was 
the middle of the year, and in effect they decided that a cake 
was baked before it was ready to come out of the oven. Only a 
few months were given to carry out the agreement, not anywhere 
near enough time to protect workers and businesses by holding 
Canada and Mexico to their commitments.
    Now it is up to the Biden administration to clean up the 
messes that I am going to outline now, that the Trump 
administration left behind.
    For example, Canada has unfairly blocked American dairy 
products for decades. Under USMCA, Canada agreed to give our 
dairy products more access to the Canadian market. The 
Canadians then undermined that commitment with new regulatory 
barriers before USMCA went officially into effect last July. 
The Trump administration hardly lifted a finger to do anything 
about it. Now the Biden administration will have to work to 
make sure that our dairy farmers finally get the access that 
they were promised.
    Another example: Mexico made commitments to improve the 
rights and conditions for its workers. It is moving too slowly 
on the implementation of those key reforms to labor laws. To 
enforce some of those commitments, the Biden administration has 
had to hit back, using what is called a rapid response 
mechanism.
    Senator Brown deserves enormous credit for his leadership 
on this. I was pleased to partner with him. It is an important 
tool, a rapid response mechanism. But the previous 
administration should have done more to push Mexico to raise 
the bar for labor rights prior to last summer. That would have 
helped protect more American workers.
    With the Trump administration coming up short and trade 
enforcement looking weak, it is no surprise that Canada and 
Mexico issued new laws and regulations that were inconsistent 
with the text of USMCA, even walking back some of the core 
commitments.
    For example, Mexico is refusing to approve innovative 
American ag products, including corn and soybeans, without any 
scientific justification. It is also threatening to ban 
agricultural products that have been previously approved. 
Ambassador Tai and the administration are working hard now to 
knock down those barriers as soon as possible.
    Canada is joining a list of countries that are unfairly 
targeting and discriminating against innovative American 
employers with digital service taxes. Make no mistake about it. 
These unfair digital daggers are just knifing American firms 
and the prospects for creating all of the high-scale, high-wage 
jobs that we want.
    It is a big setback to our trade relationship with Canada. 
It goes against the spirit of USMCA and the global minimum tax 
agreement that is in the works. I hope--and I press this case 
to the Canadians--that they change course on the issue. 
Otherwise, the United States will need to consider all options 
for our response.
    So, we have a lot to talk about. I come from a State where 
one out of four jobs revolves around international trade. 
Oregon has always been about just growing things, designing 
things, innovating breakthroughs, adding value to them, and 
then shipping them to Oregon lovers around the world.
    In Oregon we talk about getting trade done right by 
protecting workers and companies, creating high-wage jobs. We 
want to raise the bar on issues like labor and environmental 
protection. We want vigorous enforcement. It means not cutting 
corners the way the previous administration did on USMCA. 
Fortunately, the Biden administration is addressing all the 
outstanding issues so that USMCA lives up to all its promise 
about the challenges ahead.
    I want to thank our witness panel for joining the 
committee. I look forward to question and answers. In the 
Pacific Northwest, we always try to find common ground on trade 
policy. We will again.
    [The prepared statement of Chairman Wyden appears in the 
appendix.]
    The Chairman. Senator Crapo?

             OPENING STATEMENT OF HON. MIKE CRAPO, 
                   A U.S. SENATOR FROM IDAHO

    Senator Crapo. Thank you, Mr. Chairman, and I appreciate 
you giving us an opportunity to remember Mike Enzi before 
beginning the hearing.
    But returning to work as Mike would have wanted, I also 
appreciate our witnesses taking the time to discuss issues 
critically important to the work of this committee. I 
specifically welcome Allan Huttema, chairman of the Northwest 
Dairy Association and Darigold board of directors, who is 
joining us from Parma, ID. Thank you all for taking the time to 
discuss these issues that are critical to us. Today's hearing 
marks the 1-year anniversary of the United States-Mexico-Canada 
Agreement, or USMCA as we all describe it.
    Mexico and Canada are two of our most important trading 
partners, and we cannot take these relationships for granted. 
To take one example, the United States exported $1.4 billion 
and $731 million worth of dairy products to Mexico and Canada, 
respectively, in 2018. But just a generation ago, nearly all of 
the dairy products produced in the United States stayed in the 
United States. Today the Idaho dairy industry, which represents 
6 percent of the State's GDP, produces more than 15 times the 
production necessary for our State's needs. Opening markets 
have fed our neighbors and created jobs at home.
    However, our dairy industry faces a number of new barriers, 
including attempts by trading partners to prevent our farmers 
from using common cheese names by claiming that they are 
geographic indications. The potato industry has also faced its 
share of challenges, with the Mexican Supreme Court only 
recently ruling that potato growers can sell fresh potatoes 
into all of Mexico, consistent with its obligations under the 
USMCA.
    Now I have recently met with the President of Mexico and 
the Ambassador from Mexico and the Minister in charge of the 
economy in Mexico, and they have all assured me that they are 
proceeding to implement that trade agreement and that Supreme 
Court ruling, to get the potatoes, finally after years, into 
Mexico. However, I will not consider the matter finished until 
Idaho's farmers are able to sell high-quality potatoes to every 
family in Mexico.
    Likewise, when the North American Free Trade Agreement, or 
NAFTA, was negotiated, we did not fully appreciate the 
potential of digital trade, which my colleague Senator Wyden 
has referenced, which now contributes over $2 trillion annually 
to our GDP. That is why I support a number of USMCA innovations 
to help us meet the challenges of the 21st-century economy and 
drive economic prosperity in North America. These include 
Canada allocating new tariff rate quotas for dairy products, 
Mexico agreeing to protect 33 common cheese names, a cutting-
edge digital trade chapter, and better protection for 
copyright.
    This committee had a role in developing them, and it is 
appropriate to examine whether these innovations are 
delivering. That cannot be said for the last-minute changes 
added through the USMCA protocol amendment at the behest of the 
House Democrat working group.
    This committee had no opportunity to vet those changes or 
even see the text of these changes before they were finalized. 
I am concerned that some of our Democratic House colleagues now 
want to push their changes that allegedly strengthen labor and 
environmental standards, but almost certainly weaken our 
intellectual property rights, into new agreements before we 
even have a complete understanding of their full implications. 
I will not accept that.
    That is why this hearing is so important. If we are going 
to unlock the promise of the USMCA and also understand its 
shortcomings, we need to press for effective implementation and 
enforcement. To date, the administration's efforts on that 
front are fairly disappointing, and I will highlight three 
examples.
    First, the USMCA contains commitments that should 
facilitate cooperation on agricultural biotechnology, including 
that decisions regarding the approval of such technology be 
based on science. This technology not only increases farmer's 
yields, but allows them to grow crops more sustainably, 
including by using less pesticide and reducing tillage. 
Unfortunately, Mexico has refused to approve any biotechnology 
food or feed products since May of 2018. Despite the clear 
economic and environmental benefits, the administration has yet 
to take any enforcement action on this important issue.
    Second, Mexico is proceeding with new discriminatory 
actions, such as measures favoring its own state-owned 
electricity and petroleum companies. Mexico previously 
prioritized dispatch on its electrical grid on the basis of 
cost, which allowed private producers, including wind and solar 
energy providers, to compete. Instead, Mexico intends to give 
preference to its state-owned electricity company. The 
administration needs to be engaged now before barriers like 
this are fully in place.
    Finally, where the administration is taking enforcement 
actions, it fails to do so transparently or in appropriate 
consultation with Congress. I am referring to the use of the 
USMCA rapid response labor mechanism. As I noted in our hearing 
on the President's trade agenda, I am committed to ensuring 
that our workers can compete on a level playing field. That 
effort requires transparency. Otherwise, how would Congress, 
the affected parties, and civil society know if the mechanism 
is being used appropriately and effectively? Accordingly, the 
USTR must explain what potential actions, in its view, may or 
may not constitute a denial of rights. The USTR has failed to 
do so with respect to its recent use of the mechanism with 
respect to Tridonex's Mexico facility.
    This hearing is a good opportunity for the committee to 
examine whether USMCA's commitments are delivering on their 
promise. This discussion will also help in developing a future 
trade agenda, and I look forward to hearing what our 
knowledgeable witnesses have to say in this effort.
    Mr. Chairman, thank you again for organizing this hearing, 
and again thank you to our witnesses for appearing today.
    [The prepared statement of Senator Crapo appears in the 
appendix.]
    The Chairman. Thank you, Senator Crapo, and I think it is 
very important that we work to find common ground on this issue 
so important to American workers and American businesses.
    Let me give a brief introduction to our guests. Mr. Ben 
Davis of Pittsburgh, PA is the director of international 
affairs for the United Steelworkers. He also chairs the 
Independent Mexico Labor Expert Board established by the 
Congress to monitor implementation of the labor provisions of 
USMCA. He has decades of experience in this field, and we 
appreciate him.
    Mr. Allan Huttema of Parma, ID--a guest of Senator 
Crapo's--is a dairy farmer and owner of Almar Dairy, a member 
of the Northwest Dairy Association since 2003. Mr. Huttema 
farmed in Whatcom County, WA for several years before moving to 
his current dairy farm in Idaho with his wife and four 
children. He too has decades of experience in the field and is 
on the Northwest Dairy Association Darigold board.
    Dr. Michelle McMurry-Heath of Washington, DC is the 
president and CEO of Biotechnology Innovation Organization, 
which represents 1,000 life sciences companies and 
organizations that are involved in research and development of 
health care, agricultural, industrial, and environmental 
biotechnology products. She is a medical doctor, and members of 
this committee, both Democrats and Republicans, have worked 
closely with her organization for many years.
    Finally, online today will be Ms. Beth Lowell of 
Washington, DC, who serves as the deputy vice president for 
U.S. campaigns at Oceana. Ms. Lowell oversees Oceana's 
campaigns related to ocean conservation, illegal fishing, 
seafood farms, and other issues. She has 20 years-plus of 
working on these issues and joined Oceana in 2005.
    So let us go now to hear from our witnesses. We will make 
your prepared remarks a part of the record, and if you can take 
5 minutes or so to summarize your views, that would be helpful.
    We will begin with you, Mr. Davis.

STATEMENT OF BENJAMIN DAVIS, DIRECTOR OF INTERNATIONAL AFFAIRS, 
              UNITED STEELWORKERS, PITTSBURGH, PA

    Mr. Davis. Chairman Wyden, Ranking Member Crapo, members of 
the committee, thank you very much for the opportunity to 
testify on the implementation of the USMCA, and specifically 
labor provisions which are so important to workers in the U.S., 
Canada, and Mexico. I am Ben Davis, director of international 
affairs for the United Steelworkers, and also Chair of the 
Independent Mexico Labor Expert Board, an entity created by the 
USMCA implementing bill passed by this committee and signed 
into law.
    The USMCA passed Congress with a large bipartisan majority. 
The Steelworkers, along with the AFL-CIO, supported the final 
agreement after the Congress improved upon the text negotiated 
by the prior administration. Most critical to our support was 
the emphasis on labor rights improvements in Mexican law, 
backed up by the rapid response mechanism initially developed 
by you, Chairman Wyden, and Senator Brown. The focus of the 
labor law changes was to disrupt the protection union system in 
Mexico, under which most workers have no real voice in choosing 
their union representatives, and often have no knowledge of the 
contract that determines their wages and working conditions.
    This system has maintained artificially low wages. For 
example, at the GM Silao plant, the starting wage is $1.35 per 
hour. Workers' rights to democratic unions and collective 
bargaining have been denied in Mexico for many years, and the 
jury is still out as to whether Mexico's new laws and the USMCA 
will make a difference.
    Let me briefly summarize the key conclusions and 
recommendations of the Board's report of July 7th, which is in 
the record. While there has been some significant progress on 
USMCA implementation in some areas, the Board raised concerns 
about transparency, the contract legitimation process, budget 
and staffing of Mexico's new labor institutions, and U.S. 
technical cooperation.
    On transparency, almost 27 months after Mexico's labor law 
reform was approved, most workers covered by union contracts 
still do not have a copy of that contract or their union 
statutes, including the workers at Tridonex in Matamoros which 
is, as has been mentioned, the subject of a rapid response 
mechanism case under the USMCA.
    The 2019 labor law requires employers and unions to give 
workers copies of their contracts. But these provisions will 
not be fully implemented for several years. Online access, 
which is already available for contracts in some jurisdictions, 
should be accelerated and should not require workers to submit 
individual requests.
    On contract legitimation, the Board raised significant 
concerns about the effectiveness of the contract legitimation 
process. As of today, Mexico reports that 1,378 legitimation 
votes have been held, covering 797,587 workers, which is about 
18 percent of the estimated unionized workforce. Government 
officials have stated that they ultimately expect at least 
80,000 contracts to be voted on. This would require about 120 
legitimation votes per day every day from now until May 1st, 
2023. That clearly exceeds the capacity of the government 
institutions and may require them to rely on private notaries 
hired by the incumbent unions. As we have seen in the GM Silao 
case initiated by USTR, putting the incumbent union in charge 
of the vote creates an inherent conflict of interest and 
potentially disastrous consequences.
    On budget and staffing, the Board raised concerns about 
staff shortages at the Labor Secretariat and the Federal 
Conciliation and Labor Registration Center, which have faced a 
huge challenge of implementing the reforms under pandemic 
conditions. For example, the Federal Center currently has only 
29 staff responsible for monitoring legitimation votes. 
Clearly, there is not enough money to support timely and 
effective implementation of the reforms. The Inter-American 
Development Bank gave Mexico an $800-billion unsecured loan to 
support the labor reform, but it appears that none of these 
funds have been used for this purpose.
    Finally on U.S. technical assistance, the Board raised 
significant concerns about the pace and focus of U.S. 
assistance to support Mexico's labor reforms. Of the $180 
million appropriated by Congress, only 50 million has been 
allocated and only 10 million of that directly supports efforts 
by Mexican workers to establish democratic unions. Strangely, 
this initial allocation of USMCA funds excluded the auto and 
auto parts sector from labor capacity building. The Board 
referenced the recommendation of Ways and Means Democrats that 
IMLEB should spend at least $30 million annually of USMCA 
appropriated funds on worker organizing and union capacity 
building. I personally believe this funding will be essential 
to achieve our goals.
    Without a fundamental shift from protection unions like the 
ones at GM and Tridonex towards democratic labor organizations, 
no amount of government oversight will result in a trade union 
movement that can organize and bargain for higher wages for 
Mexican workers to address the structural inequality in the 
USMCA region that drives both migration and loss of good 
manufacturing jobs.
    Thank you, and I will be happy to answer any questions.
    [The prepared statement of Mr. Davis appears in the 
appendix.]
    The Chairman. Thank you, Mr. Davis.
    Mr. Huttema, welcome.

STATEMENT OF ALLAN HUTTEMA, CHAIR, BOARD OF DIRECTORS, DARIGOLD 
           AND NORTHWEST DAIRY ASSOCIATION, PARMA, ID

    Mr. Huttema. Good morning and thank you, Chairman Wyden and 
Ranking Member Crapo. It is truly an honor for a farmer from 
Parma, ID to be here today, so thank you. I am Allan Huttema, 
and I am here today to discuss the critical role of trade 
policy in supporting U.S. dairy farmers. I started milking cows 
in Chilliwack, British Columbia in 1991. Twelve years later, I 
moved to Everson, WA, where I started a 500-cow dairy. In 2010, 
along with my wife Mary Jo and our two sons Christopher and 
Jeremy, we relocated to Parma, ID, where we currently operate 
an 800-cow dairy and farm 500 acres of corn and triticale for 
silage.
    I also serve as the chairman of the board at Darigold and 
Northwest Dairymen's Association, and I am also on the board of 
the National Milk Producers Federation. The American dairy 
industry is an economic force employing almost a million 
Americans. The industry contributes $64 billion in tax revenue, 
and almost ten times that amount to the U.S. economy. Trade 
opportunities are an integral part of that story.
    Despite last year's difficulties, U.S. dairy upheld its 
reputation as suppliers of a variety of high-quality dairy 
products to the world. Around one in every six gallons of milk 
produced here was exported to foreign markets to meet global 
demand. When on a level playing field, American dairy products 
are highly sought after in international markets. 
Unfortunately, without sufficient market access opportunities 
to provide us with tariff parity, or better, in key markets 
when compared to our trade competitors, American dairy farmers 
are left feeling the effects.
    Today I will discuss three primary trade topics of great 
importance to the American dairy industry. First, the 
importance of USMCA as a catalyst to pursuing new market-
opening trade agreements. Second, the subsequent enforcement of 
existing agreements. And last but certainly not least, the 
chronic misuse of non-trade tariff barriers, specifically the 
European Union's continued desire to lay claim to geographical 
indications.
    It has been a very long time since Congress passed a new 
trade agreement aside from USMCA, for which we are very 
grateful. Our industry needs new trade agreements with key 
export markets to counter our competitors, namely the EU and 
New Zealand. As our competition continues to ink new trade 
deals, the U.S. is increasingly left in the dust. We are the 
only country in the G7 or G10 that has such an incredibly 
difficult time understanding that trade is a good thing. We 
just need to work in a bipartisan manner and drop the extreme 
positions that have not been conducive to new market 
opportunities. We must focus on concluding comprehensive 
agreements with the United Kingdom, Vietnam, and Japan, as well 
as seeking new opportunities in China and Southeast Asia.
    On USMCA, we look at the agreement as an important 
accomplishment. As we like to say on the farm, a deal is a 
deal, which is why our industry appreciates the decision by the 
U.S. Trade Representative Katherine Tai to initiate a dispute 
settlement proceeding with Canada over its government's 
administration of the dairy tariff rate quota system. We are 
grateful for this committee's support and advocacy in securing 
that step. I am Canadian-born, and I have worked in that 
system, so I know that the government will do all they can to 
avoid fulfilling their dairy commitments.
    The U.S. should not tolerate trading partners not living up 
to their obligations, so we also must encourage this committee 
and Ambassador Tai to keep a careful eye on milk protein 
isolate and skim milk powder blend exports out of Canada. We 
are concerned that they may be increasing production to 
circumvent milk protein export caps, undermining the spirit of 
USMCA.
    Our other USMCA partner, Mexico, warrants greater 
integration and collaboration. A surge of newly devised Customs 
and regulatory requirements have been in the works or 
instituted, including new documentation requirements for milk 
powder for U.S. exports that differ from requirements for 
domestic Mexican companies. In addition, several unwarranted 
regulatory barriers appear to have a more political connotation 
than a scientific background.
    Let me now turn to a topic that would be amusing if it were 
not so serious: the EU's non-stop campaign on attacking names 
like parmesan, feta, and asiago through GI provisions. I urge 
Congress to remind the Biden administration of the letter 
signed by 61 Senators supporting the protection of common food 
names as a formal trade policy objective of all future trade 
agreements.
    Again, Chairman Wyden and Ranking Member Crapo, thank you 
so very much for the opportunity to testify to this committee 
on the importance of global trade to all American dairy farm 
families, including my own.
    [The prepared statement of Mr. Huttema appears in the 
appendix.]
    The Chairman. Thank you, Mr. Huttema. We are glad you are 
here.
    Dr. Michelle McMurry-Heath.

STATEMENT OF MICHELLE McMURRY-HEATH, M.D., Ph.D., PRESIDENT AND 
   CEO, BIOTECHNOLOGY INNOVATION ORGANIZATION, WASHINGTON, DC

    Dr. McMurry-Heath. Chairman Wyden, Ranking Member Crapo, 
members of the committee, my name is Dr. Michelle McMurry-
Heath, and I am the president and CEO of the Biotechnology 
Innovation Organization. I am honored to testify before you 
regarding the 1-year anniversary of USMCA's entry into force, 
and how the agreement has impacted the biotech sector, 
particularly as it relates to agricultural biotechnology.
    BIO represents over 1,000 members, and our central mission 
is to advance public policy that supports the application of 
biology and technology in energy, agriculture, manufacturing, 
and health. Our members work every day to cure patients, 
protect our climate, and nourish humanity.
    As the U.S. biotechnology industry demonstrated with our 
response to COVID-19, our Nation can lead the world in 
developing technologies that will solve critical health and 
economic challenges. American innovation in biosciences, 
coupled with government leadership, can address growing crises 
such as climate change and malnutrition. Executing thoughtful 
and creative trade strategies is among the most effective means 
to strengthen the U.S. bioeconomy and enhance global science-
based collaboration to effectively confront these and other 
public health, environmental, and nutritional issues.
    The enhanced provisions for agricultural biotechnology in 
USMCA represented a significant improvement on NAFTA for the 
industry. As a result, BIO applauded the inclusion of these 
provisions. Unfortunately, what exists on paper is a far cry 
from reality.
    The Government of Mexico's treatment of agricultural 
biotechnology clearly demonstrates how trade barriers still 
actively restrict the development of new biotechnologies. 
Mexico's regulatory authority, COFEPRIS, has not granted a 
single new agricultural product application in more than 3 
years, and its backlog of pending approvals has grown to 23. 
This bottleneck affects all of BIO's agricultural members, 
covering a wide range of commodities: apples, canola, corn, 
cotton, potatoes, and soybeans. Compounding matters, on 
December 31st of last year, Mexico issued a decree announcing 
its intention to phase out the use of important agricultural 
technologies, including biotech corn, from human consumption by 
2024.
    There are numerous consequences to Mexico's actions. For 
one, they are impeding global research and development, and 
jeopardizing the potential for biotechnology to address the 
many challenges that I previously mentioned. Take climate 
change and nutrition. According to the International Service 
for the Acquisition of Agro-Biotech Applications, biotech crops 
reduced carbon dioxide emissions by 27.1 billion kilograms in 
2016. These crops also helped to maintain yields in the face of 
drought, which has direct bearing on food security and poverty 
alleviation.
    Unfortunately, provisions in the USMCA intended to 
invigorate investment and development of these technologies is 
now threatened by the obstruction of one of the agreement's key 
signatories. BIO appreciates the U.S. Government for being a 
consistent champion for biotechnology, defending it against 
scientifically unjustified regulatory practices. However, with 
little indication from Mexico that it will adhere to USMCA's 
commitments, BIO strongly urges the administration to begin 
taking enforcement action against Mexico's unjust treatment of 
agricultural biotechnology. Without enforcement, BIO and its 
members fear the Government of Mexico will continue the status 
quo and possibly even broaden the scope of its infringement to 
additional agricultural products.
    In closing, United States global leadership in biotech 
innovation is vital to the Nation's security, climate policy, 
pandemic preparedness, and international diplomacy. Yet our 
biotech sector is faced with tremendous uncertainty. Companies 
are making decisions today about whether to proceed with launch 
plans or delay, potentially costing them billions of dollars in 
revenue and future investment. Similarly, U.S. farmers are 
facing increasing challenges related to climate change and 
sustainability. Doing so without 
cutting-edge biotechnology tools at their disposal is like 
fighting with one hand tied behind their back.
    I submitted a more in-depth statement for the record on the 
need for industry and government to work together to leverage 
American strengths and remove barriers that restrict the 
development of the global biotech ecosystem.
    Thank you, and I look forward to your questions.
    [The prepared statement of Dr. McMurry-Heath appears in the 
appendix.]
    The Chairman. Thank you very much, Dr. McMurry-Heath.
    So let us go now online to Ms. Beth Lowell.

