Washington Insider -- Thursday

Canadian Unity on NAFTA Shows Cracks

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

Perdue Comments on Payment Rate For Corn Producers In Trump Tariff Aid Package

USDA Secretary Sonny Perdue responded to criticism from a top corn producers group of his agency's trade aid plan for farmers, insisting the level of assistance corresponded with calculations of economic damage caused by new tariffs.

National Corn Growers Association (NCGA) President Kevin Skunes, told USDA Sec. Sonny Perdue on Wednesday he is disappointed corn growers stand to receive a penny per bushel for losses incurred in the summer's trade disputes. Skunes said the federal government's $12 billion aid package fails to calculate losses corn growers have suffered from tariffs — especially on ethanol and dried distillers’ grains, a high-protein ethanol byproduct fed to livestock.

"Prices have declined about 44 cents a bushel — or $6.3 billion," Skunes said referencing an industry study. "We don't feel it's fair and equitable."

Perdue responded that the calculations are based on "actual tariff disruption damage to the crop,” adding, "The numbers are the numbers. …These are the calculations you have to defend in court," considering the possibility of a World Trade Organization (WTO) challenge, Perdue said. "The damages they've had from tariff retribution has been minimal."

Trump Pushes to Find Win-Win On RFS Changes, Including Year-Round E15

USDA Secretary Sonny Perdue was upbeat when asked about prospects for year-round E15 ethanol sales at the Farm Progress Show. “The president called me this morning and said …we need to get this RFS straightened out and get E15 twelve months,” said Perdue. “He wants something done quickly. We’ve just got to balance it out and talk with our corn constituency, our corn growers, and the ethanol community, about what is the balance with the refineries ... He needs to have something he can demonstrate to them as well.”

Six White House-instructed meetings in the past have failed to find a win-win announcement that would please an ethanol industry that has said it feels no reason to compromise, with a crude oil industry wanting some things that ethanol supporters deem would be negative to biofuels.

Perdue noted some legal issues and regulatory “hiccups” remain in implementing year-round E15 sales but said of President Trump: “This is what he wants to do, and he doesn’t give executive suggestions, he gives executive orders, so we’re going to get it done.”


Washington Insider: Canadian Unity on NAFTA Shows Cracks

Bloomberg suggests this week that the administration’s strategy of working deals with first, Mexico and then Canada may be working. Until now, pretty much all of Canada had Justin Trudeau’s back in his NAFTA fight with President Trump -- but cracks are emerging as some pivot to blame him if the pact falls apart, Bloomberg says.

Specifically, the U.S. is using a deal it announced with Mexico on Monday to pressure Canada into signing on and that is exposing rifts within the Canadian Conservative Party, Trudeau’s main opposition, which had mostly refrained from criticizing the prime minister on this issue. Prominent former Conservative lawmakers stuck to supporting the government in talks, but Conservative Leader Andrew Scheer now is blaming Trudeau.

Bloomberg says this development creates a problem for the prime minister, who was elected in 2015 in spite of Conservative attacks that he was “just not ready” to govern—so that now, any indication he allowed NAFTA to collapse could sour public opinion. So too could horse-trading if, for instance, he makes concessions on a dairy regime that’s more popular in some parts of the country than others.

“Canadians generally supported the approach when it looked like Canada and the United States were the ones working things out,” pollster Nik Nanos of Nanos Research said. “The narrative now for some Canadians is ‘have we become a passenger in the NAFTA negotiation process’ -- because that’s clearly the signal Donald Trump sent.”

Scheer launched a political attack--if only by Canadian standards--this week. “Once again Justin Trudeau has failed Canadian workers,” Scheer tweeted amid reports of a U.S.-Mexico deal. “With the U.S. and Mexico coming to a trade agreement without Canada, Canadians are now on the outside with 1000s of jobs on the line.”

While hardly fire and fury, it raised eyebrows as a break in the political solidarity to date. Other prominent Conservatives have avoided doing so. James Moore, a former industry minister and Rona Ambrose, former Conservative leader--who both served on a multi-partisan government NAFTA advisory council--each said this week that now was the window to haggle to reach a deal.

“We clearly have some momentum. We have a window here for a modernized NAFTA that will have some broad support from business and the general public,” Moore, now a senior adviser at Dentons, told Bloomberg Monday. “The alternative is economic chaos.”

John Baird, foreign minister under Stephen Harper, said there was no reason for Canada to be at the table for the recent U.S.-Mexico talks focused on auto rules. “Trump is now going to play hardball with Canada. However, our competent and highly experienced team of trade negotiators knew this all along. Trade negotiations are always toughest just before a deal is reached,” he tweeted.

Politically, what’s been apparent in Canada is a “really united front,” said Shachi Kurl, executive director of the Angus Reid Institute, a polling firm. “Much of this will hinge on what people see in front of them,” such as changes to the dairy system, known as supply management. “I suspect we’re going to find deep divisions in the country on this issue.”

Maxime Bernier, an outspoken Conservative lawmaker, quit the party this month partly to protest its support for supply management. That may force Scheer, who only barely beat Bernier for the party leadership, to soften his support for the dairy regime, she said.

Trump’s press conference Monday drew sharp rebukes from some observers in Canada. “I thought it was a disgraceful display of bad faith on the part of the Trump administration and the president in particular,” trade lawyer Lawrence Herman said in a telephone interview. The relationship has descended to an all-time low.” Canada can’t agree to accept a deal that’s forced on it as a take-it-or-leave-it offer, he said.

The political fallout will hinge, of course, on the outcome.

“This file changes day by day and tweet by tweet. Today, the narrative is the Liberals have to watch out that it doesn’t look like they’re going to get steamrolled by the Americans on NAFTA,” Nanos said. But a deal “would be a significant accomplishment and political win.”

So, we will see. The supply managed commodity systems have been a sore point with the United States and other for decades, and are thought to still have strong, if regional support. If it turns out that Bloomberg is right about growing internal concerns in Canada about those sectors, it could be beneficial to both Canadian consumers and U.S. dairy producers. This is a tough debate for Canada that U.S. producers should watch closely as it intensifies, Washington Insider believes.

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