From tariffs on dairy and solar products to rules of origin for automobiles, the three parties to the United States-Mexico-Canada Agreement (“USMCA”) have disagreed on a variety of issues since the agreement came into force in 2020. This time, the subject of the dispute is corn, or more specifically, the measures taken by Mexico to ban the import of certain genetically engineered (“GE”) corn and other GE products.

On June 2, 2023, the United States Trade Representative (“USTR”) announced that the U.S. requested dispute settlement consultations with Mexico pursuant to Article 31.2 and 31.4 of the USMCA. As discussed in our previous article on USMCA Chapter 31 disputes, a request for consultations under Chapter 31 can lead to the establishment of a Dispute Resolution Panel if the disagreements are not resolved within 75 days. During the talks, the parties will discuss the provisions of the USMCA, their interpretations, and the rights and obligations each party has under the agreement. This article will provide an overview of the events leading up to this request for consultations and dissect the U.S.’s complaints regarding Mexico’s restrictions on GE corn and other products.

Background
Mexico is the second largest export market for U.S. corn. The U.S. Department of Agriculture (“USDA”) reports that corn exports to Mexico in 2022 were worth $4.92 billion and the U.S. Grains Council indicates that more than 25% of U.S. corn exports go to Mexico. More than 90% of U.S. corn is genetically modified to help increase crop efficiency and resiliency against pests. Not surprisingly, U.S. agricultural groups such as the National Corn Growers Association have been strong opponents of efforts by Mexico to regulate its imports of GE corn.

The current dispute originates from a 2020 presidential decree issued by Mexican President Andres Manuel Lopez Obrador in late 2020 that called for a phase-out of GE corn and the use of glyphosate, a widely used herbicide, that would end in a total ban by January 2024. The decree cited health concerns related to the use of glyphosate and stated that other countries had already banned its use.

U.S. Agriculture Secretary Tom Vilsack has stated that the use of biotechnology is something that “has been proven to be safe for decades,” and the FDA has reported that, while glyphosate residue can be found on corn, it does not appear at unsafe levels. Meanwhile, Mexican organizations, like the Center for Biological Diversity, have claimed that U.S. corn is genetically engineered so that it can withstand the heavy use of pesticides like glyphosate, which has been linked by independent research to serious human health concerns such as cancer.

Procedural History
Leading up to the U.S.’s June 2nd request for consultations, in January the U.S. sent Mexico a formal written request to explain the reasons for its anti-GE products measures, which conflict with Chapter 9 of the USMCA on Sanitary and Phytosanitary (“SPS”) Measures.

In response to this action, Mexico issued a modified decree on February 13, 2023 (the “2023 Corn Decree”) that eliminated the deadline for banning GE corn used in animal feed and other industrial purposes. However, the 2023 Corn Decree includes a ban on GE corn used in nixtamalization and flour production (the “Tortilla Corn Ban”) and instructs that GE corn in other products, including animal feed, should be gradually substituted with non-GE corn.

Following the issuance of the 2023 Corn Decree, the USTR announced that it was requesting technical consultations under Chapter 9 of the USMCA regarding the measures that “adversely affect U.S. trade with Mexico and appear to be inconsistent with Mexico’s commitments under the Sanitary and Phytosanitary (“SPS”) Measures chapter of the USMCA.” However, because no resolution was reached through technical consultations, the USTR requested formal consultations under the dispute settlement provisions of Chapter 31 of the USMCA.

Topics of Dispute
The Dispute Settlement Consultations Request issued by the U.S. lists three main points of dispute:

⦁ Event Authorization Rejections and Resultant Product Bans: The Consultations Request states that since 2021, Mexico has rejected authorization applications covering corn, canola, cotton, and soybean GE events. These rejections have the effect of banning the importation and sale of any products included in the rejected events (i.e., certain GE products).

⦁ Mexico’s Decision to Ban GE Corn for Nixtamalization and Flour Production (Tortilla Corn Ban): The second topic of concern for the U.S. is Mexico’s 2023 Corn Decree which banned GE corn used for nixtamalization and flour production (i.e., tortillas and dough).

⦁ Mexico’s Decision to Gradually Substitute GE Corn Used for Other Human Consumption and Animal Feed: The third topic concerns the provisions in the 2023 Corn Decree that instruct Mexican authorities to gradually substitute GE corn used for purposes other than nixtamalization and flour production. This measure covers corn used for animal feed as well as human consumption.

The U.S. claims the above-listed measures violate multiple provisions of the USMCA, but it mainly relies on the SPS provisions found in Chapter 9. Under Article 9.6 of the USMCA, the parties to the agreement have the right to adopt unilateral SPS measures necessary to protect public health or human, animal, and plant life. However, the parties are generally restricted by other Article 9 provisions from adopting measures that are overly broad or burdensome on trade or that are not based on relevant international standards or a proper risk assessment.

For example, the U.S. claims that each of the above-mentioned measures may be inconsistent with Article 9.6.6(a), which states that each party to the agreement shall ensure that its SPS measures “are applied only to the extent necessary to protect human, animal, or plant life or health.” In addition, the U.S. cites Article 9.6.10, which states that a party shall “select an SPS measure not more trade restrictive than required to achieve the level of protection that the party has determined to be appropriate.” The language of these provisions reflects a listed objective of USMCA Chapter 9, which is to ensure that SPS measures “do not create unnecessary barriers to trade.”

The Article 9 provisions cited by the U.S. are indicative of the government’s repeatedly-stated position that Mexico’s measures are unnecessary and not based on scientific evidence recognized by the U.S. That may mean that to resolve this matter, one party must compromise on a position it believes is based on science and protecting the health of its citizens and environment.

Next Steps
On June 9, 2023, Canada announced that it would join as a third party in the dispute settlement consultations. In a Joint Statement, Canada’s Ministers of Agriculture and International Trade stated that the government of Canada “shares the concerns of the U.S. that Mexico’s measures are not scientifically supported and have the potential to unnecessarily disrupt trade in the North American market.” The three parties will now attempt to reach a resolution in the coming months, and as has happened in the past, a dispute resolution panel may be established if no agreement is reached.

The resolution of this matter may significantly impact the U.S. agricultural industry. For example, a resolution favorable to the U.S. would likely mitigate the negative effects Mexico’s measures have on U.S. farmers. However, it may prove difficult for Mexico to compromise on measures it has enacted to protect human and environmental health.

Torres Trade Law will continue to monitor this dispute resolution process as it develops.