The Foreign Agricultural Service’s Role in Addressing MRL-Related Trade Issues Julie Chao, Senior Technical Advisor USDA Foreign Agricultural Service Office of Agreements and Scientific Affairs Plant Division March 5, 2018 FOREIGN AGRICULTURAL SERVICE

A few words on agriculture and trade: Exports are a key driver of economic growth for U.S. agriculture and rural America. Trade helps to create markets for U.S. agricultural products, and has multiplier effects that generate additional jobs and investment that foster economic growth in both the rural and non-farm economies. 2016 exports were $135 billion, 2017 were $138 billion. Source: USDA FAS FOREIGN AGRICULTURAL SERVICE

The U.S. has an agricultural surplus, meaning that we produce more than we as a nation consume. We export more than 20% of our overall agricultural production, and for some commodities (cotton, tree nuts) more than 70% of U.S. production is destined for export markets. Not surprisingly, we are the world’s top exporter of food and agricultural products. Source: USDA FAS FOREIGN AGRICULTURAL SERVICE

Modern crop protection tools and trade are At the same time, 11% of the world’s population lacks food security…that’s nearly 800 million people who do not have reliable access to an affordable, safe, nutritious food supply. The current population is 7.5 billion, and is expected to reach 9.7 billion in 2050. With current population growth and changes in food preferences, it is expected that food demand will rise significantly—particularly in net-food-importing countries. At the same time, certain regions around the globe are facing potential reductions in agricultural yields due to climate change. Agricultural trade is critical to addressing food security. Modern crop protection tools and trade are critical to achieving global food security Source: USDA FAS FOREIGN AGRICULTURAL SERVICE

Given the importance of agricultural trade to economic growth and global food security, how do we: Grow more? Waste less? Move it around better? FOREIGN AGRICULTURAL SERVICE

Top Agricultural Export Markets U.S. agricultural products are exported to countries all over the world. Here is a look at the top export markets in 2016. As you can see, our top markets include both highly developed economies (Canada, Japan, EU) and emerging economies (China, Mexico, Korea). FOREIGN AGRICULTURAL SERVICE

Growing Markets Some of our fastest growing markets are also emerging economies in Central and South America and Southeast Asia. In all of these markets, though—whether we are talking about developed or emerging economies—one of the increasing challenges that growers and exporters face today is ensuring that these markets remain accessible, and free from trade disruptions that can be caused by pesticide maximum residue limit (MRL) violations. Source: USDA FAS FOREIGN AGRICULTURAL SERVICE

International MRL Standards National MRL Regime Codex MRL Standard With this growth in international food supply chains, we are seeing regulatory frameworks evolving around the world. FOREIGN AGRICULTURAL SERVICE

International MRL Standards Inability of Codex to keep pace with global demand for MRLs Public concern about food safety Codex MRL Standard National MRL Regime Due to increased awareness/concern about food safety issues among consumers and regulators, many countries are taking a greater interest in establishing and monitoring pesticide MRLs. As new crop protection tools have become available, Codex has struggled to keep up with the pace of innovation and establish a sufficient number of MRLs. Some countries are starting to diverge from Codex deferral policies in favor of national MRL standards. (National MRLs, Codex MRLs, deferral systems, default MRLs) FOREIGN AGRICULTURAL SERVICE

International MRL Standards Inability of Codex to keep pace with global demand for MRLs Erosion of consumer confidence Public concern about food safety Codex MRL Standard Political pressure on governments to regulate food supply National MRL Regime With this evolution of different regulatory systems, we see a significant increase in the number of MRLs being established around the world, but these MRLs are not always harmonized. As a result, the international MRL landscape is becoming increasingly complex, making it challenging to produce food for the export market FOREIGN AGRICULTURAL SERVICE

MRL Disharmonization There are many reasons why MRLs end up being set at different. Some are technical or policy-related—differences in consumption patterns, different GAPs, determination of the residue definition, deterministic vs. probabilistic exposure estimates, different methods for assessing risk. The lack of MRLs in a given market may also be driven by economic incentives (or rather the lack of economic incentives to establish MRLs in export markets or high costs of data development) While some MRL-related trade barriers may result from disparate data requirements or policies, many are unintentional and stem from a lack of technical or regulatory capacity, particularly in developing economies. FOREIGN AGRICULTURAL SERVICE

