Washington Insider -- Wednesday

The Ghost of TPP

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

Is a US Canada Softwood Lumber Trade Deal in Sight?

Optimism is now being expressed by Canada that the potential is there for a deal on softwood lumber trade with the U.S., according to Canada's Foreign Affairs Minister ChrystiaFreeland.

While a deal could be reached, Freeland cautioned in a teleconference with reporters from the Philippines that it still is not clear if such a deal is at hand. "Having said that, I can't today say whether or not and when such an agreement might be achievable," she said. "At this point, I'm unable to predict when we might reach an agreement."

Last week, Canadian ambassador to the U.S. David MacNaughton indicated the two sides were close to a deal that would limit Canada's share of the U.S. market to 30 percent for softwood lumber, noting a debate was still ongoing relative to what would happen if the U.S. was unable to meet its share of the market.

The U.S. softwood lumber industry rejected the proposal, saying it was insufficient and criticized Canada for "negotiating in the media" on the matter, according to a statement from U.S.Lumber Coalition spokesman Zoltan van Heyningen. The U.S. will "not accept" a deal with Canada that is at or above their current market share, he noted.

Still, Freeland said Canadian officials "including very much me personally" have continued to be "very actively and energetically and substantively engaged with the U.S. on the lumber dispute.

The U.S. Commerce Department is currently set to make final determinations on the level of dumping and subsidies in early September unless the statutory deadline is extended.

USDA Proposes Lifting Restrictions on Mexican Pork

USDA is proposing to recognize Mexico as free of classical swine fever, USDA's Animal and Plant Health Inspection Service (APHIS) announced August 7. This action would then lead the U.S. to lift import restrictions on Mexican pork and pork products, though not restrictions on live swine and swine genetics, which are tied to other health concerns.

Classical swine fever, also known as hog cholera, is a highly infectious viral disease. While it does not cause illness in people, it is often deadly to infected pigs. Mexico had previously asked the U.S. to lift the restrictions in 2007, but APHIS at the time was not convinced that Mexico's program to control classical swine fever was sufficient to ensure the products were safe.

In 2015, the World Organization for Animal Health recognized Mexico as free of the disease, and a USDA site visit to Mexico and other data support that conclusion, APHIS said. The agency will accept public comments for 60 days before making a final determination.

Washington Insider: The Ghost of TPP

A recent Politico report renews the criticism of Trump administration trade policy. Its "Iowa Farmers Haunted by Ghost of TPP," is focused on Wright County, Iowa, a community roughly 100 miles north of Des Moines. Politico says the are may seem far from the raging debate over globalism sparked by the Trump's presidency, "but it's actually right at the center."

In fact, the county's economic survival depends on agriculture and "right now there are relatively few signs of optimism on the trade front." Trump's decision to walk away from the TPP has stoked uncertainty about U.S. trade policy as well as the strength of the president's commitment to rural America, Politico concludes.

The report says Prestage Farms, a North Carolina-based, family-owned pork and poultry business, gave the people of Wright County hope by committing to build a 700,000-square-foot processing plant in the town of Eagle Grove. The Prestage plant, set to open by the fall of 2018, was an investment motivated in large part by expected gains from TPP.

Trump was quick to leave the deal, but the administration hasn't made other moves to help the slumping farm economy. So, other countries have moved to strike agreements that promise to effectively box U.S. producers out of market share. "Any move to add a second shift at the Prestage plant or expand production will largely depend on new trade opportunities" the report says.

"I don't think that Trump is naïve enough to not recognize the value of trade deals to the U.S.," Ron Prestage, owner of Prestage Farms, told Politico. "I just think he has an unusual way of introducing what his policy is going to be."

"I sure hope I'm right about that," he added after a pause.

Politico says its analysis found that the 11 other TPP countries are now involved in 27 separate trade negotiations with each other, other major trading powers in the region like China and massive blocs like the EU. Those efforts range from exploratory conversations to deals already signed and awaiting ratification. Seven of the most significant deals for U.S.farmers were either launched or concluded in the five months since the United States withdrew from the TPP.

So, it's is no accident that Agriculture Secretary Sonny Perdue's "Back to Our Roots" tour brought him to Iowa where he assumed the "full pro-trade mode" when he appeared at the Iowa Ag Summit in Des Moines on Saturday. Politico notes that the first round of the NAFTA renegotiation is set to begin in Washington, DC on Aug. 16 and the Secretary emphasized his "familiar refrain" that he wants to make sure the agriculture sector doesn't take the brunt of concessions as the Trump administration seeks to draw down the U.S. trade deficit and boost manufacturing.

"Overall, agriculture has done very well under NAFTA and we hope to continue that," Perdue told reporters Saturday. So, "do no harm, but then let's figure out how we can enhance the agreement, Perdue said.

Sen. Joni Ernst, R., Iowa, called on the administration to strike new trade deals with countries in Asia in light of Trump's TPP pullout. "If we don't pursue these trade agreements, I guarantee you that China will," she said.

She's right about that, Politico thinks. "As China, which was never a part of the TPP, senses blood in the water, it is moving quickly to assert itself, rather than the United States, as the region's trade arbiter." Politico Magazine also reports that "China is aiming to close talks by the end of this year on its behemoth Regional Comprehensive Economic Partnership (RCEP) — a trade agreement involving 15 other Asia-Pacific countries.

Politico also cites Alicia Rockwell, public affairs director for Blue Diamond Growers. "International trade is vital to U.S.agriculture, and it needs to be a priority in the farm bill," she said and added that almonds are the top exported specialty crop in the U.S. and California's number one agricultural export. "In light of our stalled trade policy, the U.S. is being left behind and almonds are being put at a great disadvantage," she argued.

A representative from the California Strawberry Commission made a similar case, arguing that farm bill trade promotion initiatives such as the Market Access Program are to thank for opening up China as an export market for the fruit.

Farm country is still Trump country, many observers say. But, it also is export country and, while the administration—especially Secretary Perdue—clearly recognizes that fact, there is a battle among administration experts on what to emphasize—efforts to cut some trade deficits, or to preserve and expand current excellent overseas markets for farm products.

This is a high stakes fight, and it includes many geopolitical issues that were high priority concerns under TPP, but not so much today. These are fights producers are watching closely, as they should, Washington Insider believes.

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