Washington Insider - Thursday

Fifth Round of NAFTA Talks Begin

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

Top NAFTA Trade Officials Will Not Be In Mexico City Sessions

Top trade officials from the U.S., Canada and Mexico will not participate in the fifth round of NAFTA 2.0 negotiations in Mexico City, according to a joint statement released by the three countries.

The development comes as Ministers from the three countries met at the Asia Pacific Economic Cooperation (APEC) meeting in Vietnam and agreed not to attend the fifth round "so negotiators can continue to make important progress on key chapters advanced in Round 4," the statement said. Ministers had already agreed at the close of the fourth round to allow more space between the negotiating round to "provide negotiators with enough time to analyze the proposals that all three countries have tabled so far and to conduct internal consultations."

USDA Proposes Adjusting Orange Size Requirements Due To Supply

Changing the minimum size requirements for oranges from 2 8/16 inches to 2 4/16 inches is being proposed by USDA's Agricultural Marketing Service (AMS) to address a reduced supply of oranges in the U.S.

"This rule implements a recommendation from the Citrus Administrative Committee (Committee) to relax the minimum size requirements currently prescribed under the marketing Order for oranges, grapefruit, tangerines, and pummelos grown in Florida (Order)," AMS said in the Federal Register notice to be published November 16. "This rule will maximize shipments by allowing more oranges to be shipped to the fresh market and help reduce the losses sustained by the citrus industry during the September 2017 hurricane in Florida."

There is a 60-day comment period from the date of publishing in the Federal Register and comments received by that deadline will be considered prior to issuance of a final rule.

The Committee approved the changes to the fruit size June 29 and September 28.

Washington Insider: Fifth Round of NAFTA Talks Begin

U.S. officials are heading into the fifth round of NAFTA 2.0 talks this week with a goal of wrapping up the discussions by the end of March.

The fifth round got underway in Mexico City yesterday, with smaller groups of officials holding technical discussions on textiles, cross-border trade, intellectual property and labor issues. The official start date remains today and the round is to conclude November 21. Issues like rules of origin will be focused on in the final four days of the session along with areas on investment, dispute settlement and some other provisions. Talks are also on tap in areas like digital trade and environment.

As negotiators closed up the fourth round, they signaled the talks would go into the first quarter of 2018. But Commerce Secretary Wilbur Ross Monday told the U.S.-Japan Council that they are aiming to conclude the negotiations by the end of March.

Politics/elections in all three countries were cited by the Commerce chief for that goal. "There is no precise date by which the negotiations must end," Ross stated. "But as a practical matter, if there's no resolution by more or less the end of March, the political calendar will make it very difficult to complete a deal." Mexico will hold presidential elections in mid-2018 and there will also be Canadian provincial elections in that timeframe, he noted, and the mid-term U.S. congressional elections in November also loom.

That means the "deeper we get into 2018, the harder it will be to get anything approved in Mexico, Canada or in the U.S.," Ross noted.

Trade Promotion Authority (TPA) also a factor, with Ross indicating the July expiration as another reason to get the talks done. The current climate in the U.S. Congress is one that makes it "unclear whether that authority would be renewed," he added. "If we don't have it, the so-called fast-track authority, it would be very, very difficult as practical matter to get anything done."

Meanwhile, Mexico is readying a response if President Donald Trump acts to pull the U.S. out of NAFTA. Mexico's government and central bank are preparing a plan in the event that NAFTA disappears that would diversify its trade, protect foreign investment in the country, examine possible tariff changes and bring a macroeconomic response.

"These are the four lines a plan B must include," Mexican Foreign Minister Luis Videgaray told Mexican radio. "We have to be prepared for all the scenarios and one of the scenarios is that the United States leaves the treaty, and as we have said, that is not the end of the world, the Mexican economy is much bigger than NAFTA." Those four areas were mentioned by Videgaray, but he offered few details on exactly what the contingency plan could involve.

This comes on the heels of USDA Secretary Sonny Perdue last week signaling that he, too, was preparing a contingency plan for U.S. agriculture in the event the NAFTA talks do not reach a successful conclusion.

The fifth round of talks also will get underway with a report from the International Monetary Fund (IMF) that said the end of NAFTA would see tariffs revert to Most-Favored Nation (MFN) levels, something that would hamper U.S.-Mexican trade and hurt Mexico's economic growth. However, the IMF also noted that there are options for Mexico and that "temporary foreign exchange interventions and liquidity provision could help smooth extreme volatility."

Exit threats from Trump must stop, according to the U.S. Chamber of Commerce. The group has held this view consistently and continues to emphasize the NAFTA pullout talk by President Trump has to end for the talks to move to a successful conclusion.

And Senate Agriculture Committee Chairman Pat Roberts, R-Kan., indicated the exit threats are not a positive for the prospects of getting a deal. "There is sort of a pervasive view that NAFTA could be terminated, and I know that they feel that basically it's a means to an end, but I think that's the wrong message — that's the wrong way to approach it," Roberts told the Chamber early this month. While lauding U.S. Trade Representative Robert Lighthizer as being a "good man" who knows how valuable U.S. agriculture is, Roberts cautioned, "the path he may take — that of (President Trump) — is a path that I think is fraught with a lot of danger."

So, the developments out of Mexico City will be watched carefully especially given increasing concern that the talks will fail to achieve a deal. Signs of progress could help ease some of these concerns, but the path to agreement remains a long one, Washington Insider believes.

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