Washington Insider -- Tuesday

By DTN's Washington Insider

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

Perdue: Trump Holding Tough on Biofuel Policy

President Donald Trump has "hung tough" on U.S. biofuel policy as various interests have tried to push several policies that could negatively impact the biofuel mandates, USDA Secretary Sonny Perdue said in Nebraska last week.

"He has been a real stalwart," Perdue stated. One focal point has been the liberal use of waivers of Renewable Fuel Standard (RFS) obligations for small refiners, and Perdue noted that the deal brokered by the White House has called on EPA to reallocate those waived obligations to other refiners.

The prospect of allowing exported ethanol to count toward RFS obligations is one that Perdue labeled acceptable as it will drive demand and will come in concert with the reallocation of waivers, "making sure we reallocate those waived gallons for the future," Perdue said. He indicated the waivers would be "reallocated in the next volume obligation."

EPA is expected to announce their proposal on 2019 biofuel (2020 biodiesel) Renewable Volume Obligations in late June or early July. It is currently under review at the Office of Management and Budget (OMB).

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Lawmakers Worried About What Concessions US May Be Offering China

Reports China has agreed to import large amounts of U.S. ag goods as part of a tentative framework deal to resolve a trade dispute between the nations have prompted some lawmakers to express concern about what kind of concessions the administration may be offering China.

Leading up to the latest round of talks, China lifted tariffs on U.S. sorghum and the U.S. eased sanctions on the Chinese telecom equipment maker ZTE Corp., allowing the company to stay in business.

U.S. lawmakers from both political parties have pointed questions about what the administration has agreed to give up in exchange for a truce with China. The Commerce Department had banned ZTE from receiving imports from its U.S. suppliers, a move that crippled the corporation. The administration would face a "real backlash" if it offers concessions to ZTE as part of the trade talks, Sen. Lindsey Graham, R-S.C., told Fox News.

Larry Kudlow, Trump's top economic advisor, told ABC that although there may be "perhaps some small changes around the edges" in U.S. action on ZTE, there will still be big fines and other remedies, and, he added, "do not expect ZTE to get off scot-free. It ain't gonna happen."

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Washington Insider: New Tariffs on Hold for Chinese Goods

Well, it appears that the administration has changed its mind on tariffs on Chinese goods. On Sunday, Treasury Secretary Steven Mnuchin told the press said that the administration put its trade war with China “on hold” after two days of talks in Washington that he said had produced an agreement on increased Chinese purchases of American products and measures to make it easier for U.S. companies to operate in China, the Washington Post and most other urban media reported.

Even though the agreement lacked specifics, it halted tariffs that the administration had threatened to impose on up to $150 billion in Chinese products.

In an earlier sign of softening, the president directed administration officials to consider easing harsh penalties on a prominent Chinese telecom company that had violated US sanctions on Iran and North Korea.

Responses to the decision were mixed. The Washington Post said that “President Trump’s tough-guy persona is taking a beating from China, judging from the reaction of some of his allies on Capitol Hill and in the trenches of the trade wars.”

“The former business executive, who prides himself on his negotiating savvy, is now facing criticism for bending to the Chinese government on two key trade disputes in the space of a week,” the Post said.

“It’s a huge disappointment, given the expectations,” said Scott Paul, president of the Alliance for American Manufacturing, a partnership between steelworkers and their employers. “It plays right into Beijing’s hands ... and is more of the same old failed policies we saw under the Bush and Obama administrations.”

Administration officials on Sunday scrambled to cast the Chinese talks as a victory.

“Not good enough. Time to take the gloves off,” Dan DiMicco, former chief executive of the steelmaker Nucor, tweeted Saturday.

Sen. Marco Rubio, R-Fla., warned in a tweet Sunday that by continuing to talk while putting the tariffs on hold “China has out-negotiated the U.S. again.”

The president personally demonstrated an appetite for harsher measures, saying at one point that trade wars were “good and easy to win.”

The administration’s rocky handling of relations with China reflects a complex intermingling between economic and national security, the Post said. Trump on Friday proclaimed that the United States “has entered a new era in trade policy that is based on the recognition that our economic security is critical to our national security.”

In March, he cited national security to justify imposing tariffs on imported steel and aluminum, a move designed to boost domestic employment. But now, national security concerns are causing him to give ground on other economic objectives.

Dennis Wilder, a former China analyst for the Central Intelligence Agency, said the president’s softer line was linked to his desire for a successful June 12 summit with North Korean leader Kim Jong Un, a Chinese ally.

The recent visit to Beijing of a North Korean delegation of municipal and provincial officials—the first such visit in eight years—suggested that Beijing might have been preparing to relax its sanctions on Pyongyang, perhaps in retaliation for Trump’s tariff threats, Wilder said.

“The administration has been a little rattled by how quickly the China-North Korea rapprochement occurred,” he said. “He probably believes that China is using the North Korea card in the trade negotiations.”

Mnuchin said the two sides have agreed on a “framework” to avoid the sanctions that require China to lower tariffs on unspecified American goods, protect US technology and buy more made-in-the-USA items.

“Right now we have agreed to put the tariffs on hold while we try to execute the framework,” Mnuchin said on Sunday.

Commerce Secretary Wilbur Ross will be dispatched to Beijing “immediately” to work out the details of accelerated Chinese purchases, said Mnuchin, who led the U.S. delegation in the talks with a Chinese team headed by Vice Premier Liu He.

Amid concerns that Trump was also preparing to soften the punishment for a major Chinese telecom company that had illegally traded with Iran and North Korea, Mnuchin said the administration “didn’t agree to any quid pro quo.” Last week, after Trump directed the Commerce Department in a tweet to help the company return to normal operations, lawmakers from both parties objected. The Republican-controlled House Appropriations Committee amended a must-pass annual spending bill to bar the department from lifting the penalties.

“I can assure you that the president wants us to be very tough on ZTE, and all he did was ask the secretary to look into this,” Mnuchin said.

Kudlow on Friday said that ZTE would have to overhaul its top management ranks before the United States would ease the enforcement action.

Mnuchin also suggested that Trump was prepared to wait until 2019 to wrap up negotiations aimed at a new North American trade deal. He confirmed that the United States, Mexico and Canada remain “far apart” after nine months of talks, having missed a deadline set by House Speaker Paul Ryan, R., Wis., last week to reach a deal on which lawmakers could vote this year.

“The president is more determined to have a good deal than he is worried about any deadline,” the treasury secretary said.

So, we will see. Cynics see the growing anger among producer groups as the fall elections near as important, along with the talks with North Korea. But, whatever the source of the policy shift, it is a new trend that producers should watch closely as the season progresses, Washington Insider believes.

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(GH/BAS)

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