       STATEMENT OF BETH LOWELL, DEPUTY VICE PRESIDENT, 
             U.S. CAMPAIGNS, OCEANA, WASHINGTON, DC

    Ms. Lowell. Good morning and, first of all, my condolences 
on the loss of your colleague and friend. My name is Beth 
Lowell, deputy vice president for U.S. Campaigns at Oceana, an 
international conservation organization dedicated to protecting 
the world's oceans.
    After 1 year in force, Oceana has identified some ways to 
improve the implementation of the USMCA, and we have some 
outstanding questions. While the environmental chapter covers a 
wide range of issues, my testimony is focused just on 
fisheries.
    Seafood is a highly traded commodity, with domestic and 
international fisheries management; high prevalence of illegal, 
unreported, and unregulated, or IUU fishing; opaque supply 
chains; and links to forced labor and other human rights 
abuses. IUU fishing undermines the legal seafood trade, 
destabilizes coastal States with limited resources to enforce 
and protect their waters, and impacts national security. The 
International Trade Commission estimated the U.S. imported $2.4 
billion worth of IUU seafood products in 2019 alone, and 25 
percent of the imports from Mexico were products of IUU 
fishing.
    IUU fishing, paired with fishery subsidies, puts U.S. 
fishermen at a disadvantage, forcing them to compete with 
highly subsidized fleets and those that fish outside the 
boundaries of the law. The world's top industrial fishing 
nations are providing subsidies that make distant-water fishing 
more profitable, drive over-capacity, and shift the risk of 
overfishing to the waters of other countries. Some distant-
water fleets subsidize as much as 20 to 40 percent of the value 
of their catch. We were happy to see subsidies included in the 
agreement, and the USMCA requires the parties to notify each 
other of their fisheries subsidies within a year. This 
information is now overdue.
    The IUU fishing provisions include requirements to 
implement stronger measures including Port State controls, 
improved monitoring control, and surveillance to deter IUU 
fishing. The USMCA also helps promote transparency through 
better documentation of vessels, and it requires each country 
to develop a publicly available and easily accessible registry 
of flag vessels.
    Earlier this month, Oceana in Mexico released a report 
reviewing compliance with the USMCA. Our team in Mexico 
recommends that the government require more documentation, 
transparency, and traceability for seafood to comply with the 
terms of the USMCA, but also to comply with the requirements 
under NOAA's Seafood Import Monitoring Program, or SIMP, and 
other trade requirements on fisheries like the use of turtle 
excluder devices in shrimp fishing nets.
    Multiple Federal agencies under various authorities address 
international fisheries, trade, IUU fishing, and forced labor. 
It is critical that these programs are coordinated, including 
sharing information and capacity. The USMCA is one of these 
tools. Oceana wants to thank the committee for the inclusion of 
language to address forced labor in seafood in the U.S. 
Innovation and Competition Act. This directed Customs and 
Border Protection to work with NOAA's SIMP program to inform 
implementation of the Tariff Act. This is the type of 
government-coordinated approach that is needed and can be 
achieved through leadership in the administration and direction 
from Congress.
    So, after 1 year, Oceana still has outstanding questions on 
how the U.S., Mexico, and Canada are implementing the USMCA, 
specifically on fishery subsidies. It appears that the U.S. and 
Canada have reported some of their subsidies information under 
the requirements of the WTO's Subsidies and Countervailing 
Measures Agreement. But the USMCA requires additional reporting 
that it does not look like any of the countries have complied 
with yet.
    Second, the IUU provisions call for more transparency on 
fishing. So, when and how is NOAA going to improve the 
transparency of our vessel documentation, including providing 
that publicly available and easily accessible registry of 
vessels?
    Third, NOAA was provided additional resources in the 
implementation legislation for USMCA for addressing IUU, 
including SIMP implementation. Specifically, they received $8 
million. NOAA needs to report how that money is being spent, 
and if it is not spent yet, what is the spending plan?
    In a recent report by NOAA about SIMP implementation, the 
agency discussed how the lack of resources is hamstringing the 
implementation of the SIMP program. So this $8 million should 
allow NOAA to prioritize expanding the program to all seafood, 
ensuring that information collected can help identify shipments 
of the high risk of IUU fishing, seafood fraud, forced labor, 
and other human rights abuses.
    Lastly, how does the U.S. plan to work with the other 
parties when it identifies areas of non-compliance with the 
measures of the USMCA? Illegally caught or produced products 
give bad actors an advantage over those that follow the law. 
Trade agreements like the USMCA and trade programs like SIMP 
help set the minimum standards that seafood must meet to enter 
the legal seafood market. The White House, Federal agencies, 
and Congress should work together to ensure that all seafood is 
safe, legally caught, responsibly sourced, and honestly 
labeled.
    Thank you.
    [The prepared statement of Ms. Lowell appears in the 
appendix.]
    The Chairman. Great; thank you very much, Ms. Lowell.
    So let us begin with you, Mr. Davis. From Day 1, it was 
important that USMCA was a game changer in terms of trade law 
enforcement. American workers and American companies win when 
they are not being undercut by trade cheats. So, to cut off the 
opportunities for the trade rip-off artists, Senator Brown and 
I came together to create what has been called the Brown-Wyden 
rapid response mechanism, a faster, tougher labor enforcement 
tool that is directly responsive to American workers and 
American businesses, and Mexican workers and Mexican 
businesses.
    So the rapid response mechanism, Mr. Davis, is pretty new. 
So far the reviews are good, and my question to you to begin 
our discussion is--I think you are going to have a number of 
colleagues ask about this--are there additional steps so as to 
be able to make the rapid response mechanism even stronger, 
particularly to help address facility-specific labor 
violations?
    Mr. Davis. Thank you, Chairman Wyden. Rapid response is 
something that we fought very hard for in the labor movement. 
It is a very important mechanism, and we are very pleased that 
USTR is putting this into effect in a pretty emphatic way 
initially.
    We think it--and in the report, the Board pointed to some 
of the difficulties that have occurred in the implementation, 
in the specific cases, by Mexico of its labor law reforms, and 
that is certainly complicated a little bit. I am thinking 
particularly of the Silao case, which is a complicated case.
    So we need to have the mechanism. We need to be using the 
mechanism regularly and effectively, but we also need to look 
beyond this to other aspects of USMCA and other aspects of the 
Mexican labor law reform, which they are committed to 
implementing.
    So for example, in the General Motors case, we have a 
contract legitimation vote, which is the focus, the focal point 
of the alleged denial of rights, and that vote initially took 
place on April 20th. There was documented fraud and ballot 
tampering by the incumbent union which was, as I pointed out 
previously, under the procedure actually in charge of 
conducting the vote. The authorities intervened, but they did 
not--they stopped the vote, but then they allowed the incumbent 
union to rerun the vote, still in control of the process. The 
incumbent union from the CTM said, ``No, we are not going to do 
that.'' So now USTR has taken action, and there is an agreement 
that that vote will finally take place on August 20th, but that 
is 4 months after the original vote took place.
    Our experience from anti-union campaigns in the U.S. is 
that you may start out with a good, strong group of workers who 
want a union, but after they have been pressured and 
intimidated and all the things that happen in these 
circumstances for 4 months, there is often not a whole lot 
left.
    So we are very pleased with the fact that USTR is going 
forward with this, but there are definitely concerns about the 
capacity of the Mexican institute.
    The Chairman. We will want to follow up with you, Mr. 
Davis, on that, because you have years of expertise, because we 
need to know about the next steps, and I appreciate that.
    Just because time is short, a question for you, Dr. 
McMurry-Heath. We looked to USMCA--updated obligations, new 
enforceable chapters on labor, environment, digital trade--and 
it took a long time to negotiate. But the administration seemed 
so eager with respect to actually going during this election 
season. They were so eager to close on the house, they did not 
wait for the inspections to be done.
    So here we are. We are still talking about some basic 
implementation on a host of issues that relate to your members 
for example, that relate to the digital sector--you know, 
hugely important areas.
    Could you tell us what kind of compliance and 
implementation actions, in your view, should have been taken 
before the agreement went into effect to make sure that our 
innovators, our workers, and our businesses could get the 
bargain that was written in the text? Your thoughts.
    Dr. McMurry-Heath. Well, thank you, Chairman Wyden, for the 
question, and you are absolutely right. Our innovators deserve 
and need our protection under these trade agreements.
    It would have been prudent--given the fact that we knew 
that COFEPRIS, the Mexican regulator, had ceased new approvals 
back in May of 2018--to insist upon their resumption before the 
trade agreement went into effect. Given that that was not the 
case, it now really behooves us to make sure that we double 
back and hold them to their agreement.
    We feel that this can best be done by the appointment of an 
Agricultural Negotiator for USTR. This is critically important 
to do because it affects not just our relationship with Mexico, 
but it has the potential to creep or seep into our other trade 
agreements and with trading partners. So it is very important 
that we address it at this stage.
    The Chairman. Thank you. We will work closely with you. My 
time has expired. What is so important about this area is, 
having worked with you all for years, you are on the cutting 
edge with your members in so many fields of innovation. When 
there is a delay on, particularly updating the kinds of rules 
that are a way to green-light opportunities for them, our 
workers and our companies suffer. So I appreciate your answer.
    Senator Crapo?
    Senator Crapo. Thank you, Mr. Chairman.
    And, Mr. Huttema, as you well know, we have had issues with 
Canada over dairy for years and years and years. And finally, 
one day when NAFTA was renegotiated, we thought we had achieved 
some resolution of those dairy issues in the USMCA. Your 
testimony, as I understand it, is that Canada may be attempting 
to, or is attempting to, circumvent the agreement, particularly 
as it relates to how Canada has handled the application of its 
tariff rate quota commitments. Could you elaborate on that in a 
little more detail?
    Mr. Huttema. Yes, absolutely. When it comes to TRQs and 
access into Canada, the way they administer the TRQs or the 
access to Canada is mostly through processors who really do not 
have any intent of importing product. Not only that, it really 
leaves a lot of the low-value product coming into Canada, when 
it was our intention to get branded product into Canada, 
especially for Darigold with close proximity to the Canadian 
border. We thought we could get higher-value products into 
Canada.
    Another bigger part, just as big a part though, is they are 
continuing to export milk proteins all over the world. We see 
them in markets. It is as big an issue from the exports we see 
leaving Canada as it is access to their market when it comes to 
the TRQs.
    Senator Crapo. And I assume that if we can get those issues 
resolved, the actual terms of the USMCA with regard to dairy, 
for example, would result in significant benefits to American 
dairy producers. Is that correct, and could you elaborate on 
that a little bit?
    Mr. Huttema. Absolutely. So getting products into Canada 
would create more demand for our products, which in turn would 
raise prices. The spirit of the agreement was great. We got 
access; we got what we wanted. Canada got to keep some of the 
markets they stole. In return, they gave us access to their 
country, which was all good. But the spirit of the agreement is 
not being upheld. It is definitely very advantageous for 
American dairy farmers to access markets. When we are held out, 
it hurts dairy farm families.
    Senator Crapo. Thank you.
    And, Dr. McMurry-Heath, as you have testified--and as I 
indicated in my opening statement--Mexico has not approved an 
application for biotech crops since 2018. The economic 
environment for U.S. businesses seeking access to the Mexican 
market deteriorated significantly, in my opinion, in the last 
year. And their law requires that they approve these 
applications within 6 months, correct?
    Dr. McMurry-Heath. Correct.
    Senator Crapo. So the question I have for you is, is there 
a scientific basis behind Mexico's treatment of our biotech 
crops?
    Dr. McMurry-Heath. As a former regulator, I can assure you, 
Ranking Member Crapo, that there is not. This is particularly 
disturbing to not only our innovative agricultural businesses, 
but also to the investors that really support their work and 
make sure that the innovation continues.
    The behavior of COFEPRIS is very unusual on the global 
stage. Not only have they not approved an agricultural 
technology in that time frame, but they have not approved a 
biopharmaceutical product in that time frame as well, and that 
backlog is numbering up around 100.
    So this is incredibly disturbing. It disrupts the global 
marketplace, and because Mexico is such an important trade 
partner for us in our agricultural products, it hampers our 
innovators from developing new technologies not just for use in 
Mexico, but for use at home and for use around the world, and 
their potential impact to help stem the tide of climate change 
is being impacted by this slowdown. So we greatly appreciate 
the committee's attention to this.
    Senator Crapo. Well, thank you. And have we received any 
indication from Mexico's regulator as to why they have not made 
these approvals?
    Dr. McMurry-Heath. No. We know that this behavior started 
with the new presidential administration in Mexico. But our 
companies have received mysterious silence from the Mexican 
regulators since this backlog began.
    Senator Crapo. And then one final question; I am running 
out of time here. But I would just like you to state on the 
record--my understanding is these technologies that we are 
talking about are good both for the farmers and for the 
environment.
    This is not something where there is some kind of a 
negative environmental impact that Mexico is trying to protect 
against. What we are asking is that they approve applications 
for products that would actually help us boost the economy and 
strengthen the environment. Am I right?
    Dr. McMurry-Heath. Absolutely. These crops bring undeniable 
benefits to nutrition and to climate change, and they are 
accepted here and around the world.
    Senator Crapo. Thank you.
    The Chairman. Thank you, Senator Crapo.
    Senator Stabenow?
    Senator Stabenow. Well, thank you, Mr. Chairman. And of 
course, in listening to our leader's questions, I think you are 
going to hear a pattern today of things that we are very 
concerned about and issues that we share, and I appreciate all 
of you being here today.
    Mr. Davis, rather than a question, I just want to say 
``amen'' to what you said, and I want to thank Chairman Wyden 
and Senator Brown for leading our efforts to get us to a spot 
where we can have a level playing field for workers. We 
certainly need that in Michigan. We need that across the 
country. I was listening very closely to your concerns about 
the effectiveness and the funding needs of the contract 
legitimation process. And so we need to be working together, 
and, Mr. Chairman, I look forward to working with you to make 
sure things are being done the way that we anticipated when 
this passed.
    Mr. Huttema, I also come from a dairy State. This is our 
number one commodity in Michigan, and I very much appreciate 
your comments about upholding both Canada's and Mexico's dairy 
commitments. We fought very hard for that. That was a top 
priority for me as a leader on the Agriculture Committee.
    I am so glad that we are seeing a dispute settlement panel 
that was put together in May, and I know how important the 
dairy tariff rate quotas are. But I wonder if more broadly, in 
addition to our focus there, which is critical, in terms of 
export markets, when you look at the USMCA, what are some of 
the most important pieces to replicate when we look at future 
trade agreements?
    Mr. Huttema. Yes; great question. So, when you look at it, 
number one is market access, especially when it comes to 
Mexico. The zero tariff on our imported products there was a 
great thing to go after. Number two is, there is a resolution 
process put in place, which we have, and we will see how that 
plays out. Thirdly, I would say, when it comes to Mexico, 
protecting cheese names, common cheese names. I mean, we got 
side letters agreeing to that, and now it is just a matter of 
staying on top of it and working with the Mexican Government to 
make sure these things play out well.
    So those three things, I think, are important moving 
forward.
    Senator Stabenow. Thank you very much.
    And, Dr. McMurry-Heath, good to see you. Biotechnology 
certainly has the potential to help us increase our 
productivity while helping farmers address the climate crisis, 
certainly. If we want to make the most of that potential and 
provide certainty for farmers and consumers and trading 
partners, I agree we need regulatory systems that are 
effective, science-based, and transparent, both here and 
abroad. I also agree that we need an Agricultural Negotiator as 
soon as possible to help with this.
    I have long raised concerns with China's opaque 
biotechnology approval process, and it is now concerning to see 
Mexico making decisions that do not seem to be grounded in 
science and causing long delays in biotechnology approvals. So 
I wonder if you might just speak a little bit more about the 
real-world consequences that decisions like these by our 
trading partners can have, and the impact on producers and 
future innovation.
    Dr. McMurry-Heath. Thank you so much, Senator Stabenow, and 
thank you for your continued efforts to really demonstrate how 
biotechnology can lead to improvements toward climate change 
and pest resilience. So China's opaque trade practices have 
been a very difficult path for our biotechnology companies for 
quite some time. On average, it takes our companies 7 years to 
get their products approved through China, and we estimate that 
this has cost over $50 billion just in the 5-year period 
recently for U.S. farmers. So this is incredibly important to 
address, and we have every reason to believe that a similar 
analysis that we are conducting now will show similar results 
in Mexico.
    So our innovators need certainty, and they need a path open 
to science that is sound. That is all we are asking for, and we 
think that will aid not just our farmers, but it will help us 
address hunger and reduce climate change.
    Senator Stabenow. Thank you. I agree.
    The Chairman. Thank you, Senator Stabenow.
    We are going to go at least through a reading of everyone, 
and I believe we will be able to accommodate everyone quickly. 
The next person is Senator Grassley. I believe he is not 
available. After Senator Grassley, Senator Cantwell. I believe 
she is not available now, which means Senator Cornyn, who is 
available.
    Senator Cornyn. Well, thank you, Mr. Chairman.
    Mr. Huttema, when you say that, in farm country, a deal is 
a deal, apparently that does not necessarily apply to 
international trade agreements like the USMCA. I think we can 
all agree about the importance that the chairman and others 
have placed on enforcement, and certainly I would say that we 
ought to ask the U.S. Trade Representative to prioritize all 
these dispute resolutions and discussions with our Mexican and 
Canadian counterparts, and not just rely on the USMCA, what it 
says.
    Former Justice Scalia used to point out that the Soviet 
Union had one of the most highfalutin-sounding constitutions in 
the world. But because they did not have an enforcement 
mechanism through an independent judiciary, it did not really 
mean much. So I agree with all my colleagues that we need to 
get the USTR to emphasize the dispute resolution and 
enforcement provisions.
    I particularly want to state my concerns about how Mexico 
is favoring state-owned oil companies, which eliminates really 
the intent of the USMCA in dealing with these companies on a 
level playing field. I was one of 19 Senators who wrote a 
bipartisan letter to President Lopez-Obrador, and he basically 
blew us off, which unfortunately reinforces what I said a 
moment ago. We need these enforcement mechanisms rather than 
just the rhetoric and language that people use when we pass 
these trade agreements.
    I also want to associate myself with the comments of 
Senator Crapo when it came to the process by which the USMCA 
passed into law. Basically the Senate Finance Committee, the 
primary committee that was responsible for trade agreements in 
Congress, was excluded from the process by the then-USTR. I 
think that exclusion jeopardizes the integrity and future of 
Trade Promotion Authority, which has delegated constitutional 
authority.
    So let me get to something more specific, Mr. Davis. I know 
that labor had significant concerns that were addressed by 
proposals made by the chairman and Senator Brown.
    I was a party to an op-ed piece with Senator Carper--who is 
the chairman of the Trade Subcommittee in the Finance 
Committee--that encouraged the administration to revisit the 
Trans-Pacific Partnership in some form. As everybody knows, our 
competition with China looms large for our country, and one 
thing we have that China does not have is friends.
    I do believe that we would have more leverage dealing with 
China if we worked with our friends and partners in the region. 
But specifically what I wanted you to answer, Mr. Davis, is 
what would it take for organized labor to support a 
multilateral regional and comprehensive trade agreement in the 
Asia-Pacific?
    Mr. Davis. Thank you, Senator. I think, from labor's point 
of view, we are a long way from there.
    Senator Cornyn. Give me something specific on how we can 
get closer.
    Mr. Davis. We have the first steps of a worker-centered 
trade policy, as Ambassador Tai frames it, and we are very 
supportive of that approach. That is going to take very strong 
enforcement, and frankly much stronger when we get outside of 
places like Mexico, where we have long, historic relationships. 
They are not always easy ones, but they are there. Where we get 
into countries that have non-market economies that are hurting 
American workers, countries that are dumping steel and aluminum 
today into our market, we are going to have to have a lot more 
enforcement, as has been mentioned a couple of times, and we 
are going to have to have a much more critical approach to 
folks who define themselves as our friends but then want to 
take money out of our bank account.
    Senator Cornyn. Well, I know when China became part of the 
WTO, there was a hope that they would join the rules-based 
international order and actually comply with their agreements. 
Unfortunately, they have a history of not complying with their 
agreements and stealing our intellectual property and 
committing other violations of norms and laws.
    Thank you very much.
    The Chairman. Thank you very much, Senator Cornyn.
    Senator Grassley?
    Senator Grassley. Thank you, Mr. Chairman. A very important 
hearing. We had a chance to discuss some of this last night 
when a few of us met with the Ambassador from Canada in their 
embassy downtown. I am going to start with Dr. McMurry-Heath.
    Two months ago at the Finance Committee hearing, I asked 
Ambassador Tai about Mexico's failure to adhere to the USMCA 
commitments to issue broad biotech import approvals, and its 
recent decree to phase out GMO corn. I was pleased to see 
Ambassador Tai follow through with her commitment and raise the 
issue in meetings earlier this month in Mexico City.
    Unfortunately, it looks like Mexico will not work with the 
U.S. in a good faith effort to resolve the issue and ensure 
Iowa farmers full access to Mexican markets. What steps should 
USTR take in regard to enforcement actions for Mexico's 
treatment of agricultural biotechnology?
    Dr. McMurry-Heath. Thank you, Senator Grassley, for the 
question, and thank you so much for your leadership and your 
urging to Ambassador Tai to address the issue. This was a very 
important first step. However, as you know, more is needed.
    And we really think it is time for the USTR to begin taking 
enforcement action by appointing an Agricultural Negotiator. We 
greatly appreciate Ambassador Tai's and Secretary Vilsack's 
efforts to date to try to engage and address this issue with 
the Mexican Government. However, an enforcement case would, at 
the minimum, give us a framework and a timeline to resolve the 
COFEPRIS-regulated delays in biotechnology approvals, and the 
December 31, 2020 decree against biotech crops. So it is 
incredibly important that we address this now with the 
Government of Mexico, so that a bad problem does not go from 
bad to worse.
    Senator Grassley. Well, there is an Iowan, Dr. Norman 
Borlaug, who passed away at age 95. But he did a lot of 
agricultural biotech research, and he did a lot of it in 
Mexico. He won the Nobel Peace Prize, presumably for his 
research saving over a billion people from starvation.
    For those who do not know much about agriculture, could you 
share some other benefits of using genetically modified crops?
    Dr. McMurry-Heath. Certainly. We are facing hunger and 
nutritional shortages globally. Our technologies are able to 
use biotech to create pest-resistant crops. This cuts down on 
the need for pesticides. It increases crop yields. It makes 
agriculture a lot more sensitive to impacting the climate, and 
all of this helps us get more crops out to more people.
    If you look at short stature corn, that is a crop that is 
designed to resist windstorms and make the crops much more 
high-yield when it comes to withstanding the weather changes 
that we are witnessing to date. So these technologies are 
incredibly important. We use science in almost every other 
setting to improve our lives, and this is just another area 
where science can lead to huge benefits.
    Senator Grassley. Mr. Huttema, USMCA found a way to change 
Canada's trade-distorting policies and reform Canada's dairy 
pricing system, including by eliminating its Class 7 program. 
However, we know that these changes only take place when they 
are fully enforced.
    I was glad to see that in May, USTR announced that the 
agency will request a dispute settlement panel be established 
to consider Canada's failure to comply with tariff rate quota 
provisions. Does USMCA adequately protect American-made dairy 
products?
    Mr. Huttema. If the spirit of the trade deal is upheld, yes 
it could. But the way the Canadian Government and industry up 
there are behaving, it circumvents what we put in place. So as 
of today, no. So enforcement is needed.
    Senator Grassley. Also for you, are there other areas 
besides Canada's dairy TRQ provisions where you would like to 
see USTR take action?
    Mr. Huttema. Absolutely. When it comes to exports of 
product out of Canada--specifically milk protein isolates and 
skim milk powders--action is needed there as well. There were 
caps put in place, and they are creating products to circumvent 
that agreement as well.
    Senator Grassley. Yes.
    Mr. Chairman, could I have one more question, please?
    The Chairman. Sure.
    Senator Grassley. Okay. To Mr. Davis, do you think closing 
down the Enbridge Line 5 pipeline would do the same damage to 
U.S.-Canadian relations and cause Americans to lose their jobs?
    Mr. Davis. Yes sir. We very much support keeping that 
pipeline open. Our members have been fighting hard for that.
    Senator Grassley. Thank you. Thank you, Mr. Chairman.
    The Chairman. Okay. I thank my colleague. The next three in 
order are Senator Menendez, Senator Thune, and Senator Carper, 
and then we have been joined by additional colleagues.
    Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman.
    If the United States is going to successfully diversify 
away from China, we need to continue to deepen our trading 
relationships with our neighbors in the western hemisphere. 
When it comes to addressing the challenges of migration in 
Central America, it is critical that we use all the tools at 
our disposal, including trade and economic development.
    So taking a fresh look at CAFTA-DR is a natural part of 
both of those efforts, I believe. So, while we still need time 
to judge the effectiveness of all the changes, are there any 
USMCA provisions that you believe should be included or 
expanded upon in an updated CAFTA-DR?
    Mr. Davis. Thank you, Senator Menendez. It is a very 
important question, and obviously a lot of people are thinking 
about, is this a model? Is it the floor, is it the ceiling? We 
think that USMCA, as we understand it right now, is a floor for 
enforcement.
    But certainly, the kinds of programs that are being talked 
about for Central America should be addressing the serious 
violations of worker rights that exist throughout that region. 
So it does concern us a little bit, that sort of pitch to bring 
in private investment, recognizing that Central American 
countries have weak labor enforcement capacity and weak laws in 
many cases. Those raise a lot of concerns about whether this is 
really going to be effective in either improving living 
standards or as any kind of deterrent to migration. We need a 
lot more work.
    Senator Menendez. Dr. McMurry-Heath?
    Dr. McMurry-Heath. It is very important that we get CAFTA 
to focus on provisions that enhance cooperation with biotech. 
We really need to see our biotech innovations sent around the 
globe and have open access to markets around the globe.
    Senator Menendez. Let me ask you. As you may know, 
Nicaragua is a CAFTA-DR country. In recent months, Nicaragua's 
Ortega regime has arrested six presidential candidates and over 
a dozen prominent leaders from the private sector and civil 
society. We have not seen an authoritarian crackdown of this 
nature in our hemisphere in decades.
    When Congress passed CAFTA-DR, I do not think anyone 
expected that it would end up with the United States extending 
trade benefits to an authoritarian regime. So do any of you 
believe that when we are faced with this kind of situation, 
when we have a trade agreement partner that makes a sharp 
authoritarian turn, they should continue to receive all the 
benefits of that agreement?
    Mr. Davis. Senator, I think any kind of violation of human 
rights, including labor rights, is something that we have to 
take very seriously. We have to look at the mechanisms, whether 
that is Nicaragua or whether that is Guatemala or El Salvador, 
where there have been very serious labor rights violations and 
human rights violations as well, and Honduras, where human 
rights defenders have been killed.
    So that has to be the frame through which we look at all of 
these agreements.
    Senator Menendez. All of you, either from a labor or from a 
business perspective, want to deal with countries that not only 
observe the rule of law, but if there is a dispute on 
intellectual property or a dispute on a contract, you can 
believe that you have a good opportunity to actually have that 
dispute fairly litigated in a court.
    But when you have authoritarian rule, courts are not a 
question of the due process and the rule of law. So I 
personally believe the United States has to incorporate 
standards into future trade agreements to safeguard against the 
deterioration of democratic governance and the proliferation of 
corruption and human rights abuses.
    Dr. McMurry-Heath, I know your organization has been 
closely watching the administration's work on the TRIPS waiver. 
Details on the scope, time frame, and other factors are going 
to be critical to make sure we get the outcome we all want: 
more vaccines distributed to those who need them, but of course 
with the appropriate safeguards. Can you describe your 
interactions with the administration on this issue? Have you 
been consulted as USTR develops their negotiating posture?
    Dr. McMurry-Heath. Thank you, Senator. We have met with 
USTR, but in doing so we made it clear that, while well-
intentioned, the TRIPS waiver actually will not solve the issue 
of getting more COVID vaccines into more people around the 
globe. We completely agree that it is a humanitarian priority, 
an imperative that we do so, and no one is safe until everyone 
is safe from COVID.
    But IP is not the right limiting step. Rather, our global 
SHARE initiative, which we can submit into the record, outlines 
really pragmatic steps we can take today to not have the 3- to 
5-year delay it would take to actually build new manufacturing 
facilities that do not already exist.
    But it would allow our companies to fully use the 70 global 
manufacturing partnerships that they have in place today, and 
give them the supplies and raw materials to manufacture really 
compliant vaccines and safe vaccines for patients around the 
globe tomorrow.
    Senator Menendez. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Menendez.
    Of the next two, Senator Thune is with us, and Senator 
Carper will be online. The way the order is now, we have 
Senator Thune, Senator Carper, Senator Toomey, Senator Brown, 
Senator Cassidy, and what we are doing is just calling through 
in order of appearance.
    Senator Thune. I was here at gavel down.
    The Chairman. You were here at gavel down. Well, this is in 
order of appearance, but let me follow it up with you and let 
us just keep moving, okay? All right.
    Senator Thune then Senator Carper.
    Senator Thune. Good morning. Thank you, Mr. Chairman, and 
thank you for holding this important hearing.
    While the focus of this hearing is on USMCA, I want to 
reiterate my concern that it is almost August and there is 
still not a nominee for Chief Ag Negotiator at USTR. It is an 
issue I have raised with Ambassador Tai and more recently with 
other USTR nominees. The lack of an Ag Negotiator is deeply 
concerning to farmers and ranchers in South Dakota and across 
the country. I strongly encourage the administration to fill 
this role as soon as possible.
    In that vein, I would like to ask you, Dr. McMurry-Heath, 
can you tell us about the importance of having a Chief Ag 
Negotiator to better engage with Mexico and Canada? And beyond 
the USMCA, how would having a Chief Ag Negotiator benefit U.S. 
workers and businesses?
    Dr. McMurry-Heath. Well, it is very important that we hold 
all of our trade partners to our trade agreements, and USMCA is 
really setting the gold standard for science-based trade 
policies and making sure that our regulators are paying 
attention to the science, rather than misplaced concerns, when 
judging our biotechnology crops.
    An Ag Negotiator, a Chief Ag Negotiator at USTR, would be 
our point person on this and would have the most pivotal 
influence to make sure that these points are made with all of 
our important trading partners. But even in the absence of a 
USTR Chief Negotiator, it is an imperative that we act now to 
try to right some of the missteps that we are seeing so far in 
the implementation of USMCA.
    Senator Thune. So, as a number of my colleagues I think 
have mentioned, Trade Promotion Authority expired less than a 
month ago. TPA is critical to opening markets and expanding 
opportunities for American workers, businesses, farmers, and 
consumers. TPA was instrumental in the successful passage of 
USMCA, and it keeps the U.S. leading in trade, which is why its 
renewal is so important.
    Dr. McMurry-Heath, how significant is renewing TPA to your 
industry and, more broadly, to our economy?
    Dr. McMurry-Heath. It is critically important, and BIO is 
fully supportive of renewing TPA. One of the things that we 
desperately need in both our multilateral and bilateral trade 
agreements is that we modernize U.S. trade policy and pay close 
attention to intellectual property.
    BIO represents a lot of small companies as well as large 
companies, and for many of our small companies their 
intellectual property, their ingenuity, is perhaps their most 
valuable resource. Until our trade policies fully recognize and 
protect that around the globe, then all of our businesses and 
the investors that support them are at risk.
    Senator Thune. There are a number of cheese producers in 
South Dakota that rely on generic names like asiago and 
parmesan to market their product, not only in Mexico and 
Canada, but around the world. In a side letter to USMCA, there 
was a list of common cheese names to be protected from the EU's 
abuse of geographical indications.
    Mr. Huttema, could you share insight into how the EU goes 
about utilizing or seizing these common names and how much of a 
concern this is to U.S. producers?
    Mr. Huttema. Yes Senator, it is a very important issue for 
American producers and processors. The EU goes about this not 
only when it comes to cheese, but meat and wine and a host of 
other products. They essentially do it to have the consumers in 
those countries not be able to recognize what truly is a cheese 
that is exactly the same.
    So, when it comes to producers in South Dakota that export 
some of these cheeses, they would have to relabel, remarket, 
and consumers would be totally unaware of what they would be 
buying. So the EU definitely does do this as a practice to try 
to withhold us from certain markets.
    In the case of USMCA and Mexico, those side letters were 
very helpful.
    Senator Thune. Thank you.
    And finally, Dr. McMurry-Heath, Mexico was consistently the 
top market for U.S. corn exports, valued at $3 billion last 
year. Our farmers and ranchers were some of the strongest 
advocates for passage of USMCA. However, farmers in my State 
are concerned that Mexico is backsliding on its USMCA 
commitments, because they have not approved any new biotech 
crops since the treaty was ratified last year. In fact, Mexico 
has not approved any biotech crop traits since May of 2018. So 
can you speak to this issue and what impact it may have on U.S. 
corn farmers when it comes to trade with Mexico?
    Dr. McMurry-Heath. Certainly, Senator. This is an 
incredibly important issue. To see the breakdown of an 
important global regulator like COFEPRIS, to the point where 
they are not approving, not only biotechnology agricultural 
crops, but also biopharmaceutical products, is almost unheard 
of, and it creates such uncertainty in this very interlinked 
and interrelated global marketplace.
    When we see a breakdown in our ability to innovate in corn 
crops in the U.S. to export to Mexico, that also impacts our 
ability to innovate for almost all other markets, including our 
own. We need certainty and we need action to make sure these 
innovations have a path forward, as long as they are proved 
safe and effective.
    Senator Thune. Thank you.
    The Chairman. Our next three will be--Senator Carper will 
go next and then Toomey, Brown, and Cassidy in order of 
appearance.
    Senator Carper?
    Senator Carper. Before I ask questions, could I say a word 
about Mike Enzi?
    The Chairman. Of course.
    Senator Carper. Yes. I remember well when I was a brand new 
member of the Senate, oh gosh, 20 years or so ago, that I ended 
up presiding over the Senate. One of the people who asked for 
recognition was Mike Enzi, whom I really did not know.
    He spoke for what I--he was the senior Republican on the 
Health, Education, Labor, and Pensions Committee, and the 
senior Democrat was Ted Kennedy. He talked that day about how 
the two of them were able to get a lot done and accomplish a 
lot by working together, and he mentioned--in his remarks, he 
mentioned the 80-20 rule.
    I did not know--I had heard of the 80-20 rule in other 
contexts, but I did not know what he was talking about. So I 
gave a note to a page and asked him to come and talk to me when 
he finished, before he left the floor, and he did. And while 
somebody else was speaking, I said, ``What is the 80-20 rule?'' 
And he said, ``It is the rule that guides Ted Kennedy and me.'' 
I said, ``Well, what is it?''
    He said, ``Ted and I agree on about 80 percent of the stuff 
before our committee, and we disagree on maybe 20 percent of 
the stuff. What we decided to do is focus on the 80 percent 
where we agree, and the 20 percent where we disagree, we will 
come back and deal with that another day.'' When I mourn, along 
with our colleagues, seeing the people who are mourning the 
passing of Mike Enzi, I always think about the 80-20 rule. It 
is something that has guided me for, oh, the past 20 years. It 
is something that, as we try to come to a conclusion and a good 
resolution with respect to infrastructure, different kinds of 
proposals that are put forth, maybe we should remember Mike 
Enzi and that 80-20 rule. So thank you. Thank you for letting 
me say that.
    The Chairman. Thank you.
    Senator Carper. I want to thank our witnesses today for 
joining us. About a year since the USMCA treaty went into 
force, as chairman of the Environment and Public Works 
Committee today, protecting the air, protecting the water, the 
land that we all share is of the utmost priority to me and the 
members of our committee, and I think the members of the 
Senate.
    I was proud to work with many of our colleagues in the 
House and Senate to help develop the environmental provisions 
in the USMCA, which are the most comprehensive of any U.S. 
trade agreement and which, I think, will serve as a model for 
negotiations on other trade agreements as we go forward.
    I believe trade policy is one of the best tools to protect 
our environment and work with our allies on shared 
environmental goals. However, in order for these environmental 
provisions to be more than just words on a piece of paper, they 
must be enforced.
    Ms. Lowell, could you take a moment to share with us some 
of the areas of progress between the U.S., Canada, and Mexico 
when it comes to addressing these environmental commitments, 
please?
    Ms. Lowell. Sure. Well, we were certainly happy to see 
environment have its own chapter in the USMCA, and really 
believe that enforcement of trade measures is important 
because, without enforcement, we just have a wish list of what 
we would like to see rather than what is a binding commitment 
to real change happening, either on the water, on land, or with 
the environment.
    So, just some items that have happened since the USMCA has 
been implemented for the past year. There have been two places 
where the public has actually raised a submission to the 
committee. The USMCA provides a mechanism for the general 
public to take action if they believe an environmental law is 
not being effectively enforced by the U.S., Canada, or Mexico.
    And so anyone can file a submission on enforcement matters 
when they see something that is not happening. So just a couple 
of examples that have happened since 2020--there have been two 
submissions following this process.
    The first was in Mexico, highlighting where the Mexican 
Government was not following its rules to protect loggerhead 
sea turtles in the Atlantic and Pacific. So that is an example 
of someone raising, ``You need to do more, Mexican 
Government.'' Secondly in Canada, there was a submission 
regarding the port authority, that they were not following 
their process similar to our NEPA process, the Canadian 
Environmental Assessment Act, on taking in the impacts of 
expanding a port in British Columbia.
    So I think both of these examples show that the mechanisms 
can work, where the general public can raise areas where they 
see that the countries need to do better.
    I really encourage the Senate Finance Committee and others 
in the Senate and in Congress to really help push the U.S. to 
do better in our own areas, as well as identify ways that we 
can push our trade partners to ensure that they are enforcing 
our laws because, again, we do not want the environmental 
chapter just to be a wish list of things that would be nice to 
do but actual commitments, binding commitments that the 
countries are doing.
    Senator Carper. Thank you. Thank you for that response. 
Just a quick follow-up if I could, Ms. Lowell. The USMCA 
Implementation Act included significant funding, as you will 
recall, for environmental monitoring and enforcement. However, 
some stakeholders have raised concerns about transparency on 
the use of these funds.
    Could you just take a moment and discuss what additional 
transparency is needed, to give us recommendations on where we 
should enhance our focus when it comes to the use of these 
funds?
    Ms. Lowell. Sure. So specifically for NOAA, with that money 
for implementation of the Seafood Import Monitoring Program and 
addressing IUU provisions, we have yet to see how that money 
has been spent. So we would love to have NOAA report to you all 
and the public on how they have used those resources toward 
implementation of the USMCA's IUU provisions, and including the 
money to build capacity in Mexico as well.
    The resources were definitely needed. NOAA outlines in its 
own report in June that it was limited in resources on the 
implementation of that program to help keep illegal product out 
of the U.S. So we feel like that $8 million should have given 
them a significant investment in the infrastructure to make the 
program successful, but we have not seen to date how that has 
been spent.
    Senator Carper. Okay, and one more quick one. Mr. Davis, 
would you please share with us thoughts on how the labor and 
environmental reporting mechanisms have functioned since the 
USMCA entered into force, as well as the opportunity for their 
continued improvement, please? Just briefly.
    Mr. Davis. Yes. It is a big improvement. I would say we are 
still having difficulty getting data on a lot of metrics from 
Mexico, and that is a concern that the Board raised in its 
report. So we need to do some more work in that area.
    Senator Carper. Okay. And, Ms. Lowell, I will follow up 
with you with a question for the record on the same question, 
if I could. Thanks a lot; very, very much. This is important 
stuff, and we are grateful. Thank you.
    The Chairman. Thank you, Senator Carper.
    Senator Cassidy?
    Senator Cassidy. Mr. Davis, I am going to ask you a couple 
of questions that may seem far afield and are questions I do 
not have the answer to, which will make it more interesting. I 
read that there was a problem of China sending steel and 
aluminum through Mexico, as if it was being made in Mexico, but 
merely it was a pass-through to our Nation circumventing, if 
you will, the rules. Did I remember that correctly?
    Mr. Davis. Yes sir.
    Senator Cassidy. And how does USMCA address that?
    Mr. Davis. Actually, we have been trying to address that 
through a number of pieces of legislation which have been 
proposed, and through the government's enforcement of current 
anti-dumping and circumvention rules. We are very pleased that 
the administration has been with us fighting steel dumping, 
aluminum dumping, which affects our members directly, affects 
members in other manufacturing unions and our critical supply 
chains.
    Senator Cassidy. Can I ask you, is there any evidence of 
complicity in the Mexico Government, that they would be turning 
a blind eye towards Chinese aluminum and steel being dumped 
into our Nation passing through Mexico? Or are they cooperating 
in determining this?
    Mr. Davis. I am not sure I have the details to give you a 
direct answer to that.
    Senator Cassidy. Okay.
    The other thing--again this seems far afield, and I may ask 
Ms. Lowell this as well--we speak of Mexico's compliance with 
labor laws and with environmental regulations. There is a 
certain cost associated with that. We know that; that is okay. 
But China does not enforce such regulations. The absence of 
enforcement therefore results in, effectively, a subsidy given 
to people who wish to locate their manufacturing plants there. 
Again, they do not have the cost of compliance with labor or 
environmental laws.
    But in turn, China seems to violate both with seeming 
impunity. Any thoughts on that?
    Mr. Davis. We do not have a level playing field with non-
market economies, and we have supported legislation that would 
address that more directly.
    Senator Cassidy. How can we address the absence of 
environmental enforcement and/or labor law enforcement in 
China, again thereby giving the playing field an advantage 
tilted towards them vis-a-vis Mexico, us, and others?
    Mr. Davis. We have to keep those, those subsidies, direct 
and indirect, from filtering into our market, sometimes through 
our legitimate trading partners. But we cannot, cannot let 
China get away with that.
    Senator Cassidy. Ms. Lowell, any thoughts on that which I 
just asked Mr. Davis?
    Ms. Lowell. Yes, absolutely. I mean, I think China is 
really putting our U.S. fishermen at a disadvantage, and it 
comes down to putting import controls in place that ensure that 
any seafood coming into the U.S. is legally caught and produced 
legally, which means not using forced labor or other human 
rights abuses.
    Oceana strongly believes that more transparency and 
documentation on seafood products coming in can help just 
ensure that an import is legal. So the Seafood Import 
Monitoring Program right now only applies to 13 types of 
seafood, which are not some of the ones that are also----
    Senator Cassidy. Let me stop--let me stop you.
    Ms. Lowell. Sure.
    Senator Cassidy. Because I think we are in total agreement 
on most things. I represent a bunch of shrimpers in Louisiana. 
Now one thing I will say though, practically speaking, shrimp 
is what, 80 percent of what we import.
    If we are going to put in systems--and you initially aspire 
to do everything--it seems like you are going to overwhelm your 
system, as opposed to starting with that which is highest 
volume/most problematic and then growing in capability. Would 
you agree or disagree?
    Ms. Lowell. I disagree with that. I think the information 
flow should apply to everything, and when you target 
resources----
    Senator Cassidy. Yes, but it is not that we should not. It 
is just--do we have the capability to start and immediately go 
to scale on everything?
    Ms. Lowell. That information allows you to target the 
shipments at the highest----
    Senator Cassidy. You are missing my point. The question is, 
how rapidly can we scale? Not that ideally we would not do it, 
but rather--I will move on, just because I am not sure it is 
worth belaboring.
    Dr. McMurry-Heath, I am not sure that--you have probably 
already been asked this. I apologize; I have been in another 
committee hearing. How has Mexico complied with respecting IP 
vis-a-vis our biologics, if you will, pharmaceuticals?
    Dr. McMurry-Heath. I wish I had the answer to that 
question, Senator, but because they have not so far actually 
approved our agricultural biotech crops, it has been difficult 
to see with really some of our cutting-edge innovations. So 
far, that is an area of concern, and we keep watching it.
    But we would love to see more innovations going into Mexico 
so that we can then safeguard the intellectual property.
    Senator Cassidy. But under the terms of the treaty, they 
are supposed to approve that; correct?
    Dr. McMurry-Heath. Yes.
    Senator Cassidy. Okay. With that, I yield back. Thank you.
    The Chairman. I thank my colleague. The next two are 
Senator Bennet and then Senator Young, who I believe is online, 
and then Senator Casey.
    Senator Young, are you online?
    Senator Young. I am, Mr. Chairman. Thank you.
    The Chairman. Go ahead.
    Senator Young. Well, I welcome our panelists. The USMCA is 
a landmark agreement, critical to our economic success in the 
State of Indiana. We are the most manufacturing-intensive State 
in the country, and also one of the Nation's top 10 States for 
ag exports.
    In looking at corn and soybean production, 87 percent of 
this year's corn acreage was planted with biotech varieties in 
Indiana, and 91 percent of soybean acres were planted using 
biotech varieties. Ultimately, Mexico has taken steps that 
threaten the market reliability for ag products.
    No biotech approvals have been issued in over 2 years. 
Executive decrees also attempt to phase out the use of 
genetically engineered foods, and in case anyone is in need of 
a reminder, biotech allows crops to withstand drought, pests, 
flooding, all while increasing yields and therefore reducing 
the prices of these important commodities and reducing the need 
for herbicide application. So it leads to a healthier 
environment and also a healthier product.
    Dr. McMurry-Heath, given what the science says about the 
benefits of biotech, what is at stake for our farmers and 
innovators should Mexico's decrees be implemented?
    Dr. McMurry-Heath. Thank you so much, Senator, for the 
question, and yes, there is a lot at stake. Biotechnology 
really allows our agricultural innovators to develop new crops 
that can withstand the global warming that we see to date and 
prevent future global warming going forward.
    We have seen so far that there has been impact from this 
kind of uncertainty, in terms of trying to get the investment 
needed to really speed those innovations--and those innovations 
are critical. We have a company called Benson Hill that is 
trying to use CRISPR, a technology that just won the Nobel 
Prize in science, to engineer very specific, high-nutrition 
crops that can be grown in almost any hydroponics setting in 
any small neighborhood or low-
income area.
    This could allow us to address hunger. It could allow us to 
get more nutritious foods to inner-city and poor communities in 
the U.S. But the hampering of this technology at the 
international trade level is also hampering our domestic 
ability to use these technologies to help Americans and others 
around the globe.
    Senator Young. Well, that is incredibly compelling 
testimony at a time when there is much discussion here in 
Washington, across the country, and back home in Indiana about 
the price of our food. Inflation is among the greatest concerns 
for my constituents, and we are talking about something that 
actually could increase the cost of food--is increasing the 
cost of food.
    How might these delays be impacting--we will move beyond 
the consumer level to the ag sector more generally. How are the 
delays impacting the ag sector, particularly for States in the 
Corn Belt?
    Dr. McMurry-Heath. Yes, so we started to look deeply into 
this question with Mexico, but we can use China as an example. 
In 2018, BIO and our international partners conducted an 
extensive economic analysis on the impact of regulatory delays 
in China, where it takes an average 7 years for our new 
agricultural crops to get approved. This has cost the U.S. 
nearly 34,000 jobs between 2011 and 2016.
    So we can see that these trade agreements have a real-world 
impact on Americans' earning capabilities and job 
opportunities, not to mention global warming, nutrition, and 
hunger.
    Senator Young. And hunger, something that is being 
exacerbated by the COVID pandemic, with supply chain challenges 
and even some challenges at the production level. We see the 
number of people across the world on the verge of starvation 
spiking.
    How can Congress be helpful to Ambassador Tai, in her role 
over at USTR, in seeking a resolution to this issue before 
irreversible harm is caused?
    Dr. McMurry-Heath. We appreciate the bipartisan efforts to 
really support Ambassador Tai in her efforts to try to 
negotiate with the Mexican Government. But it is critically 
important that we see movements like the appointment of a Chief 
Agricultural Negotiator for USTR, so that we can enhance our 
efforts and show the Mexican Government that we are serious 
about these concerns, and that they must be addressed urgently.
    Senator Young. Thank you, Doctor. I am out of time.
    The Chairman. I thank my colleague.
    We are going to try and see if we can get Senator Casey, 
Senator Whitehouse, Senator Hassan, and Senator Cortez Masto in 
before we have to go vote.
    Senator Casey?
    Senator Casey. Mr. Chairman, thanks very much. I want to 
join a lot of our colleagues across the Senate in noting the 
passing of Senator Mike Enzi. I had a longer commentary in the 
HELP Committee just a few minutes ago, but I did want to say 
how saddened we were about the accident that he suffered and 
then the terrible and tragic passing of Mike Enzi.
    Probably the best way to describe Mike Enzi is, he was a 
paragon of decency in a town where that quality is in short 
supply. We are just thinking of his family and praying for 
Mike. We will miss him more, I guess, as a human being than 
anything else, but of course as a colleague as well.
    I also want to commend the chairman for, not only calling 
this hearing to focus on USMCA and its implementation, but also 
to commend Chairman Wyden's work to get this agreement done. I 
realize it was work done by the previous administration, but 
that agreement would be well short of what I could have 
supported were it not for the work of Chairman Wyden and 
Senator Brown and others in the House and the Senate. So I want 
to commend them.
    Mr. Davis, I will start with you. I will be introducing 
soon the Market Economy Sourcing Act, and that will be with 
Senators Brown and Warren. This legislation establishes a 
supplemental rule of origin for non-market economies like China 
that can ensure that countries like China cannot free ride on 
trade agreements.
    As you know, half of all content under existing rules of 
origin can come from countries outside of those participating 
in a trade agreement. This means a significant share of content 
for goods receiving preferential market access under a trade 
agreement can come from Communist countries like China, half of 
the content. That is not only counterproductive but it can 
further enmesh our supply chains, including critical supply 
chains, with those of the Chinese Communist Party.
    So, Mr. Davis, my question for you is, can you discuss how 
implementation of policy like that embedded in the bill I am 
introducing will help, number one, secure critical supply 
chains, and number two, contribute to high standards, and 
number three, curb free-riding from Communist countries on 
trade agreements?
    Mr. Davis. Thank you, Senator. And the Steelworkers are 
very proud to have endorsed this legislation that you are 
sponsoring. In fact, I think under TPP, it would actually have 
allowed up to 60 percent of an automobile's content to come 
from outside member countries, including non-market economies, 
as you stated.
    So this is really fundamental towards reinvesting in the 
American workforce and in our critical supply chains, so that 
we are prepared for the next pandemic or the next ship shortage 
or all the things that are really weighing down on the growth 
of our economy and the possibility of expanding the income of 
our workers at this point.
    Senator Casey. I want to thank you, and thanks for your 
work on this and your scholarship in this area, as well as your 
service to the country. Also, the last thing I wanted to ask 
you about was if you could discuss how you are working to 
ensure that the work you are doing in the context of both labor 
and labor rights is being employed to support all workers, 
including women and historically disadvantaged communities?
    How are you ensuring that women are included at the table 
from the outset with regard to both the engagement and 
consultation process? Senator Cortez Masto and I have worked on 
this with a number of our colleagues, and I just wanted to get 
your comments on that, and I will be done after that.
    Mr. Davis. Thank you, Senator. That is a fundamental issue. 
That is something that the whole labor movement is 100-percent 
behind, and I think in the USMCA case specifically, there are 
some interesting things.
    For example, Mexican labor law now requires that there be a 
gender proportionality in the elected leadership of trade 
unions. That is more progressive than what we have in the U.S., 
although we are trying to get there on our own.
    Making sure that there is compliance with that and making 
sure that other legislation that prohibits pregnancy testing, 
particularly in the Maquiladoras--this is a problem that has 
been going on for decades. It is well-documented, but we know 
it is still happening, and we look forward to using this 
mechanism to push back on that.
    Senator Casey. Thanks very much.
    Thanks, Mr. Chairman.
    The Chairman. Thank you, Senator Casey, and I remember 
coming to Pennsylvania to listen to working families on these 
issues, and you and Senator Cortez Masto both have been 
wonderful advocates.
    Here is where we are. We are going to try to get everybody 
in and still make this vote. I think Senator Whitehouse may be 
online, is that right? Okay. Senator Hassan, are you online? 
Senator Cortez Masto is here. And, colleagues, what we are 
going to do for those who are here and were listening, Senator 
Crapo should be arriving soon. Then I will go vote, and we will 
just keep it going.
    Senator Cortez Masto?
    Senator Cortez Masto. Thank you, Mr. Chair, and thank you 
to the panelists. Thank you for being here today.
    Mr. Huttema--did I pronounce that right? Close enough; all 
right. Farming and ranching is the lifeblood of--I mentioned 
the rural economy in my home State of Nevada. It is actually 
responsible for about $1.5 billion in economic output and over 
8,000 jobs across the State of Nevada. It is critical that we 
ensure that our USMCA partners adhere to the dairy provisions 
they agreed to, as USTR did in initiating a dispute settlement 
over Canada's tariff rate quotas.
    My question to you is, what additional steps should we take 
to work with USTR to ensure that Canada is abiding by the 
protections for U.S. dairy farmers provided for in the USMCA?
    Mr. Huttema. Yes, thank you, Senator. So a big part of what 
needs to be done is just oversight and monitoring. So, when it 
comes to them skirting issues, I do not believe that will ever 
stop. So organizations like National Milk Producers, IDFA, are 
in that arena and see what is going on.
    So it is a matter of constant monitoring of what is going 
on. So USTR is a small group. They do not have a large 
workforce that can go out and do this. I think we have to count 
on the organizations in place to provide that information.
    Senator Cortez Masto. Okay; thank you.
    Mr. Davis, you mentioned in your testimony that the 
Independent Mexico Labor Expert Board's July 7th report on the 
USMCA implementation raised concerns about four areas: 
transparency, the contract legitimation process, budgeting and 
staffing of Mexico's new labor institutions, and U.S. technical 
cooperation.
    I am curious. Of these four concerns, which would you say 
is the most crucial to focus on in order to facilitate the 
shift which you have identified from protection unions towards 
democratic labor organizations?
    Mr. Davis. It is a really hard question, Senator, so let me 
try to answer it this way. I think there are three key things 
that we need. We need strong enforcement, and Brown-Wyden sets 
the floor. We need to be going up from that floor and making 
sure that that works effectively. We need to support the 
process that Mexico has started of creating new labor market 
institutions and new domestic enforcement mechanisms, and we 
need to help workers build their own capacity, because a 
democratic labor movement in Mexico has been repressed for 50 
years at least.
    You know, they do not just come out--there are some great 
folks, but they do not come out overnight with the ability to 
come and use the rapid response mechanism and other tools or 
even the domestic laws. So I cannot really say which one is 
more important than the other because if we do not do all 
three, it is going to be an unbalanced stool, and it is going 
to fall over. But I am confident that we can do all three 
things.
    Senator Cortez Masto. Thank you. Again, thank you to the 
panel members. I appreciate the conversation today. I yield the 
remainder of my time.
    The Chairman. I thank my colleague.
    So, calling again in order of appearance: Senator Sasse, 
Senator Scott--and Senator Warren is here. Senator Warren, you 
and I both have to vote. Where is Senator Brown? All right. 
Senator Brown, have you voted? All right.
    What I will do is, Senator Warren is going to go next. Let 
us have Senator Warren go next for 5 minutes, then Senator 
Brown, and I will meanwhile go vote and get back so my 
colleagues can vote.
    Senator Warren, and then Senator Brown.
    Senator Warren. Thank you, Mr. Chairman. So, for too long 
our trade rules have undercut workers, promoting offshoring and 
a global race to the bottom in labor and environmental 
standards. Rules get written this way because our trade process 
is rigged in favor of corporate interests. But it is not just 
the negotiation of new deals that puts corporate profits ahead 
of workers; it is also the enforcement of existing rules.
    Mr. Davis, our trade officials have not bothered to put 
many enforceable labor protections in our trade agreements, but 
they also do not have a good track record of enforcing the few 
labor standards that we do have. The U.S. Trade Rep and the 
Department of Labor--the agencies that share responsibility 
here--have historically been very slow and very hesitant to 
bring any labor cases. So let me start with this, Mr. Davis. I 
want to focus for a minute on the track record prior to the 
USMCA, the trade deal that we are discussing today.
    Before the USMCA, how many times had the U.S. brought a 
labor violation case under a trade agreement?
    Mr. Davis. Once.
    Senator Warren. One. Only one labor case ever among the 
hundred-plus trade disputes that the U.S. has ever initiated, 
and that one labor case happened more than 2 years after the 
AFL-CIO complaint was filed in 2008. It then took another 5 
years after the case was finally brought to get a final ruling 
which, by the way, was that the union and the workers were 
right all those years ago. Guatemala had failed to enforce its 
labor law, but it could get away with it on a technicality.
    Mr. Davis, I think it is fair to say that this is a very, 
very poor rate of enforcement actions. Is it because there are 
not many complaints about labor violations in the first place--
is that the reason that we have such a bad record here?
    Mr. Davis. No.
    Senator Warren. No. So numerous labor issues have 
languished for years, with only one enforcement action. Which 
brings me to the USMCA. A key improvement, secured with 
leadership from Chairman Wyden and Senator Brown, is the rapid 
response labor mechanism, which ensures that workers get relief 
in months, not years or never. Under this mechanism, when the 
U.S. Government receives a complaint that workers' rights are 
being violated, in a Mexican factory for example, it has 30 
days to determine whether there is sufficient, credible 
evidence of a violation. If there is, USTR must initiate a 
complaint with Mexico.
    USTR has already done this once, so they have already 
matched the standard of the previous years under the earlier 
trade agreement, and it has done this based on a complaint from 
American and Mexican unions. This piece of USMCA is a step in 
the right direction. But enforcing the rules should not be 
limited to just one part of one trade deal.
    So, Mr. Davis, would it help if the U.S. Government 
committed to reviewing and acting upon any complaint that a 
trading partner is violating any labor commitment, within say, 
months instead of years or never?
    Mr. Davis. Senator, I think that is certainly the direction 
that we would like to see. I would just say we could go further 
in the case of Xinjiang, you know. We are using withhold 
release orders. That is for forced labor, and forced labor 
clearly has to be immediately addressed.
    But why is violation of freedom of association, firing 
hundreds or thousands of workers, or gender discrimination--I 
think forced labor is worse, but that does not mean that those 
others do not deserve a similarly rapid and effective response.
    Senator Warren. Well, I appreciate that very much, Mr. 
Davis. You know, any future trade agreements must include 
strong protections with automatic enforcement and automatic 
deadlines. But USTR and the Labor Department could decide right 
now to update their own rules, to make sure that the Labor 
Department is responsive and fair in how they handle all labor 
complaints, not just those under the USMCA. If we want trade 
policy to actually start working for workers, we need to make 
the structural changes that ensure that workers' concerns are 
addressed.
    So thank you very much. Thank you, Mr. Acting Chairman.
    Senator Crapo [presiding]. Thank you, Senator.
    Senator Brown?
    Senator Brown. Thank you, Senator Crapo, and thanks to you 
and Senator Wyden for holding this hearing. Senator Warren, 
thank you for the comments that you made. Thanks all of you for 
shining a light on the Brown-Wyden rapid response mechanism 
that many on this committee in both parties worked on, one step 
to reforming our country's approach to trade policy, a 
departure from where we have been. We are now looking at trade 
as worker-centered--and Mr. Huttema might say farmer-centered--
rather than corporate-centered trade policy, and that is 
important.
    Ohioans know that in my entire career, I never voted for a 
single trade agreement until USMCA. Since NAFTA was enacted, 
thousands of workers, Dayton to Lordstown, Lorraine to Fremont 
to Mansfield, where I grew up, saw $30-an-hour manufacturing 
jobs move to Mexico, where workers made no more than a couple 
of dollars an hour for the same work.
    Independent economists at the Economic Policy Institute 
noted that in the first 11 years of the agreement, we lost 1 
million jobs across the country. Mr. Davis certainly knows, 
studies have confirmed the agreement had only a modest impact 
overall on GDP.
    The Mexican media pays attention to this hearing. We know 
that. I want to speak directly to workers there and in the U.S. 
The Brown-Wyden rapid response mechanism labor enforcement 
provisions were put in place to empower all workers to exercise 
their right to form a union, to alert us of any interference or 
strong-arm tactics of their labor rights. We frankly have seen 
that in both countries. And in the United States--and maybe in 
a bigger way in Mexico--every worker should have a copy of 
their union contract. The success of this agreement depends on 
enforcement and implementation.
    So, Mr. Davis, my question is to you, and I enjoyed meeting 
you early, briefly this morning. You raised concerns about 
implementation. Can you elaborate on the Independent Mexico 
Labor Expert Board's recommendations and what will need to take 
place to address them?
    Mr. Davis. Senator, I would answer it this way, to do it 
quickly. You remember that we had a problem with Goodyear, and 
workers were fired for trying to start an independent union. 
They have not gotten their jobs back, although some of them are 
still trying.
    The same protection union that was at that Goodyear plant 
is the protection union that is at the General Motors plant in 
Silao. And it may be that the workers, despite the company 
having 4 months and then the union having a 4-month period to 
carry out this legitimation vote, they might still vote that 
contract down.
    But it is going to be really hard. They do not have a 
union, so even if they vote the contract down, Medina or 
another CTM union can come back the next day and try and get 
it. So this is--we are making progress here, but we have to do 
a lot more to push back on the protection union czars like 
Medina and some others, who still control the Mexican labor 
force.
    Senator Brown. Thank you, Mr. Davis. I want to make clear, 
as we continue--and as Senator Menendez said, building on his 
comment/question, most of us on this committee see USMCA as the 
minimum standard for trade agreements going forward, especially 
with countries we do not have a longstanding relationship with.
    We will need more, we will need much more robust 
enforcement of labor rights. Brown-Wyden is the basic position. 
It is so important. Speak to why this committee, Mr. Davis, 
should view USMCA as the floor not the ceiling for trade 
agreements around the world.
    Mr. Davis. Just because of the risks that workers face on a 
daily basis: firing, blacklisting, a black list, pregnancy 
discrimination--which we mentioned--threats, beatings, murder. 
In Mexico, there are still nine cases of trade unionists who 
have been killed, including an American, that are unresolved, 
some of these going back 10 or 15 years.
    Employers, whether it is in the U.S. or Mexico, know that 
it is quicker and cheaper to fire the union leaders and drag 
out the legal process rather than agreeing. And we want to 
change that balance. There are a lot of workers--not just in 
Mexico but in Central America, Colombia, another place with a 
terrible labor rights record--who share that vision and that 
ideal. Until now, they have not had the tools to do it. We 
think that we are starting to get some of those tools, and we 
want to get to work and build on it.
    Senator Brown. Thank you. One final point, Senator Crapo. 
It is vital to my State. Our trade policy only works for 
American industries if we take enforcement of dumping and over-
capacity issues seriously. That is why I have introduced our 
bipartisan bill Leveling the Playing Field 2.0 to update our 
trade remedy laws, to make sure we are enforcing our trade laws 
against trade cheats around the world, including those who try 
to get around our laws.
    Senator Cassidy brought up this point earlier. I thank the 
United Steelworkers for endorsing this bill. Thank you, sir.
    Senator Crapo. Thank you, Senator Brown. Next we have 
Senator Toomey with us remotely, I believe.
    Senator Toomey?
    Senator Toomey. That is right. Thank you, Senator Crapo.
    The hearing today is about USMCA enforcement 1 year in, and 
several witnesses have alluded to the importance of what the 
Biden administration calls ``worker-centered trade policy.''
    So let us take a look at the impact of this new USMCA and 
enforcement upon workers. USMCA's and NAFTA's biggest benefit 
to workers clearly comes from its trade liberalizing 
provisions. The American economy and the American workforce 
indisputably benefited enormously from NAFTA. U.S. exports to 
Mexico grew five-fold. Under NAFTA, the U.S. consistently set 
new records year after year as the world's number one 
manufacturer. Currently, 14 million U.S. jobs rely on trade 
with Canada and Mexico. There are over 500,000 such jobs in 
Pennsylvania alone.
    These jobs pay on average 15 to 20 percent more than jobs 
that were lost. NAFTA already substantively liberalized almost 
all North American trade. There was complete reciprocity. We 
had zero tariff on 100 percent of manufactured goods, zero 
tariff on 97.5 percent of agricultural goods.
    Now USMCA contains some narrow improvements upon NAFTA like 
improved digital trade provisions and a very slightly expanded 
access to the Canadian dairy markets. But most of the USMCA's 
new provisions moved us away from free trade and towards 
managed trade instead.
    Hundreds of millions of dollars of U.S. taxpayer money are 
set to be spent in Mexico to monitor their environmental and 
labor practices. This is an egregious misuse of hard-earned 
taxpayer funds, footing the bill for a foreign country's 
enforcement of its own domestic laws. Now for all this 
investment, what has been the impact? Well, the jobs impact 
that is projected is basically negligible. In 2019, the ITC 
report projecting the impacts of USMCA stated that on balance, 
if we put aside, leave out the positive effects of the digital 
trade provisions that increase certainty, the rest of the USMCA 
will restrict trade and cause employment in the United States 
to decline by 54,000 jobs.
    The primary reason for negotiating NAFTA was to reduce our 
trade deficit with Mexico by restricting free trade in autos. 
USMCA represents a misguided attempt to diminish Mexico's 
comparative advantage in some categories of auto production. So 
are auto manufacturers flocking back to the U.S. after USMCA 
passed? Not really, and the U.S. trade deficit in goods with 
Mexico has gone up since USMCA passed. An ITC report written 
this year on the impact of the trade agreement finds that on 
balance, there is simply no clear evidence of USMCA causing any 
overall shift in auto production in the U.S., and that is 
despite an extremely aggressive interpretation of the enhanced 
auto rules of origin and new ``labor value content'' provisions 
designed specifically to shift production to the U.S.
    Are any U.S. jobs gained from the rapid response labor 
mechanism or the environmental provisions? Not yet, unless you 
include the bureaucrats hired by the government for 
enforcement. In fact, the rapid response labor mechanism's only 
confirmed impact on American workers thus far is arguably 
negative. In my State, constituent jobs are at stake as an 
investigation continues into one of my constituent's Mexican 
subsidiary. The firm is given no details about the 
investigation and no recourse to defend themselves, caught up 
in a fight between the Mexican and U.S. Governments in which 
they face substantial financial impact if the mechanism allows 
the U.S. to block their components at the border.
    Outside of the digital trade provisions, there is really 
very little evidence that USMCA's new provisions will be good 
for U.S. workers. What we do know is that trade liberalization 
helps workers. It creates high-paying jobs. It gives high-
quality low-cost choices to consumers. If the Biden 
administration wants to truly pursue a work-centered trade 
policy, they should focus on pursuing new FTAs, lowering tariff 
and non-tariff barriers to trade, and expanding export markets. 
These are the policies that demonstrably increase high-quality 
job opportunities for U.S. workers.
    Free trade is the best mechanism that we know of to give 
the highest standard of living for the largest number of 
people. Over 39 million U.S. jobs, one out of every five, exist 
thanks to foreign trade. The Biden administration should seek 
to expand that number by pursuing new trade liberalizing 
policies.
    Thank you, Mr. Chairman.
    The Chairman. All right.
    Senator Whitehouse, I believe, is online. Is that correct?
    Senator Whitehouse. Yes, I am here and online, and my 
questions are for Beth Lowell. So we are having a double online 
here: online Senator and online witness. I am very happy that 
Oceana is a part of this hearing, and I want to particularly 
thank Chairman Wyden for making sure that Oceana was a part of 
this hearing.
    Very often--in fact, almost without exception--on occasions 
in which we get environmental conditions into trade agreements, 
the enforcement somehow manages never to appear. I think the 
focus of this committee on the oceans provisions of the USMCA 
is very helpful, and I am grateful to the chairman for doing 
that and grateful to you, Ms. Lowell, for testifying today.
    Your testimony focuses primarily on fisheries, and I would 
like to get to that in a moment. But the USMCA also has a 
provision on marine litter, which is the language for marine 
plastic waste. By the way, I gather Paulita Bennet-Martin has 
just moved up to a plastics position at Oceana, which I am very 
happy about, so, congratulations.
    In Oceana's view, what has actually been accomplished 
pursuant to the marine litter provisions of the USMCA? Is there 
a place where we can identify a reduced pound of marine plastic 
waste as a result of this agreement and the enforcement 
provisions of it, or is most of that work ahead of us?
    Ms. Lowell. Thanks; it is good to see you today. I would 
say that we are very thankful for the investments that the 
USMCA implementing language had on marine debris, an investment 
of $8 million to help address the problem. We hope that Canada 
and Mexico are mirroring that with additional investments in 
their own countries. As we know, marine debris, marine litter, 
is a huge problem. The flow of plastics into our oceans is just 
creating a storm out there.
    You know, we have not--the latest studies that we have seen 
on some of the clean-ups have been since 2019. So I really 
cannot see what happened in 2020, but in 2019 from the coastal 
clean-ups around the world, the most prominent items on the 
beach, the top ten found were things like single use plastics 
like chip wrappers, bottle caps, stirrers, straws, lids, 
plates.
    That type of single use plastic is really something that 
our countries could focus on to reduce the flow of pollution in 
the water. We really need to reduce the production and use of 
single use plastics. And you know, the provisions in the USMCA 
do not require that, but it is something our countries could 
work on collaboratively to address a problem that impacts not 
only our countries, but the health of the oceans.
    Senator Whitehouse. Yes. Well, thank you. I think it is 
good that the USMCA mentioned marine litter, and it is good 
that there is funding, but I do not think we are at a point yet 
where we can identify a single pound of plastic that has been 
kept out of the oceans as a result of anything that has been 
done yet. So I think we continue to have a call to action as 
our oceans fill more and more and more with plastic waste that 
tends not to biodegrade.
    So over to your issue of fisheries. We have been focusing 
in the National Defense Authorization Act on trying to improve 
the information flow to those who are trying to combat IUU 
fishing, and we are having, I would say, only moderate success. 
The Navy was not interested at all. The Coast Guard is somewhat 
interested.
    But as you know, there is quite a robust, private, and non-
governmental network out there, led in many respects by Vulcan, 
to help provide information to people who are doing IUU 
enforcement. We would like to do what we can to strengthen 
that, if you have any advice on that.
    Second, we see China as a very significant abuser of 
fisheries all around the world. I traveled a lot with Senator 
McCain, and we went at various times to the Philippines, 
Indonesia, Vietnam, Thailand, and in every one of those 
countries, when we raised the issue of fishing, they were very 
upset at the way Chinese fishing vessels were behaving in their 
fishing waters, and the extent to which Chinese military and 
Coast Guard vessels provided physical protection for vessels 
that were fishing illegally--and that there were actually 
encounters between their sovereign vessels and Chinese 
sovereign vessels trying to interfere with enforcement in their 
waters. There are other countries like East Timor that have 
communicated with us those same concerns.
    Could you comment a little bit on what we need to do next 
on IUU fishing?
    Ms. Lowell. Yes. So really I think transparency and 
documentation of fish products is primary. We really need to 
get, for every fish coming into the U.S., reporting on who 
caught it, where they caught it, how they caught it, their 
authorization, to ensure that legality is a condition of 
import. And then also transparency, so that we can see where 
those vessels are, verify the information that comes in, that 
only fish that is legally caught and produced without using 
forced labor or other human rights abuses actually makes it 
into the U.S.
    And you know, on the China issue, I really do think fishery 
subsidies are a way to get to the Chinese fleet as well. We 
were happy to see the subsidies language in the USMCA, and 
really encourage the U.S. to continue negotiations at the WTO 
to put stronger disciplines on fishery subsidies.
    That is really driving the over-capacity of the distant 
water fishing fleets that are fishing right outside of coastal 
nations that do not have the ability to enforce their own 
waters. Some are IUU fishing, and it really undermines U.S. 
fishermen that are very heavily regulated, that have some of 
the strongest management measures in the world, to have to 
compete in a marketplace with IUU fishing and the subsidized 
distant water fishing fleets.
    Senator Whitehouse. Yes, it is just not fair. Thank you 
very much.
    Thank you Mr. Chairman.
    The Chairman. I thank my colleagues.
    Senator Hassan is here.
    Senator Hassan. Thank you, Senator Wyden.
    The Chairman. I want to tell all our guests, this has been 
a hectic day, even by Senate standards.
    Senator Hassan, you voted, so you can----
    Senator Hassan. Actually I have not voted, but I had two 
other hearings. So I am going to quickly go, and then we are 
going to go vote.
    The Chairman. Go; great.
    Senator Hassan. So I appreciate all of you very much, and I 
wanted to start with a couple of questions to you, Mr. Huttema. 
The USMCA expanded New Hampshire dairy farmers' access to the 
Canadian market by reforming its milk supply management system 
and dairy trade policies. In implementing this agreement, the 
U.S. also needs to monitor whether Canada responds to increased 
U.S. exports by selling below-cost milk into other markets, 
which would undercut competition. How do you expect Canada to 
respond to increased U.S. dairy exports, especially given the 
issues you raised in your testimony about Canadian progress in 
implementing dairy reforms?
    Mr. Huttema. History repeats itself. I would expect them to 
just continue to continue to export. I do not believe that the 
dairy system in Canada is very regulated, and we are not 
against Canadian dairy farmers per se. We are more about just 
maintaining their market and not interfering with ours. But 
they have had a history of trying to push more product.
    Senator Hassan. Thank you. In addition to increasing access 
to the Canadian dairy market, New Hampshire dairy farmers have 
also highlighted the importance of the USMCA for boosting U.S. 
dairy exports to Mexico. Before the USMCA, trade tensions and 
retaliatory cheese tariffs from Mexico were costing U.S. dairy 
jobs and making it harder for our dairy farmers to compete.
    How did the passage of the USMCA and deescalation of trade 
tensions help U.S. dairy exports to Mexico, and how have the 
concerning trade restrictions you mentioned in your testimony 
affected U.S. dairy exports since passage of the deal?
    Mr. Huttema. So the trade tensions before the deal were 
definitely hindering our exports and hurting our farmers. Since 
then, with the implementation of USMCA, it has definitely 
helped and helped raise prices as well. I think when it comes 
to Mexico, we can get a handle on it. We just have to be 
proactive and make sure that it happens.
    Senator Hassan. I would look forward to working with you on 
that.
    And then, Ms. Lowell, I just have one additional question, 
kind of building on what Senator Whitehouse was just talking 
about. Marine debris is a critical issue for humans, for 
wildlife.
    I too live in a coastal State, where organizations like the 
Blue Ocean Society for Marine Conservation collected more than 
6,000 pounds of litter from New Hampshire's beaches in 2019 
alone. I will just note that we have about 18 miles of 
coastline. So that is 6,000 pounds of litter from 18 miles of 
coastline in 2019.
    I am grateful to Senators Whitehouse and Carper as 
champions of addressing this issue, and I am glad that there 
was additional funding in the USMCA Implementation Act to 
support efforts to prevent, reduce, and remove marine debris 
across the country. But are there things in addition to what 
you talked about in your answer to Senator Whitehouse, things 
we can do, efforts to encourage cooperation with our partners 
like Canada, to ensure that we are adequately addressing marine 
debris in New Hampshire and all across the country?
    Ms. Lowell. Yes; thanks for that question. I really think 
the way to address plastics and marine debris in our oceans is, 
we really need to turn off the tap and slow the flow of single 
use plastic production and use. From those coastal clean-ups, 
as I mentioned before, you know the top ten items found were 
food wrappers, so candy and chip bags, cigarette butts, plastic 
beverage bottles, plastic bottle caps, straws and stirrers, 
plastic cups and plates, plastic grocery bags, plastic takeout 
containers, and other plastic bags and lids.
    So these are the items that are making up the bulk of 
marine litter on beaches around the world. So really, one of 
the keys to reduce the flow of plastics into our oceans is to 
reduce the use of single use plastic, reduce the production of 
that, and transition into more sustainable products that can 
both protect our oceans and reduce waste so you do not need a 
beach clean-up on your beaches. That is a crazy amount of 
litter in just a small New Hampshire-sized coastline.
    Senator Hassan. Well, thank you for that, and thank you, 
Mr. Chair. It is something we can work on with our partners 
globally too. Thanks.
    The Chairman. All right. I thank my colleague, and let me 
just tell our guests we so appreciate your coming, because as 
we said something like 3 hours ago, this was a chance to really 
review where we are with respect to USMCA at 1 year old.
    And the reality--and I see this in my home State, because 
we are so trade-sensitive and the trade jobs often pay better 
than do the non-trade jobs. The very first thing people say is, 
``Hey, you talk about new trade agreements. How about enforcing 
the laws that are on the books today?'' And that is what caused 
Senator Brown and I to write the rapid response provision.
    Mr. Davis, we thank you. We are going to be looking for, as 
I asked in my questions, your suggestions on how to take a 
strong provision and strengthen it, because the failure to 
enforce trade rules has real consequences.
    And in particular, the point that you made, Dr. McMurry-
Heath, is, when they basically said let's go ahead with this 
new agreement without really getting these new obligations in 
place, to use your words, that had real consequences for 
innovators in terms of agriculture and health care, biotech and 
technology.
    So I think the message that the three of you have given 
us--and of course, as Mr. Huttema knows, dairy is hugely 
important in my State, where we share many of the concerns that 
you have outlined today. It just doubles our effort now with an 
administration that really wants to tackle these problems in an 
aggressive way to get at it.
    You have given us a lot of good, good suggestions, and I 
particularly appreciate your outlining the real-world 
consequences of the failure to have aggressive trade law 
enforcement. Coming from my State which is, of course, nearly 
always thinking about trade as it relates to Asia, to have 
citizens in Oregon say the first thing that Washington has to 
do is enforce the laws on the books, the trade laws on the 
books, it sends a very powerful message which you all have 
helped--the word of the day--to reinforce. So, thank you all.
    And for members, the questions for the record are due 
August 3rd.
    And with that, the Finance Committee is adjourned.
    [Whereupon, at 12:11 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


