By Cassandra Garrison
(Reuters) - The U.S. has requested formal trade consultations with Mexico over the Latin American country's plans to restrict imports of genetically modified corn.
The North American neighbors will inch closer to a full-blown trade dispute under the U.S.-Mexico-Canada Agreement on trade (USMCA) if there is no resolution during the talks, which Mexico says will last one month.
WHAT DOES MEXICO'S GMO CORN DECREE SAY?
Mexico published a presidential decree on genetically modified (GM) corn in late 2020, saying it would ban GM corn in the diets of Mexicans and end the use the herbicide glyphosate by Jan. 31, 2024. The wording of the order threw Mexico's demand for corn imports into question.
President Andres Manuel Lopez Obrador has said GM seeds can contaminate Mexico's age-old native varieties and has questioned their impact on human health.
Mexico, under pressure from its top trading partner the United States to avoid disrupting the export of about 17 million tonnes of corn annually, modified its decree in February. The new decree eliminated the deadline to ban GM corn for animal feed and industrial use, by far the bulk of its U.S. corn imports.
The new plan bans only GM corn used for dough or tortillas but leaves the door open to gradually substituting GM corn for animal feed and industrial use in the future.
The transition period to eliminate glyphosate was also extended to March 31, 2024.
The country's health regulator is now responsible for authorizations of GM corn to be used as animal feed or in industrial uses for human consumption, it said.
WHY DOES THE U.S. OBJECT?
U.S. officials have criticized Mexico's plans as not being science-based and warn that any restriction of genetically modified corn could morph into an all-out trade dispute under the USMCA.
Powerful U.S. farm lobby groups have called on the government to take action against Mexico, citing major economic disruptions to U.S. farmers even under the modified decree.
Biotech industry groups representing companies like Bayer AG (ETR:BAYGN) and Corteva (NYSE:CTVA) Inc have also spoken against Mexico's order, defending biotechnology products as vital for improving food security and lessening the impact of climate change on agricultural production.
Some sector experts have said they worry that Mexico's restriction on GM corn, if successful, could set a precedent, prompting other countries to take a similar approach and disrupting the global corn trade. They argue that if biotechnology is restricted, production will drop and food costs will rise, even as the global population continues to grow.
HOW ARE U.S. CORNS EXPORTS AFFECTED?
U.S corn exports to Mexico in 2022 were worth about $5 billion, according to the U.S. Department of Agriculture. Corn for human food use comprises about 21% of Mexico's corn imports from the U.S., according to a representative from the National Corn Growers Association, citing U.S. Grains Council data.
Data from the USDA shows that over the past five years 4% of all Mexican corn imports have been white corn, which is mostly used for human food.
Most yellow corn is destined for livestock feed, but about 16% of yellow corn exported to Mexico is consumed by humans, rather than livestock, according to the Grains Council data.
Sector experts still have doubts about the amount of U.S. corn exports that will be impacted by Mexico's modified order, due to the wording.
WHAT ARE THE NEXT STEPS?
The U.S. and Mexico will begin technical consultations and have one month to reach a resolution, Lopez Obrador said on March 7.
If the two countries cannot agree, the issue will move to a dispute panel under the USMCA, Lopez Obrador added.
A dispute settlement panel could ultimately lead to retaliatory U.S. tariffs if no resolution is reached. The U.S. Trade Representative said the United States exported $28 billion in agricultural goods to Mexico in 2022, and bought some $43 billion in agricultural imports from Mexico.