Washington Insider - Monday

A New TPP Emerges Without the U.S.

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

Trump Talks Tough on Trade at APEC

President Donald Trump's focus on trade on his Asian trip continued as he arrived in Vietnam for the Asia Pacific Economic Cooperation (APEC) summit. "When the United States enters into a trading relationship with other countries or other peoples, we will, from now on, expect that our partners will faithfully follow the rules just like we do," Trump stated.

"We expect that markets will be open to an equal degree on both sides, and that private industry, not government planners, will direct investment." He lamented that the opposite has happened for "too long" as the U.S. has opened its economy to others with few conditions. "We are not going to let the United States be taken advantage of anymore," Trump stated. "I am always going to put America first the same way that I expect all of you in this room to put your countries first."

Mexico Looks to Beef up Agriculture Trade with Russia

Russia says it wants to import up to 300,000 metric tons of beef a year from Mexico as the two countries strengthen bilateral trade in farm goods.

With Russian beef production stagnating, and demand showing signs of recovery, other Latin American nations are also looking to boost sales to the country over the coming months.

Officials from Mexico and Russia have held a series of meetings in recent weeks that aim to smooth the way for closer trade ties. On the Mexican side, the government is seeking access to the Russian market - not only for beef but also for poultry and dairy products. In turn, the Russians see Mexico as a potential buyer of fertilizers, wheat and agricultural machinery.

The rationale for closer trade ties is strategic as well as economic; Mexico is keen to diversify its markets given the uncertainty over relations with the U.S. since Donald Trump came to power. There is still debate as to whether the U.S. will exit NAFTA, with agriculture groups on both sides concerned that this could negatively impact trade.

Washington Insider: Without the U.S., a New TPP Emerges

While most of the media attention this week is on upcoming tax reform votes, the ag industry is increasingly anxious about possible pull-backs from NAFTA markets. In addition, Bloomberg reports, eleven Pacific nations now have a framework to salvage a trade deal the United States once led. Bloomberg called it a “blockbuster” deal President Trump abandoned.

Japanese Economy Minister Toshimitsu Motegi said the 11 remaining members of the Trans-Pacific Partnership had agreed on a negotiating framework to salvage the deal. Canada, which had held out for a day on signing onto the agreement, said it had won some desired concessions while warning that work is needed to reach a full deal.

Motegi spoke to reporters in Da Nang, Vietnam, late Friday night, after ministers held another meeting and confirmed the content of the broad agreement, which includes sections to be suspended after the U.S. withdrawal earlier this year.

Canada’s Trade Minister Francois-Philippe Champagne defended the delay, saying he had refused to be rushed into an agreement on what he now called the Comprehensive Progressive TPP. The frictions in talks--which saw the chief Vietnamese trade negotiator walk out late Thursday night in frustration--had raised concerns that the deal, which took years to negotiate, might collapse entirely.

“What we’ve been able to achieve is to preserve market access in Japan, we’ve been able to improve the progressive elements and we’ve also been able to suspend key sections like intellectual property which our Canadian stakeholders thought would have an impact on innovation,” Champagne said late Friday in an interview in Vietnam.

Champagne cautioned there was months of work ahead to bring the TPP to completion. “We made progress, but we clearly identified the things we still need to work on,” he said.

“We have a framework that has been established, so in the sense that we know the elements that people wanted to preserve,” Champagne said. “We’ve also identified a number of work programs, including from the Canadian side, the one on cultural diversity. That means over the next six to eight months we need to work on that.”

The original TPP, which would have covered 40% of the global economy, was thrown into disarray when President Trump withdrew the U.S. in one of his first acts as president. He argued that the withdrawal was the result of “a perceived risk to American jobs,” leaving other countries scrambling to keep the deal alive. The TPP discussions in Vietnam centered on suspending some parts of the agreement in a bid to move forward without America’s involvement.

The TPP was seen as a hallmark of U.S. engagement with Asia under the prior administration and a buffer against China’s rising clout. Then-Defense Secretary Ash Carter called it more strategically important than having another aircraft carrier battle group in the Pacific. It would go beyond traditional deals by including issues like intellectual property, state-owned enterprises and labor rights.

"The 11 countries completely share the view that bringing the agreement into force as quickly as possible is important to help persuade the U.S. to return to it," Motegi told reporters at a joint briefing on Saturday with Vietnamese Trade Minister Tran Tuan Anh.

The new agreement consists of seven provisions. It will incorporate content from the original TPP agreement but suspend 20 sections, 11 of which are related to intellectual property, Motegi said. The deal will come into force 60 days after six of the 11 members agree to it, he said.

The push for the TPP comes at a time when protectionist winds are sweeping the globe. Trump in his speech Friday to APEC business leaders warned he’d no longer join multilateral deals like the TPP but would seek bilateral pacts--and only with countries that played by the rules. “We are not going to let the United States be taken advantage of anymore,” Trump said.

Still, APEC ministers released a statement Saturday morning--three days after their meeting wrapped up--pledging to fight protectionism and citing the work of the World Trade Organization in ensuring international trade is rules-based, free, open and fair.

The ministers said they would “recommit to fight protectionism, including all unfair trade practices, recognizing the role of legitimate trade defense instruments.”

Mexico Foreign Minister Luis Videgaray said the TPP-11 framework was a “step in the right direction.” He called the TPP “particularly appealing” because it has high standards.

Questions swirled Friday over Prime Minister Justin Trudeau’s absence from that scheduled meeting as the TPP’s fate remained unclear. Champagne said Trudeau didn’t attend because another meeting ran late. There was "never an intention not to show up," he told reporters.

Thus, questions about the administration’s trade policies are becoming increasingly pointed—especially as prospects that Canada and other trading partners may be able to enjoy more favorable positions in important markets than the U.S. does. Certainly, the ag sector has been strongly favorable toward this administration, but increasingly pointed questions are being raised now, and likely will become more pointed as trade concerns intensify, Washington Insider believes.

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