                Prepared Statement of Hon. Mike Crapo, 
                       a U.S. Senator From Idaho
    Thank you, Mr. Chairman. Returning to our work as Mike would have 
wanted, I appreciate our witnesses taking the time to discuss issues 
critically important to the work of our committee.

    Welcome to Allan Huttema, chairman of the Northwest Dairy 
Association and Darigold board of directors, who is joining us from 
Parma, ID. Thank you for taking the time to discuss how these issues 
are important to our State.

    Today's hearing marks the 1-year anniversary of the United States-
Mexico-
Canada Agreement, or USMCA, coming into force. Mexico and Canada are 
two of our most important trading partners. We cannot take these 
relationships for granted. To take one example, the United States 
exported $1.4 billion and $731 million worth of dairy products to 
Mexico and Canada, respectively, in 2018. But just a generation ago, 
nearly all of the dairy products produced in the United States stayed 
in the United States.

    Today, the Idaho dairy industry--which represents 6 percent of the 
State's GDP--produces more than 15 times the production necessary for 
the State's needs. Opening markets has fed our neighbors and created 
jobs at home. However, our dairy industry faces a number of new 
barriers, including attempts by trading partners to prevent our farmers 
from using common cheese names by claiming they are geographic 
indications.

    The potato industry has also faced its share of challenges, with 
the Mexican Supreme Court only recently ruling that potato growers can 
sell fresh potatoes into all of Mexico, consistent with its obligations 
under the USMCA. However, I will not consider the matter finished until 
Idaho's farmers are able to sell high-quality potatoes to every family 
in Mexico.

    Likewise, when the North American Free Trade Agreement, or NAFTA, 
was negotiated, we did not fully appreciate the potential of digital 
trade, which now contributes over $2 trillion to annual GDP. That is 
why I support a number of USMCA innovations to help us meet the 
challenges of the 21st-century economy and drive economic prosperity in 
North America. These include Canada allocating new tariff rate quotas 
for dairy products, Mexico agreeing to protect 33 common cheese names, 
a cutting-edge digital trade chapter, and better protection for 
copyright.

    This committee had a role in developing them, and it is appropriate 
to examine whether these innovations are delivering. That cannot be 
said for last-minute changes added through a USMCA Protocol of 
Amendment at the behest of the House Democrat Working Group. This 
committee had no opportunity to vet those changes, or even see the text 
of those changes before they were finalized.

    I am concerned that some of our Democrat House colleagues now want 
to push their changes--that allegedly strengthen labor and environment 
standards, but most certainly weaken our intellectual property rights--
into new agreements before we even have a complete understanding of 
their full implications. I will not accept that. That is why this 
hearing is so important. If we are going to unlock the promise of 
USMCA, and also understand its shortcomings, we need to press for 
effective implementation and enforcement.

    To date, the administration's efforts on that front are fairly 
disappointing. I will highlight three examples. First, USMCA contains 
commitments that should facilitate cooperation on agricultural 
biotechnology, including that decisions regarding the approval of such 
technology be based on science. This technology not only increases 
farmers' yields but allows them to grow crops more sustainably, 
including by using less pesticide and reduced tillage. Unfortunately, 
Mexico has refused to approve any biotechnology food or feed products 
since May 2018. Despite the clear economic and environmental benefits, 
the administration has yet to take any enforcement action on this 
important issue.

    Second, Mexico is proceeding with new discriminatory actions, such 
as measures favoring its state-owned electricity and petroleum 
companies. Mexico previously prioritized dispatch on its electrical 
grid on the basis of cost, which allowed private producers, including 
wind and solar energy providers, to compete. Instead, Mexico intends to 
give preference to its state-owned electricity company. The 
administration needs to be engaged now before barriers like this are 
fully in place.

    Finally, where the administration is taking enforcement actions, it 
fails to do so transparently, or in appropriate consultation with 
Congress. I am referring to the use of the USMCA rapid response labor 
mechanism. As I noted at our hearing on the President's trade agenda, I 
am committed to ensuring our workers can compete on a level playing 
field. That effort requires transparency. Otherwise, how would 
Congress, the affected parties, and civil society know if the mechanism 
is being used appropriately and effectively?

    Accordingly, USTR must explain what potential actions, in its view, 
may or may not constitute a denial of rights. USTR has failed to do so 
with respect to its recent use of the mechanism with respect to 
Tridonex's facility in Mexico. This hearing is a good opportunity for 
the committee to examine whether USMCA's commitments are delivering on 
their promise. This discussion will also help in developing a future 
trade agenda. I look forward to hearing what our knowledgeable 
witnesses have to say to help us in this effort.

    Mr. Chairman, thank you again for organizing this hearing, and 
thank you again to our witnesses for appearing today.

                                 ______
                                 
           Prepared Statement of Benjamin Davis, Director of 
               International Affairs, United Steelworkers
    Chairman Wyden, Ranking Member Crapo, members of the committee, 
thank you very much for the opportunity to testify on the 
implementation of the USMCA, and specifically the labor provisions 
which are so important to workers in the U.S., Canada, and Mexico.

    I am Benjamin Davis, director of international affairs for the 
United Steelworkers, and also the chair of the Independent Mexico Labor 
Expert Board, an entity created by the USMCA implementing bill passed 
by this committee and signed into law.

    NAFTA, and the generation of trade agreements that followed it, did 
tremendous damage to the American middle class and, in many ways, sowed 
the seeds of our current political crisis. The argument that trade 
improves the general welfare, without taking account of its 
differential impact across all sectors of the population--particularly, 
manufacturing workers--has been questioned in theory and clearly 
refuted in reality.

    In order to effectively assess the value of a good or a service, we 
must analyze not only its price, but the conditions under which it was 
produced--specifically, whether technology and skills are subject to 
democratic regulation, and whether the fundamental rights of workers 
are respected in the production process. The failure to address these 
issues effectively and systematically has done tremendous damage to 
workers--both here and abroad--and to industries and supply chains that 
are critical to our national security.

    As the Chair of the International Trade Commission recently noted 
in a comprehensive report on ``Economic Impact of Trade Agreements 
Implemented under Trade Authorities Procedures'':

        trade agreements today do not simply reduce or eliminate 
        (``liberalize'') trade barriers and expand trade, and not every 
        domestic rule or regulation should be viewed as an 
        ``unnecessary obstacle to trade.'' Trade policymakers today are 
        often just as interested in negotiating provisions that require 
        trading partners to adopt and implement rules and regulations 
        concerning, for example, intellectual property rights, consumer 
        protections on the Internet, labor standards, and environmental 
        protections. All of these rules can create winners and losers 
        in our economy. But the distributional effects of trade 
        agreements are not fully accounted for in most models, 
        particularly when economies are not fully employed (and 
        economies are rarely fully employed).\1\
---------------------------------------------------------------------------
    \1\ United States International Trade Commission, Economic Impact 
of Trade Agreements Implemented under Trade Authorities Procedures, 
2021 Report, p. 219.

    In the specific case of NAFTA, ``the ever-present threat of 
offshoring production to Mexico in the absence of enforceable labor 
provisions combined with tariff reductions on Mexican imports likely 
weakened U.S. manufacturing workers' ability to bargain for higher 
wages; but standard models cannot account for that.''\2\ The Report 
pointed to evidence that Mexico's labor costs in key export industries 
were declining prior to USMCA, leading to an increase in the wage gap 
in motor vehicles, for example, of nearly 60 percent (see table 
below).\3\
---------------------------------------------------------------------------
    \2\ Id., p. 220.
    \3\ Id., p. 152. We are concerned that the International Labor 
Comparisons program, which was a major source of data for the ITC 
study, was discontinued by the Bureau of Labor Statistics in 2013 and, 
although a successor program is maintained by The Conference Board, key 
data on hourly compensation costs in manufacturing have not been 
updated since 2016. The lack of current information complicates efforts 
to measure the effectiveness of USMCA enforcement measures. See 
Information Technology and Innovation Foundation, Federal Statistical 
Needs for a National Advanced Industry and Technology Strategy (July 
2021), p. 3; Josh Wright, ``Why Jobs Reports Are Less Useful for 
Business,'' Fortune, May 6, 2016.


  Table 4.2 Hourly Compensation Costs in Three Major Industries in the
                 United States and Mexico, 2008 and 2016
------------------------------------------------------------------------
                                    2008        2016       CAGR,  2008-
      Industy          Country     (U.S.$)     (U.S.$)       2016 (%)
------------------------------------------------------------------------
Computer,            United          45.42       54.28              2.3
 electronic, and      States
 optical  products
Computer,            Mexico           5.11        4.13             -2.6
 electronic, and
 optical  products
Motor vehicle and    United          41.91       48.97              2.0
 other                States
 transportation
 equipment
Motor vehicle and    Mexico           6.39        4.68             -3.8
 other
 transportation
 equipment
Primary and          United          30.21       35.87              2.2
 fabricated metals    States
Primary and          Mexico           5.04        4.17             -2.3
 fabricated metals
------------------------------------------------------------------------
Source: The Conference Board, International Labor Comparisons program,
  April 2018.
CAGR = compound annual growth rate.


    The ITC report also provides an update on the impact of automotive 
rules of origin in USMCA. This analysis shows some relocation of global 
production towards the North American region. Whether production within 
the region will shift towards the U.S. remains to be seen.\4\ The 
agreement has only been in effect for a year and is still in its 
infancy; moreover, recent decisions call this shift into question.\5\ 
But there is no doubt that such a shift cannot be sustained without 
strong enforcement of the automotive rules of origin provisions of 
USMCA. Reported recent attempts by Canada and Mexico to weaken these 
provisions threaten to roll back a commitment made to U.S. autoworkers 
and must be rejected.\6\
---------------------------------------------------------------------------
    \4\ United States International Trade Commission, Economic Impact 
of Trade Agreements Implemented under Trade Authorities Procedures, 
2021 Report, p. 125.
    \5\ `` `Slap in the face' UAW says of GM's move to build EVs in 
Mexico,'' Detroit Free Press, April 21, 2021.
    \6\ ``U.S., Mexico fail to resolve dispute on trade rules for 
cars,'' The Spokesman-Review, July 23, 2021.

    Likewise, the continuing drumbeat of plant closings and relocations 
to Mexico \7\ underscores the urgent need for reauthorization of Trade 
Adjustment Assistance \8\ as well as reform of the WARN Act.
---------------------------------------------------------------------------
    \7\ ``Wisconsin workers fight factory move to Mexico: `Anxiety is 
through the roof,' '' Guardian, July 18, 2021; ``FreightCar America got 
a $10 million PPP loan, then closed its plant and moved manufacturing 
jobs to Mexico,'' Roanoke Times, July 17, 2021; ``Fair Lawn Nabisco 
Plant to Bake Last Cookies Friday. What's Next?'', Patch, July 15, 
2021.
    \8\ Tom Conway, A Life-Saving Program, July 16, 2021.

    The USMCA passed Congress with a large bipartisan majority. The 
Steelworkers, along with the AFL-CIO, supported the final agreement 
after Congress improved upon the text negotiated by the prior 
administration. We pushed for changes in rules of origin for steel. We 
advocated for changes to provisions that would limit patients' access 
to medicines. Environmental provisions needed to be enhanced. All of 
the provisions of the Agreement require oversight to ensure their 
---------------------------------------------------------------------------
proper implementation, monitoring and enforcement.

    Most critical to our support was the emphasis on labor rights 
improvements in Mexican law, backed up by the rapid response mechanism 
initially developed by you, Chairman Wyden, and Senator Brown.