Exports Lost export potential Agricultural Production 10 ppm Disharmonized MRLs are like uneven staves on a barrel. The lowest MRL is the limiting factor for exports 5 ppm 3 ppm 2 ppm So how does MRL disharmonization impact growers and exporters? Lost export potential FOREIGN AGRICULTURAL SERVICE

MRL Violations and Commercial Risk Violations can trigger sanctions for entire industry Potential losses and cost of compliance deter trade Compliance plans require significant resources Potential risks may limit use/adoption of crop protection tools Reduced opportunity for U.S. exports Misaligned and missing MRLs in foreign markets impose high commercial risks that discourage export opportunities and limit growers’ options for crop protection tools. FOREIGN AGRICULTURAL SERVICE

Emerging Challenges Fear-based campaigns undermining science Hazard-based regulation Spread of misinformation eroding trust in regulatory agencies Fear-based campaigns undermining science There are a number of external factors that are also shaping the macro environment surrounding pesticides. FOREIGN AGRICULTURAL SERVICE

Foreign Agricultural Service Linking U.S. agriculture to the world to enhance export opportunities and promote global food security U.S. Agricultural Producers and Exporters Trade Policy Promotion Trade Capacity Building FAS is the lead agricultural trade agency for the USDA and represents the interests of U.S. agriculture overseas Three Pillars: Trade Policy; Trade Promotion (Marketing Programs); and Capacity Building and Food Security Work with U.S. growers and other industry stakeholders to resolve sanitary, phytosanitary, and technical barriers to trade, and to support transparent, science-based regulations and standards FAS Headquarters and Overseas Offices FOREIGN AGRICULTURAL SERVICE

Interagency Partners Also other agencies within USDA (Animal and Plant Health Inspection Service, Federal Grain Inspection Service) FOREIGN AGRICULTURAL SERVICE

On the Ground Assistance FAS foreign service officers in 95 offices around the world provide assistance in obtaining the release of detained U.S. shipments Under the trade policy pillar of the FAS mission, FAS engages with foreign counterparts on MRL issues, both on the ground at a technical level, and at high-levels of political engagement. 2015: Released 250 shipments, $45 million Photo: https://www.cbp.gov/border-security/protecting-agriculture FOREIGN AGRICULTURAL SERVICE

WTO Notifications Over 16,000 SPS notifications have been submitted to WTO since 1995 FAS also monitors foreign regulations that have the potential to impact U.S. agriculture and trade. FAS is lead in coordinating U.S. government responses to World Trade Organization notifications. Under the WTO agreements on sanitary and phytosanitary measures and technical barriers to trade, Member economies are obligated to notify trading partners of measures that may impact trade. MRL notifications specifically have grown by over 50% in recent years. Source: USDA STAR System FOREIGN AGRICULTURAL SERVICE

Bilateral and Multilateral Engagement We also work in bilateral fora: FTAs, TIFAs Regional fora like APEC and OECD Multilateral fora like World Trade Organization and Codex GMUS – international gathering to address minor use issues, FAS and IR-4 FOREIGN AGRICULTURAL SERVICE

Tools and Outreach www.globalmrl.com www.mrlpriority.com ams.usda.gov/datasets/pdp apps.fas.usda.gov/gats gain.fas.usda.gov Work to make data and information available to assist agricultural stakeholders. FOREIGN AGRICULTURAL SERVICE

TASC Program (Technical Assistance for Specialty Crops) Funding for projects that address sanitary, phytosanitary and technical barriers affecting the export of U.S. specialty crops. Eligible activities include seminars and workshops; study tours; field surveys; pest and disease research; pre-clearance programs. Applications are accepted on a rolling basis, with a maximum of $500,000 per year for up to 5 years. Trade Promotion/Marketing Programs, 2nd pillar of FAS mission https://www.fas.usda.gov/programs/technical-assistance-specialty-crops-tasc FOREIGN AGRICULTURAL SERVICE

