Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.White House Gives Up on TPP Vote
It is now official in what was largely accepted prior to the November 8 elections – the White House will not seek a vote on the controversial Trans-Pacific Partnership (TPP) agreement during the lame duck session of Congress.
Republican and Democratic leaders in Congress told the White House they will not advance it in the election’s aftermath, and Obama administration officials acknowledged it has no way forward now.
Senate Majority Leader Mitch McConnell, R-Ky., and Sen. Chuck Schumer, D-N.Y., have said no to bringing the TPP to a vote in the lame duck session.
In the House, Rep. Kevin Brady, R-Texas, chairman of the committee that oversees trade, said in a statement that “this important agreement is not ready to be considered during the lame duck and will remain on hold until President Trump decides the path forward.”
Matthew McAlvanah, a spokesman for U.S. Trade Representative Mike Froman, said Friday that despite all the work the administration has done with lawmakers on Capitol Hill “ultimately it is a legislative process, and the final step is for Congress to take.”
White House officials preparing for President Obama’s trip to meet Pacific leaders in Peru appeared to acknowledge the defeat on Friday. “In terms of the TPP agreement itself, Leader McConnell has spoken to that, and it’s something that he’s going to work with the president-elect to figure out where they go in terms of trade agreements in the future,” said Wally Adeyemo, deputy national security adviser for international economic affairs.
Trump, Chinese President Xi Speak Of Mutual Respect
President-elect Donald Trump and Chinese President Xi Jinping spoke and established a "mutual respect," according to a statement from the president-elect.
Meanwhile, U.S. goods could suffer sales hits in China if President-elect Donald Trump goes through with his "naive" plan of slapping a large 45% import tariff on Chinese products, according to state-backed Chinese newspaper Global Times.
Should any such policy come into effect, China will take a tit-for-tat approach, the article noted, specifically stating, "A batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and corn imports will be halted."
Washington Insider: Stock Concerns Over Ag Exports
There are several types of news themes this week, mostly concerning the new administration. In addition, there is a Bloomberg report on the risks to agriculture implied by campaign promises about trade. Bloomberg reports that the campaign promises really could affect agriculture negatively, especially at this time of ag surpluses and declining farm income.
The report asserts that campaign pledges to “get tough on trade with China and Mexico” could increase risks for American farmers, who are heavily dependent on selling food to other countries. It notes that while few details are yet available about new policies, there have been calls for punitive tariffs on imported goods. “Such moves could spur retaliation by other countries, Bloomberg says, “disrupting U.S. farm-product exports valued at $133 billion last year, 28% of which went to China and Mexico.”
Bloomberg cites Brett Stuart, founding partner of Denver-based Global AgriTrends, who notes that this year about a fifth of U.S. pork will be shipped to buyers overseas along with nearly half of the soybean crop. China is the largest importer of U.S. soybeans and Mexico is the top buyer of U.S. chicken and corn, Bloomberg says.
Also, the sector’s overseas markets are already under pressure, with agricultural exports at a five-year low in 2015. As economic growth slowed, other countries produced more and the dollar rallied—changes that “compounded an erosion of farm income that is down for a third straight year.”
Perhaps the key uncertainty about how tough the new administration will be on overseas competitors and markets arises from the “strong support it got from rural states that are major agricultural producers, including Iowa, the nation’s largest corn and hog producer; Georgia, the top chicken producer; and Texas, the biggest cattle state.
During the campaign, China was criticized for currency manipulation and a wall was proposed along the border with Mexico, along with threats to withdraw from the World Trade Organization and change the North American Free Trade Agreement with Mexico and Canada, who are very important U.S. trading partners. There also were strong criticisms of the Trans-Pacific Partnership, which the National Corn Growers Association, American Soybean Association and National Cattlemen’s Beef Association are urging Congress to pass.
Bloomberg notes that agricultural exports to Mexico and Canada have quadrupled since NAFTA was enacted in 1994 and that China bought $20.3 billion of U.S. agricultural products during the same period. Still, “The TPP is very likely dead,” Ann Duignan, a New York-based analyst for JPMorgan Chase & Co., reported last week. She concluded that “The U.S. presidential election result may have an out-sized impact on U.S. agriculture.”
Bloomberg agrees that much depends on how the new administration implements campaign rhetoric as policy and that “rhetoric and policies may be two different things.”
Paul Jeschke, who grows corn and soybeans in Illinois, said he isn’t worried even though his business is dependent upon exports. He said that “Trump is against bad deals with other countries, not trade and exports overall... I believe he probably does understand how important trade is...”
Still, Bloomberg points out that, “Some investors aren’t so sure.” Shares of Chicago-based Archer-Daniels-Midland Co., the world’s largest corn processor, fell as much as 7.7% in New York Friday, the biggest intraday decline in nine months, after Duignan cut JPMorgan’s rating to "underweight" from "neutral."
That’s because if trade with Mexico is “negatively impacted” and companies including ADM could be affected, David Driscoll, a New York-based analyst for Citigroup Inc., said in a report on Wednesday. ADM processes the grain into sweeteners and starches in Mexico and also exports high fructose corn syrup to the country.
Also, ADM’s grain handling business helps moves surpluses from countries including the U.S. to areas of demand such as Asia and the Middle East. “At ADM, we have prospered for 115 years under 20 US presidents, and nothing in yesterday’s US presidential election changes our positive outlook for the food or agriculture industry, or for ADM specifically,” Jackie Anderson, a company spokeswoman, said Wednesday.
So, we will see. Like many issues that were tossed around in the campaign, those concerning trade may be implemented in many different ways, especially as the Congress begins to have its say.
Perhaps the biggest threat is that policies that promote isolation may well be more important than many of the campaign advisors understood. Trade certainly is a particular area producers should watch as issues concerning global links are increasingly on the agenda, Washington Insider believes.
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