    The focus of the labor law changes was to disrupt the protection 
union system in Mexico under which most workers have had no real voice 
in choosing their union representatives and often have no knowledge of 
the contract that determines their wages and working conditions. This 
system has maintained artificially low wages: for example, at the GM 
Silao plant--the subject of a USTR-initiated filing under the rapid 
response mechanism--the starting wage is $1.35 per hour.

    Workers' rights to secure democratic unions and collective 
bargaining have been denied in Mexico for many years and the jury is 
still out as to whether Mexico's new laws and the USCMA will make a 
difference.

    Let me briefly summarize the key conclusions and recommendations of 
the Board's report of July 7th, which is included as an attachment to 
this testimony. While there has been significant progress on USMCA 
implementation in some areas, the Board raised concerns about (1) 
transparency, (2) the contract legitimation process, (3) budget and 
staffing of Mexico's new labor institutions, and (4) U.S. technical 
cooperation.
                              transparency
    Almost 27 months after Mexico's labor law reform was approved, most 
workers covered by a union contract still don't have a copy of their 
contract or their union statutes--including the workers at Tridonex in 
Matamoros, which is the subject of a rapid response mechanism case 
under the USMCA. The 2019 labor law requires employers and unions to 
give workers copies of their contracts, but these provisions won't be 
fully implemented for several years. Online access--which is already 
available for contracts in some jurisdictions--should be accelerated 
and should not require workers to submit individual requests.
                         contract legitimation
    The Board raised significant concerns about the effectiveness of 
the contract legitimation process. As of today, Mexico reports that 
1,378 legitimation votes have been held, covering 797,587 workers 
(about 18 percent of the estimated unionized workforce). Government 
officials have stated that they ultimately expect at least 80,000 
contracts to be voted on. This would require about 120 legitimation 
votes per day, every day, from now until May 1, 2023. That clearly 
exceeds the capacity of the government institutions, and may require 
them to rely on private notaries hired by the incumbent unions. As we 
have seen in the GM Silao case, putting the incumbent union in charge 
of the vote creates an inherent conflict of interest and potentially 
disastrous consequences.
                          budget and staffing
    The Board raised concerns about staff shortages at the Labor 
Secretariat and the Federal Center for Conciliation and Labor 
Registration, which have faced a huge challenge of implementing the 
reforms under pandemic conditions. For example, the Federal Center 
currently has only 29 staff responsible for monitoring contract 
legitimation votes. Clearly, there is not enough money to support 
timely and effective implementation of the reforms. The Inter-American 
Development Bank gave Mexico an $800-million unsecured loan to support 
the labor reform, but it appears that none of those funds have been 
used for this purpose.
                       u.s. technical assistance
    Finally, the Board raised significant concerns about the pace and 
focus of U.S. technical assistance to support Mexico's labor reforms. 
Of the $180 million appropriated by Congress, only $50 million has been 
allocated, and only $10 million of that directly supports efforts by 
Mexican workers to establish democratic unions. Strangely, this initial 
allocation of USMCA funds excluded the auto and auto parts sector from 
labor capacity building.

    The Board referenced the recommendation of Ways and Means Democrats 
that ``ILAB should spend at least $30 million annually of USMCA 
Appropriated Funds on worker organizing and union capacity building in 
Mexico,'' and I believe this funding is the minimum level needed to 
achieve our goals.

    Without a fundamental shift from protection unions like the ones at 
GM and Tridonex towards democratic labor organizations, no amount of 
government oversight will result in a trade union movement that can 
organize and bargain for higher wages for Mexican workers to address 
the structural inequality in the USMCA region that drives both 
migration and loss of good manufacturing jobs.

    Thank you, and I will be happy to answer any questions.

    Attachment 1--July 7, 2021 report of the Independent Mexico Labor 
Expert Board and Separate Statement of Members Fortson et al., https://
www.maquilasolidarity.org/sites/default/files/attachment/
IMLEB%20Report%20and%20Separate%20Stmt%20of%20Members%20Fortson
%20et%20al.%202021.07.7.pdf.

                                 ______
                                 
          Questions Submitted for the Record to Benjamin Davis
                  Question Submitted by Hon. Ron Wyden
    Question. One of the game changers in the USMCA was the rapid 
response mechanism. It presents an opportunity to respond quickly and 
efficiently to facility level violations, and has the potential to turn 
the tide for workers in Mexico and the United States. USTR has now 
twice engaged the rapid response mechanism to address facility-level 
labor violations.

    Recognizing that the USMCA parties are still working to understand 
what role the rapid response mechanism can and will play in labor 
obligation enforcement, what aspects of the rapid response mechanism 
should we as the Finance Committee pay attention to when thinking about 
how to make the mechanism as effective as possible or how it may need 
to be improved in the future?

    Answer. The rapid response mechanism (RRM) is a critical element of 
USMCA enforcement that should be incorporated--with improvements--into 
other trade agreements. To fulfill its potential as a means of 
empowering Mexican workers to democratize their unions and increase 
their wages, it is essential that the RRM be used regularly and 
effectively, and that it be complemented by capacity building for 
workers and government institutions.

    In the initial cases, we have seen the need for extensive 
documentation of worker rights violations. But in Mexico, currently 
only about 1 percent of the workforce is represented by democratic 
unions, and these unions in most cases have limited resources and 
capacity to document violations. In addition, there are only a small 
number of labor lawyers who represent democratic unions, and in many 
parts of the country it can be difficult or impossible for workers to 
find representation. Capacity building to enable workers to exercise 
their rights to organize and bargain is therefore essential. The IMLEB 
report of July 7, 2021 recommended that ``ILAB should immediately 
direct at least $100 million of the unallocated USMCA funding to 
building worker capacity for organizing and bargaining, including legal 
and research support.''

    The capacity of Mexican government institutions, including the STPS 
and the CFCRL, also needs reinforcement. As the IMLEB report points 
out, these institutions face both immediate challenges, including a 
backlog of at least 80,000 contract legitimation votes and the 
requirement to ensure workers' access to their union contracts and 
other documents, as well as a long-term need to recruit, train and 
deploy inspectors to enforce the new labor laws. While Mexico has 
invested significant resources in creating and staffing these 
institutions, they will likely require both political and financial 
support to become truly effective.

    The early cases under the RRM will help us understand what is 
working, and what needs improvement. The entrenched protection union 
system in Mexico will seek to protect its interests and continue to 
degrade workers' rights. We must be willing to update and reform the 
mechanism if need be.

                                 ______
                                 
               Questions Submitted by Hon. Maria Cantwell
    Question. During consideration of the U.S.-Mexico-Canada Agreement 
(USMCA), I pushed for $240 million in U.S. technical assistance for 
capacity building through the U.S. Department of Labor to support 
reforms of the Mexican labor justice system, worker-focused capacity 
building, and efforts to reduce child labor, forced labor, and human 
trafficking in Mexico.

    This assistance was aimed at educating Mexican judges and labor 
officials about worker rights, digitizing and reviewing collective 
bargaining agreements, and strengthening mechanism for monitoring and 
enforcement.

    Capacity building and enforcement go hand in hand. The COVID 
pandemic has slowed everything down around the world, but efforts to 
improve labor law and labor rights in Mexico must continue.

    From your perspective, where do we stand on U.S. assistance to 
improve Mexican labor conditions and protection of labor rights?

    Answer. Of the $130 million appropriated by Congress for USMCA 
implementation, only $50 million has been allocated and only $10 
million of that goes directly to increase workers' capacity to use the 
new laws and mechanisms. Given the challenges noted in the IMLEB 
report, the disbursement of the remaining funds should be stepped up 
and focused on worker capacity building. While ILAB has issued 
additional notifications in the past month,\1\ none of these appears to 
be focused on building worker capacity to achieve union democracy and 
genuine collective bargaining.
---------------------------------------------------------------------------
    \1\ See FOA-ILAB-21-09, July 16, 2021; NOI-ILAB-21-13, July 30, 
2021; NOI-ILAB-21-14, July 30, 2021; NOI-ILAB-21-15, August 5, 2021.

    Question. How much has the COVID-19 pandemic slowed down efforts to 
---------------------------------------------------------------------------
implement labor law reforms in Mexico?

    Answer. The pandemic has had a severe impact on employment and 
wages, with the greatest effect on informal and contingent workers. In 
terms of labor reform implementation, there have been multiple delays 
of the deadline for unions to reform their statutes to comply with the 
democracy and transparency requirements of the law. Contract 
legitimation votes may also have been affected. And it has hampered the 
ability to collect facts at a number of facilities where there have 
been allegations of workers' rights violations.

    Question. What should the Biden administration be doing now to help 
the Mexican Government stay on track to follow through on reforms and 
efforts to improve workers' rights? What should the priority areas of 
focus be?

    Answer. Priority areas should be:

    1.  Reform of the contract legitimation process.
    2.  Ensure that workers have access to their collective bargaining 
agreements, union statutes, and financial reports as quickly as 
possible.
    3.  Hire and train additional enforcement personnel.
    4.  End the widespread and legal practice of employer payments to 
officials of protection unions and consider adopting a requirement that 
any U.S. employer or contractor operating in Mexico publicly disclose 
payments to officials of protection unions.

    Question. In 2020, ALCOA idled its Intalco aluminum plant in 
Ferndale, WA, costing about 700 jobs. The U.S. has had to compete with 
global overcapacity and subsidized steel and aluminum for many years, 
putting extreme pressure on U.S. producers.

    In June, President Biden agreed with the European Union to try to 
resolve differences on steel and aluminum by the end of the year. USTR 
Ambassador Tai is in the process of holding talks to try to reach an 
agreement.

    Should the United States bring Canada into any agreement with the 
European Union on steel and aluminum?

    Answer. There are unique considerations between Canada and U.S. 
related to defense and a preexisting agreement. U.S. negotiators will 
have their hands full focusing on the importance of maintaining 
domestic employment and production capabilities of the domestic 
industry to ensure our national defense and critical infrastructure, 
which should be priority in negotiations with the EU.

    Question. Could an agreement among allies on steel and aluminum 
help to bring them together to address overcapacity and subsidies in 
other countries like Russia, India, and China?

    Answer. For the union a focus on maintaining domestic employment is 
a priority in any agreement between countries to address overcapacity 
in steel and aluminum. Russia, India, and China have compounded 
overcapacity issues and we should work with our allies to contain 
overcapacity or subsidies but will need to carefully navigate economic 
competition even with our allies. So far, efforts to limit global 
overcapacity (e.g., Global Forum on Steel Excess Capacity, OECD steel 
committee) have not produced results, because many of our trading 
partners refused to really work for a solution. Strong, multilateral 
enforceable disciplines are the goal, but we must not unilaterally 
disarm and jeopardize our national and economic security interests in 
the interim.

                                 ______
                                 
    Prepared Statement of Allan Huttema, Chair, Board of Directors, 
                Darigold and Northwest Dairy Association
    Chairman Wyden, Ranking Member Crapo, and members of the committee, 
thank you for inviting me to testify on ``Implementation and 
Enforcement of the United States-Mexico-Canada Agreement: One Year 
After Entry Into Force.'' My name is Allan Huttema, and I am a dairy 
farmer from Parma, ID. My dairy career started in 1991 in Chilliwack, 
British Columbia under the Canadian supply management system. I moved 
to Everson, WA in 2003, where I started a 500-cow dairy, and then to 
our current location in Parma in 2010. Together with my wife Mary Jo 
and two sons, Christopher and Jeremy, we operate an 800-cow dairy and 
crop approximately 500 acres of corn and triticale for silage. I 
currently serve as chair of the Darigold and Northwest Dairy 
Association board, as well as board member for the National Milk 
Producers Federation (NMPF), the latter of which develops and carries 
out policies that advance the well-being of dairy producers like myself 
and the cooperatives we own.

    NMPF's member cooperatives produce the majority of the U.S. milk 
supply, making NMPF the voice of more than 32,000 dairy producers on 
national issues. International trade is one of those issues and in 
recent years it has been one of the most important to our industry. 
NMPF works closely on international trade issues with the U.S. Dairy 
Export Council whose partnership between producers, proprietary 
companies, trading companies and others interested in supporting U.S. 
dairy exports has contributed greatly to the success of the industry 
and the thousands of workers who are supported by dairy exports 
throughout the supply chain.
                           testimony summary
    Maintaining our trade relationships and expanding market access for 
U.S. dairy products is vital to the strength of the domestic dairy 
industry and the economic health of rural America. USMCA made 
tremendous strides to modernize trade rules and facilitate the smooth 
flow of U.S. dairy products throughout North America, but the benefits 
of USMCA will only flow if Canada and Mexico properly implement the 
agreement. This will require proactive monitoring and enforcement of 
USMCA implementation, including through enforcement actions such as 
that taken against Canada's administration of its tariff rate quotas 
for dairy products.

    While the U.S. Trade Representative's recent initiation of USMCA 
dispute settlement proceedings over Canada's allocation of dairy 
tariff-rate quotas (TRQs) is a welcome step, additional monitoring and 
enforcement efforts must also focus on Canada's implementation of its 
commitments on Class 7 pricing and export surcharges on Canada's dairy 
protein exports, as well as on Mexico's proliferation of ill-intended 
regulations that are aimed at disrupting trade. Close attention must 
also be paid to Mexico's implementation of USMCA provisions on 
geographical indications (GIs).

    USMCA's GI provisions can and should serve as a valuable foundation 
to respond to the threat posed by the EU's efforts in various markets 
to restrict U.S. dairy competition by denying U.S. producers the right 
to use common food names.

    While USMCA represents an important step in maintaining and 
expanding export opportunities for U.S. dairy, it should be followed by 
active negotiation of additional trade agreements with key export 
markets and aggressive efforts to level the playing for dairy exports.
                                 usmca
    The U.S.-Mexico-Canada Agreement builds on the most important trade 
agreement--the North America Free Trade Agreement (NAFTA)--for 
America's dairy farmers and businesses. NAFTA resulted in U.S. 
agriculture's strongest and most important trade relationship, growing 
to over $40 billion in exports, including $1.9 billion in U.S. dairy 
exports. Canada and Mexico now take 27 percent of all U.S. agricultural 
exports and over 30 percent of U.S. dairy exports, providing critical 
farm income to America's farmers and ranchers.

    In 2017, the prior administration threatened to withdraw from 
NAFTA, putting at significant risk the economic viability of U.S. 
agricultural and dairy exports. That threat, which resulted in a public 
outcry from U.S. agriculture, was able to be turned into a negotiation 
to improve on NAFTA and to address remaining market access barriers.

    For example, NAFTA had failed to provide preferential access for 
U.S. dairy exports into Canada. Dairy is the most protected and one of 
the politically strongest sectors in Canada. In the USMCA, the United 
States prioritized getting improved access for U.S. dairy into Canada 
and to fixing distortions in Canada's milk pricing policies that 
undermined U.S. dairy exports to Canada and other countries. The 
results included Canada establishing tariff rate quotas (TRQs) solely 
for U.S. exports, worth an estimated $300 million as well as important 
changes to Canada's distortions in its milk class pricing system. This 
was the first time U.S. dairy exports received preferential access into 
the Canadian market.

    Mexico was also negotiating with the European Union in 2017, which 
could have completely prohibited certain cheese sales into Mexico. The 
EU was demanding that Mexico protect certain geographical indications 
for cheeses even though U.S. exporters sold those cheeses (e.g., 
``feta,'' ``parmesan,'' etc.) into Mexico. The United States used its 
leverage in USMCA negotiations to minimize the negative impact of any 
EU-Mexico agreement on GIs, obtaining Mexico's commitment to allow 
certain common cheese names to continue to be used in the Mexican 
market.

    Negotiations with Mexico and Canada on dairy were some of the 
hardest issues to tackle. The close coordination between the U.S. dairy 
industry and U.S. negotiators enabled outcomes that benefit America's 
dairy farmers and exporters. While the results may not be everything 
that the U.S. dairy industry sought, USMCA's improvements over NAFTA 
are important, providing opportunities for new markets in Canada and 
protecting U.S. access into Mexico. The U.S. dairy industry welcomes 
the hard work of U.S. negotiators and the broad bipartisan support from 
Congress in supporting U.S. dairy interests and passing USMCA.
                   importance of trade to u.s. dairy
    America's dairy industry is an economic force that employs nearly 1 
million Americans, contributes more than $64 billion in tax revenue, 
and adds about $620 billion to the U.S. economy.\1\
---------------------------------------------------------------------------
    \1\ https://medium.com/dairy-exports-mean-jobs.

    Trade is essential to the health of the dairy industry. America's 
dairy farmers and processors have established themselves as the world's 
preeminent suppliers of high-quality dairy products, exporting more 
than $6.5 billion in dairy products in 2020 to customers around the 
world. Approximately 16 percent of U.S. milk production last year was 
exported overseas in the form of a wide variety of dairy products from 
---------------------------------------------------------------------------
cheese to ice cream to milk powder.

    Our industry manufactures high-quality Made-in-America products 
that are beloved by consumers across the globe. In fact, in 2019, a 
cheese from the U.S. won ``Best in the World'' at the World Cheese 
Awards for the first time ever. It is clear that our dairy products can 
compete toe-to-toe and win against any country.

    Importantly, these exports drive growth across the U.S. economy. 
Dairy exports alone create more than 85,000 U.S. jobs and have a nearly 
$12 billion economic impact.\1\

    Unfortunately, trade disputes and uncertainty in the global 
marketplace have exacerbated the prolonged rural recession that has 
gripped the heartland and America's dairy industry has been among the 
hardest hit. Dairy farmers and processors have found their livelihoods 
under threat and the communities and economies that depend on these 
producers are at risk. The U.S. Department of Agriculture reports that 
the U.S. lost more than 6,000 dairy farms from 2017 to 2019, 
representing a 15-percent decline in dairy farm numbers over that 
period.\2\
---------------------------------------------------------------------------
    \2\ USDA's National Agricultural Statistics Service reports there 
were 40,199 licensed dairy herds in 2017 and 34,187 in 2019. The 
average 2-year loss rate prior to 2017 was less than 8 percent, 
starting in 2003.

    When our exports increase, all dairy producers benefit. And when 
our exports are impeded or we give up market share, the effect is 
---------------------------------------------------------------------------
ultimately felt by the farmer in the prices they receive.

    Free trade agreements have played an indispensable role in 
increasing U.S. exports. For example, before NAFTA was implemented in 
1993, the United States exported just $618 million worth of dairy 
products, less than 10 percent of the current figure. Dairy product 
exports to countries with which we have an FTA have grown by $2.14 
billion in total since their respective implementations. In terms of 
volume, that is equivalent to 1.4 billion gallons of milk, greater than 
what Michigan, the 6th largest U.S. milk producing State, produces in 1 
year.

    USMCA built on this success, making tremendous strides to modernize 
trade rules and facilitate the smooth flow of U.S. dairy products 
throughout North America. America's dairy farmers, manufacturers and 
exporters are grateful for this new agreement that we hope will bring 
increased certainty to the U.S. dairy industry by preserving access to 
our largest export market (Mexico), addressing Canada's discriminatory 
Class 7 dairy pricing policy, expanding critical market access, and 
defending common cheese names, among other accomplishments.

    If Canada and Mexico implement USMCA in keeping with the 
expectations established during negotiations, it will strengthen 
exports of high-quality U.S. dairy products and secure real benefits 
for our industry. Under USMCA, U.S. dairy exports will ultimately 
increase by more than $314 million a year, according to the U.S. 
International Trade Commission. These dairy sales will have a positive 
effect on American farmers, bolstering dairy farm revenue by an 
additional $548 million over the first 6 years of implementation.

    However, these benefits will only be fully realized if our trading 
partners adhere faithfully not just to the letter of their commitments 
under USMCA, but to their spirit as well.
                                 canada
    In this regard, NMPF and USDEC applaud U.S. Trade Representative 
Katherine Tai's May 25th decision to initiate USMCA dispute settlement 
proceedings over Canada's dairy TRQ administration. We also wish to 
express our appreciation to the Finance Committee for its support of 
this critically important step.

    Canada has not administered its TRQs fairly, as required by its 
USMCA obligations. Unfortunately, this is consistent with Canada's long 
history of undermining its market access commitments to protect its 
tightly controlled dairy market. Canada's TRQ system discourages full 
utilization and valuation of agreed upon quantities. For example, the 
system allocates up to 85 percent of each TRQ to Canadian processors 
who have little incentive to import and fails to allocate TRQs in the 
quantities that applicants request. Further, up to only 15 percent of 
the TRQs are allocated to distributors and zero is administered to 
retailers. USMCA dispute settlement is the right course of action to 
address these unfair restrictions.

    The decision to pursue dispute settlement also delivers a strong 
message against the erection of future barriers in Canada and other 
markets as well. Our trading partners need to know that failure to meet 
their agricultural trade commitments with the United States will result 
in robust action to defend U.S. rights.

    In this connection, we urge Congress to work proactively with USTR 
and USDA as they monitor Canada's implementation of other dairy related 
USMCA provisions, such as those eliminating Canada's discriminatory 
Class 7 dairy pricing policy and requiring export surcharges on dairy 
protein exports like skim milk powder, milk protein concentrate, and 
infant formula. Here as well, Canada's actions have given cause for 
concern. Canadian exports of milk protein isolates (MPI) and certain 
skim milk blends manufactured under the new Class 4a have been 
increasing in a manner that seems designed to evade USMCA disciplines. 
USTR and USDA should move quickly to deploy the dairy consultation 
tools laid out in USMCA's Agriculture Chapter to address this concern 
and to ensure that Canada's other policies comply with USMCA 
disciplines affecting trade in milk proteins.
                                 mexico
    Vigilant monitoring and aggressive enforcement will also be 
necessary with our other USMCA partner, Mexico. Mexico is the largest 
export market for U.S. dairy products, and the U.S. trade relationship 
with Mexico is of the utmost importance. Unfortunately, of late there 
has been a proliferation of poorly designed Mexican regulations that 
have been disrupting trade, eroding the U.S.'s role as a reliable 
supplier.

    For example, Mexico has introduced new standards for milk powder 
(NOM-222) and cheese (NOM-223) in January 2020. Despite being in force 
for less than a year, a rule making process to amend these regulations 
will begin later this year for both. From the outset, an update of 
these regulations so close to their entry into force with the purpose 
of adding additional obligations for the industry is against the good 
regulatory practices provided for under the USMCA.

    There are many concerns with the proposed amendments to the milk 
powder standard (NOM-222), which has a huge potential to disrupt trade. 
A prohibition on using milk powder as raw material for fluid milk, as 
well as limitations on a certain class of milk powder for production of 
dairy products (e.g., yogurt, cream, or cheese) will not only make 
dairy products extremely expensive for Mexican consumers but will 
discourage significant number of exports into Mexico. Additionally, the 
proposal includes new requirements for additional information not 
related to the product discriminates against U.S. product.

    Similarly, there are a number of concerns with proposed amendments 
to the cheese standard (NOM-223) that not only will make imports of 
cheese from the United States more difficult but will also create an 
issue with national treatment since our products will be treated 
differently than the Mexican products.

    The U.S. should pursue discussions with Mexico treating this surge 
in regulatory and customs enforcement issues as a collective concern, 
and not simply as one-off issues. We need to restore smooth and 
predictable trading conditions with Mexico to ensure that the U.S. and 
Mexico remain an integrated market and the promise of USMCA is 
fulfilled.

    Another area bearing close monitoring and, if necessary, 
enforcement is Mexico's implementation of USMCA provisions on common 
cheese names and geographical indications (GIs). Regrettably, Mexico 
has acceded to the European demands to prevent the use of common food 
names through the imposition of illegitimate GIs. Living in Idaho, I 
recognize the importance of defending the rights of specific regions 
like Idaho to protect compound names like ``Idaho potatoes.'' However, 
common cheese names like ``parmesan,'' in addition to certain meat and 
wine terms that indicate a type or method of production, have been in 
the public domain for centuries and are considered as generic. GIs were 
not meant to restrict the generic names by which millions of consumers 
recognize some of their favorite foods; use of GIs to create this 
result must be firmly rejected as the protectionist and anti-trade 
policy that it is.

    Mexico undertook important commitments to the United States through 
USMCA side letters on cheese common names \3\ and prior users,\4\ to 
protect from the abusive and illegitimate actions from the European 
Union during the Mexico-EU free trade agreement negotiations. We need 
to ensure that Mexico implements these provisions in a manner that 
fulfills and recognizes the market access gains in NAFTA and USMCA.
---------------------------------------------------------------------------
    \3\ https://ustr.gov/sites/default/files/files/agreements/FTA/
USMCA/Text/MX-US_Side_Let
ter_on_Cheeses.pdf.
    \4\ https://ustr.gov/sites/default/files/files/agreements/FTA/
USMCA/Text/MX-US_Side_Let
ter_on_Prior_Users.pdf.
---------------------------------------------------------------------------
      misusing geographical indications to erect barriers to trade
    To provide some perspective, I live in Parma, ID. According to the 
EU Commission, I could never call anything Parma despite that my town 
has had that name since 1904 when it was incorporated. The United 
States needs to stop Mexico's deteriorating approach to GIs. It is 
symptomatic of broader efforts that the EU has been pursuing for some 
time to limit U.S. competition through imposition of GI provisions in 
EU FTAs with U.S. trading partners. As stated above, the U.S. dairy 
industry does not object to the protection of proper GIs, such as 
``Parmigiano Reggiano.'' However, the EU has been aggressively seeking 
to confiscate generic terms that derive from part of the protected name 
or are otherwise in common usage--such as ``parmesan,'' ``feta,'' and 
``asiago.'' The threat to common food names is not constrained to dairy 
but extends to other products as well, such as generic meat terms like 
``black forest ham'' and ``bologna,'' as well as common descriptive 
terms for wine such as ``vintage'' and ``chateau,'' or the use of 
common wine grape varietal terms.

    The EU's GI campaign is as deliberate as it is destructive. If the 
EU is successful in blocking U.S. exports of common food names, U.S. 
food producers will be severely harmed, and consumers will no longer 
recognize familiar products. We appreciate the actions the U.S. has 
taken so far to protect American jobs as well as the legitimate rights 
of our food manufacturers, farmers, and exporters; however, combating 
the EU will require continued vigilance, a coordinated U.S. interagency 
effort focused on preserving U.S. market access opportunities, and a 
pragmatic, results-
oriented approach to combating the EU's trade-distorting approach to 
this topic.

    The USMCA side letters on common names and prior users offer a 
potential bulwark against EU efforts by listing specific cheese names 
that the United States will be permitted to continue to use and by 
ensuring that U.S. companies will be recognized as ``prior users'' of 
common food names and therefore entitled to continue to use them. The 
U.S. government must make it a policy objective to further expand upon 
this successful framework in other trade negotiations to ensure that 
safeguards for American-made common food name products are 
strengthened, cloaked barriers to trade are rejected, and legitimate IP 
protections preserved. The alternative would be continued erosion of 
U.S. market access as the EU continues efforts to erect barriers to our 
products in third markets.
                    building on usmca in key markets
    While USMCA is a significant step forward towards continued dairy 
export growth, by itself it cannot achieve this goal. That will require 
a forward-leaning posture by the U.S. Government and active negotiation 
of additional trade agreements with key export markets, both to level 
the playing field for American dairy products and to allow our industry 
to grow exports and invest in expanding dairy jobs. The United Kingdom, 
Southeast Asia, Japan, and even China present valuable opportunities.
                             united kingdom
    The UK dairy market is a prosperous one with a significant segment 
of its dairy consumption coming from imports, representing strong 
potential to expand U.S. market share. However, numerous tariff and 
non-tariff barriers imposed by the EU have long hindered U.S. dairy 
exports to the UK. These include bans on the use of several common 
cheese names due to EU geographical indication policies and 
certification-related challenges that overly complicate our industry's 
ability to ship product consistently and simply to Europe. The UK's 
exit from the EU presents an opportunity to move beyond the EU's 
complex trade policies which act as major disincentives to U.S. 
exports.
                             southeast asia
    U.S. dairy producers and businesses have worked hard to make 
advancements in Southeast Asia and believe increased sales throughout 
Asia are key to the industry's future success.

    Unfortunately, America's biggest dairy export competitors--Europe, 
New Zealand, and Australia--have negotiated FTAs with partners in 
Southeast Asia or are in the process of doing so, leaving the U.S. as 
the only major supplier that will be left without an FTA. The tariff 
advantages provided by these FTAs may in some cases price alternate 
suppliers out of the market, including the U.S. This has put the U.S. 
dairy industry at a distinct disadvantage, and we are at risk of seeing 
our competitiveness erode in this important market region, particularly 
as our tariff disadvantage exacerbates with ongoing dairy tariff phase-
outs our competitors enjoy.

    U.S. focus would be most effectively invested in expanding American 
inroads into key and growing markets throughout Southeast Asia, 
particularly Vietnam. Vietnam was the 8th largest U.S. dairy export 
destination in 2019. A developing economy and changing food trends in 
Vietnam have fueled a demand for dairy that cannot be met by their 
domestic industry alone.
                                 japan
    U.S. dairy farmers applauded the strides made for dairy in the 
Phase One U.S.-Japan Trade Agreement as they will help stem the erosion 
of U.S. market share in this key market, especially for cheese, whey, 
and lactose products. However, more remains to be done to maximize 
opportunities in this top five U.S. dairy export market for U.S. dairy 
farmers and processors. The dairy industry is urging U.S. trade 
negotiators to build upon the Phase One deal and deliver the complete 
range of market access opening and assurances necessary to ensure that 
U.S. dairy products can best compete. A 2019 U.S. Dairy Export Council 
study found that if the U.S. has at least the same market access as its 
competitors, the U.S. could roughly double its share of the Japanese 
market over the next 10 years.
                                 china
    China is the world's second largest importer of dairy products and 
a critical market for the U.S. dairy industry. The Phase One trade 
agreement with China made important advances on nontariff issues and 
regulatory restrictions harming U.S. dairy trade.\5\ However, the U.S. 
Government's work with China is not complete until the retaliatory 
tariffs against all U.S. dairy exports are fully lifted.
---------------------------------------------------------------------------
    \5\ Summary of dairy-related results: https://ustr.gov/sites/
default/files/files/agreements/phase%20one%20agreement/
Phase_One_Agreement-Commodity_Fact_Sheet-Dairy_and_Infant_
Formula.pdf.

    Prior to the imposition of retaliatory tariffs, the U.S. had been 
expanding its market share of China's rapidly growing import market, 
growing by 10 percent a year over the past decade. Although the dairy 
market in China continues a strong trajectory of growth with tremendous 
potential, recent gains for U.S. dairy exports have been reversed by 
the waves of retaliatory tariffs imposed by China. Once hard-earned 
market access is lost, it will be difficult to recover or find another 
market as pivotal for U.S. dairy exports as China. We therefore urge 
that Congress work with the administration to press for removal of all 
retaliatory tariffs on dairy.
                              enforcement
    Just as new trade agreements will be critical to expanding export 
opportunities and jobs for U.S. dairy farmers, insisting on a level 
playing field across the board, including through enforcement of 
existing agreements, will be essential to securing and maintaining 
market access for U.S. dairy. The decision to pursue dispute settlement 
with Canada over its TRQ administration sends exactly the right 
message, but other trading partners need to get that message as well. 
Notably, the EU's misuse of GIs is just one of the many barriers the EU 
is constantly erecting to our products, all while benefitting from 
wide-open market access here in the United States. This imbalance of 
opportunities is not right, and it cannot continue.
                               conclusion
    The U.S. dairy industry recognizes the importance of expanding 
overseas market opportunities in order to bolster our farmers, 
processors, and manufacturers here at home. We have worked hard to 
establish the U.S. as a reliable supplier of safe and nutritious 
products to meet growing foreign demand for high-quality American dairy 
products, and we want to be able to capitalize on these extensive 
efforts through improved access to these markets.

    USMCA represents an indispensable step towards maintaining and 
expanding export opportunities for U.S. dairy, albeit one requiring 
vigilant monitoring and aggressive enforcement. USMCA also represents a 
foundation that should be built upon through efforts to pursue 
additional trade agreements in key markets and to dismantle trade 
barriers including GIs, in order to ensure continued growth and 
economic security for the domestic dairy industry and, in turn, my 
family business.

    I appreciate the opportunity to provide comments on these important 
issues to this committee. Thank you.

                                 ______
                                 
          Questions Submitted for the Record to Allan Huttema
                  Question Submitted by Hon. Ron Wyden
    Question. Dairy producers have faced significant issues getting 
their products into the Canadian market, and even greater issues 
competing with underpriced dairy ingredients in Canada and third 
markets. Essentially, Canada's supply management system is distorting 
the dairy market at home and abroad.

    I was pleased to see that USTR initiated dispute resolution on 
Canada's tariff rate quota (TRQ) system. But what other issues should 
we be watching with regard to Canada's dairy obligations? In 
particular, do you think Canada has fully eliminated the Class 6 and 7 
ingredient prices that were distorting the market for dairy 
ingredients?

    Answer. While Canada has eliminated Class 6 and 7 pricing 
categories in accordance with the USMCA, there are outstanding concerns 
that it may be attempting to circumvent export surcharges imposed on 
dairy protein exports, including skim milk powder (SMP), milk protein 
concentrate (MPC) and infant formula. The fundamental problem with 
Class 7 was Canada's use of global markets to export increasingly large 
volumes of its dairy protein at artificially low prices--an issue that 
was addressed in the agreement. However, Canadian exports of milk 
protein isolates (MPI) and certain SMP blends manufactured under the 
new Class 4a have been increasing in a manner that seems designed to 
evade these USMCA disciplines.

    We ask that Congress and USTR closely monitor these milk protein 
exports and move quickly to deploy the dairy consultation tools laid 
out in USMCA's Agriculture Chapter to address this concern, as these 
attempts to circumvent export caps are inconsistent with the spirit of 
the agreement.

                                 ______
                                 
               Questions Submitted by Hon. Maria Cantwell
    Question. The dairy industry is important to the economy of 
Washington State and that of the Pacific Northwest. In Washington 
alone, there are around 400 dairy farms that support more than 50,000 
jobs. Dairy exports alone contributed almost $170 million to my home 
State's economy last year.

    Given its strategic location, Washington State is a significant 
dairy exporter, supplying customers all over the world.

    However, the dairy industry continues to face challenges when it 
comes to trading with our U.S.-Mexico-Canada Agreement (USMCA) 
partners. Canada has been holding back U.S. dairy imports through its 
unfair allocation of dairy tariff-rate quotas. Mexico, the United 
States' top market for dairy exports, has proposed several costly 
regulations on dairy imports that are contrary to our agreement as 
outlined by the USMCA.

    The main purpose of the USMCA is to promote trade while reducing 
barriers and other regulatory burdens. We must press Canada and Mexico 
to adhere to these principles and hold them accountable to their trade 
commitments.

    From your perspective, why do we continue to have challenges with 
Canada on dairy? What is behind these challenges? What will it take to 
get the Canadians to live up to their commitments and to remove 
barriers to U.S. dairy imports?

    Answer. Having operated a dairy farm under the supply management 
system in British Columbia, I can attest to Canada's long history of 
undermining its market access commitments to protect its tightly 
controlled dairy market. Consequently, it is not surprising that we are 
now seeing Canada's attempts to circumvent its obligations under the 
USMCA regarding dairy TRQ allocations and the diversion of milk protein 
production to avoid export surcharges. The Canadian dairy supply 
management system has not been challenged in the past, largely due to 
the sizable support supply management groups receive from their own 
government. Persistent intervention from the United States will send 
the message that it takes the issue seriously and will continue to 
press for changes, which, at the very least, will deter new investment 
by Canadian processors.

    To that end, close monitoring and strong enforcement is necessary 
to ensure Canada adheres to its commitments in the agreement. We were 
pleased to see Ambassador Tai initiate formal dispute settlement 
proceedings over Canada's dairy TRQ allocations that discourage imports 
from the United States. Further enforcement is necessary to ensure that 
Canadian milk protein exports do not violate the spirit of the 
agreement and replicate the issues associated with Class 7 and the 
offloading of dairy proteins on the global market. Left unchecked, I am 
certain Canada will not hesitate to recreate the same issues that 
persisted prior to the USMCA. We appreciate your attention to this 
important issue and encourage careful scrutiny of Canada's 
implementation of all its dairy provisions in the trade deal.

    Question. Thank you for noting the issues with the side letters 
with Mexico pertaining to common cheese names and prior users. Could 
you elaborate on how the implementation of these provisions benefits 
Washington State and your cooperative?

    You mentioned that there are regulatory issues cropping up in that 
market that appear to be politically driven. Could you talk a bit more 
about the impacts that these regulations have on your farm?

    Answer. Mexico is the U.S. dairy industry's largest export market, 
so trade disruptions with Mexico ripple throughout the industry on down 
to the farm level. If we're unable to send our dairy products to 
Mexico, the repercussions for milk pricing in the U.S. would be 
devastating for the producers in my co-op and around the country. With 
feed prices competitive now due to rising commodity prices, it is key 
for dairy farmers that the U.S. maintains and expands its export 
markets, especially Mexico. We ask Congress and the administration to 
pursue discussions with Mexico to maintain a cordial relationship and 
manage the trade barrier issues surging in the regulatory and Customs 
enforcement area.

                                 ______
                                 
                  Prepared Statement of Beth Lowell, 
             Deputy Vice President, U.S. Campaigns, Oceana
    My name is Beth Lowell, deputy vice president for U.S. Campaigns at 
Oceana. Oceana is an international ocean conservation organization 
dedicated to protecting the world's oceans. We work in North, Central, 
and South America; the European Union; and the Philippines to promote 
responsible fisheries management and thereby save the oceans and feed 
the world.

