Washington Insider--Wednesday

Cuban Trade Still a Trickle

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

USDA Sets 2015-Crop Rice PLC Payment Rates

Market-year average prices for 2015 long grain and medium/short grain rice will result in payments under the Price Loss Coverage (PLC) program for eligible producers, according to USDA.

Payments under PLC are generated when the market-year average price is under the reference price for a covered commodity. The 2015 rates will be 2.9 cents per pound for long grain rice and 2.8 cents per pound for medium/short grain rice.

As for Agriculture Risk Coverage-County (ARC-CO) payment rates for long grain and medium/short grain rice, actual crop revenue is calculated by multiplying the actual average county yield for the covered commodity times the higher of either the market year average price or the national loan rate for the covered commodity. Once the yield is known for a specific county and covered commodity, the ARC-CO actual revenue can be determined for long grain rice and medium/short grain rice.

The only commodities where PLC payment rates have not yet been determined for 2015 crops are those for minor oilseeds (large and small chickpeas, sunflowerseed, flaxseed, mustard seed, rapeseed, safflower, crambe and sesame seed) and temporate Japonica rice. The market year price for minor oilseeds will be published November 30, 2016, while the price for temporate Japonica rice will be released January 31, 2017.

Canada Introduces Legislation to Implement Trade Deal With EU

Canada Bill C-30, the Act to Implement the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its member states, was introduced Oct. 31 by International Trade Minister Chrystia Freeland, and must be passed by the House of Commons and the Senate before becoming law. The EU and Canada signed the trade deal over the weekend.

The strong majority held by Prime Minister Justin Trudeau's government in the House of Commons assures quick passage. The trade minister at the same time presented to Parliament a copy of the full text of the bilateral deal, in both English and French.

Freeland confirmed that European Parliament President Martin Schulz told her October 30 that he expects the EU body to hold a ratification vote in December. Approval by the Canadian and European parliaments would immediately bring more than 98% of the deal provisionally into effect, including all “commercially relevant” provisions, she said at a news conference. “We now see a clear next step to bring the agreement into effect,” she said.

Freeland said the deal's investor-state dispute provisions require more work before they can be approved by all parties, but stressed that the most recent proposals offer a progressive new way to resolve disputes. “That's a process that we're now very much engaged with Europe on,” she said.

She said the government is working on support packages to help Canadian companies, particularly in the agriculture and fisheries sectors, that may be negatively affected by increased imports from Europe. Those packages will be finalized before the deal takes effect, she said.

Freeland addressed a question on how Britain's decision to leave the EU would affect its participation in CETA. Canada remains in “close touch” with the United Kingdom, which has signed the trade deal and is currently still part of the EU, she said.

Washington Insider: Cuban Trade Still a Trickle

Earlier, there was a surge of interest in U.S.-Cuba trade and investment when the first cracks in the long-standing embargo appeared. Now, two years into President Barack Obama's campaign to normalize relations, the results are disappointing, the Associated Press is reporting this week.

“Apart from a few marquee deals for big U.S. brands, formal trade between the two countries remains at a trickle,” AP said in an article reporting on discussions with US companies who exhibited Monday at the International Fair of Havana, the island's biggest general-interest trade fair. As Cuba trumpeted new deals with Russia and Japan, US corporate representatives staffing stands at a pavilion shared with Puerto Rico said they saw little immediate prospect for doing business with Cuba on a broader scale.

The article was fairly downbeat. It quoted Diego Aldunate, Latin America director for Illinois-based Rust-Oleum paints, who said: "We know we have to be here, to show our willingness to be here," he told the AP. He and a colleague, Oscar Rubio, said they were waiting for potential clients from Cuba's small worker-owned cooperative sector to stop by their stand, but by midafternoon no one had appeared.

The Cuban government maintains a monopoly on importing and exporting and on virtually all sales of products inside the country, making the state bureaucracy the final arbiter of what business gets done, AP noted. "The complicated thing is that the distributor is the government, and we don't know how that will work," Rubio said.

The administration enacted six rounds of regulations changing the half-century-old U.S. trade embargo on Cuba, allowing imports and exports, sales to the socialist government and limited U.S. investment on the island. Cuba has allowed Airbnb, Starwood hotels and 10 U.S. airlines to set up operations. However, the “tone” of US-Cuban trade relations is still quite cool.

As might be expected, Cuban officials blame the remaining provisions of the embargo as the true obstacle to greater trade, placing constant and heavy emphasis on what they call "the blockade." For example, they say, "The blockade remains in force, the absurd commercial and financial blockade," Commerce Secretary Rodrigo Malmierca said at the ceremony opening the fair Monday. "This is causing great damage to the Cuban people, and it's the principal obstacle to the normalization of relations between Cuba and the United States."

Observers note that Cuba's small but growing private sector has been able to flourish and produce tens of thousands of new jobs despite the strictures of the embargo. “Untold millions of dollars have flowed into Cuba over the last two years, funding thousands of new private bed-and-breakfasts and dozens of new restaurants in the capital as detente with the US sets off a boom in tourism to the island,” AP said.

In addition, some see the stagnant state of official trade with the US as a conscious decision by the Cuban government to limit commerce to a few high-profile bites of the apple while funneling most business toward European and Asian companies, in order to keep the US business community hungry for more and pushing Congress to do away with the embargo, AP said.

"The Cuban government is using the interest by U.S. companies as bait to entice the interest of companies in other countries," said John Kavulich of the U.S.-Cuba Trade and Economic Council, a private group that produces mostly skeptical analyses of the prospects of U.S.-Cuba trade. "The Cuban government is saying, 'Let's not give any more than absolutely necessary to U.S. companies,' so that the companies will continue to salivate toward illusory potential opportunities. There's far more inspiration and aspiration than reality."

So, we will see. It is not surprising that the remnants of the long embargo can still be seen and that those policies rankle Cubans. However, U.S. products likely will be seen as increasingly competitive in Cuba as trade and investment ties strengthen—a change likely to take time.

At the same time, some traders note that Cuban market prospects have been expanding significantly in several areas and likely will continue to do so in spite of the strong anti-trade political environment in the United States, which could well affect even promising new markets like Cuba. This is especially since competitors like the Europeans and Chinese can be expected to continue to exploit any U.S. ambiguity toward expanding Cuban trade. This is an issue US producers should watch closely as it evolves, Washington Insider believes.

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