Market Access Program Partnership between USDA and agricultural stakeholders to share the costs of overseas marketing and promotional activities. Helps build commercial export markets for U.S. agricultural products and commodities through consumer advertising, public relations, point-of-sale demonstrations, participation in trade fairs and exhibits, market research, and technical assistance. Through the Market Access Program (MAP), FAS partners with U.S. agricultural trade associations, cooperatives, state regional trade groups and small businesses to share the costs of overseas marketing and promotional activities that help build commercial export markets for U.S. agricultural products and commodities. FAS supports four State Regional Trade Groups (SRTGs), which in turn assist U.S. companies with creating and expanding export markets for value-added food and agricultural products. These non-profit organizations work closely with state Departments of Agriculture and offer services including: exporter training and education; analysis of export markets and opportunities;  trade shows and buying missions; and support for international marketing campaigns and product promotion activities. All promotional activities conducted by the SRTGs are coordinated with FAS's Washington and overseas offices and most are funded through the Market Access Program. https://www.fas.usda.gov/programs/market-access-program-map FOREIGN AGRICULTURAL SERVICE

Emerging Markets Program Helps U.S. organizations promote exports of U.S. agricultural products to countries that have, or are developing, market-oriented economies and that have the potential to be viable commercial markets. Provides cost-share funding for technical assistance activities such as feasibility studies, market research, sectorial assessments, orientation visits, specialized training and business workshops. Capacity building projects often funded under this program, e.g. work with China on import tolerances. https://www.fas.usda.gov/programs/emerging-markets-program-emp FOREIGN AGRICULTURAL SERVICE

Quality Samples Program Enables potential customers around the world to discover the quality and benefits of U.S. agricultural products. Targets processors and manufacturers rather than consumers, with a focus on developing a new market or promoting a new use for U.S. products. https://www.fas.usda.gov/programs/quality-samples-program-qsp FOREIGN AGRICULTURAL SERVICE

Foreign Market Development (Cooperators Program) FAS partners with non-profit commodity or trade associations called “cooperators,” to promote U.S. commodities overseas. Focuses on generic promotion of U.S. commodities, rather than consumer-oriented promotion of branded products.  Projects address long-term opportunities to reduce foreign import constraints and expand export growth opportunities. Strategic engagement https://www.fas.usda.gov/programs/foreign-market-development-program-fmd FOREIGN AGRICULTURAL SERVICE

Capacity Building Encourage the use of Codex and U.S. standards Promote alignment of MRL policies and laboratory analytical procedures Support residue research to remove MRL trade barriers and reduce U.S. cost burden for generating data Enhance capacity for agricultural development and participation in international trade Finally, 3rd pillar of the FAS mission, capacity building. Some emerging/transition economies are developing their pesticide regulatory structures. FAS works with government partners to: Encourage use of international/Codex standards Provide guidance and training that promotes alignment of MRL policies and analytical procedures Support residue research to reduce U.S. cost burden for generating data and remove MRL trade barriers Through our capacity building activities, we are working to promote inclusivity and broad participation by all Member economies in Codex and the global trading system. As countries build up their capacity to meet international standards and export their own products, they are also emerging as some of the fastest growing markets for U.S. agricultural products. FOREIGN AGRICULTURAL SERVICE

EPA minor use program helped to conceive this project. Example of a long-term capacity-building project that is just starting to bear fruit: Global residue project. USDA and IR-4 have been working with other countries to collaboratively generate data to support Codex MRLs. Often times, U.S. trials alone are not enough to obtain a Codex MRL. If we combine with trials from other countries, everyone saves resources. EPA minor use program helped to conceive this project. Source: Dr. Jason Sandahl, USDA-FAS FOREIGN AGRICULTURAL SERVICE

USDA and IR-4 Partnering with countries around the world. 2017 saw first Codex MRLs established from application package pulling together this data. Source: Dr. Jason Sandahl, USDA-FAS FOREIGN AGRICULTURAL SERVICE

FAS: Linking U.S. agriculture to the world to enhance export opportunities and promote global food security Interagency and Industry Cooperation Capacity Building and Food Security Trade Policy Trade Promotion FOREIGN AGRICULTURAL SERVICE

Questions? Julie.Chao@fas.usda.gov Thank you! FOREIGN AGRICULTURAL SERVICE