    Oceana thanks the committee for the invitation to testify on these 
matters. After one year in force, Oceana has some outstanding questions 
and recommendations on how to improve implementation of the United 
States-Mexico-Canada Agreement (USMCA). While the environment chapter 
addresses a wide range of issues, my testimony today is focused on 
fisheries issues.

    Seafood is the most highly traded food commodity internationally 
with vastly complex and often opaque supply chains, requiring 
governments to use a number of tools to improve fisheries conservation 
and management, combat IUU fishing, protect those most vulnerable and 
level the playing field for legal fishermen and trade. The United 
States should advance a one-government approach, especially in 
addressing illegal, unreported and unregulated (IUU) fishing, that uses 
all its tools, including trade agreements like the USMCA.

    The USMCA must be paired with other agency-driven actions like the 
National Oceanic and Atmospheric Administration's Seafood Import 
Monitoring Program, other international trade programs, and Custom and 
Border Protection's enforcement of the Tariff Act, especially with 
respect to IUU fishing and forced labor. Working also with the State 
Department, Department of Defense, Labor, and other agencies, the 
United States government can forge a unified, coordinated effort to 
become a global leader in the fight against IUU fishing, forced labor 
and other human rights abuses. These illegal practices undermine U.S. 
fishermen, unfairly disadvantage legal fishers who follow the rules, 
and put seafood tainted by forced labor on the plates of American 
consumers.

    Trade measures, such as the USMCA, can drive positive change for 
ocean conservation and fisheries management in both importing and 
source countries. As discussed in this testimony, Oceana in Mexico 
identified ways that the Mexican government must improve management of 
their fisheries by adopting documentation and traceability to comply 
with the requirements of the USMCA as well as other U.S. import 
requirements like Seafood Important Monitoring Program and bycatch 
reductions measures.

    Overall, the White House, Federal agencies and Congress should work 
together to advance polices to ensure that all seafood is safe, legally 
caught, responsibly sourced and honestly labeled. Setting the minimum 
standard that seafood must meet to enter and be sold in the U.S. market 
will level the playing field for legal fishermen and help drive change 
in both source and market states.
                          fisheries subsidies
    The environment chapter of the USMCA commendably includes a 
provision intended to reduce fisheries subsidies. Article 24.20 opens 
with this statement:

        The Parties recognize that the implementation of a fisheries 
        management system that is designed to prevent overfishing and 
        overcapacity and to promote the recovery of overfished stocks 
        must include the control, reduction, and eventual elimination 
        of all subsidies that contribute to overfishing and 
        overcapacity.

    This provision takes a step in the right direction toward reducing 
harmful fisheries subsidies in the United States, Mexico, and Canada 
and establishes a floor for disciplining these subsidies in future 
trade agreements.

    Many fisheries subsidies--such as tax breaks and fuel subsidies--
are concerning from a sustainability perspective because they 
artificially increase profits and encourage more fishing. These 
payments are known as harmful subsidies, to distinguish them from 
government spending on beneficial or ambiguous programs, such as 
fisheries management or vessel buybacks.

    A recent report \1\ released by Oceana shows that the world's top 
industrial fishing nations are providing subsidies that make distant-
water fishing more profitable, drive overcapacity, and shift the risk 
of overfishing to the waters of other countries. For the first time, 
harmful subsidies worth billions of dollars from wealthy nations can 
now be tracked to destinations around the world, including to least 
developed countries (LDCs) and the high seas.
---------------------------------------------------------------------------
    \1\ Skerritt, Daniel J. and Sumaila, U. Rashid. (2021) Assessing 
the spatial burden of harmful fisheries. Oceana, https://oceana.org/
reports/tracking-harmful-fisheries-subsidies/.

    Distant-water fishing fleets often receive subsidies worth 20 to 40 
percent of the catch's value, making it highly probable that they would 
not be profitable without fisheries subsidies and unfettered access to 
waters of other nations, including LDCs that can least afford it and 
where management capacity is often most lacking. The top 10 providers 
of harmful fisheries subsidies in 2018 are China, Japan, Korea, Russia, 
the United States, Thailand, Taiwan, Spain, Indonesia and Norway, for a 
total of $15.4 billion. Of that total, these nations spent more than 
$5.3 billion per year in harmful subsidies for fishing in the waters of 
---------------------------------------------------------------------------
116 other nations.

    The United States ranked fifth in the world in 2018, providing $1.1 
billion in harmful fisheries subsidies. These findings show that our 
country has work to do to comply with the spirit and letter of our 
commitments in the USMCA on fisheries subsidies. While Oceana's recent 
report did not include Canada and Mexico, research is underway to 
analyze subsidies from other maritime nations.

    The USMCA requires the parties to notify each other of their 
fisheries subsidies--within 1 year of the date of entry into force and 
every 2 years thereafter--and specifies the information to be provided 
regarding the subsidies. To the extent that notification under the WTO 
Subsidies and Countervailing Measures Agreement partially meets this 
USMCA requirement,\2\ the United States and Canada reported some of the 
required information on fisheries subsidies as of July 2021; however, 
the last notification from Mexico is from September 2019.\3\ The USMCA 
also requires the parties to notify each other on an annual basis of 
any list of vessels and operators engaged in IUU fishing. Since the 
USMCA entered into force on July 1, 2020, complete information on 
fisheries subsidies and IUU fishing appears to be overdue; Oceana would 
like to know whether the parties have submitted the information and 
when it will be available to the public.
---------------------------------------------------------------------------
    \2\ WTO. Subsidies and countervailing measures, https://
www.wto.org/english/tratop_e/scm
_e/scm_e.htm#dol.
    \3\ From the WTO website, the latest notification on subsidies from 
the United States as of July 14, 2021: https://docs.wto.org/dol2fe/
Pages/SS/directdoc.aspx?filename=q:/G/SCM/N372
USA.pdf&Open=True. From Canada as of July 8, 2021: https://
docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/SCM/
N372CAN.pdf&Open=True. From Mexico as of September 24, 2019: https://
docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/SCM/N315
MEX.pdf&Open=True.

    The USMCA also states, ``The Parties shall work in the WTO towards 
strengthening international rules on the provision of subsidies to the 
fisheries sector and enhancing the transparency of fishing subsidies.'' 
It is discouraging that the negotiations in the WTO on fisheries 
subsidies have lingered for more than 20 years without resolution. 
---------------------------------------------------------------------------
Oceana urges the U.S. government to push on the WTO negotiations to:

        Prohibit harmful subsidies to all fishing and related support 
activities outside of each member state's own jurisdiction;
        Call on the largest providers of subsidies to take the largest 
share of responsibility to eliminate and redirect harmful subsidies 
into beneficial areas;
        Develop a framework to mitigate harmful fisheries subsidies 
that is transparent, time bound, performance-based, and has clear 
standards for reporting data across member states.
    the crisis of illegal, unreported, and unregulated (iuu) fishing
    The world's oceans face a dire threat: illegal, unreported, and 
unregulated fishing. Across the globe, IUU fishing depletes marine 
resources, destroys habitats, undermines food security, and frequently 
drives forced labor and human rights abuses. IUU fishing is off the 
books and outside the rule of law, compromising responsible and 
effective fisheries management. IUU fishing hides in the shadows and 
beyond the horizon, and it thrives on a lack of transparency, limited 
enforcement, and a complex global supply chain. IUU fishing costs the 
global seafood industry as much as $26 billion to $50 billion every 
year.

    IUU fishing includes fishing without authorization, ignoring 
quotas, fishing in closed areas or with prohibited gear, catching 
unmanaged species or failure to report catch to proper authorities. The 
potential for IUU fishing is especially great on the high seas where 
fisheries management and enforcement are often insufficient and 
sometimes inconsistent.\4\, \5\ The same conditions that 
make the high seas vulnerable to IUU fishing also make it susceptible 
to other forms of transnational organized crime. IUU fishing has been 
linked to a range of illicit activities, including document forgery; 
money laundering; forced labor; and human, drug and wildlife 
trafficking.\6\, \7\
---------------------------------------------------------------------------
    \4\ National Intelligence Council. (2016) Global Implications of 
Illegal, Unreported, and Unregulated Fishing.
    \5\ Bondaroff P. (2015) The illegal fishing and organized crime 
nexus: Illegal fishing as transnational organized crime. The Global 
Initiative Against Transnational Organized Crime.
    \6\ Ibid.
    \7\ Haenlein C. (2017) Below the Surface. How Illegal, Unreported 
and Unregulated Fishing Threatens our Security. Royal United Services 
Institute.

    IUU fishing vessels are already evading laws, regulations and 
oversight to gain higher profits and, in some cases, are more willing 
to further drive down costs by exploiting workers through forced 
labor.\8\, \9\ The seafood supply chain is complex, opaque 
and difficult to trace. It starts at sea and follows a winding path 
from fishing vessel to reefer, from reefer to reefer, from vessel to 
factories, from factories to processing, out to market, and then onward 
for global distribution. Human trafficking and forced labor can occur 
at every step in the supply chain. Human trafficking in fisheries 
entails the transfer and containment of persons on board vessels, where 
they are forced to work as crew by means of violence, threat or debt. 
Human trafficking is the fastest growing transnational criminal 
enterprise in the world, generating $150 billion dollars annually and 
enslaving an estimated 21.9 million people.\10\ IUU fishing practices 
threaten food security, compromise the health of the oceans and 
fisheries, and undermine fishermen and seafood businesses that play by 
the rules. Until the government takes stronger measures to keep IUU 
products out of the United States, our dollars will continue to support 
the pillaging of the ocean through the seafood we buy. All seafood 
should be safe, legally caught, responsibly sourced, and honestly 
labeled.
---------------------------------------------------------------------------
    \8\ United Nations Office on Drugs and Crime. (2011) Transnational 
Organized Crime in the Fishing Industry.
    \9\ Environmental Justice Foundation. (2010) All at Sea--The Abuse 
of Human Rights Aboard Illegal Fishing Vessels. London.
    \10\ International Labour Organization. (2014) Profits and poverty: 
The economics of forced labour.

    In February of this year, the U.S. International Trade Commission 
(ITC) issued an important report on IUU fishing.\11\ The ITC economists 
analyzed the amount of seafood obtained via IUU fishing that is 
imported into the U.S. and estimated the economic impact of those 
imports on U.S. commercial fisheries.
---------------------------------------------------------------------------
    \11\ United States International Trade Commission. (2021) Seafood 
Obtained via Illegal, Unreported, and Unregulated Fishing: U.S. Imports 
and Economic Impact on U.S. Commercial Fisheries, Publication Number 
5168, Investigation Number 332-575, https://www.usitc.gov/publications/
332/pub5168.pdf.

    The ITC report found that the U.S. imported an estimated $2.4 
billion worth of seafood derived from IUU fishing in 2019--which is 
almost 11 percent of total U.S. seafood imports and more than 13 
percent of U.S. imports caught at sea (``wild caught''). Confirming 
that IUU imports are undermining U.S. fishers, the analysis found that 
preventing IUU imports from entering the U.S. market ``would have a 
positive effect on U.S. commercial fishers, with estimated increases in 
U.S. prices, landings (catches of fish), and operating income.''\12\ 
The ITC's figures include not only wild caught seafood but also catch 
that is used as feed in aquaculture operations. The ITC used a 
definition of IUU that includes labor violations as well as factors 
relating to fisheries management and conservation.\13\
---------------------------------------------------------------------------
    \12\ United States International Trade Commission. (2021) News 
Release: Illegal, Unreported, and Unregulated Fishing Accounts for More 
Than $2 billion of U.S. Seafood Imports, Reports USITC, News Release 
21-040.
    \13\ United States International Trade Commission. (2021) February 
2021, USITC, Seafood Obtained via Illegal, Unreported, and Unregulated 
Fishing: U.S. Imports and Economic Impact on U.S. Commercial Fisheries, 
p. 17.

    Regarding our partners in the USMCA, the analysis identified Mexico 
as one of the countries with relatively substantial exports of wild 
caught IUU seafood to the U.S.\14\ The ITC estimated that 25.1 percent 
of seafood imports from Mexico to the U.S. were products of IUU 
fishing. Canada, on the other hand, had one of the lowest estimated IUU 
shares of imports into the U.S. at 3.4 percent (wild caught 
seafood).\15\
---------------------------------------------------------------------------
    \14\ ITC report, p. 15.
    \15\ ITC report, p. 17.
---------------------------------------------------------------------------
  seafood fraud undermines responsible fisheries management and u.s. 
                                fishers
    Seafood fraud further undermines U.S. fishermen, hinders ocean 
conservation efforts and cheats consumers. Seafood fraud comes in 
different forms, including species substitution, improper labeling, 
hiding the true origin of the product to avoid tariffs, or other forms 
of economic fraud like adding extra breading, water or glazing to the 
product.

    Species substitution is found around the world. In a review of more 
than 200 seafood fraud studies by non-government organizations, 
governments, academic institutions, and journalists, overall one in 
five fish of the more than 25,000 samples tested worldwide were 
mislabeled.\16\ The reviewed studies found seafood mislabeling in every 
sector of the seafood supply chain: retail, wholesale distribution, 
import/
export, packaging/processing and landing.\17\
---------------------------------------------------------------------------
    \16\ Warner K, Mustain P, Lowell B, Geren S, Talmage S. (2016) 
Deceptive dishes: Seafood swaps found worldwide. Oceana.
    \17\ Ibid.

    Oceana investigated seafood fraud in the United States, and overall 
approximately one-third of the more than 1900 seafood samples that we 
tested were mislabeled. We often found farmed seafood sold as wild 
caught, imported fish sold as local favorites, less sustainable fish 
sold as more sustainable options and cheaper fish sold as more 
expensive selections. For example, Oceana found farmed shrimp sold as 
wild Gulf shrimp in the Gulf of Mexico region, Asian imported crab 
inside crab cakes sold as local Chesapeake Bay blue crab and fish 
imported from Asia and Europe sold as local Great Lakes favorites, like 
---------------------------------------------------------------------------
walleye and lake perch.

    In Oceana's 2013 nationwide survey, we tested 120 samples of red 
snapper, and only seven were actually red snapper. That means that U.S. 
fishermen are selling their red snapper in a market flooded with 
imposters. They should be getting more for their catch, and consumers 
are getting ripped off when buying a cheaper substitute like tilapia 
for red snapper prices.

    Seafood fraud can happen anywhere in the seafood supply chain. 
While Oceana tested at the retail level, the Food and Drug 
Administration (FDA) found 15 percent of the 174 lots tested at the 
wholesale level were mislabeled, and the Department of Justice has 
convicted over a dozen U.S. businesses of importing and distributing 10 
million pounds of mislabeled Asian catfish to defraud consumers and 
avoid tariffs. More recently, a Virginia supplier was convicted of 
selling millions of dollars of expired foreign crab as fresh local blue 
crab, putting honest businesses and consumer's health at risk.

    IUU fishing and seafood fraud are complex problems that cut across 
many Federal agencies with no clear indication of leadership. 
Recognizing the need to coordinate the Federal Government response, the 
Task Force on Combating IUU Fishing and Seafood Fraud was established 
in 2014, bringing together 11 Federal agencies to develop 
recommendations to address these issues. The 15 recommendations 
included international, national, state and local measures, including a 
traceability program to track seafood from the point of catch to entry 
into U.S. commerce.

    The Seafood Import Monitoring Program (SIMP) requires some imported 
seafood at risk of illegal fishing and seafood fraud to be accompanied 
by catch documentation that provides key information about the fish, 
including who caught it, where it was caught, how it was caught and 
what specific species it is. This information is used to establish that 
it was caught in a legal fishery. The seafood must also have 
documentation that allows it to be traced back to the original point of 
catch or farm if requested.

    The SIMP allowed the United States to enact import controls to help 
ensure that seafood imported into the United States was legally caught 
and properly labeled. However, this risk-based program only includes 13 
species and species groups--abalone, Atlantic cod, blue crab 
(Atlantic), dolphinfish (mahi mahi), grouper, king crab (red), Pacific 
cod, red snapper, sea cucumber, sharks, shrimp, swordfish, tunas 
(albacore, bigeye, skipjack, yellowfin, and bluefin)--and stops at the 
U.S. border. Seafood mislabeling can happen to all types of seafood and 
can occur at any stage from the point of catch to the final consumer. 
To truly stop seafood fraud, all seafood must be traced from boat to 
plate.
            the u.s. needs stronger mechanisms to motivate 
                 other countries to address iuu fishing
    The Magnuson-Stevens Fishery Conservation and Management Act (MSA) 
is the primary law governing Federal fisheries management in the United 
States. When properly and fully implemented, the MSA is one of the most 
effective fishery laws in the world today. Since it was first passed in 
1976, and through subsequent reauthorizations in 1996 and 2006, the law 
has helped stop overfishing, protect essential fish habitats and 
rebuild depleted stocks.

    In addition to the domestic fisheries management provisions, the 
High Seas Driftnet Fishing Moratorium Protection Act (HSDFMPA) outlines 
international actions specifically on IUU fishing, bycatch of protected 
living marine resources and sharks. Under the HSDMPA, NOAA identifies 
nations with problematic practices in the biennial report to Congress. 
NOAA then enters a two-year consultation process with the Nation to 
address the issues for which it was identified. At the end of the 2 
years, a Nation is either negatively or positively certified. A 
positive certification indicates that the Nation has addressed the 
issue. A negative certification may result in import restrictions or 
denial of port access for fishing vessels.

    In the 2019 Biennial Report to Congress,\18\ NOAA identified Mexico 
for having vessels fishing illegally in the Gulf of Mexico. Mexico was 
also identified for this same issue in 2015 and 2017. Despite being 
repeatedly identified in the biennial reports, Mexico yet to resolve 
IUU fishing activity by Mexican vessels. Mexico is a key example of how 
the HSDMPA does not have the teeth that it needs to lead to real, 
systematic improvement to a country's management regime.
---------------------------------------------------------------------------
    \18\ NOAA Fisheries. (2019) Improving International Fisheries 
Management. Report to Congress.

    In contrast, the European Union's IUU regulations empower 
authorities to issue warnings (yellow cards) that can lead to sanctions 
(red cards) including banning seafood imports. This rigorous system has 
improved fisheries management and enforcement \19\ in several 
countries, including South Korea and the Philippines.\20\ To be 
successful, the U.S. must be willing to use sanctions to drive change. 
The USMCA offers another mechanism for the U.S. to engage with Mexico 
to compel the government to address IUU fishing in the Gulf of Mexico 
and in other fisheries.
---------------------------------------------------------------------------
    \19\ IUU Watch. (2015) EU Regulation to combat illegal fishing: 
Third country carding process.
    \20\ IUU Watch, EU Carding Decisions, http://www.iuuwatch.eu/map-
of-eu-carding-deci
sions/, accessed July 25, 2021.
---------------------------------------------------------------------------
            oceana report on usmca implementation in mexico
    Oceana in Mexico released a report earlier this month outlining 
USMCA implementation in Mexico. Oceana recommended that Mexico 
prioritize and execute the necessary changes to the legal framework and 
implement the necessary tools to ensure compliance with commitments 
made at the international level to guarantee a sustainable and 
competitive fishing sector with practices in accordance with the law.

    Since signing the USMCA, the U.S. has imposed measures restricting 
imports of fish caught in Mexico by Mexican flagged vessels. The first 
measure was imposed in March 2021, restricting the importation of 
certain fishery products from the Upper Gulf of California by 
determining that comparability requirements are absent in contrast to 
those implemented by the United States to ensure protection of 
endangered species during fishing activities, specifically the vaquita 
porpoise, a species endemic to the Upper Gulf.\21\
---------------------------------------------------------------------------
    \21\ Oceana Mexico, El T-MEC Y La Pesca: Reporte Sobre el 
Cumplemiento de las Obligaciones que Asume el Estado Mexicano en 
Materia Pesquera at 3, n. 2, n. 3 (July 1, 2021), https://
mx.oceana.org/sites/default/files/la_pesca_y_el_t-mec.pdf (The USMCA 
and Fishing: Report on Compliance with Obligations Assumed by the 
Mexican State in Fishing-Related Matters; English translation available 
upon request) [hereinafter ``Oceana Mexico USMCA and Fishing Report''].

    The second trade restriction imposed after the entry into force of 
the USMCA was also by the United States and applies to the export of 
wild shrimp from Mexico. This measure was ordered on April 1, 2021. The 
United States determined that provisions to protect sea turtles in 
shrimp fisheries, and their enforcement, are not comparable to those 
applicable in the United States, since an inspection carried out by the 
U.S. government found numerous shrimp fishing vessels that were not 
using Turtle Excluder Devices (TEDs). Therefore, for the time being, 
Mexico has lost its certification to export wild shrimp to the United 
States.\22\
---------------------------------------------------------------------------
    \22\ Oceana Mexico USMCA and Fishing Report at 4, n. 5, n. 6.

    In addition to the U.S. shrimp export requirement of using TEDs, 
the use of such devices is also mandatory under rule NOM-061-SAGPESC/
SEMARNAT-2016. The Mexican government has announced measures to regain 
certification for shrimp exports, including training in the use of TEDs 
and the use of the Satellite Monitoring System for Fishing Vessels 
(SISMEP) to concentrate inspection and surveillance actions.\23\
---------------------------------------------------------------------------
    \23\ Oceana Mexico USMCA and Fishing Report at 4, n. 7.

    Despite the measures announced by the Mexican government to 
eliminate restrictions on the export of fish species, it is important 
to strengthen inspection and surveillance actions carried out by 
Mexican authorities to ensure compliance with conservation measures for 
endangered species. Likewise, the Mexican government must ensure that 
the fishing sector that complies with conservation measures has the 
necessary tools to continue marketing its products. In Article 24.17, 
the parties undertake the obligation to promote and facilitate trade in 
sustainably managed and legally harvested fish and fish products. 
Mexico must enforce traceability as its main tool to comply with this 
provision and prevent trade restrictions from extending to sustainable 
and legal products. A traceability standard providing information about 
each stage of the value chain, from vessel to the final point of sale, 
would allow verification of which fishery products effectively comply 
with provisions of species conservation and exclude from the market 
only those that violate these provisions. Thus, the objective of 
promoting commercialization of legal and sustainable fishing is 
achieved.\24\
---------------------------------------------------------------------------
    \24\ Oceana Mexico USMCA and Fishing Report at 5.

    Lastly, Article 2 of the Environment Cooperation and Customs 
Verification Agreement commits the parties to trade, import and export 
only goods and services produced in compliance with Chapter 24. 
Therefore, Mexico, the United States and Canada must ensure that the 
products they trade comply with conservation efforts for vulnerable and 
endangered species, as well as fishery products that are not derived 
from illegal fishing.\25\
---------------------------------------------------------------------------
    \25\ Oceana Mexico USMCA and Fishing Report at 5.

    To verify this, Mexico must implement a traceability system for 
fishery products that collects and provides information along the whole 
value chain, from capture to commercialization. Today, Mexico lacks 
this tool even though Article 119 Bis 9 of the General Law of 
Sustainable Fisheries and Aquaculture (LGPAS) mandates implementation 
of a traceability system for fishery resources for human consumption, 
from point of origin to the final destination.\26\
---------------------------------------------------------------------------
    \26\ Oceana Mexico USMCA and Fishing Report at 5.

    Oceana outlined specific measures that the Mexican government must 
adopt to allow for continued trade with the U.S. and avoid of 
commercial sanctions, such as the one imposed on the Upper Gulf of 
California and on Mexican shrimp. Among these measures is the adoption 
of traceability standards providing information about each stage of the 
value chain, from vessel to the ultimate selling point. This would 
allow verification of which fishery products effectively comply with 
provisions of species conservation and exclude from the market only 
those that violate these provisions. Thus, the objective of promoting 
commercialization of legal and sustainable fishing is achieved and 
prevents trade restrictions from extending to sustainable and legal 
products.\27\
---------------------------------------------------------------------------
    \27\ Oceana Mexico USMCA and Fishing Report at 5.

---------------------------------------------------------------------------
    Specifically, to fully comply with the USMCA, Mexico should:

        Approve a traceability standard that allows government 
authorities and the fishing sector to verify the legal origin of 
products and prevent market entry to illegal fishing, caught in 
violation of the rules for protection of vulnerable species, without a 
permit or in prohibited areas.
        Promote transparency of fishing vessel data as a tool to 
combat illegal fishing, so that the data are understandable and 
publicly accessible through Global Fishing Watch.
        Have updated, public, and coincident information and data on 
fishing vessels that have fishing permits and carry out such 
activities.
        Sign and ratify the Agreement on Port State Measures or 
incorporate into the regulatory framework provisions that incorporate 
the obligations set forth in the PSMA to combat illegal fishing.
        Reform the General Law of Fisheries and Aquaculture 
integrating provisions that contemplate restoration of overexploited 
fisheries and require the fishing authority to implement actions for 
conservation and restoration of fish species.
        Ensure that subsidies granted to the fishing sector do not 
contribute to the overexploitation of fisheries or are directed to 
vessels that have engaged in illegal fishing activities. Also, direct 
the subsidies granted to strengthen the fishing sector, encourage 
sustainable fishing practices and adequate management of existing 
fisheries.
        Conduct an evidence-based analysis of percentages in fisheries 
where this practice represents a risk, establish maximum bycatch 
percentages, as well as ensure the use of fishing gear and devices that 
minimize bycatch of endangered species.\28\
---------------------------------------------------------------------------
    \28\ Oceana Mexico USMCA and Fishing Report at 16.
---------------------------------------------------------------------------
                  putting the usmca agreement to work
    The Environment Chapter of the USMCA includes articles on Marine 
Wild Capture Fisheries; Sustainable Fisheries Management; Conservation 
of Marine Species; Fisheries Subsidies; Illegal, Unreported, and 
Unregulated (IUU) Fishing; and Conservation and Trade. Together these 
provisions, if fully implemented, would improve fisheries management 
systems to prevent overfishing and overcapacity, reduce bycatch of non-
target species and marine wildlife, and protect habitat. The agreement 
also outlines that the U.S., Mexico, and Canada shall adopt or maintain 
measures to prohibit the practice of shark finning. The agreement 
prevents subsidies to IUU fishing vessels or for fishing on an 
overfished stock.

    The IUU fishing provisions includes requirements to implement port 
state measures; support monitoring, control, surveillance and 
enforcement including deterring nationals and flagged vessels from 
engaging in IUU fishing and addressing transshipments. Each Party shall 
maintain a vessel documentation scheme and promote the use of 
International Maritime Organization numbers or comparable unique vessel 
identifiers for vessels operating outside of its national waters to 
enhance transparency of fleets and traceability of fishing vessels. The 
U.S., Canada, and Mexico are also to develop and maintain publicly 
available an easily accessibly registry data of vessels flying its flag 
and support a Global Registry of Vessels, among other measures.

    The USMCA provides a mechanism for the general public to take 
action if they believe an environmental law is not being effectively 
enforced by the United States, Mexico, or Canada. The USMCA includes 
provisions (Articles 24.27 and 24.28) allowing anyone in one of the 
three countries to file a Submission on Enforcement Matters with the 
Secretariat of the Commission for Environmental Cooperation.\29\ While 
this mechanism existed under NAFTA, under the USMCA, the time frames 
for the process have been shortened, the scope of environmental laws 
has been narrowed to those enacted, promulgated, or enforced by the 
central level of government (so, state, provincial, or local laws are 
not included), and the scope of eligible submitters is no longer 
limited to residents or NGOs in the territory of one of the three 
countries; instead, anyone in any of the three countries can file a 
Submission on Enforcement Matters.
---------------------------------------------------------------------------
    \29\ SMCA, arts. 24.27 and 24.28.

    If adequately substantiated, Submissions on Enforcement Matters 
about government failures to enforce environmental laws require 
responses from relevant government agencies and can result in a factual 
record that government representatives from all three countries must 
review and consider. Such Submissions under NAFTA have proven 
successful in getting governments to take necessary actions to protect 
the environment.\30\ Since the USMCA went into effect on July 1, 2020, 
two submissions have been made: the first, filed in December 2020, 
asserts that the Mexican Ministry of Environment and Natural Resources 
and other environmental agencies are failing to effectively enforce 
provisions to protect loggerhead turtles in both the Atlantic and 
Pacific oceans,\31\ and the second, filed in February 2021, asserts 
that a Port Authority in Canada failed to effectively enforce the 
Canadian Environmental Assessment Act when considering expansion of a 
marine port on the Pacific Coast of British Columbia.\32\ As these 
examples demonstrate, this USMCA mechanism offers the public a viable 
way to gain leverage to advance policies for protecting marine life and 
our oceans.
---------------------------------------------------------------------------
    \30\ See, e.g., Sumidero Canyon II Submission on Enforcement 
Matters, http://www.cec.org/submissions-on-enforcement/registry-of-
submissions/sumidero-canyon-ii/ (resulting in the closure of a 
limestone quarry damaging the Sumidero Canyon National Park in Chiapas, 
Mexico); BC Mining Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/bc-
mining/ (resulting in greater public participation and transparency 
regarding the protection of fish and fish habitat from the impacts of 
mining in British Columbia).
    \31\ Loggerhead Turtle Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/
loggerhead-turtle/.
    \32\ Fairview Terminal Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/
fairview-terminal/.

    Oceana is considering how we can use this process to ensure the 
United States, Mexico and Canada are enforcing their own environmental 
laws.
               funding for noaa for usmca implementation
    As part of the USMCA Supplemental Appropriations Act, NOAA received 
an additional $16 million to implement the agreement. Specifically, 
NOAA was provided $8 million for engagement with the Government of 
Mexico to combat illegal, unreported and unregulated fishing and to 
enhance implementation of the Seafood Import Monitoring Program. The 
other $8 million was to carry out section 3 of the Marine Debris Act. 
The funds for both are available until September 30, 2023. Oceana 
recommends that there be more reporting and transparency in how that 
money has been spent to date and how NOAA plans to spend the remaining 
funds.

    In June, NOAA issued a report on the implementation of SIMP and 
outlined limited progress with the program and highlighted limited 
investment of resources and dedicated staff for the program. Oceana 
remains concerned that NOAA is not building the SIMP program 
effectively and efficiently to allow the U.S. to stop imports of 
illegal seafood. It is not clear how NOAA has spent the $8 million 
dedicated to enhance implementation of SIMP or increase engagement with 
the Government of Mexico. If money remains, NOAA should prioritize 
expanding SIMP to all seafood and ensuring the information collection 
by SIMP is the right information in a format that allows for data 
analysis to identify shipments of high risk of IUU fishing, seafood 
fraud, forced labor and other human rights abuses to guide risk-based 
targeting for inspections, audits, and enforcement.
                  collaboration and capacity building
    The United States established via regulations the Seafood Import 
Monitoring Program in 2016. SIMP requires catch documentation and 
traceability requirements for some species at risk of IUU fishing and 
seafood fraud. Since SIMP, both Canada and Mexico have begun work on 
establishing similar documentation and traceability requirements for 
seafood. As parties to the agreement and major seafood producing and 
importing nations, the USMCA should incentivize all three governments 
to work together to harmonize requirements for catch documentation and 
traceability. The United States could help advise Mexico and Canada on 
how best to establish their programs and provide lessons learned from 
the creation of SIMP. And the United States, Mexico, and Canada should 
work with other major market states to align programs and harmonize 
requirements. For example, the USMCA countries should harmonize our 
programs with the European Union's IUU regulation that requires catch 
documentation and traceability for all seafood and has been in force 
for over a decade. Japan recently passed legislation and is working to 
develop their IUU programs as well.
                 u.s. government action on iuu fishing
    The transparency provisions, specifically on developing a publicly 
available registry, requiring IMO or other unique vessel numbers and 
supporting a Global Record of Vessels, is an area where the U.S. has 
made little progress. NOAA should push to advance transparency in our 
own vessel registries, including by requiring that U.S. vessels secure 
IMO numbers when available, so we can then ask our trading partners to 
do the same.

    Technology tools provide additional cost-effective measures to 
improve monitoring and transparency of fishing vessels. The U.S., 
Canada and Mexico should increase transparency by requiring fishing 
vessels to carry and continuously transmit Automatic Identification 
System (AIS) devices. AIS provides vessel identity, location and course 
data that allows for greater maritime domain awareness and visibility 
in behavior at sea. AIS data allows for management authorities to use 
the data in verification of catch documentation and for identifying 
shipments at high risk of IUU fishing, forced labor and other human 
rights abuses for further inspections, audits, and enforcement.

    The USMCA is one tool that the U.S. government can use to combat 
IUU fishing and USTR is one agency. The Biden administration should 
take a one-government approach on IUU fishing, building upon a 
foundation of the SIMP and other measures to ensure that all seafood 
sold in the U.S. is safe, legally caught, responsibly sourced and 
honestly labeled. This requires:

        Expanding SIMP to all species so that all seafood entering the 
U.S. provides catch documentation and can be traced back to a legal 
source.
        Extending traceability requirement through the full supply 
chain. This can be accomplished by finalizing the Food and Drug 
Administration's pending rule on food traceability that includes almost 
all seafood.
        Increasing transparency requirements for fishing vessels and 
making transparency a condition of import.
        Using the information collected via the various trade 
programs, including SIMP, more efficiently and effectively to better 
target shipments with the highest risk for screening, audits and 
enforcement and close our market to illegal products.
        Improving coordination, collaboration and information-sharing 
across the Federal agencies to better target countries and shipments 
with the highest risk of illegal fishing, seafood fraud and forced 
labor.
        Building into the programs that address IUU fishing measures 
to allow the U.S. to also identify and block shipments of products 
produced using forced labor and other human rights abuses.
        Reduce harmful fishing subsidies in the U.S., discipline 
fisheries subsidies in all future trade agreements, and push for an 
agreement in the WTO to end harmful fishery subsidies.
                               conclusion
    After 1 year, there has been some progress in the implementation of 
the USMCA, but more needs to be done. USMCA countries should take a 
hard look to ensure that we are all implementing the agreement. For 
example, Mexico can improve documentation and traceability of fisheries 
to both comply with the SIMP and improve market access. Canada can 
advance their seafood traceability requirements.

    Trade agreements like the USMCA and trade programs like SIMP help 
level the playing field for U.S. fishermen. The United States must 
ensure that legality is a condition of import. SIMP is first step in 
that direction, but more needs to be done to close loopholes in that 
program and integrate other efforts within the Federal Government.

    The Biden administration and Congress have an opportunity to craft 
a one-
government approach to combating IUU fishing which includes trade 
agreements, import controls--including requiring catch documentation 
and traceability for all seafood, expanded transparency of fishing, 
enhancing our nation-based efforts to drive change and building in 
tools that allow the U.S. to identify shipments produced using forced 
labor. Overall, these programs can help ensure that all seafood sold in 
the U.S. is safe, legally caught, responsibly sourced, and honestly 
labeled.

                                 ______
                                 
           Questions Submitted for the Record to Beth Lowell
                  Question Submitted by Hon. Ron Wyden
    Question. One of the biggest reasons why the original NAFTA hurt 
American workers and did little to protect our environment was that its 
enforcement system was ineffective, and it pushed labor and 
environmental protection off into unenforceable side letters.

    USMCA included improvements on both counts. Labor and environment 
were moved from unenforceable side letters straight into the core 
agreement. They are also subject to the full dispute settlement 
mechanism that Democrats worked to include in the agreement.

    Can you speak to why this enforceability is critical for 
environmental provisions? What tools does this give parties and the 
environmental community to demand compliance with the environmental 
rules set out in USMCA?

    Answer. Environmental provisions without enforcement merely create 
a bunch of text that sounds good on paper, but without enforcement is 
meaningless. The ability to hold a country accountable to their 
environmental commitments in the USMCA is a key improvement over NAFTA. 
Two separate mechanisms give the public/
environmental community and State Parties the ability to demand 
compliance with national environmental laws and regulations and the 
environmental rules in the USMCA. Each is addressed below.
mechanism for the public/environmental community to demand compliance, 
 implementation, and/or enforcement of national environmental laws and 
                              regulations
    The Environment Chapter of the USMCA provides a mechanism for the 
general public, including the environmental community, to take action 
if they believe a national environmental law or regulation is not being 
effectively enforced by the United States, Mexico, or Canada. The USMCA 
includes provisions (Articles 24.27 and 24.28) allowing anyone in one 
of the three countries to file a Submission on Enforcement Matters with 
the Secretariat of the Commission for Environmental Cooperation.\1\ 
While this mechanism existed under NAFTA, under the USMCA, the 
timeframes for the process have been shortened, the scope of 
environmental laws has been narrowed to those enacted, promulgated, or 
enforced by the central level of government (so, State, provincial, or 
local laws are not included), and the scope of eligible submitters is 
no longer limited to residents or NGOs in the territory of one of the 
three countries; instead, anyone in any of the three countries can file 
a Submission on Enforcement Matters.
---------------------------------------------------------------------------
    \1\ USMCA, arts. 24.27 and 24.28.

