Washington Insider -- Wednesday

Japanese Safeguard Tariffs Triggered by Imports

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

USDA's Perdue on Ag Tour in US

USDA Secretary Sonny Perdue is embarking on a five-state farm bill tour via an RV, starting Thursday at the Wisconsin State Fair and move on to Minnesota, Iowa, Illinois and Indiana.

He'll hold listening sessions to hear from producers and consumers "on the front lines of American agriculture and ... know best what the current issues are," Perdue said in a statement. "USDA will be intimately involved as Congress deliberates and formulates the 2018 Farm Bill," Perdue said.

"We are committed to making the resources and the research available so that Congress can make good, facts-based, data-driven decisions. It's important to look at past practices to see what has worked and what has not worked, so that we create a farm bill for the future that will be embraced by American agriculture in 2018."

Group: Bridge Spending Up in Past Decade, But More Needed

States have ramped up their spending in bridge repair projects over the last decade, but it still isn't enough, according to a new analysis from the American Road and Transportation Builders Association (ARTBA).

The group examined federal data that tracks investments in bridge work, finding that bridge construction had increased just 8%, from $54.6 billion in 2007 to $59.2 billion in 2016.

At the current pace of investment it would take more than three decades to replace and repair every bridge that needs work, ARTBA Chief Economist Alison Premo Black said.

The group said that "a long-term infrastructure package from Congress and a permanent revenue solution to the Highway Trust Fund would help states make greater progress."

Infrastructure spending has been given a high profile by the Trump administration though details of their plan to use $200 billion in government spending to unleash $1 trillion in infrastructure spending have yet to be released.

Washington Insider: Japanese Safeguard Tariffs Triggered by Imports

It is usually good news when exports to a trading partner rise, but not always. Informa Economics is reporting that quarterly imports by Japan exceed their trigger that will bring higher duties on imports of most frozen beef through March 31.

Japan increases duties on imports of frozen beef from countries it does not have an economic partnership agreement with, and the new level will be 50% ad valorem, up from the current 38.5%. The reason was trade data showed shipments during April-June exceeded the trigger under "safeguard" mechanisms, Japanese government officials said.

The excess wasn’t much — just over 113 metric tons, Informa said, citing U.S. Meat Export Federation (USMEF) data. The new duties will be in place through the rest of Japan's fiscal year – through March 31, 2018. This is the first time the duties have been triggered since August 2003.

Japan's government is currently explaining the action to the U.S. and other countries, Finance Minister Taro Aso told reporters. He said he is ready to discuss the matter at a high-level economic dialogue with Vice President Mike Pence later this year if requested.

The impact to Japanese consumers should be "limited," according to farm minister Yuji Yamamoto as frozen beef accounts for about 20% of total Japanese beef imports.

However, the new tariff may affect U.S. exporters significantly, USMEF warned. "USMEF recognizes that the safeguard will not only have negative implications for US beef producers, but will also have a significant impact on the Japanese foodservice industry," explained USMEF President and CEO Philip Seng. "It will be especially difficult for the gyudon beef bowl restaurants that rely heavily on Choice U.S. short plate as a primary ingredient. This sector endured a tremendous setback when U.S. beef was absent from the Japanese market due to BSE, and was finally enjoying robust growth due to greater availability of US beef and strong consumer demand."

The group pledged to push the U.S. and Japanese governments to find a "mutually beneficial resolution" on the matter, and said it would work with partners in Japan to minimize the impact.

Japan has separate quarterly import safeguards on chilled and frozen beef that allow imports to rise 17% compared to the same quarter the prior year, with the higher duties put in place if imports exceed that level. USMEF points out that Japan's frozen beef imports in the Japan's fiscal 2016 were lower than in previous years resulted in higher imports during the April-June period (the first quarter of Japan's fiscal year 2017) as firms sought to rebuild inventories and there was solid demand from the foodservice sector.

While U.S. beef will be subject to the higher duties, the Japan-Australia Economic Partnership Agreement says imports from Australia will continue at a rate of 27.2%. The 50% duties will apply to imports from countries like the U.S., Canada and New Zealand.

It will be important to watch what the administration does in response to the Japanese move. One step is to work with industry to make sure that trigger is not kick in in the future. Another, of course, is to work with Japan to insure that U.S. exports are treated as favorable as those from competitors. How this confrontation is dealt with will be an important test for future trade policy and should be followed closely as it is approached, Washington Insider believes.

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