    If adequately substantiated, Submissions on Enforcement Matters 
about government failures to enforce environmental laws require 
responses from relevant government agencies and can result in a Factual 
Record that government representatives from all three countries must 
review and consider. Such Submissions under NAFTA have proven 
successful in getting governments to take necessary actions to protect 
the environment.\2\ Since the USMCA went into effect on July 1, 2020, 
three Submissions have been made: the first, filed in December 2020, 
asserts that the Mexican Ministry of Environment and Natural Resources 
and other environmental agencies are failing to effectively enforce 
provisions to protect loggerhead turtles in both the Atlantic and 
Pacific oceans;\3\ the second, filed in February 2021, asserts that a 
Port Authority in Canada failed to effectively enforce the Canadian 
Environmental Assessment Act when considering expansion of a marine 
port on the Pacific Coast of British Columbia;\4\ and the third, filed 
in August 2021, alleges that the Mexican government has failed to 
effectively enforce its laws to protect the endangered vaquita 
porpoise.\5\ As these examples demonstrate, this USMCA mechanism offers 
the public a viable way to gain leverage to advance policies for 
protecting marine life and our oceans.
---------------------------------------------------------------------------
    \2\ See, e.g., Sumidero Canyon II Submission on Enforcement 
Matters, http://www.cec.org/submissions-on-enforcement/registry-of-
submissions/sumidero-canyon-ii/ (resulting in the closure of a 
limestone quarry damaging the Sumidero Canyon National Park in Chiapas, 
Mexico); BC Mining Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/bc-
mining/ (resulting in greater public participation and transparency 
regarding the protection of fish and fish habitat from the impacts of 
mining in British Columbia).
    \3\ Loggerhead Turtle Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/
loggerhead-turtle/.
    \4\ Fairview Terminal Submission on Enforcement Matters, http://
www.cec.org/submissions-on-enforcement/registry-of-submissions/
fairview-terminal/.
    \5\ Center for Biological Diversity, USMCA Commission Urged to 
Investigate Mexico's Failure to Protect Vaquita Porpoise (August 11, 
2021), https://biologicaldiversity.org/w/news/press-releases/usmca-
commission-urged-to-investigate-mexicos-failure-to-protect-vaquita-
porpoise-2021-08-11/.
---------------------------------------------------------------------------
 mechanism for usmca state parties to hold each other accountable for 
       compliance with environmental commitments in the agreement
    The Environment Chapter also provides a mechanism that allows any 
of the three State Parties to hold each other accountable for complying 
with environmental commitments in the USMCA. The first phase is 
consultations, which must escalate through three tiers;\6\ failing 
resolution via consultations, the next phase is dispute resolution 
before a State-to-State arbitral panel.\7\ In the consultation phase, 
one State Party requests consultations with another regarding any 
matter arising under the Environment Chapter; a third State Party with 
a substantial interest in the matter may participate. Consultations 
must begin within 30 days of the receipt of the request. If initial 
consultations do not resolve the matter, consultations among the USMCA 
Environment Committee Senior Representatives \8\ may be requested.\9\ 
Failing resolution at this second level of consultations, the State 
Party may escalate the matter once more to relevant Ministers of the 
State Parties for resolution.\10\ Failing resolution via the three 
tiers of consultations within 30 days of receipt of the request, the 
requesting State Party may then move to the next phase to request 
establishment of a panel of arbitrators to resolve the issue in 
accordance with procedures set out in the Chapter 31 for dispute 
resolution under the USMCA.\11\
---------------------------------------------------------------------------
    \6\ USMCA, arts. 24.29, 24, 30, 24.31.
    \7\ USMCA, art. 24.32.
    \8\ USMCA, art. 24.26 (laying out how the Environment Committee is 
to be established and its purpose).
    \9\ USMCA, art. 24.30.
    \10\ USMCA, art. 24.31.
    \11\ USMCA, art. 24.32; see generally USMCA Chapter 31.

    Since the USMCA went into effect on July 1, 2020, Oceana is not 
aware of any State Party consultations or dispute resolution 
proceedings related to non-
compliance with provisions of the Environment Chapter. We are aware, 
however, of a recent petition filed on August 11, 2021 by several 
environmental groups requesting that the United States Trade 
Representative and other members of the Interagency Environment 
Committee for Monitoring and Enforcement initiate State-to-State 
consultations with Mexico under the USMCA due to failures of 
enforcement of environmental provisions leading to the near extinction 
of the vaquita porpoise.\12\
---------------------------------------------------------------------------
    \12\ Center for Biological Diversity, USMCA Commission Urged to 
Investigate Mexico's Failure to Protect Vaquita Porpoise (August 11, 
2021), https://biologicaldiversity.org/w/news/press-releases/usmca-
commission-urged-to-investigate-mexicos-failure-to-protect-vaquita-
porpoise-2021-08-11/.

    Transparency is lacking for this State-to-State mechanism. 
Unfortunately, neither the fact that consultations or dispute 
resolution is occurring nor any documentation is made public, nor is 
public participation allowed;\13\ as a result, the public may not be 
apprised until a final report is issued by an arbitral panel.\14\ While 
certain periodic reporting to Congress is required (annually until 2025 
and biennially thereafter),\15\ more frequent congressional inquiry 
with relevant executive branch agency stakeholders (e.g., the 
Interagency Environment Committee for Monitoring and Enforcement) to 
specifically inquire about consultations and/or dispute resolution 
related to environmental matters may shed further light on this 
important topic. Should the opportunity present itself, provisions 
requiring greater public transparency in the State-to-State 
environmental accountability processes would be important additions to 
the text of the USMCA and/or the implementing legislation.\16\
---------------------------------------------------------------------------
    \13\ USMCA, arts. 24.29, 24, 30, 24.31; see generally USMCA Chapter 
31.
    \14\ USMCA, art. 31.17(6).
    \15\ 19 U.S.C. Sec. 4716 (requiring regular reports (annually for 
first 5 years and biennially thereafter) to Congress on ``efforts of 
the USMCA countries to implement their environmental obligations''; and 
``additional efforts to be taken with respect to USMCA countries that 
are failing to implement their environmental obligations.'') At a 
minimum, it would be most helpful if these reports to Congress were 
made publicly available.
    \16\ 19 U.S.C. Sec. 4501 et seq.

                                 ______
                                 
               Questions Submitted by Hon. Maria Cantwell
    Question. The USMCA Environment Chapter outlined what each country 
must do to ensure sustainable management of fisheries. Mexican poaching 
of red snapper in U.S. waters in the Gulf of Mexico is a significant 
challenge that impacts the livelihood of American fishermen, as well as 
harming red snapper stocks and damaging the marine ecosystem. The red 
snapper fishery is an important economic engine in the Gulf of Mexico 
and is currently overfished.

    In the USMCA, Congress directed $8 million to NOAA for cooperating 
with Mexico to combat illegal, unreported, and unregulated fishing.

    In your view, has this funding and the USMCA reduced illegal 
fishing by Mexico?

    Are these provisions improving sustainable fisheries management in 
the Gulf of Mexico and other regions?

    Answer. Oceana appreciates the funding the Congress provided to 
NOAA for combating illegal, unreported, and unregulated fishing. This 
money was intended both for implementation of the Seafood Import 
Monitoring Program and to work with Mexico on compliance with SIMP. 
Oceana remains concerned that NOAA has not outlined how it has spent or 
will spend the balance of these funds to enhance implementation of SIMP 
or increase engagement with the Government of Mexico. If money remains, 
NOAA should prioritize expanding SIMP to all seafood and ensuring the 
information collection by SIMP is the right information in a format 
that allows for data analysis to identify shipments of high risk of IUU 
fishing, seafood fraud, forced labor and other human rights abuses to 
guide risk-based targeting for inspections, audits, and enforcement.

    The USMCA's impact in Mexico is still a work in progress. Oceana in 
Mexico has pointed out that the government is still far from complying 
with the obligations established in fishing matters in the USMCA, 
including that of combating IUU fishing. To this day there is no public 
tool to ensure the legal origin of fishing products all along the 
supply chain. Traceability of fishery products and transparency of 
fishing activities are also tools that benefit a lawful fishing sector. 
By only allowing marketing, importing, and exporting of products whose 
legal origin can be proven and providing the necessary mechanisms to 
make this verification possible, the Mexican State can close the door 
to illegal fishing, while encouraging, favoring, and strengthening the 
fishing sector's compliance with national and international standards. 
For this, it is fundamental for the Mexican Government to approve a 
traceability standard that allows government authorities and the 
fishing sector to verify the legal origin of products and prevent 
market entry to IUU products, caught in violation of the rules for the 
protection of vulnerable species, without a permit or in prohibited 
areas.

    Overall, the USMCA provides tools and a framework to improve 
sustainable fisheries management in the Gulf of Mexico and other 
regions, but implementation needs to improve. The Environment Chapter 
of the USMCA includes articles on Marine Wild Capture Fisheries; 
Sustainable Fisheries Management; Conservation of Marine Species; 
Fisheries Subsidies; Illegal, Unreported, and Unregulated (IUU) 
Fishing; and Conservation and Trade. Together these provisions, if 
fully implemented, would improve fisheries management systems to 
prevent overfishing and overcapacity, reduce bycatch of non-target 
species and marine wildlife, and protect habitat. The agreement also 
outlines that the U.S., Mexico, and Canada shall adopt or maintain 
measures to prohibit the practice of shark finning. The agreement 
prevents subsidies to IUU fishing vessels or for fishing on an 
overfished stock.

    The IUU fishing provisions includes requirements to implement Port 
State measures; support monitoring, control, surveillance and 
enforcement including deterring nationals and flagged vessels from 
engaging in IUU fishing and addressing transshipments. Each Party shall 
maintain a vessel documentation scheme and promote the use of 
International Maritime Organization numbers or comparable unique vessel 
identifiers for vessels operating outside of its national waters to 
enhance transparency of fleets and traceability of fishing vessels. The 
U.S., Canada, and Mexico are also to develop and maintain publicly 
available an easily accessibly registry data of vessels flying its flag 
and support a Global Registry of Vessels, among other measures. We have 
yet to see most of these provisions implemented by the U.S., Canada, or 
Mexico.

    The transparency provisions, specifically on developing a publicly 
available registry, requiring IMO or other unique vessel numbers and 
supporting a Global Record of Vessels, is an area where the U.S. has 
made little progress. NOAA should push to advance transparency in our 
own vessel registries, including by requiring that US vessels secure 
IMO numbers when available, so we can then ask our trading partners to 
do the same.

    Technology tools provide additional cost-effective measures to 
improve monitoring and transparency of fishing vessels. The U.S., 
Canada, and Mexico should increase transparency by requiring fishing 
vessels to carry and continuously transmit Automatic Identification 
System (AIS) devices. AIS provides vessel identity, location and course 
data that allows for greater maritime domain awareness and visibility 
in behavior at sea. AIS data allows for management authorities to use 
the data in verification of catch documentation and for identifying 
shipments at high risk of IUU fishing, forced labor and other human 
rights abuses for further inspections, audits and enforcement.

    In addition to the Environment Chapter, the Labor Chapter requires 
the U.S., Canada, and Mexico to take measures to prohibit the 
importation of goods produced by forced labor, among other provisions. 
In the U.S., section 307 of the Tariff Act already prohibits 
importation of goods produced by forced labor. It would be good for the 
U.S. to get a report from Canada and Mexico on whether they have 
equivalent prohibitions and if not, their plan to prohibit such goods. 
Strong prohibitions across North America are needed to ensure we are 
not continuing to import products that put workers at risk and 
undermine basic human rights.

    The USMCA is one tool that the US government can use to combat IUU 
fishing and USTR is one agency. The Biden administration should take a 
one-government approach on IUU fishing, building upon a foundation of 
the SIMP and other measures to ensure that all seafood sold in the U.S. 
is safe, legally caught, responsibly sourced and honestly labeled. This 
requires:

        Expanding SIMP to all species so that all seafood entering the 
U.S. provides catch documentation and can be traced back to a legal 
source.
        Extending traceability requirement through the full supply 
chain. This can be accomplished by finalizing the Food and Drug 
Administration's pending rule on food traceability that includes almost 
all seafood.
        Increasing transparency requirements for fishing vessels and 
making transparency a condition of import.
        Using the information collected via the various trade 
programs, including SIMP, more efficiently and effectively to better 
target shipments with the highest risk for screening, audits and 
enforcement and close our market to illegal products.
        Improving coordination, collaboration and information-sharing 
across the Federal agencies to better target countries and shipments 
with the highest risk of illegal fishing, seafood fraud, and forced 
labor.
        Building into the programs that address IUU fishing measures 
to allow the U.S. to also identify and block shipments of products 
produced using forced labor and other human rights abuses.
        Reduce harmful fishing subsidies in the U.S., discipline 
fisheries subsidies in all future trade agreements, and push for an 
agreement in the WTO to end harmful fishery subsidies.

                                 ______
                                 
              Questions Submitted by Hon. Thomas R. Carper
    Question. The USMCA includes new enforcement tools to give labor 
and environmental stakeholders a direct role in trade enforcement 
matters. These new tools ensure that the obligations in this trade 
agreement are enforced and that those who break the rules can be held 
accountable.

    Would you please share some thoughts on how the environmental 
reporting mechanisms have functioned since the USMCA entered into 
force, as well as some opportunities for their continued improvement?

    Answer. The USMCA requires the parties to notify each other of 
their fisheries subsidies--within 1 year of the date of entry into 
force and every 2 years thereafter--and specifies the information to be 
provided regarding the subsidies.\17\ Specifically, Article 24.20(5)-
(7) of the USMCA States:
---------------------------------------------------------------------------
    \17\ USMCA, art. 24.20(5)-(7).

      5.  Each Party shall notify the other Parties, within 1 year of 
the date of entry into force of this agreement and every 2 years 
thereafter, of any subsidy within the meaning of Article 1.1 of the SCM 
Agreement that is specific within the meaning of Article 2 of the SCM 
Agreement, that the Party grants or maintains to persons engaged in 
---------------------------------------------------------------------------
fishing or fishing related activities.

      6.  These notifications shall cover subsidies provided within the 
previous 2-year period and shall include the information required under 
Article 25.3 of the SCM Agreement and, to the extent possible, the 
following information:\23\

          (a)  program name;

          (b)  legal authority for the program;

          (c)  catch data by species in the fishery for which the 
subsidy is provided;

          (d)  status, whether overfished, fully fished, or 
underfished, of the fish stocks in the fishery for which the subsidy is 
provided;

          (e)  fleet capacity in the fishery for which the subsidy is 
provided;

          (f)  conservation and management measures in place for the 
relevant fish stock; and

          (g)  total imports and exports per species.

      7.  Each Party shall also provide, to the extent possible, 
information in relation to other subsidies that the Party grants or 
maintains to persons engaged in fishing or fishing related activities 
that are not covered by paragraph 1, in particular fuel subsidies.

    To the extent that notification under the WTO Subsidies and 
Countervailing Measures Agreement partially meets this USMCA 
requirement,\18\ the United States and Canada reported some, but not 
all, of the required information on fisheries subsidies as of July 
2021; however, the last notification from Mexico to the WTO is from 
September 2019.\19\ Notifications regarding fisheries subsidies from 
each of the State Parties with the full list of information required 
under Article 24.20(5)-(7) should be made publicly available.
---------------------------------------------------------------------------
    \18\ WTO. Subsidies and countervailing measures, https://
www.wto.org/english/tratop_e/scm_e
/scm_e.htm#dol.
    \19\ From the WTO website, the latest notification on subsidies 
from the United States as of July 14, 2021: https://docs.wto.org/
dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/SCM/N372USA.pdf&Open=True. 
From Canada as of July 8, 2021: https://docs.wto.org/dol2fe/Pages/SS/
directdoc.aspx?filename=q:/G/SCM/N372CAN.pdf&Open=True. From Mexico as 
of September 24, 2019: https://docs.wto.org/dol2fe/Pages/SS/
directdoc.aspx?filename=q:/G/SCM/N315MEX.pdf&Open=True.

    The USMCA also requires the parties to notify each other on an 
annual basis of any list of vessels and operators engaged in IUU 
fishing.\20\ Article 24.20(10) states:
---------------------------------------------------------------------------
    \20\ USMCA, art. 24.20(9).

      10.  Each Party shall notify the other Parties on an annual basis 
of any list of vessels and operators identified as having engaged in 
---------------------------------------------------------------------------
IUU fishing.

    It is unclear whether this notification has occurred. If it has, 
then the information should be made publicly available.

    In addition, the USMCA requires the State Parties to develop and 
maintain a publicly available and easily accessible registry data of 
fishing vessels flying its flag. Article 24.21(2)(f) includes this 
obligation:

      2.  In support of international efforts to combat IUU fishing and 
to help deter trade in products from IUU fishing, each Party shall: . . 
 

          (f)  develop and maintain publicly available and easily 
accessible registry data of fishing vessels flying its flag; promote 
efforts by non-Parties to develop and maintain publicly available and 
easily accessible registry data of such vessels flying its flag; and 
support efforts to complete a Global Record of Fishing Vessels, 
Refrigerated Transport Vessels, and Supply Vessels; and

    In short, since the USMCA entered into force on July 1, 2020, 
complete information on fisheries subsidies and IUU fishing appears to 
be overdue; Oceana would like to know whether the parties have 
submitted the information and when it will be available to the public. 
In addition, Oceana would like to know when the registry of fishing 
vessels flying each State's flag will be made publicly available.

    Question. It is my hope that future U.S. agreements will build upon 
much of the progress in the USMCA, including its environmental 
provisions.

    With that said, I've long believed that if it isn't perfect that we 
should work to make it better. I certainly believe this approach 
applies to U.S. trade policy.

    What are one or two key issues of importance that Congress should 
focus on in the months and years ahead when it comes to overseeing the 
enforcement of the USMCA's environmental provisions?

    Answer. When it comes to overseeing the enforcement of the USMCA's 
environmental provisions, in the months and years ahead, Congress 
should make regular inquiries with relevant Federal Government agency 
stakeholders and ensure public transparency about State-to-State 
consultations and dispute resolution related to environmental matters. 
Should the opportunity present itself, provisions requiring greater 
public transparency about the State-to-State environmental 
accountability processes would be important additions to the text of 
the USMCA and/or the implementing legislation.

    To better ensure enforcement of environmental provisions, in the 
public mechanism outlined in USMCA Articles 24.27 and 24.28, Congress 
should significantly reduce the time frames for review and response to 
public submissions, remove opportunities for State Parties to thwart or 
stall the review process, require that all Factual Records be 
published, and outline repercussions for State Parties found in a 
Factual Record to have failed to effectively enforce national 
environmental laws and regulations that will serve as true deterrents. 
In the State-to-State mechanism outlined at USMCA Articles 24.29-32 and 
in Chapter 31, Congress should reduce the three-tier consultation 
process to, at most, one consultation phase followed by referral to a 
dispute resolution panel to allow failures to enforce environmental 
provisions to move more quickly to resolution. Better yet, akin to the 
highly effective rapid response mechanism for labor enforcement issues 
in the USMCA, Congress should consider developing a rapid response 
mechanism for environmental enforcement issues in the USMCA as well as 
in other existing and future free trade agreements. Congress should 
also insist that the State-to-State dispute resolution process for 
environmental matters allow for timely public review of government 
submissions, citizen submissions (akin to amicus briefs), and 
webcasting of arbitral panel hearings.

    Last but certainly not least, Congress should consider amending the 
USMCA and other existing as well as future free trade agreements to 
ensure that more provisions in the Environment Chapter are binding 
obligations rather than hortatory statements.\21\ One binding 
obligation that is completely missing from the USMCA Environment 
Chapter is the obligation to address climate change. At a bare minimum, 
among the Multilateral Environmental Agreements (MEAs) that should be 
added to Article 24.8(4) of the USMCA Environment Chapter are the 
United Nations Framework Convention on Climate Change and the Paris 
Agreement. Current language in the USMCA allows the State Parties to 
amend the agreement to add any other relevant environmental or 
conservation agreement to the list of MEAs that must be adopted, 
maintained, and implemented.\22\ Congress should insist on this 
amendment. As the Intergovernmental Panel on Climate Change's recent 
Sixth Assessment Report makes abundantly clear, human activities are 
responsible for climate change impacts, including the warming, 
acidification and rise of our oceans--to the detriment of marines 
species and coastal communities.\23\ Governments must take action 
immediately to mitigate as well as to adapt to climate change.\24\ In 
light of the urgent need for government action, provisions that address 
climate change in free trade agreements are an excellent addition to 
Congress's legislative toolbox to tackle this major existential crisis 
facing humanity and our blue planet.
---------------------------------------------------------------------------
    \21\ See, e.g., USMCA, art. 24.11 (Air Quality); art. 24.15 (Trade 
and Biodiversity); art. 24.16 (Invasive Alien Species).
    \22\ USMCA, art. 24.8(5); art. 34.3.
    \23\ IPCC, Sixth Assessment Report--Summary for Policy Makers, 
https://www.ipcc.ch/report/ar6/wg1/#SPM.
    \24\ IPCC, Sixth Assessment Report--Summary for Policy Makers, 
https://www.ipcc.ch/report/ar6/wg1/#SPM.

                                 ______
                                 
      Prepared Statement of Michelle McMurry-Heath, M.D., Ph.D., 
        President and CEO, Biotechnology Innovation Organization
    Chairman Wyden, Ranking Member Crapo, members of the committee, my 
name is Dr. Michelle McMurry-Heath. I am the president and CEO of the 
Biotechnology Innovation Organization (BIO). I am honored to testify 
before you for today's hearing, ``Implementation and Enforcement of the 
United States-Mexico-Canada Agreement: One Year After Entry Into 
Force,'' and address our industry's concerns around the implementation 
of the agricultural biotechnology provisions of the United States-
Mexico-Canada Agreement or USMCA.
                              introduction
    BIO \1\ represents 1,000 members in a biotech ecosystem with a 
central mission--to advance public policy that supports a wide range of 
companies and academic research centers that are working to apply 
biology and technology in the energy, agriculture, manufacturing, and 
health sectors to improve the lives of people and the health of the 
planet. BIO is committed to speaking up for the millions of families 
around the globe who depend upon our success. We will drive a 
revolution that aims to cure patients, protect our climate, and nourish 
humanity.
---------------------------------------------------------------------------
    \1\ https://www.bio.org/.
---------------------------------------------------------------------------
                        biotech and trade policy
    United States leadership in biotech innovation represents the 
cornerstone of the U.S. economy. Our industry is vital to U.S. national 
security, climate policy, pandemic preparedness, and provides a 
platform from which to exercise global leadership on key issues.

    As the U.S. biotechnology industry has demonstrated in our response 
to COVID-19, the U.S. can lead the world in developing technologies 
that will solve health and economic crises. In record time, the U.S. 
biotechnology industry and its global partners launched highly 
effective vaccines and therapeutics to help the world begin to turn the 
corner on the pandemic. Like with COVID, American innovation in 
biosciences, coupled with the U.S. Government's leadership, can 
similarly be unleashed to help address several other crises, including 
climate change and malnutrition.

    Executing thoughtful and creative trade strategies is among the 
most effective means to enhance global science-based collaboration 
while growing the U.S. bioeconomy. An open, global trading and 
investment system benefits innovators, researchers, patients, farmers, 
and consumers everywhere by establishing a level playing field for all. 
Trade agreements help to establish science-based regulatory systems 
that can promote the development of and access to disruptive and 
transformative biotechnologies that will be required to effectively 
confront serious public health, environmental, and nutritional 
challenges.

    The U.S. must reassert its influence within the global trading 
system by leading efforts to place science and technology at the core 
of its global economic and strategic interests. This will require 
maintaining long-standing U.S. trade policy commitments to intellectual 
property (IP), which is critical to risk-taking and investment in pre-
profit companies, who are at the heart of BIO's membership. It will 
also require modernizing U.S. trade policy to address novel issues such 
as the need to ensure enforceable digital trade rules that minimize 
restrictions on cross-border data flows and enable the international 
transfer of data needed to advance global biotechnology R&D efforts. It 
is also essential that we enhance our ability to proactively confront 
regulatory barriers in other countries that stifle the trade of 
transformative biotech innovations--barriers that not only do a 
disservice to global society by delaying their adoption but also have a 
chilling effect on future biotechnology investment.

    Leveraging U.S. leadership in global trade to address these 
concerns will boost the American bioeconomy revolution, creating high-
quality jobs and better position the United States to effectively 
confront and lead on big global challenges. We have an obligation--
industry and government--to leverage American strengths and work 
collectively to remove barriers that restrict the development of the 
global biotech ecosystem.
            agricultural biotechnology in the united states
    The United States is the world's largest producer of biotechnology 
crops. With over 90 percent of corn, soybean, and cotton acres produced 
with biotechnology crops,\2\ this technology is ubiquitous in American 
agriculture. The United States is also a major exporter of these crops. 
In the case of corn, Mexico is the United States largest international 
market, representing nearly 30 percent of total U.S. corn exports in 
2020. If Mexico does not approve a new corn biotechnology product, U.S. 
corn farmers are reluctant to plant the product for fear of disrupting 
trade to Mexico. This means, in effect, that Mexico determines which 
technology U.S. farmers can use.
---------------------------------------------------------------------------
    \2\ https://www.ers.usda.gov/data-products/adoption-of-genetically-
engineered-crops-in-the-us
.aspx.

    Biotechnology companies plan their commercial launches years in 
advance, preparing regulatory submissions in export markets, and 
consulting with value chain customers. When regulatory authorities in 
export destinations cease to function and shut off communication with 
companies, as in the current case of Mexico, it is impossible to 
predict with certainty when to launch a product in the United States. 
As a result, biotechnology companies often delay, affecting investments 
---------------------------------------------------------------------------
and future R&D.

    In 2018, BIO and international partners conducted an extensive 
economic analysis of the impact of regulatory delays in China.\3\ Like 
Mexico, China is a major importer of U.S. soybeans and corn. Without 
Chinese approval, the same scenario applies. The analysis showed that 
delays in China decreased U.S. farm income by $5 billion and cost 
nearly 34,000 jobs between 2011 and 2016. Today China remains a major 
challenge, with approvals delayed by 7 years on average, but through 
the U.S.-China Phase One agreement there are continued efforts to 
address these systemic challenges.
---------------------------------------------------------------------------
    \3\ https://croplife.org/wp-content/uploads/2018/05/Impact-of-
Delays-in-Chinese-Approvals-of-Biotech-Crops-05-18-FINAL-1.pdf.
---------------------------------------------------------------------------
                                 usmca
    For agricultural biotechnology, USMCA represented a significant 
improvement on NAFTA for the agricultural biotechnology industry and 
the constituents it seeks to serve. Enhanced provisions for 
agricultural biotechnology set it apart from previous trade agreements. 
For these reasons BIO applauded the USMCA as a major step forward and 
as the basis for future agreements. Over the past year, however, we 
have noted both practical barriers to seamless implementation of USMCA 
as well as missed opportunities that stemmed from the process leading 
to U.S. approval of the agreement. Today, I hope to highlight these 
barriers and missed opportunities for your consideration in future 
discussions with our allies.

    With respect to agricultural biotechnology, what exists on paper is 
a far cry from reality. USMCA is the first agreement to address 
agricultural biotechnology specifically. All three parties confirmed 
the importance of encouraging agricultural innovation and facilitating 
trade in products of agricultural biotechnology.\4\ The provisions 
focus on ensuring trading partners have functional regulatory systems 
that promote transparency and cooperation. The intent of the provisions 
is to supplement the requirements of the Sanitary and Phytosanitary 
(SPS) Agreement, facilitate trade, and to proactively avoid unnecessary 
and costly trade disruption that can occur when regulatory approvals 
are delayed. Furthermore, the agreement established a committee to 
enhance cooperation and regulatory consistency on current and emerging 
agricultural biotechnologies, including genome editing. Unfortunately, 
the Government of Mexico's treatment of agricultural biotechnology is a 
stark example of how it has strayed in a matter of 3 years and how 
trade barriers actively restrict the development of new technologies.
---------------------------------------------------------------------------
    \4\ https://ustr.gov/sites/default/files/files/agreements/FTA/
USMCA/Text/03_Agriculture.
pdf.
---------------------------------------------------------------------------
           regulatory challenges for innovative agricultural 
                    biotechnology products in mexico
Failure to Issue Biotech Import Approvals
    Even before USMCA negotiations were completed, problems began to 
emerge. While Mexico never fully embraced the cultivation of 
agricultural biotechnology, it was a model trading partner. The 
Government of Mexico's food and drug regulatory authority (COFEPRIS) 
routinely processed new product applications within Mexico's statutory 
limit of 6 months. The process was largely transparent, science-based, 
and predictable. Since the election of President Andres Manuel Lopez 
Obrador, however, COFEPRIS has effectively shut down and Mexico's 
regulatory system has become nonfunctional.

    For agricultural biotechnology specifically, Mexico has not granted 
a single approval since May 2018; meanwhile, the backlog of pending 
approvals has grown to 23. This affects all of BIO's agricultural 
members, covering a wide range of commodities: apples, canola, corn, 
cotton, potatoes, and soybeans. Twenty of these have now exceeded the 
6-month statutory time limit for COFEPRIS to determine whether to issue 
a biotech import approval. During this time, Mexican regulators have 
provided no substantive communications with companies on the delays. It 
is also important to highlight that the products pending approval in 
Mexico are legal to grow in the United States as well as many other 
countries.

    It is worth noting, these challenges are not unique to agricultural 
biotechnology. Similarly, for biopharmaceutical products, COFEPRIS has 
not issued a new approval since early 2019. The queue of pending 
approvals for new treatments and formulations, as well as pending 
applications to initiate clinical studies, number in the hundreds. 
There are dozens of new drugs that have been favorably reviewed by the 
New Molecules Committee and are awaiting approval. These pending 
applications have also exceeded the statutory time limit for COFEPRIS 
to issue a decision. Likewise, companies are still unable to meet 
directly with the regulator.
Decree to Ban Biotech Corn
    Compounding the uncertainty caused by COFEPRIS's failure to issue a 
biotech import approval in over 3 years, the Government of Mexico 
published a decree on December 31, 2020, announcing the intention to 
phase-out the use of important agricultural technologies, including use 
of biotech corn for human consumption by 2024. In 2020, the U.S. 
exported $2.7 billion of corn to Mexico. As a result, this decree could 
have a major impact on the U.S. agriculture industry and producers 
across the country. It is another unfortunate example of Mexico's 
waning adherence to our trade agreements.

    Further, the decree raises the potential for existing biotech 
authorizations to be revoked and signals the government's intention to 
not grant approvals for future biotech corn products. The announcements 
of these policy changes, which have far-reaching implications for North 
American agriculture, were issued with neither industry or trading 
partner consultation nor any demonstrable scientific rationale. They 
also incorrectly allege that biotech corn and modern agricultural 
practices harm the environment.

    Economic impacts from the decree would not stop at the U.S. border. 
To date, the decree's application to imports of biotech corn for use as 
animal feed remains ambiguous. While the decree does not specify if the 
ban will apply to imports for animal feed, Mexican officials have 
issued competing statements. Regardless, the practicality of separating 
corn for feed from corn for human consumption is costly and creates 
supply chain challenges, not to mention increased risk of shipment 
rejections. Such uncertainty risks longstanding cross-border commercial 
relationships between suppliers in the United States and Mexican 
livestock producers who have mounting questions about their supply 
chains, economic well-being, and future of their domestic industries. 
What is more, enactment of the decree will be in direct violation of 
Mexico's commitments under USMCA and the World Trade Organization 
(WTO), as the decree is neither science nor risk-based and is out of 
step with international standards and norms.
Mexico's Lack of Regulatory Framework for Gene Edited Products
    As existing biotechnology products await action in Mexico, we are 
highly concerned about the implications for emerging biotechnologies 
such as genome editing and synthetic biology. BIO members are actively 
leveraging genome editing techniques to help plants, animals, and 
microbes become more resilient to pests, diseases, and extreme weather, 
and reduce usage of agricultural inputs. While the global regulatory 
landscape is emerging, several agricultural producing countries, 
including most of the Western Hemisphere, have established regulatory 
pathways for products derived through genome editing. Mexico stands out 
as the major exception.

    USMCA's goal to enhance cooperation in emerging technologies among 
the three parties aimed to facilitate commercial availability and 
acceptance of biotech products. Lack of progress by Mexico is forcing 
biotechnology companies with robust pipelines of gene-edited products 
to make unenviable decisions move forward with product development 
without the benefit of regulatory clarity in Mexico, or cease 
developing gene edited products that may be produced in, or traded 
with, Mexico.
Impact on Addressing Global Challenges
    Mexico's actions are impeding global research and development, 
jeopardizing the potential of biotechnology to address myriad 
challenges related to climate change, sustainability, human nutrition, 
animal welfare, and worker safety. What was intended in USMCA to 
invigorate investment in, and development of these technologies, is now 
threatened by the obstruction of one of its key signatories. 
Biotechnology crops positively impact food security, sustainability, 
and climate change solutions. For example, biotechnology crops:

        Reduced carbon dioxide emissions in 2016 by 27.1 billion kg, 
equivalent to taking 16.7 million cars off the road for one year.\5\
---------------------------------------------------------------------------
    \5\ https://www.isaaa.org/resources/publications/briefs/54/
executivesummary/default.asp.
---------------------------------------------------------------------------
        Maintain yields in the face of drought, which has a direct 
bearing on improved food security and poverty alleviation.
        Combat global hunger and malnutrition by increasing the 
vitamin and mineral contents of plants. They also address the lack of 
fresh fruits and vegetables in food deserts in urban and rural 
communities. (Additional information available in the New York Times 
Magazine article, ``Learning to Love GMOs.''\6\)
---------------------------------------------------------------------------
    \6\ https://www.nytimes.com/2021/07/20/magazine/gmos.html.
---------------------------------------------------------------------------
        Extend the shelf life of produce, cutting down on food waste, 
which creates 8 percent of all global emissions.\7\
---------------------------------------------------------------------------
    \7\ http://www.fao.org/fileadmin/templates/nr/
sustainability_pathways/docs/FWF_and_cli
mate_change.pdf.

    To learn more about how biotechnology can enable agriculture to be 
solution to climate change please see BIO's Biotech Solutions for 
Climate Report (https://www.bio.org/sites/default/files/2021-04/
Climate%20Report_FINAL.pdf) and BIO's response to U.S. Department of 
Agriculture's (USDA) Request for Public Comment on the Executive Order 
on Tackling the Climate Crisis at Home and Abroad.\8\
---------------------------------------------------------------------------
    \8\ https://www.federalregister.gov/documents/2021/03/16/2021-
05287/notice-of-request-for-public-comment-on-the-executive-order-on-
tackling-the-climate-crisis-at-home.
---------------------------------------------------------------------------
          resolving mexico's ag biotech regulatory challenges
    Mexico's failure to perform scientific regulatory assessments in 
over 3 years, its disregard for due process and transparency, and its 
decree to arbitrarily ban key technologies is a direct violation of 
both the letter and spirit of USMCA and commitments to the WTO. These 
actions require a strong response from the U.S. Government.

    Mexico must resume the approval process for all agricultural 
biotechnology products and implement a science-based and predictable 
regulatory process going forward. It must immediately rescind its anti-
USMCA decree banning the import of biotech corn and begin creating a 
gene editing framework that conforms with international norms and trade 
agreement commitments.

    BIO appreciates the work of the U.S. Trade Representative (USTR) 
and USDA to date. Specifically, USTR Ambassador Katherine Tai calling 
for the immediate resumption of agricultural biotechnology product 
approvals in Mexico in her recent meetings with Mexico's Secretary of 
Economy, Tatiana Clouthier and Secretary of Agriculture and Rural 
Development, Victor Villalobos, and for USDA Secretary Tom Vilsack's 
efforts to engage and reinforce this message. This engagement builds on 
numerous attempts by former USTR Ambassador Robert Lighthizer and USDA 
Secretary Sonny Perdue.

    However, with little indication from Mexico that it will adhere to 
its USMCA commitments, BIO strongly urges USTR to begin taking 
enforcement action on Mexico's treatment of agriculture biotechnology. 
An enforcement case would at a minimum provide a framework and timeline 
to resolve the COFEPRIS-related delays in biotechnology approvals and 
the December 31, 2020, decree. Without a process, BIO and its members 
fear the Government of Mexico will continue the status quo, and 
possibly broaden the scope of the decree to additional agricultural 
products, which would compound the impact on U.S. trade and future 
innovation.

    More broadly, if the United States does not enforce against 
Mexico's practices, BIO is concerned about the message this sends to 
current and future trading partners. The biotech sector has faced a 
host of challenges with Europe and China. Each time the U.S. government 
has aggressively engaged to protect American interests in advancing 
this critical technology. Taking enforcement action with Mexico on this 
issue is critical to protect economic growth and job creation and 
ensure science and American innovation can continue to thrive to solve 
society's biggest and most pressing challenges.
missed opportunity for biopharmaceutical innovation incentives in usmca
    As negotiated, the USMCA represented a significant step towards 
advancing rules for intellectual property rights to support the modern 
biotechnology sector. However, while the final text advanced helpful 
rules for trade secrets, copyrights, and trademarks generally, 
important IP provisions for biopharmaceuticals that had been agreed to 
by Canada and Mexico were ultimately stripped from the agreement at the 
insistence of U.S. lawmakers.

    Specifically, the removal of the agreement on 10 years of 
Regulatory Data Protection, as well as the elimination of patent and 
regulatory incentives for the study of important product improvements 
to existing medicines, represents an important, even historic lost 
opportunity to raise IP standards in key markets and create high-
quality U.S. jobs at no cost to North American patients and consumers. 
More importantly, stripping these provisions sent a global signal that 
the U.S. Government no longer appears willing to protect leading 
American innovation in the biopharmaceutical sector against 
appropriation by foreign competitors.

    A more recent manifestation of such misguided antagonism to 
biopharmaceutical IP is the U.S. government's support for a global 
waiver of intellectual property rights relating to COVID-19 vaccines, 
which, however well-intentioned, will only serve as a harmful 
distraction from the urgent work that must be done to ameliorate global 
vaccine inequity.

    BIO urges the U.S. Government to rethink its support for the 
proposed global waiver of IP rights that is currently pending in the 
WTO, and to increase its focus on effective policies to maximize the 
global availability and equitable distribution of COVID-19 vaccines and 
therapeutics. BIO's COVID Global Strategy for Harnessing Access 
Reaching Everyone (SHARE) Program (https://www.bio.org/letters-
testimony-comments/bio-outlines-share-blueprint-global-cooperation) and 
a Declaration from members of the World's Biotechnology Sector (https:/
/www.bio.org/letters-testimony-comments/declaration-members-worlds-
biotechnology-sector-global-access-covid) provide solutions to ensure 
vaccines and treatments get to the patients in the world who most need 
them without undermining innovation.
                               conclusion
    In closing, a year after the United States, Mexico, and Canada 
confirmed their commitment to North American trade, the biotech sector 
is faced with tremendous uncertainty. Companies are making decisions 
today about whether to proceed with launch plans or delay, potentially 
costing technology companies billions of dollars in foregone revenue 
and future investment. Similarly, U.S. farmers are facing increasing 
challenges related to climate change and sustainability, potentially 
without cutting edge biotechnology tools.

    The U.S. Government has been a consistent champion for this 
technology, defending against scientifically unjustified regulatory 
practices in Europe and China for decades. As one of the United States 
longest and most significant export markets, Mexico's dramatic policy 
reversal creates significant risk to the trade of U.S. agricultural 
products and the ability to leverage biotechnology going forward.

                                 ______
                                 
                 Questions Submitted for the Record to 
                  Michelle McMurry-Heath, M.D., Ph.D.
                  Question Submitted by Hon. Ron Wyden
    Question. One of the achievements of USMCA was to bring NAFTA into 
the 21st century. Neither digital trade, nor the products of 
biotechnology were contemplated by the original agreement and both are 
now critical parts of our trading relationship.

    It can be difficult to understand what something like the sanitary 
and phytosanitary chapter or the customs facilitation chapters 
described in your testimony mean for people on the ground in the United 
States or Mexico and how that translates into jobs.

    Can you describe how operating from a framework of increased 
transparency and a principle of science-based decision as required by 
the SPS Chapter of USMCA could--if fully implemented--increase trade 
and support good-paying jobs in the United States, Mexico, and Canada?

    Answer. As crafted, USMCA's provision on agricultural biotechnology 
was intended to supplement the SPS Agreement, with the goal of 
facilitating trade, and to proactively avoid unnecessary and costly 
trade disruptions that can occur when regulatory approvals are delayed.

    Unfortunately, despite these provisions within USMCA, Mexico has 
moved forward with actions that are neither science-based, nor risk-
based. As a result U.S. farmers are reluctant to plant a product for 
fear of disrupting trade to Mexico. This means, in effect, that Mexico 
determines which technology U.S. farmers can use. If these barriers are 
left unaddressed, we risk longstanding cross-border commercial 
relationships and the economic well-being U.S. farmers and technology 
producers.

    Full implementation of the SPS commitments, specifically 
transparency and science-based decision making, will provide the 
necessary predictability to enable biotechnology companies and U.S. 
farmers to plan for the introduction of a new biotechnology product in 
a manner that does not disrupt trade. Timely and predictable regulatory 
decisions in Mexico enables biotechnology companies to continue to 
invest in innovative technologies which supports job growth and enables 
trade to flow between the United States and Mexico.

                                 ______
                                 
              Question Submitted by Hon. Thomas R. Carper
    Question. I understand from your testimony that Mexico's barriers 
to biotechnology could impede innovations in agriculture that help 
reduce greenhouse gas emissions and adapt crops to climate change.

    Could you provide examples of how these barriers are preventing 
producers from sustainably increasing production and adapting to 
climate change?

    Answer. Biotech crops have already allowed farmers to reduce 
greenhouse gas emissions in their production practices. For example, 
the use of ag biotech has led to greater adoption of no-till farming 
practices, which reduce the amount of carbon released from the soil 
during planting, while also curtailing emissions from farm equipment. 
The development and deployment of new technology will play a vital role 
in making crops and livestock more resilient to pests, disease, and 
extreme weather variabilities caused by climate change.

    Unfortunately, Mexico's practices will ultimately limit what 
technology will be available for U.S. producers.

    One of the cotton applications pending for approval in Mexico has 
an insect resistant trait, which could reduce greenhouse gas emissions 
with producers needing to us less insecticide and in turn making fewer 
trips across the field.

    Another example is how last summer's derecho flattened corn crops 
across the Midwest.

    Developers are already developing a short stature corn which could 
help farmers be more resilient to future extreme weather events brought 
on by climate change.

    Because short stature corn grows lower to the ground, it is 
sturdier and less likely to break in high winds than traditional corn. 
Short stature corn varieties can potentially better withstand drought.

    Multiple varieties of short stature corn leveraging the latest 
innovations in biology--including biotech and gene editing--are 
currently under development.

    However, Mexico's delays in import approvals and the potential 
decree phasing out the import of biotech corn could keep this 
technology from coming to market.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. The digital trade chapter within USMCA contains a number 
of provisions that promote integrity, hold bad actors accountable, and 
facilitate robust e-commerce. These provisions are crucial to combat 
localization requirements and favoritism to state-owned enterprises 
that we frequently see with China.

    The purpose of trade agreements, generally, is to promote the free 
movement of goods, not to prop up bureaucracy and act as a bank for 
communist governments. As such, these groundbreaking chapters on state 
owned enterprises are absolutely critical to allowing our businesses to 
operate on a level playing field with our closest neighbors.

    How are the digital trade provisions with USMCA helping us combat 
the rising influence of China globally, and particularly closest to 
American soil?

    How will these digital trade provisions continue to support 
businesses and consumers in the future?

    Answer. The digital trade provisions of the USMCA are critical to 
promoting U.S. innovation and competitiveness across a range of 
sectors, including biotech.

    Life science researchers around the world require a robust and 
reliable global ecosystem for data, an ecosystem that allows for timely 
and efficient cross-border transfers of information.

    Restrictions on the flow of data and policies requiring 
localization of data hampers biotech R&D, which is increasingly 
globalized and heavily data driven. The USMCA provisions on cross-
border data flows and data localization address these key issues.

    However, more can be done, and in terms of responding to China's 
influence. We need to ensure that we have a strong relationship with 
our allies, like the European Union.

    Strengthening the transatlantic data relationship and the data 
flows on both sides of the Atlantic is in the interest of U.S. biotech 
researchers and more broadly is for the benefit of science and the 
global biotech research community.

                                 ______
                                 
                 Questions Submitted by Hon. Ben Sasse
    Question. Mexico is consistently the top market for U.S. corn 
exports, valued at $3 billion last year. Our farmers and ranchers were 
one of the loudest advocates for passage of USMCA. However, farmers in 
Nebraska are concerned that Mexico is backsliding on its USMCA 
commitments because they have not approved any new applications for 
biotech crops since May 2018. Then most recently in December the 
Mexican President issued a decree banning glyphosate and biotech corn 
in Mexican diets--both by 2024.

    Can you speak to this issue further and what impact it may have on 
U.S. and Nebraska corn farmers when it comes to trade with Mexico?

    Answer. The United States is the world's largest producer of 
biotechnology crops. With over 90 percent of corn, soybean and cotton 
acres produced with biotechnology crops, this technology is ubiquitous 
in American agriculture.

    The United States is also a major exporter of these crops. In the 
case of corn, Mexico is the United States largest international market, 
representing nearly 30 percent of total U.S. corn exports in 2020.

    If Mexico does not approve a new corn biotechnology product, U.S. 
corn farmers are reluctant to plant the product for fear of disrupting 
trade to Mexico. This means, in effect, that Mexico determines which 
technology U.S. farmers can use.

    Further, biotechnology companies plan their commercial launches 
years in advance, preparing regulatory submissions in export markets, 
and consulting with value chain customers.

    When regulatory authorities in export destinations cease to 
function and shut off communication with companies, as in the current 
case of Mexico, it is impossible to predict with certainty when to 
launch a product in the United States. As a result, biotechnology 
companies often delay, affecting investments and future R&D.

    Question. President Lopez Obrador's recent decree, more 
specifically, would phase-out the use of biotech corn for human 
consumption no later than January 31, 2024. Most of Nebraska's corn 
exports to Mexico are used in livestock feed but there is concern an 
expansion of this decree could create additional trade barriers for 
farmers.

    Can you please expand on the likelihood that Mexico will expand 
this decree to include GMO corn used for livestock feed?

    How would such a change impact agriculture in places like my home 
state of Nebraska?

    Answer. Mexico's decree compounds the uncertainty caused by 
COFEPRIS's failure to issue a biotech import approval in over 3 years. 
As a result, this decree further erodes the trading relationship 
between the United States and Mexico and if implemented will reduce 
U.S. exports.

    To date, the decree's application to imports of biotech corn for 
use as animal feed remains ambiguous. While the decree does not specify 
if the ban will apply to imports for animal feed, Mexican officials 
have issued competing statements.

    Regardless, the practicality of separating corn for feed from corn 
for human consumption is costly and creates supply chain challenges, 
not to mention increased risk of shipment rejections.

    Such uncertainty risks longstanding cross-border commercial 
relationships between suppliers in Nebraska and throughout the United 
States and Mexican livestock producers who have mounting questions 
about their supply chains, economic well-being, and future of their 
domestic industries.

    Question. USMCA modernized our trade relationships with Mexico and 
Canada and increased business for Nebraska agriculture. The United 
States should build on the benefits of this multilateral agreement but 
also apply the lessons learned from implementation and enforcement when 
pursuing new trade agreements.

    As we look towards future trade agreement frameworks, what 
preemptive steps can Congress take to prevent some of the current 
issues regarding enforcement--specifically regarding biotechnology?

    Answer. For agricultural biotechnology, USMCA represented a 
significant improvement on NAFTA for the agricultural biotechnology 
industry and the constituents it seeks to serve. Enhanced provisions 
for agricultural biotechnology set it apart from previous trade 
agreements.

    USMCA is the first agreement to address agricultural biotechnology 
specifically. All three parties confirmed the importance of encouraging 
agricultural innovation and facilitating trade in products of 
agricultural biotechnology.

    This provision supplements the requirements of SPS Agreement to 
facilitate trade, and to proactively avoid unnecessary and costly trade 
disruption that can occur when regulatory approvals are delayed. 
Furthermore, the agreement established a committee to enhance 
cooperation and regulatory consistency on current and emerging 
agricultural biotechnologies, including genome editing.

    However, given that Mexico had ceased approval of agricultural 
biotechnology products back in May of 2018, it would have been prudent 
for the U.S. to have sought some specific commitments from the 
Government of Mexico on how they would come into compliance prior to 
certifying the agreement.

    Looking forward, the biotechnology and SPS provisions of USMCA 
provide a good framework to facility the trade of innovative 
technologies. Although the USMCA does not mandate the approval of 
products, it assures trading partners that a regulatory system is in 
place and process to cooperate exists. Prior to certifying the 
agreement, an assessment should have been conducted to ensure the 
regulatory process was functional, and to address any issues and secure 
commitments to ensure compliance with USMCA's SPS and biotechnology 
provisions.

    As for Mexico and USMCA, moving forward USTR can and should use all 
the tools afforded to it under USMCA to get Mexico to resume the 
approval process for all agricultural biotechnology products and 
implement a science-based and predictable regulatory process going 
forward.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    Colleagues, we got some tragic news last night. Former Senator 
Enzi, who served on the Finance Committee with many of us, passed away 
yesterday. When he served with us in the Senate, Mike Enzi advocated 
for what he called the 80-percent rule, which urged Senators to find 
common ground on the 80 percent of the issues we agreed on and not the 
20 percent we disagreed on. It's sound advice, and I hope we'll 
remember Mike's 80-percent rule as we work together on this committee 
and in the Senate for the American people. I would like to offer my 
sincere condolences to Mike's family and friends, Senator Barrasso, and 
his colleagues in the Wyoming delegation.

    When a youngster turns one, they get a birthday party. When a trade 
agreement turns one, it gets an oversight hearing in the Senate Finance 
Committee. The committee meets to discuss USMCA today.

    I'll begin with the timeline of the USMCA. Three years ago, the 
Trump administration agreed to a NAFTA rewrite that was too weak on key 
issues to pass. Democrats got down to work improving it.

    USMCA became the strongest trade agreement ever for worker rights, 
for environmental protections, and for enforcement overall. Congress 
passed it in early 2020. Then it was up to the Trump administration to 
implement the agreement--and enforce, enforce, enforce--because 
countries don't comply with trade agreements by osmosis. You have to 
hold them to their commitments. You ought to do that when the U.S. 
holds the most leverage, which is before an agreement enters into 
effect.

    That's why Senator Grassley and I strongly urged the Trump 
administration not to rush the process, but the Trump administration 
just would not listen. It was the middle of an election year, and they 
decided the cake was baked before it was ready to come out of the oven. 
Only a few months were given to implement the agreement--not nearly 
enough time to protect American workers and businesses by holding 
Canada and Mexico to their commitments.

    Now it's up to the Biden administration to clean up the messes the 
Trump administration left behind. For example, Canada has unfairly 
blocked American dairy products for decades. Under USMCA, Canada agreed 
to give our dairy products more access to the Canadian market.

    Canada then undermined that commitment with new regulatory barriers 
before USMCA went officially into effect last July. The Trump 
administration barely lifted a finger to do anything about it. Now the 
Biden administration will have to work to make sure our dairy farmers 
have the access they were promised.

    Another example: Mexico made commitments to improve the rights and 
conditions for its workers, but it's moving too slowly on the 
implementation of key reforms to its labor laws. To enforce some of 
those commitments, the Biden administration has had to act using what's 
called the new rapid response mechanism that Senator Brown and I 
created. That's an important tool, but the previous administration 
should have done more to push Mexico to raise the bar for labor rights 
prior to last summer. That would have helped to protect more American 
workers.

    With the Trump administration looking weak on trade enforcement, 
it's no surprise that Canada and Mexico issued new laws and regulations 
that were inconsistent with USMCA, even walking back some of their core 
commitments. For instance, Mexico is refusing to approve innovative 
American agricultural products, including corn and soybeans, without 
any scientific justification.

    It's also threatening to ban agricultural products that have 
previously been approved. Ambassador Tai and the administration are 
working to knock down those barriers as soon as possible.

    Another example: Canada is joining a list of countries that are 
unfairly targeting and discriminating against innovative American 
employers with digital services taxes. These taxes are unfair digital 
daggers that are knifing American firms. It's a big setback to our 
trade relationship with Canada that goes against the spirit of USMCA 
and the global minimum tax agreement that's in the works. I hope the 
Canadian Government changes course on this issue, otherwise the U.S. 
will need to consider all options for its response.

    So there's a lot for the committee to talk about today regarding 
USMCA. I come from a State where one out of four jobs revolves around 
international trade. Oregonians know how to grow things and design 
things, add value to them, and ship them to Oregon lovers around the 
world.

    In Oregon, we talk about getting trade done right as a way to 
protect our workers and create high-wage, high-skill jobs. It means 
raising the bar on issues like labor and environmental protections. It 
means vigorous enforcement. It means never cutting corners the way the 
previous administration did on USMCA. Fortunately, the Biden 
administration has already begun addressing all these outstanding 
issues so that USMCA lives up to its promise.

    There are still a lot of challenges ahead. I want to thank our 
witness panel for joining the committee today, and I look forward to 
Q&A.

                                 ______
                                 

                             Communications

                              ----------                              


                    American Farm Bureau Federation

                  600 Maryland Avenue, SW, Suite 1000W

                          Washington, DC 20024

                            p. 202-406-3600

                            f. 202-406-3606

                          https://www.fb.org/

                  Statement of Zippy Duvall, President

    The American Farm Bureau Federation, the nation's largest general 
farm organization, submits this statement for the Senate Finance 
Committee hearing on the enforcement of the U.S.-Mexico-Canada 
Agreement (USMCA). Trade is critically important to the current welfare 
and future prosperity of U.S. agriculture. America's farmers and 
ranchers depend on stable export markets and expanded opportunities for 
the success of their businesses.

    Enforcement of trade agreements is necessary to ensure all the 
benefits that were agreed to at the negotiating table. The dispute 
settlement mechanisms included in trade agreements are critical for the 
future success of any agreement, including USMCA, which went into force 
on July 1, 2020.

    Canada and Mexico are two of our nation's most important food and 
agriculture trade partners, thanks to achievements first seen through 
the North American Free Trade Agreement (NAFTA), and the USMCA promises 
to build upon those gains. Farmers continue to face several unresolved 
issues with both Canada and Mexico, however, and these matters need 
continued attention by the U.S. government through the USMCA.

    The implementation of expanded access for U.S. dairy products by 
Canada through negotiated tariff-rate quotas (TRQ) is of importance and 
concern to our dairy producers and needs to be resolved. Canada is 
limiting access to the dairy TRQ's which impacts the exports of U.S. 
dairy products. On May 25, 2021, the U.S. Trade Representative started 
a proceeding challenging Canada's administration of its dairy TRQ's. 
This is the first dispute settlement case brought under USMCA.

    On December 31, 2020, the Mexican government issued a Presidential 
Decree stating the intention to phase out the use of glyphosate and use 
of genetically modified (GM) corn for human consumption. While the 
standing of the Decree is unclear and the scope is vague, the Decree 
creates a significant risk and uncertainty to exports of corn and corn 
products. Mexico is the largest importer of corn and corn products from 
the U.S., and the Decree has the potential to negatively impact a 
significant portion of U.S. agricultural exports.

    The Government of Mexico has created significant uncertainty for 
agricultural biotechnology, ceasing review and approval of any 
biotechnology applications since May 2018. As a result, Mexico has 
become a significant barrier to launching new biotechnology products 
within North America, potentially restricting U.S. farmer access to new 
technologies that help us achieve sustainability goals.

    In 2002, the U.S. and Mexican governments announced that both sides 
would resolve two longstanding market access issues: the U.S. agreed to 
expand market access for Mexican avocados and Mexico agreed to open 
their market for U.S. fresh potatoes. Today, the U.S. imports $2 
billion worth of Mexican avocados while Mexico remains almost entirely 
closed to U.S. fresh potatoes. In 2014, after losing several 
phytosanitary rulings before international bodies, the Mexican 
government agreed to allow U.S. fresh potatoes full market access. The 
Mexican Supreme Court has recently decided that U.S. fresh potatoes can 
be sold in Mexico. Now it is time for action on the nearly decade-old 
promise.

    Seasonal produce imports from Mexico have a direct impact on U.S. 
growers. Monitoring investigations by the International Trade 
Commission continue regarding imports of strawberries, bell peppers, 
squash and cucumbers.

    Trade agreements can create a level playing field for U.S. farmers 
and ranchers by reducing and eliminating tariffs and addressing non-
tariff barriers. Those benefits can only be realized across North 
America, however, when the U.S.-Mexico- Canada Agreement is fully 
enforced. We look forward to a focused effort by all three countries to 
ensure USMCA achieves its full potential.

                                 ______
                                 
                             Cato Institute

                      1000 Massachusetts Ave., NW

                          Washington, DC 20001

              Statement of Dr. Inu Manak, Research Fellow

Chairman Wyden, Ranking Member Crapo, I appreciate the opportunity to 
share my thoughts for this hearing on the implementation and 
enforcement of the United States-Mexico-Canada Agreement (USMCA). We 
are just over a year into the implementation of the USMCA, and the 
three countries have faced unique circumstances as we each try to 
address the pandemic brought on by COVID-19. This context should not be 
downplayed, and the resultant delays and challenges met with patience. 
Despite the hardships we have faced over the course of the last year, 
we have still managed to work towards implementation of the USMCA. Of 
course, this should not come as a great surprise, as the content of 
USMCA is very close to its predecessor, the North American Free Trade 
Agreement (NAFTA).

But not everything stayed the same. There were some areas in which we 
saw adjustments from NAFTA to USMCA. Some of these areas warrant 
additional scrutiny, if not concern, surrounding how they are being 
implemented, or what the overall goals are, or the form that 
implementation or enforcement takes. To that end, I lay out some 
lingering issues that I hope the Committee will take up in this hearing 
and continue to monitor in the coming years. I think it is fair to say 
that we all want a robust and competitive North American trading 
relationship that is equipped to deal with both current and future 
challenges. The USMCA is the focal institution in that relationship, 
and we must ensure that it is fit for purpose if we are to meet our 
shared goals.

IMPLEMENTATION

As I have previously noted, the greatest benefit of USMCA is that it 
mostly continued rules that already existed under NAFTA. The impact 
from the changes in the agreement are small. The overall effect of 
these changes, including more stringent rules of origin on automobiles, 
is negative: a -0.12% decrease in real GDP, or approximately a loss of 
US$22.6 billion, according to estimates put forward by the U.S. 
International Trade Commission (USITC).\1\ Analysis from others 
corroborates this finding.\2\ The topline positive figures put forward 
by the USITC are mainly due to ``reduced uncertainty'' from the 
inclusion of new rules on digital trade, but as I and others have 
noted, this modeling choice raises more questions than answers, and the 
baseline model does not address the fact that Canada and Mexico have 
already implemented many of those rules through their participation in 
the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) 
agreement, from which the United States withdrew.\3\
---------------------------------------------------------------------------
    \1\ U.S International Trade Commission, ``U.S.-Mexico-Canada Trade 
Agreement: Likely Impact on the U.S. Economy and on Specific Industry 
Sectors,'' Publication Number: 4889 (April 2019), https://
www.usitc.gov/publications/332/pub4889.pdf.
    \2\ Ciuriak, Dan, Ali Dadkhah, and Jingliang Xiao. ``Quantifying 
CUSMA: The Economic Consequences of the New North American Trade 
Regime.'' Trade and International Policy Working Paper, CD Howe 
Institute 21 (2020), https://www.cdhowe.org/sites/default/files/
attachments/research_papers/mixed/WorkingPaper_Ciuriak-Dadkhah-
Xiao_2020_0.pdf.
    \3\ Inu Manak, ``Canada Evaluates USMCA, Raises More Questions than 
Answers,'' Cato Institute Blog (February 28, 2020), https://
www.cato.org/blog/canada-evaluates-usmca-raises-more-questions-answers; 
Jeffrey J. Schott, ``Five Flaws in the USMCA and How to Fix Them,'' 
Peterson Institute for International Economics (August 6, 2019), 
https://www.piie.com/blogs/trade-and-investment-policy-watch/five-
flaws-usmca-and-how-fix-them.

Since most of the rules from NAFTA carried over to USMCA, 
implementation has proceeded swiftly, despite a pandemic, and far 
beyond what could be reasonably expected for any trade agreement that 
created an entirely new set of rules. Trade between Canada, Mexico, and 
the United States has been fairly resilient in the face of the numerous 
challenges we faced over the last year. However, the pandemic did 
reveal that the same institutional deficits \4\ surrounding governance 
and cooperation that were identified during the NAFTA continue to be a 
problem under the USMCA.
---------------------------------------------------------------------------
    \4\ Simon Lester and Inu Manak, ``Fixing NAFTA's Institutional 
Deficit,'' International Centre for Trade and Sustainable Development 
(March 7, 2018), https://www.cato.org/commentary/fixing-naftas-
institutional-deficit.
---------------------------------------------------------------------------

Institutional Gaps

For instance, consultations on border crossing were woefully lacking at 
the start of the pandemic, leading to confusion and delays. Subsequent 
decisions on border restrictions have been ad hoc, adding to the 
already large cloud of uncertainty hanging over people's lives. We 
should have learned from the border closures that occurred after 9/11 
that communication, coordination, and clear and consistent guidelines 
for safe and efficient crossings are necessary to maintain the flow of 
trade. And it's not just things that cross our borders, but people. 
People whose lives exist on both sides of that border, most clearly 
seen in our border communities, such as Point Roberts, WA.\5\ These 
communities rely on a predictable border infrastructure, which has been 
lacking. And even as Canada has recently announced that it is opening 
its borders to American tourists, the United States has not 
reciprocated with either Canada or Mexico. These announcements should 
be coordinated, as our tourism industries continue to struggle, 
impacting countless workers in each of our countries.
---------------------------------------------------------------------------
    \5\ Alexander Panetta, ``How border restrictions have left a U.S. 
community stranded and surrounded by Canada,'' CBC News (July 8, 2021), 
https://www.cbc.ca/amp/1.6093133.

The institutional deficit carried over from NAFTA could persist in 
other ways that impact our trading relationship as well. As Andrew 
Rudman and Christopher Sands from the Wilson Center explain, the work 
of the numerous committees created by the USMCA to oversee the 
implementation of the agreement will be critical to its success and 
growth over time.\6\ Under NAFTA, the committees quickly became 
defunct, not least because there was a lack of high level guidance and 
interest from the executive branch. It is this day to day work by civil 
servants working on the technical issues related to our trading 
relationship that is vital and requires support.
---------------------------------------------------------------------------
    \6\ Andrew Rudman and Christopher Sands, ``A Winning Bet: USMCA at 
Year One,'' Wilson Center (2021), https://www.wilsoncenter.org/sites/
default/files/media/uploads/documents/WWC_USMCA_Winning%20Bet.pdf.

Another of the major lessons from NAFTA was assuring that there was 
active stakeholder engagement on cross-border issues so that 
initiatives could be better targeted to address real, on the ground 
problems. Amb. Earl Anthony Wayne, former career Ambassador to 
Afghanistan, Argentina and Mexico, now at the Wilson Center, writes 
that ``an effective stakeholder process could increase public 
understanding of the value of trade across North America and would 
surface valuable ideas for improvements and problem solving.''\7\ One 
avenue for doing this is through the Competitiveness Committee created 
in Chapter 26, which could serve as a forum for discussion about North 
American competitiveness, including addressing issues surrounding 
supply chains, bottlenecks, and regulatory challenges. The committee's 
mandate is broad: ``The Competitiveness Committee shall discuss and 
develop cooperative activities in support of a strong economic 
environment that incentivizes production in North America, facilitates 
regional trade and investment, enhances a predictable and transparent 
regulatory environment, encourages the swift movement of goods and the 
provision of services throughout the region, and responds to market 
developments and emerging technologies.''\8\ Our experience throughout 
the pandemic should reinforce the importance of such a committee to 
identify policy areas in need of development. The knowledge of 
businesses on the ground is indispensable in crafting smart responses 
to shared trade challenges, as the pandemic has well shown.\9\
---------------------------------------------------------------------------
    \7\ Earl Anthony Wayne, ``USMCA and North America: Year One,'' 
Wilson Center (July 2021), https://www.wilsoncenter.org/sites/default/
files/media/uploads/documents/USMCA%20and%
20North%20America-%20Year%20One.pdf.
    \8\ USMCA Article 26.4.
    \9\ Scott Lincicome, ``The Pandemic Does Not Demand Government 
Micromanagement of Global Supply Chains,'' Pandemics and Policy, Cato 
Institute (February 24, 2021), https://www.cato.
org/pandemics-policy/pandemic-does-not-demand-government-
micromanagement-global-supply-chains#summary.

An area where input from business would be particularly useful is in 
the automotive sector, which has faced substantive rule changes in the 
USMCA as compared to NAFTA. In the USMCA, the rules of origin for autos 
(our most integrated supply chain) were made more stringent. Rules of 
origin are the rules that determine whether a product can cross duty 
free across the border. In NAFTA, passenger vehicles were required to 
have 62.5% North American content, and in the USMCA that has been 
increased to 75%. This means that auto producers will need to source 
more components from the region, in addition to ensuring that 70% of 
the steel and aluminum used in production also comes from Canada, 
Mexico or the United States. On top of this--a first ever in a trade 
agreement--a new labor value content requirement was added that 
requires auto makers to have 40-45% of their auto content made by 
---------------------------------------------------------------------------
workers making at least $16 an hour.

There is currently a disagreement about how the auto rules of origin 
are calculated, which was raised by Canada and Mexico at the first 
meeting of the USMCA Free Trade Commission in May 2021.\10\ As reported 
by Maria Curi at Inside U.S. Trade, ``Auto industry representatives in 
all three countries, as well as the governments of Canada and Mexico, 
agree that the Office of the U.S. Trade Representative and CBP under 
the Trump administration interpreted a USMCA auto rule of origin 
differently than what was originally negotiated.''\11\ The Biden 
administration has so far indicated support for the Trump 
administration's more stringent interpretation, which could have 
serious economic repercussion for the auto industry. As Curi explains:
---------------------------------------------------------------------------
    \10\ Jose Avila, ``Los temas controversiales del TMEC resurgen, 
tras reunion de ministras,'' Expansion (May 18, 2021), https://
expansion.mx/economia/2021/05/18/mexico-eu-se-comprometen-cumplir-
conjunta-t-mec.
    \11\ Maria Curi, ``CBP official: USMCA auto rules will be enforced 
amid confusion over interpretation,'' Inside U.S. Trade (March 30, 
2021), https://insidetrade.com/daily-news/cbp-official-usmca-auto-
rules-will-be-enforced-amid-confusion-over-interpretation.

        At issue is a so-called ``roll-up provision'' designed to 
        incentivize increased regional content. USMCA requires that 75 
        percent of a car's core parts, like engines, be regionally 
        sourced for that vehicle to qualify for duty-free treatment. 
        ``Principal'' parts, like tires, are subjected to a 70 percent 
---------------------------------------------------------------------------
        regional content rule.

        If a part meets the regional content threshold and is 
        incorporated into a larger car component, 100 percent of the 
        initial part will count as originating, according to the 
        industry's interpretation.

        However, USTR and CBP say that if the initial part contains any 
        foreign content, it must be subtracted from the regional-value 
        content calculation. The U.S. agencies' approach makes it more 
        difficult for automakers to get components to the threshold 
        needed for duty-free treatment, according to the auto 
        industry.\12\
---------------------------------------------------------------------------
    \12\ Maria Curi, ``Clouthier: Mexico, U.S. working to mesh USMCA 
auto rule interpretations,'' Inside U.S. Trade (May 21, 2021), https://
insidetrade.com/daily-news/clouthier-mexico-us-working-mesh-usmca-auto-
rule-interpretations.

As Eric Martin and Keith Laing recently reported in Bloomberg, Flavio 
Volpe, president of Canada's Automotive Parts Manufacturers' 
Association suggested that tighter rules of origin requirements could 
make preferential treatment under USMCA ``irrelevant,'' and lead to 
automakers simply paying MFN tariffs instead, which would raise 
costs.\13\ Furthermore, they report that after a meeting between U.S. 
Trade Representative Katherine Tai and Mexican Economy Minister Tatiana 
Clouthier on July 22, 2021, the Mexican Economy Ministry released a 
statement, which on the U.S. position on rules of origin says that 
``Not abiding by USMCA rules may potentially disrupt the operations of 
the North America automotive industry.''
---------------------------------------------------------------------------
    \13\ Eric Martin and Keith Laing, ``U.S., Mexico Fail to Resolve 
Dispute on Trade Rules for Cars,'' Bloomberg (July 23, 2021), https://
www.bloomberg.com/news/articles/2021-07-23/u-s-and-mexico-fail-to-
resolve-dispute-on-trade-rules-for-cars?sref=EROITBzT.

Congress should request an explanation from the Biden administration as 
to why it supports the same, more stringent interpretation of the auto 
rules as the previous administration, and what the economic costs of 
that interpretation are compared to how the auto industry, Canada and 
Mexico see it. The auto industry could offer insight into this issue 
through the Competitiveness Committee, for instance. Congress could 
also request that USTR provide an update on the impact of changes made 
on the auto rules through USMCA to the North American auto sector, 
which would help with an assessment of whether further rule changes may 
be required once USMCA is up for review.

Transparency

Since the USMCA includes a sunset clause that requires the review of 
the agreement within six years, transparency on the day to day 
implementation is essential. This will allow us to identify problems 
early, and correct them when the review process begins, and avoid the 
biggest pitfall of NAFTA, which was to lock in rules that quickly 
became out of date. For USMCA to avoid this, it must learn to adapt. 
Congress should request that the U.S. Trade Representative regularly 
provide an update on the work of the committees, and the challenges 
they identify with regard to implementation, as well as other trade 
issues that arise. Reports on the committee work will not only help 
Congress keep on top of North American trade issues, but also help 
researchers that study this to reflect on how we can improve the 
institutional design of trade agreements in this case, and more 
broadly.

A further concern with transparency involves the newly created ``Rapid 
Response Mechanism'' for labor enforcement, which was put into place to 
ensure remediation of a denial of collective bargaining rights. As 
Kathleen Claussen, Associate Professor of Law at the University of 
Miami School of Law explains, ``the RRM is not so much a claims process 
but rather a quick way to deal with a `belief' by a government that 
there is some denial of rights underway.''\14\ As an untested 
mechanism, we must proceed with utmost caution and ensure that the 
process by which complaints are raised through the RRM are transparent 
and provide the firms affected adequate time to respond. The RRM is a 
complex process, best summarized by a recent flowchart created by the 
U.S. Chamber of Commerce.\15\
---------------------------------------------------------------------------
    \14\ Kathleen Claussen, ``A First Look at the New Labor Provisions 
in the USMCA Protocol of Amendment,'' International Economic Law and 
Policy Blog (December 12, 2019), https://ielp.worldtradelaw.net/2019/
12/a-first-look-at-the-new-labor-provisions-in-the-usmca-protocol.
html.
    \15\ USMCA Rapid Response Labor Mechanism Flow Chart, https://
www.uschamber.com/sites/default/files/final_rrlm_flow_chart.pdf.

Further complicating it is the fact that the final procedural 
guidelines for petitions to the USMCA have not yet been published 
(interim guidelines were released in June 2020). Despite this, labor 
disputes have already begun. This not only creates a lot of uncertainty 
surrounding how this new mechanism is supposed to function, but also 
raises serious questions about due process. The U.S. Chamber of 
Commerce has stated ``The Labor Committee should not be acting on 
petitions without the final procedural guidance being published,'' and 
also that ``the Labor Committee is acting on petitions that allege a 
denial of rights occurred, in part, before July 1, 2020,'' which is 
before the USMCA entered into force.\16\ We must be cognizant of the 
fact that the procedural guidelines need to be published before further 
actions are taken, otherwise the executive branch could use broad 
discretion in their interpretation and application, which could further 
serve to harm already strained relations between the United States and 
Mexico. Also, the final guidelines should take comments and concerns 
from the relevant stakeholders into account.
---------------------------------------------------------------------------
    \16\ U.S. Chamber of Commerce, Comments on USMCA Interagency Labor 
Committee for Monitoring and Enforcement Interim Procedural Guidelines 
for Petitions (June 22, 2021), https://www.uschamber.com/comment/
comments-usmca-interagency-labor-committee-monitoring-and-enforcement-
interim-procedural.

Relatedly, clarity should be provided on the content of discussions in 
the Interagency Labor Committee, with documents available online, to 
the public. Some light should also be shed on the interactions between 
stakeholders, the Interagency Labor Committee and the executive branch 
---------------------------------------------------------------------------
more broadly.

Another issue is that the RRM is unbalanced in its focus. As Desiree 
LeClercq, Proskauer Employment and Labor Law Assistant Professor at the 
ILR school at Cornell writes, ``Specifically, the Rapid Response 
Mechanism requires respect for U.S. domestic processes (i.e., after an 
enforced order) but allows the U.S. to interfere with ongoing domestic 
processes in other countries. More generally, the disparate scope of 
the Rapid Response Mechanism makes it possible for facilities like GM 
to be held accountable when they are located across from Brownsville, 
Texas but shields those facilities when they are located in 
Brownsville, Texas.''\17\ In regard to the specific concern raised by 
LeClercq, it should be emphasized that Mexico must be allowed the time 
necessary to complete its labor reforms (a domestic process that was 
already underway before USMCA went into effect), and the United States 
should offer assistance, if requested, in the form of technical 
capacity. However, the United States has begun parallel efforts under 
the RRM, perhaps under the hope that this will ``speed up'' the reforms 
in Mexico or nudge them along.\18\ But this is a precarious gamble. As 
LeClercq elaborates, ``USTR is invoking the Rapid Response Mechanism 
process before Mexico's domestic processes have been exhausted, leading 
to potential fragmentation.'' This should be of concern to those 
interested in the success of Mexico's domestic reform efforts.
---------------------------------------------------------------------------
    \17\ Desiree LeClercq, ``Biden's Worker-Centered Trade Policy: 
Whose Workers?'', International Economic Law and Policy Blog (May 16, 
2021), https://ielp.worldtradelaw.net/2021/05/bidens-worker-centered-
trade-policy-whose-workers.html.
    \18\ In fact, Esteban Martinez Mejia, Head of the Liaison Unit for 
the Reform of the Labor Justice System in Mexico, stated in the public 
virtual session of the USMCA Labor Council on June 29, 2021 that Mexico 
wouldn't be speeding up its timeline for reform because the schedule 
was originally laid out to give every state ample time to plan for 
implementation with the federal government, and moving states ahead of 
schedule would disrupt those plans.

On a broader point, the inclusion of the Rapid Response Mechanism 
raises serious questions about the role of the United States in 
actively interfering with labor issues in other countries. There is 
ample debate over whether we should be doing this at all. If the United 
States thinks it should have a role to play here through trade 
agreements, then it should invite reciprocal scrutiny of its own 
domestic labor practices as well.

ENFORCEMENT

Enforcing international agreements is critical to securing the outcomes 
of what was agreed among the parties. Yet, enforcement is often 
incorrectly made synonymous with litigation. While trade disputes 
garner a lot of media attention, and policy makers pursue disputes in 
order to signal to their own public that they are taking some kind of 
action, or to compel another party to adjust its behavior, disputes on 
their own are an escalation of matters where diplomacy has either 
failed, or not been tried. It is, in fact, the regular, day to day work 
of implementation that can avoid the escalation of conflicts into 
disputes.

Energy should therefore be spent on dispute avoidance and prevention 
not only because disputes are costly and take many years to resolve, 
but also because they can disrupt trust and amicable relations between 
trading partners. The rhetoric of enforcement must therefore be used 
cautiously and surgically. As the last four years of the previous 
administration has shown us, treating your allies like your rivals only 
serves to diminish our relationships and reduce the United States' 
image in the world. To the extent that we can cooperate on solutions 
diplomatically instead of racing to ``enforce'' through legal means can 
therefore serve to neutralize tensions and produce mutually beneficial 
outcomes.

As noted above, the Labor chapter's Rapid Response Mechanism should be 
utilized with caution, and should also be carefully scrutinized by 
Congress to ensure that it meets the goals laid out in Trade Promotion 
Authority. This could assist Congress in crafting new guidelines in any 
future Trade Promotion Authority bill.

There are also two disputes under Chapter 31, the state-to-state 
dispute settlement chapter. The first is a dispute raised by the United 
States (consultations began under the previous administration) on the 
allocation of Canada's tariff rate quotas (TRQ) for dairy. Canada and 
the United States should work to resolve this issue as soon as 
possible, and Canada should ensure that its implementation of the dairy 
TRQ is not in violation of the USMCA. The second is a dispute raised by 
Canada against the United States regarding actions by the Trump 
administration to levy safeguard tariffs of 18% under Section 201of the 
Trade Act of 1974 on imports of crystalline silicon photovoltaic cells 
and modules. Given the Biden administration's commitment to green 
energy, it would be puzzling if tariffs on imports of solar products 
from our closest ally would continue to be imposed, considering that 
tariffs are born by consumers, and increasing the price of solar 
products will simply decrease Americans' access to these technologies. 
On the latter dispute, Congress should encourage the Biden 
administration to lift the tariffs on Canada and to look for 
opportunities to further integrate the North American energy market so 
that it can become globally competitive.

Contact: [email protected].

                                 ______
                                 
                        Center for Fiscal Equity

                      14448 Parkvale Road, Suite 6

                          Rockville, MD 20853

                      [email protected]

                             July 27, 2021

Hon. Ron Wyden
Chair
Hon. Mike Crapo
Ranking Member
U.S. Senate
Committee on Finance
Washington, DC 20210

Regarding: Implementation and Enforcement of the United States-Mexico-
Canada Agreement: One Year After Entry Into Force--Comment for the 
record

Dear Senators:

Just a quick note to remind you that Mexico and Canada have consumption 
taxes and the United States does not. This complicates our trade policy 
and makes such agreements a complicated mess favoring some industries 
over others. Please see our usual analysis on consumption taxes and 
trade.

Regarding Mexico, if we had the same arrangements with Canada on 
temporary visas, agricultural workers could come in easily, send money 
home and eventually return (as many do). These visas should also have 
an overt path to residency after three renewals.

Best wishes,

Michael G. Bindner
Principal Consultant

Attachment--Trade Policy and Value-Added Taxes

Consumption taxes could have a big impact on workers, industry and 
consumers. Enacting an I-VAT is far superior to a tariff. The more 
government costs are loaded onto an I-VAT the better.

If the employer portion of Old-Age and Survivors Insurance, as well as 
all of disability and hospital insurance are decoupled from income and 
credited equally and personal retirement accounts are not used, there 
is no reason not to load them onto an I-VAT. This tax is zero rated at 
export and fully burdens imports.

Seen another way, to not put as much taxation into VAT as possible is 
to enact an unconstitutional export tax. Adopting an I-VAT is superior 
to it's weak sister, the Destination Based Cash Flow Tax that was 
contemplated for inclusion in the TCJA. It would have run afoul of WTO 
rules on taxing corporate income. I-VAT, which taxes both labor and 
profit, does not.

The second tax applicable to trade is a Subtraction VAT or S-VAT. This 
tax is designed to benefit the families of workers through direct 
subsidies, such as an enlarged child tax credit, or indirect subsidies 
used by employers to provide health insurance or tuition reimbursement, 
even including direct medical care and elementary school tuition. As 
such, S-VAT cannot be border adjustable. Doing so would take away 
needed family benefits. As such, it is really part of compensation. 
While we could run all compensation through the public sector.

The S-VAT could have a huge impact on long term trade policy, probably 
much more than trade treaties, if one of the deductions from the tax is 
purchase of employer voting stock (in equal dollar amounts for each 
worker). Over a fairly short period of time, much of American industry, 
if not employee-owned outright (and there are other policies to 
accelerate this, like ESOP conversion) will give workers enough of a 
share to greatly impact wages, management hiring and compensation and 
dealing with overseas subsidiaries and the supply chain--as well as 
impacting certain legal provisions that limit the fiduciary impact of 
management decision to improving short-term profitability (at least 
that is the excuse managers give for not privileging job retention).

Employee owners will find it in their own interest to give their 
overseas subsidiaries and their supply chain's employees the same deal 
that they get as far as employee ownership plus an equivalent standard 
of living. The same pay is not necessary, currency markets will adjust 
once worker standards of living rise.

Over time, ownership will change the economies of the nations we trade 
with, as working in employee-owned companies will become the market 
preference and force other firms to adopt similar policies (in much the 
same way that, even without a tax benefit for purchasing stock, 
employee-owned companies that become more democratic or even more 
socialistic, will force all other employers to adopt similar measures 
to compete for the best workers and professionals).

In the long run, trade will no longer be an issue. Internal company 
dynamics will replace the need for trade agreements as capitalists lose 
the ability to pit the interest of one nation's workers against the 
others. This approach is also the most effective way to deal with the 
advance of robotics. If the workers own the robots, wages are swapped 
for profits with the profits going where they will enhance consumption 
without such devices as a guaranteed income.

                                 ______
                                 
                            CropLife America

                    4201 Wilson Boulevard, Suite 700

                          Arlington, VA 22203

                           202.296.1585 phone

                            202.463.0474 fax

                    https://www.croplifeamerica.org/

              Statement of Chris Novak, President and CEO

Thank you for the opportunity to provide written testimony to the 
Senate Committee on Finance's hearing on ``Implementation and 
Enforcement of the United States-Mexico-Canada Agreement: One Year 
After Entry Into Force.'' CropLife America (CLA) represents the 
manufacturers, formulators, and distributors of pesticides in the 
United States. Our member companies produce, sell, and distribute 
virtually all the vital and necessary crop protection products used by 
farmers, ranchers, and landowners in every state. Our mission is to 
help ensure growers and consumers have the technologies they need to 
protect crops, communities, and ecosystems from the threat of pests, 
weeds, and diseases in an environmentally sustainable way to support 
healthy food, healthy people, and a healthy planet.

American farmers utilize pesticides to grow healthy and safe row crops, 
tree nuts, fruits, and vegetables that are used as food, as well as 
other farm products, including animal feed, fibers, lumber, and fuel 
for Americans and consumers around the world. Without today's pesticide 
technology, insect pests, weeds, and crop diseases would devastate crop 
yields and quality, directly impacting the ability to feed consumers in 
the U.S. and around the world. Moreover, pesticides protect public 
health by helping control harmful insects such as rodents, mosquitos 
and ticks.

Pesticides, in combination with tillage management and other 
conservation practices, are necessary to meet our nation's nutritional 
goals while simultaneously sequestering carbon and reducing greenhouse 
gas emissions. We support a strong, science-based risk/benefit 
regulatory system that ensures access to safe and effective tools while 
also preserving and promoting biodiversity in the landscape.

USMCA

In 2019, Mexico was the second largest overall export destination for 
U.S. agricultural products. It is a top-three export destination for 
corn, soybeans, wheat, rice, dried beans, fruits, peanuts, sorghum, 
vegetables, and crop seed. The previous North American Free Trade 
Agreement (NAFTA) eliminated tariff barriers and allowed market access 
with Canada and Mexico for U.S. agricultural goods. The United States-
Mexico-Canada Agreement (USMCA) created an opportunity to update the 
25-year-old agreement, making important improvements to sanitary and 
phytosanitary (SPS) measures, dispute settlement mechanisms, and other 
areas impacting agriculture. Before and since the signing of USMCA, 
however, we have seen a fundamental shift in the regulation of 
pesticides in Mexico.

The Mexican government has moved away from a science- and risk-based 
regulatory approach, invoked the precautionary principle as 
justification for lack of scientific analysis, and ignored commitments 
to their trading partners and the concerns of Mexico growers. It is our 
belief that Mexico's actions violate both the letter and the intent of 
the USMCA agreement.
Registration and Re-Registration of Pesticide Products
The Federal Commission for Protection against Sanitary Risk, known as 
COFEPRIS, is the agency responsible for pesticide registrations in 
Mexico. Over the past several years, even pre-dating USMCA 
negotiations, the processing of applications for registration of new 
pesticide products and renewal of existing registrations has virtually 
ceased, causing serious disruptions. There are currently more than 
2,000 applications pending. These delays have impacted the ability for 
new innovations to be registered, directly impacting growers in Mexico, 
and have cost CLA member companies a projected $492 million from 2015 
through March of 2020. This is prejudicial to potential markets in 
Mexico for crop protection innovations developed by U.S. companies and 
delays or prevents the introduction of new lower risk products.

While some of the more recent delays can be attributed in-part to 
understaffing and a focus on COVID response, there are indications that 
many of the problems at COFEPRIS are further evidence of a fundamental 
shift in Mexico's regulatory approach. Following a recent executive 
decree in Mexico, discussed below, the agency has a lack of clarity 
regarding the Lopez Obrador Administration's policy principles for the 
regulatory process. In addition, a government reorganization in 2020 
placed the former independent agency COFEPRIS under the supervision of 
the Undersecretary of Prevention and Health Promotion in the Health 
Ministry. This move heightens concerns that the agency's scientific 
work could be further politicized.
Mexico Decree
In addition to these concerning shifts in the COFEPRIS registration 
processes, the Mexican government has taken further action to move away 
from a science and risk-based regulatory approach. In November 2019, 
the Mexican Ministry of Environment and Natural Resources, known as 
SEMARNAT, began denying import permits for the herbicide glyphosate. 
SEMARNAT cited the precautionary principle, but offered no new 
scientific evidence that would justify this de facto ban. In August 
2020, the Mexican government requested comment on a draft presidential 
decree that would mandate a four-year study of glyphosate. Ultimately, 
however, the final presidential decree promulgated December 31, 2020 
bans the importation, distribution, and use of glyphosate on a timeline 
that is phased in by early 2024. The concept of a study and any further 
scientific justification were abandoned in the final rule. This action 
sets a dangerous precedent and leaves many unanswered questions 
regarding implementation of the final decree.

The decree's use of the precautionary principle as justification for 
the action is troubling and disregards Mexico's Sanitary and 
Phytosanitary and Technical Barriers to Trade commitments under both 
the USMCA and the WTO. The risk-based regulatory system that has been a 
foundation for trade between the U.S., Mexico, and Canada relies upon 
an understanding of how a product will be used in the environment. This 
system is predicated on the idea that exposure, or the lack thereof, to 
a product is just as critical in determining the safe use of this 
product as any potential hazard associated with that product (e.g., the 
toxicity of a chemical substance). The European Union's use of a 
hazard-based approach is central to ongoing trade disputes between the 
U.S. and the EU. Similar steps by Mexico could significantly imperil 
exports of U.S. agricultural products to Mexico through unwarranted and 
unjustified restrictions on allowable pesticide residues.

The decree asserts that ``different scientific investigations'' have 
warned of harmful effects, yet only specifically mentions the 2015 
monograph of the International Agency for Research on Cancer (IARC) 
that designates glyphosate a ``probable carcinogen.'' The Mexican 
government has not performed any new comprehensive risk assessment to 
justify its import ban and glyphosate continues to be registered for 
domestic sale and use in Mexico. The decree is not only contrary to the 
reviews of Mexico's own regulatory body, but ignores the clear weight 
of scientific evidence from regulatory bodies around the world, 
including USMCA trading partners (Canada and United States), the 
European Union, and others. In formulating the final decree, the 
Mexican government ignored public comments from the Mexican grower 
community describing the devastating impact on agriculture and food 
production in Mexico that would result from a ban on glyphosate. The 
decree not only threatens this important trading partnership, but also 
undermines the integrity of scientific standards as the foundation of 
the USMCA and as a foundation for global trade.
Other Concerns
Our concerns go beyond just this one chemical. As the former Secretary 
of SEMARNAT stepped down from his position in 2020, his final speech 
foreshadowed another decree that would ban imports of another 80 
unspecified pesticides. While this potential decree has yet to appear, 
we are concerned that the actions taken against glyphosate could be 
used as a model for restricting other chemicals. SEMARNAT officials 
have cited a list of 183 ``highly hazardous pesticides'' compiled by 
the Pesticide Action Network as a likely list of the products to be 
banned. That list includes many compounds that are commonly used by 
U.S. producers, such as atrazine, 2,4D, neonic insecticides, pyrethroid 
insecticides and triaconazole fungicides. The crop protection industry 
is continually innovating and improving the safety of our products. 
Innovative products approved through a risk-based regulation processes 
should be available to producers in all the markets that supply U.S. 
grocers and families, to support continuous improvements in food safety 
and food security.

The decree raises several other concerns around worker safety, 
environmental safety, and human health. In justifying the decree, the 
President of Mexico suggested that farmers could hire more field 
laborers to battle weeds with machetes, rather than rely on glyphosate. 
This response not only demonstrates a profound disrespect for 
farmworker safety, but also a lack of serious thought on the part of 
Mexican authorities regarding viable alternatives for controlling pests 
and protecting the health and safety of Mexico's food crops.

Another unintended consequence of removing regulated pesticide products 
from farmers could be the aiding and abetting of counterfeit markets 
for these pesticide products. In other markets that have banned 
pesticides, such as the European Union, an illegal counterfeit market 
has developed that is creating serious problems. For example, in Italy, 
several regulated pesticide products were banned in 2009. Since then, 
organized crime has moved in to fill the void with illegal counterfeit 
products that are in use on some farms and have been seized by 
authorities.

In Mexico this illegal activity is already taking place with certain 
goods and services. According to a U.S. State Department report,\1\ 
``the involvement of transnational criminal organizations, which 
control the piracy and counterfeiting markets in parts of Mexico and 
engage in trade-based money laundering by importing counterfeit goods, 
continue to impede federal government efforts to improve Intellectual 
Property Rights enforcement.'' The potential for counterfeit pesticide 
products of unknown content and quality to replace glyphosate or other 
regulated chemistries would risk the health and safety of workers and 
farmers in Mexico. Equally important, the potential use of counterfeit 
products could jeopardize the safety of agricultural goods flowing from 
Mexico into the U.S. The U.S. and Mexico should have a common interest 
in ensuring food safety, worker safety, fair trade, and sound 
regulatory policy. Mexico's actions not only undermine progress 
promised under USMCA but jeopardize real progress in all of these 
crucial areas.
---------------------------------------------------------------------------
    \1\ U.S. State Department, 2021 Investment Climate Statements: 
Mexico, Section 5. Protection of Property Rights.
---------------------------------------------------------------------------

Summary

The radical shifts in regulatory approach by Mexican authorities should 
be concerning to the U.S., Canada and other countries who support 
innovation in agriculture. If these issues go unchallenged, we fear it 
will not only disrupt trade in agricultural chemicals, but could lead 
to new restrictions on imports of agricultural products treated with 
the banned substances. By moving away from a risk-based regulatory 
system, innovation in agriculture is stifled--reducing farmer yields, 
contributing to food loss, and impacting food security. This would also 
impact the U.S. jobs that develop and manufacture innovative high-
quality agricultural inputs that support agricultural production at 
home and around the world.

For a successful USMCA implementation, Mexico needs to be held 
accountable to their trade commitments. We believe these recent actions 
violate terms of the USMCA and WTO agreements and we are hopeful that 
these issues will be resolved before going even farther in the 
direction of similar policies that we've seen negatively impact U.S. 
agriculture exports.

Thank you for this opportunity to comment on USMCA implementation and 
enforcement.

                                 ______
                                 
     National Automobile Dealers Association, National Independent 
   Automobile Dealers Association, and National Association of Auto 
                                Auctions
The National Automobile Dealers Association (NADA), the National 
Independent Automobile Dealers Association (NIADA) and the National 
Association of Auto Auctions (NAAA) appreciate the opportunity to 
provide this written testimony to supplement the record of the Finance 
Committee's hearing to examine the implementation and enforcement of 
the United States-Mexico-Canada Agreement (USMCA) and to highlight an 
issue of interpretation that is disrupting used motor vehicle commerce 
to the detriment of consumers in the United States.

NADA,\1\ NIADA,\2\ and NAAA \3\ are uniquely positioned to speak 
definitively about used motor vehicle commerce in the United States. 
NADA represents approximately 90 percent of the nation's 18,144 
franchised new car and truck dealerships, which retail both new and 
used motor vehicles and engage in motor vehicle service, repair and 
parts sales. NADA's members collectively employ more than one million 
individuals and in 2020 sold or leased 14.87 million new vehicles and 
13.93 million used vehicles. NIADA represents approximately 14,000 of 
the nation's independent used vehicle dealers. The independent dealers 
retailed approximately 13.2 million used vehicles in 2020. NAAA's 
membership consists of approximately 350 domestic and international 
auctions with combined sales of 9.9 million vehicles and wholesale 
revenue of more than $107 billion annually. New and used automobile 
dealers, manufacturers, fleet operators, companies and financial 
institutions all buy and sell at NAAA member auctions worldwide.
---------------------------------------------------------------------------
    \1\ National Automobile Dealers Association, 8484 Westpark Dr., 
Suite 500, Tysons, VA 22102.
    \2\ National Independent Automobile Dealers Association, 4621 S. 
Cooper St., Suite 131-524, Arlington, TX 76017.
    \3\ National Auto Auction Association, 5320 Spectrum Drive, Suite 
D, Frederick, MD 21703.

NADA, NIADA, and NAAA commend the Finance Committee for conducting an 
oversight hearing on the implementation of USMCA and wish to highlight 
an unwarranted interpretation that is resulting in the unexpected and 
problematic broad-based imposition of tariffs on certain used motor 
vehicle imports. In general, the following tariffs are imposed on 
imported new vehicles: 2.5% on light-duty passenger vehicles, 25% on 
light-duty trucks, and 4% on commercial vehicles. Prior to the USMCA 
entry-into-force date, a used motor vehicle that was manufactured in 
North America received tariff-free treatment under the North American 
Free Trade Agreement (NAFTA) so long as it complied with the rules of 
origin (ROOs) and other requirements in NAFTA when first produced and 
---------------------------------------------------------------------------
sold as a new vehicle.

The implementation of USMCA has drastically changed the treatment of 
imported used vehicles. The U.S. Trade Representative (USTR) and 
Customs and Border Protection (CBP) are refusing to recognize the duty-
free treatment of NAFTA-compliant imported used vehicles. Instead, USTR 
and CBP are interpreting USMCA to require the assessment of tariffs on 
used vehicles manufactured before July 1, 2020, unless those vehicles 
meet the new and significantly increased requirements of the USMCA. 
This interpretation conflicts with the proper application of USMCA's 
rules of origin and labor content value rules, which were clearly 
designed to apply to only newly manufactured motor vehicles. Moreover, 
there is no evidence to suggest that the parties to the agreement 
intended to apply the USMCA rules to vehicles manufactured before and 
imported after July 1, 2020. This improper interpretation is resulting 
in an untenable, retroactive enforcement policy that defies the plain 
meaning of USMCA.

Additionally, in practice, USTR's and CBP's retroactive application of 
this purported standard is literally impossible to meet. Compliance 
with ROOs under a trade agreement is a document-intensive process that, 
of necessity, requires the prospective application of a standard. The 
ROOs of NAFTA dictated the document production and record retention 
regime that governed the import and export of vehicles while NAFTA was 
in force, and the NAFTA ROOs differ significantly from the ROOs imposed 
under USMCA. In addition to heightening the standards for ROO 
compliance, the USMCA added novel requirements for labor value content 
and regional metal which did not exist under NAFTA. As a result, the 
documentation importers relied upon to comply with NAFTA is virtually 
useless to comply with USMCA.

Under NAFTA, an importer could determine the duty status of a used car 
by referring to the Vehicle Identification Number (VIN) to demonstrate 
that the vehicle was manufactured in North America, but importers are 
powerless to show that these NAFTA-compliant vehicles also comply with 
the tariff preferences of USMCA. The necessary information simply does 
not exist anywhere today and would be virtually impossible to create. 
When NAFTA was in force, manufacturers used many second and third tier 
suppliers that certified compliance with the then-current NAFTA ROOs, 
but it is completely unrealistic to assume that even the manufacturers 
could obtain an accurate, retroactive certification to the 
significantly altered ROOs of USMCA that did not exist when the 
vehicles were manufactured. The drafters of the USMCA could not 
possibly have intended for motor vehicle manufacturers or third-party 
importers to retroactively create records to demonstrate that NAFTA-
compliant used vehicles manufactured before July 1, 2020, are also 
compliant with USMCA.

This unexpected and illogical interpretation is impacting the time-
honored used vehicle commerce between the United States, Mexico, and 
Canada which has been a valuable source of supply for American 
consumers. Historically, hundreds of thousands of used motor vehicles 
manufactured in North America for the North American marketplace have 
been imported or exported to the United States, Canada, and Mexico each 
year. Applying tariffs on pre-USMCA, NAFTA-compliant used motor 
vehicles will unnecessarily constrain legitimate importation and 
unfortunately subject U.S. consumers to higher used motor vehicle 
prices when the market for new and used motor vehicles already is 
significantly supply constrained. Importantly, since many imported used 
motor vehicles are purchased by lower income customers, the adverse 
impact of these tariffs is unduly regressive.

To resolve this matter, USTR should be encouraged to expeditiously 
reach an understanding with Canada for the tariff-free importation of 
used motor vehicles manufactured in North America in compliance with 
NAFTA before July 1, 2020. Alternatively, the USTR should be encouraged 
to work with CBP to adopt a reasonable interpretation that, with 
respect to used motor vehicles, the USMCA allows the dutiable status of 
these vehicles to be determined based on only the ROOs and other 
requirements that were in force as of the date they were manufactured. 
Either result would eliminate the threat to consumers of exacerbated 
supply constraints or increased prices.

Thank you for your consideration of our views on this important issue.

                                 ______
                                 
                 Ranchers Cattlemen Action Legal Fund 
                     United Stockgrowers of America

                             P.O. Box 30715

                           Billings, MT 59107

                              406-670-8157

                       https://www.r-calfusa.com/

                       [email protected]

U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

Dear Chairman Ron Wyden, Ranking Member Mike Crapo, and Members of the 
Committee:

The Ranchers Cattlemen Action Legal Fund United Stockgrowers of America 
(R-CALF USA) appreciates this opportunity to present this statement to 
the U.S. Senate Committee on Finance regarding its July 27, 2021 
hearing on Implementation and Enforcement of the United States-Mexico-
Canada Agreement: One Year After Entry Into Force.

R-CALF USA is the largest U.S. trade association that exclusively 
represents United States cattle farmers and ranchers within the multi-
segmented beef supply chain. Its thousands of members reside in 45 
states and include cow-calf operators, cattle backgrounders and 
stockers, and feedlot owners. R-CALF USA also represents U.S. sheep 
producers.

While several sectors of the U.S. economy report benefits arising from 
the renegotiated U.S.-Mexico-Canada Agreement (USMCA), the agreement 
has failed the United States cattle industry. More than any other 
multilateral free trade agreement, the USMCA and its North American 
Free Trade Agreement (NAFTA) predecessor have severely weakened the 
United States' single largest segment of American agriculture--
America's family farm and ranch system of cattle raising.\1\
---------------------------------------------------------------------------
    \1\ See Annual cash receipts by commodity, U.S. and States, 2008-
2021F, Farm Income and Wealth Statistics, U.S. Department of 
Agriculture (USDA) Economic Research Service (ERS), available at 
https://data.ers.usda.gov/reports.aspx?ID=17845 (cash receipts from 
cattle and calves ($66 billion in 2019) are higher than any other 
single commodity).

The manifest proof of this claim is revealed by the three charts below. 
Chart 1 shows the United States' value-based trade deficit in the trade 
of cattle, beef, beef variety meat and processed beef with Mexico and 
Canada.\2\ The U.S. value-based trade deficit has worsened considerably 
since NAFTA, with the cumulative deficit since 1994 now at $40.1 
billion. During the past seven years, while the relationship between 
the value of domestic cattle and the value of retail beef has severed, 
causing severe strain on U.S. cattle producers, the U.S. trade deficit 
with Mexico and Canada increased to historically high levels. Since 
2014, the U.S. sold on average less than $2 billion in cattle and beef 
to Canada and Mexico, while it purchased over $4.4 billion on average 
of the very same products from those two countries. In other words, the 
U.S. imports from Canada and Mexico about two and one-half times the 
value of beef and cattle that it exports to those countries.
---------------------------------------------------------------------------
    \2\ Charts 1 and 2 were produced using the USDA Foreign Agriculture 
Service's (FAS's) Global Agriculture Trade System (GATS) data 
incorporating the six-digit harmonized tariff code subheadings 
identified by the U.S. International Trade Commission (USITC) as 
accounting for trade in beef, and subheadings for live cattle were then 
added to this list. See Global Beef Trade: Effects of Animal Heath, 
Sanitary, Food Safety, and Other Measures on U.S. Beef Exports, USITC 
Publication 4033, September 2008, at 1-4, 1-5.
---------------------------------------------------------------------------

Chart 1
[GRAPHIC] [TIFF OMITTED] T2721.001


.epsChart 2 below depicts volume-based trade with Mexico and Canada 
using the same cattle and beef commodities contained in Chart 1 above. 
Chart 2 likewise reveals a horrendous volume-based deficit in the trade 
of cattle and beef with Canada and Mexico, amounting to a cumulative 
48.2-billion-pound deficit since NAFTA and a marked worsening during 
the past several years. It shows that during the past seven years the 
U.S. imported on average 2.7 billion pounds of cattle and beef from 
Canada and Mexico while exporting less than 1 billion pounds of the 
same products to those countries. In other words, the U.S. imports from 
Canada and Mexico about three and one-half times the quantity of beef 
and cattle that it exports to those countries.

Chart 2
[GRAPHIC] [TIFF OMITTED] T2721.002


.epsFrom 2012 to 2016, Australia was the largest exporter of beef and 
veal to the United States, but from 2017 to the present, Canada 
surpassed Australia as the largest exporter of beef and veal to the 
United States.\3\ This means the United States' largest beef importer 
is now a country that produces beef of comparable quality to U.S.-
produced beef--grain fed beef--which is a direct and indistinguishable 
substitute for U.S.-produced beef.
---------------------------------------------------------------------------
    \3\ See Beef and veal: Annual and cumulative year-to-date U.S. 
trade (carcass weight, 1,000 pounds), USDA-ERS, available at https://
www.ers.usda.gov/data-products/livestock-and-meat-international-trade-
data/.

The trade in cattle and beef under the USMCA is so out of balance that 
the United States cattle industry cannot benefit from beef exports to 
Asia or other parts of the world. This is because the United States' 
world beef and cattle exports are insufficient in both value and volume 
to overcome the horrendous USMCA trade deficit. As depicted in Chart 3 
below, the United States' world beef trade merely helps to mitigate 
(i.e., reduce) the USMCA deficit, but does not overcome it.

Chart 3
[GRAPHIC] [TIFF OMITTED] T2721.003


.epsUsing 2020 as a comparative example, Chart 3 above reveals the 
United States' volume-based world trade balance was a negative 1.5 
billion pounds. But Chart 2 above reveals that the United States' 
volume based USMCA trade balance alone was a negative 2.2 billion 
pounds. Thus, the United States is unable to overcome its USMCA-based 
trade deficit by trading with the rest of the world. This means, at 
best, the United States engages in beef and cattle trade with the rest 
of the world to help mitigate its USMCA trade deficit.

Also using 2020 as a comparative example, but this time to determine if 
the USMCA's value-based trade deficit likewise surpasses the value of 
the United States' world beef trade, data generated by the U.S. 
Department of Agriculture Foreign Agricultural Service's Global 
Agricultural Trade System show the United States' value-based world 
trade balance was a negative $1.1 billion in 2020. But, again, as 
revealed above in Chart 1, the United States' value based USMCA trade 
balance alone that year was a negative $3.3 billion. Thus, in 2020 the 
United States merely reduced its $3.3 billion USMCA trade deficit to a 
$1.1 billion world trade deficit by trading with the rest of the world.

The U.S. live cattle supply chain--consisting of America's three-
quarters of a million family cattle farmers and ranchers--cannot be 
expected to prosper when multinational beef packers, processors and 
importers continually source greater quantities of undifferentiated 
beef and cattle from Mexico and Canada. Yes, the multinational beef 
packers, processors and importers are benefiting greatly from sourcing 
more and more cattle and undifferentiated beef from Mexico and Canada--
as those imports are direct substitutes for U.S. cattle and beef and 
act to leverage down domestic cattle prices. Thus, the multinational 
companies' benefits come at considerable expense to United States 
cattle producers.

Due to the cattle industry's inability to respond quickly to changes in 
supply--a direct function of cattle having the longest biological cycle 
of any farmed animal \4\ and the perishable nature of both fed cattle 
and beef itself--imports of both beef and cattle effectively increase 
supplies in the domestic market (and are direct, undifferentiated 
substitutes for domestic production) and have a lasting impact on 
domestic herd size, production potential, and economic opportunities 
for participants in the domestic live cattle supply chain (i.e., for 
independent cattle farmers and ranchers).
---------------------------------------------------------------------------
    \4\ Economic Models of Cattle Prices, How USDA Can Act to Improve 
Models to Explain Cattle Prices, U.S. Government Accountability Office 
(formally the General Accounting Office) (GAO-020246, March 2002), at 
30.

That undifferentiated beef and cattle imports from Canada and Mexico 
function as direct substitutes for U.S. cattle and beef and cause the 
exodus of U.S. beef cattle operations, shrinkage of the U.S. cattle 
herd, and elimination of opportunities for aspiring cattle farmers and 
ranchers was evidenced in the 2018 U.S. International Trade Commission 
---------------------------------------------------------------------------
(USITC) investigation into the USMCA.

During the investigation, the North American Meat Institute (NAMI) 
testified that, ``The Northwest region imports 227,000 head of Canadian 
fat cattle per year representing approximately 19 percent of processing 
capacity in the region. Additionally, another 55,000 of Canadian feeder 
cattle are imported annually into Oregon, Washington, and Idaho, 
representing 8 percent of the one-time [packing] capacity [in that 
region].''\5\
---------------------------------------------------------------------------
    \5\ United States-Mexico-Canada Agreement: Likely Impact on the 
U.S. Economy and on Specific Industry Sectors, November 16, 2018, 
Investigation No. TPA-105-003, United States International Trade 
Commission, Hearing Transcript, at 499-500.

The National Cattlemen's Beef Association (NCBA) testified that 
``especially in the Pacific Northwest,'' imports of Canadian and 
Mexican cattle ``have supplemented seasonal shortages in our herd and 
helped our feed yards and packing facilities run at optimal 
levels.''\6\
---------------------------------------------------------------------------
    \6\ Id., at 504.

Data show the number of beef cattle operations in the states of 
Washington, Oregon, and Idaho (the Pacific Northwest or Northwest), 
declined from 38,500 beef cattle farms in 1994, the year NAFTA was 
implemented,\7\ to just 28,992 beef cattle farms by 2017, the latest 
available census data.\8\ This represents a 25% decline in the number 
of Pacific Northwest beef cattle farms and ranches under NAFTA.
---------------------------------------------------------------------------
    \7\ See Cattle, USDA-National Agricultural Statistics Service 
(NASS), February 1995, at 13, available at https://
downloads.usda.library.cornell.edu/usda-esmis/files/h702q636h/wm117r
357/bc386m73s/Catt-02-03-1995.pdf.
    \8\ See Table 12, Cattle and Calves--Inventory, 2017 and 2012, 
State Level Data, available for WA, OR, and ID, at https://
www.nass.usda.gov/Publications/AgCensus/2017/Full_Report/
Census_by_State/index.php.

Data also show the total number of beef cows in those same states 
declined from 1.46 million head in 1994 \9\ to only 1.22 million head 
in 2021,\10\ representing a 16% decline in the number of beef cows in 
the states of Washington, Oregon, and Idaho under NAFTA.
---------------------------------------------------------------------------
    \9\ See Cattle, USDA-National Agricultural Statistics Service 
(NASS), February 1995, at 5, available at https://
downloads.usda.library.cornell.edu/usda-esmis/files/h702q636h/wm117r
357/bc386m73s/Catt-02-03-1995.pdf.
    \10\ See Cattle, USDA-NASS, January 2021, at 6, available at 
https://downloads.usda.library.
cornell.edu/usda-esmis/files/h702q636h/n009ww19g/9880wj45t/
catl0121.pdf.

Thus, while the U.S. was importing 282,000 head of both fat cattle and 
feeder cattle from Canada and/or Mexico into the Pacific Northwest 
(this according to the NAMI testimony cited above), and producing 
undifferentiated beef from those imported cattle, the domestic beef cow 
herd in the Pacific Northwest shrank by about 240,000 head of cattle 
and over 9,500 beef cattle farms and ranches exited the U.S. cattle 
---------------------------------------------------------------------------
supply chain.

These data and admissions by both the NAMI and NCBA fully support R-
CALF USA's position that increased imports of cattle from which 
undifferentiated beef is produced has substantively harmed the U.S. 
cattle supply chain by displacing U.S. cattle operations and U.S. 
cattle. While these empirical data provide specific evidence for the 
Pacific Northwest, nationwide evidence of the shrinking numbers of 
cattle farms and ranches and the declining number of cattle in the U.S. 
herd provides every indication that this same import-related harm is 
being exacted in every state.

This outcome of the USMCA--an agreement that facilitates unlimited and 
undifferentiated imports of beef and cattle from Canada and Mexico--is 
opposite of what needs to occur to strengthen the United States beef 
supply chain. Only by making meaningful reforms to the USMCA can the 
United States expect to begin rebuilding its continually shrinking U.S. 
cattle and beef supply chain.

The imbalanced trade with Canada and Mexico under the USMCA is 
contributing significantly to the inability of U.S. cattle producers to 
expand production, or to remain profitable even in the wake of 
increasing domestic beef demand, increasing beef consumption, and 
increasing wholesale and retail beef prices. As a direct result, U.S. 
cattle producers, their domestic live cattle supply chain, and the 
rural communities they support are being irreparably harmed.

More recently--soon after the March 2020 outset of the COVID-19 
pandemic--U.S. cattle producers, with perishable, slaughter-ready 
cattle that needed to be marketed, could not get a bid for their cattle 
from domestic beef packers for as long as seven weeks.\11\ Meanwhile, 
the multinational beef packers continued importing tens of thousands of 
head of slaughter-ready cattle from Canada,\12\ prompting R-CALF USA to 
issue the warning that imports are displacing U.S. cattle producers' 
access to their own domestic markets.\13\
---------------------------------------------------------------------------
    \11\ See We're fighting for a way of life: Pandemic causes Iowa 
cattle farmers to lose money while consumers pay more, Donnelle Eller, 
Des Moines Register (November 12, 2020), available at https://
www.desmoinesregister.com/story/money/business/2020/11/12/covid-19-
exposes-
dysfunction-cattle-industry-why-cattle-producers-losing-money-when-
consumers-paying/6076820002/.
    \12\ Canadian cattle imported into the U.S. for immediate slaughter 
at U.S. beef packing plants after the March 2020 onset of COVID-19 
included 41.9 thousand in April, 47.7 thousand in May, 46.5 thousand in 
June, 36 thousand in July, 32.3 thousand in August, 41.8 thousand in 
September, and 47.4 thousand in October. See Cattle: Monthly U.S. trade 
(head), Data Set, USDA ERS, available at https://www.ers.usda.gov/data-
products/livestock-and-meat-international-trade-data/livestock-and-
meat-international-trade-data/#Monthly%20U.S.%20Livestock
%20and%20Meat%20Trade%20by%20Country.
    \13\ R-CALF USA: Imports Are Displacing U.S. Cattle Producers' 
Access to American Markets, R-CALF USA, Tri-State Livestock News (April 
25, 2020), available at https://www.tsln.com/news/r-calf-usa-imports-
are-displacing-u-s-cattle-producers-access-to-american-markets/#::text
=While%20widespread%20reports%20abound%20of%20American%20cattle%20produc
ers,cattle
%20producers%E2%80%99%20access%20to%20their%20own%20domestic%20market.

But issuing warnings do little for America's cattle producers unless 
decision makers respond, which has not yet been the case. R-CALF USA 
urges the U.S. Senate Committee on Finance to take decisive action to 
rebalance the untenable cattle and beef trade imbalance memorialized 
under the USMCA. At the very least, and as a first step, we urge you to 
take steps to assist America's cattle farmers and ranchers by giving 
them the ability to compete in their own domestic market by 
differentiating their USA-produced beef from foreign beef and beef from 
---------------------------------------------------------------------------
foreign cattle.

Congress should move quickly and decisively to accomplish this by 
introducing and passing new mandatory country-of-origin labeling 
(mCOOL) legislation to require all beef in U.S. commerce to be 
conspicuously labeled as to where the animal from which the beef was 
derived was born, raised, and harvested.

Again, thank you for this opportunity and please let me know what 
additional information you might need as you investigate this systemic 
failure of the USMCA.

Sincerely,

Bill Bullard, CEO

                                  [all]