Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.EU's Malmstrom Pushes Back On Including Ag in US-EU Talks
Discussions between U.S. Trade Representative Robert Lighthizer and European Union (EU) Trade Commissioner Cecilia Malmstrom touched on several issues, but the EU official made clear that expanding the discussions to include agriculture was a non-starter.
"I understand that it is still important from the U.S. side, but we have been very clear that it is not going to be in a trade agreement from our side," Malmström said after the talks with Lighthizer. "Things have not changed."
The EU needs to go through a process with member countries on the sectors to be covered in the talks, but if the US were to include agriculture in the negotiating objectives it is expected to release in mid-December, that process will not happen.
"We have said very clearly, and President Juncker made that very clearly as well, that agriculture would not be part of such a trade agreement. It would only be industrial goods, which would be good enough. There is a lot we can do there that would be beneficial both for the US and the European Union," she said.
The discussions next year between the two countries could be completed by October 2019 when the current terms for the European Commission expire.
She did note the EU is close to formally recognizing a U.S. sustainability and conservation program on soybeans that would open the potential for more sales of U.S. soybeans to the EU and is also taking steps to import more U.S. liquefied natural gas (LNG).
China has responded to US demands on trade: Reuters
China has delivered a written response to the U.S. relative to trade demands, according to three sources quoted by Reuters, indicating the response addressed U.S. concerns raised on intellectual property, U.S. access to China and the trade deficit the U.S. holds with China.
However, it is not clear whether the responses were sufficient to address U.S. concerns in those areas.
Meanwhile, China's Commerce Ministry said that high-level trade talks between the US and China have resumed, with spokesman Gao Feng saying the two sides are "maintaining close contact" since the Nov. 1 phone conversation between President Donald Trump and Chinese President Xi Jinping.
"High-level contacts between the two sides on economics and trade have resumed following the Nov. 1 conversation between the Chinese and American heads of state," Gao said, without giving other details.
Washington Insider: Praise for Fed From Fed
One thing seems sure in this season of political toxicity -- Fed Chair Jerome Powell is no shrinking violet. The New York Times reported this week that he firmly and directly countered the president’s loud and repeated attacks this week.
The Times said Powell hammered on two simple themes during an hour-long question-and-answer session before several hundred people at the Federal Reserve Bank of Dallas on Wednesday. He asserted that the Fed is doing its job and that the economy is doing really well.
He also added that “the Fed deserved credit for its role in the long and steady expansion. Our policy is part of the reason the economy is in such a good place now,” he said.
The president has repeatedly hammered the Fed for raising interest rates too quickly, describing the central bank as “crazy,” “loco,” “going wild” and “out of control.” Powell did not respond directly to these criticisms but rather made a point of saying twice that Congress is the Fed’s overseer.
“Our accountability is really to Congress,” and argued that tis has long been a hallmark of the Fed’s existence and a contributor to its ability to maintain monetary policy that aims to keep inflation stable and the economy running at maximum employment.
“We have a very important job that Congress has assigned us and we have the tools to do it,” he said. “We’re just trying to do our jobs and we’re doing fine.”
Powell answered questions posed by the Dallas Fed president, Robert S. Kaplan, and from members of the audience. He also acknowledged signs that global growth might be slowing but played down concerns about volatility in equity markets. He called stock prices “one of many factors” the Fed evaluates in making policy decisions.
The chairman also said the Fed is hearing a “rising chorus of concern” from businesses about the impact of the administration’s trade restrictions. Still, Powell cautioned that the Fed sees little evidence of a broad impact from the trade war in the economic data but pointed out that concerns about protectionism made sense in theory.
“If it winds up, perhaps inadvertently, in a place where we have more widespread protection, that would be bad for our economy,” he said. “To the extent that more and more products are subject to tariffs you could see a little bit higher inflation and a little bit slower growth.”
He also said the Fed was well aware that the benefits of the economic recovery have not been distributed evenly and that there are pockets of America that have yet to rebound from the recession. And he said there was a “broad consensus” among Fed officials that the central bank should keep raising its benchmark interest rate in the near term.
Investors expect an increase of one-quarter of a percentage point at the Fed’s next meeting in December although the recent volatility of financial markets has created “a little uncertainty” he said. Asset prices on Wednesday implied about a 73 percent chance of a December rate increase, the Times said.
The Fed also is expected to continue raising rates during the first half of 2019.
“It wouldn’t be surprising to me that we would need to go up again in December and at least a couple of times next year,” Mary Daly, the new president of the Federal Reserve Bank of San Francisco, said.
Chairman Powell did not comment on the timing of future rate increases, but his upbeat economic outlook is consistent with expectations that the Fed will continue to raise rates.
He also announced that he will hold news conferences after each of the Fed’s eight policymaking meetings next year, replacing the current pattern of quarterly news conferences. In recent years, the Fed has fallen into a pattern of announcing policy changes at meetings with a news conference. Powell said Wednesday that the Fed was reclaiming its ability to act at every meeting.
“The market is going to have to get used to that,” he said. “Certainly all meetings are live now. There’s no question about it now. I think over time folks will get used to the idea that we can and will move at any meeting.”
In his conference wrap-up, Powell returned to his two themes. “I want to leave on a note of optimism about our economy,” he said. “We’ve been through a difficult time and we’ve faced difficult times before. We’re in a good place now. I do believe our economy can grow and grow faster.”
And, he added, the Fed is doing a good job.
So, we will see. Not everyone is as big a fan of the recent Fed policy as Chairman Powell is, but his defense of somewhat tighter monetary policy to avoid potential inflation likely will be seen as reassuring to many investors -- along with his pledge for more transparent policy making for the Fed. The monetary policy debate certainly is important and should be watched closely by producers as it proceeds, Washington Insider believes.
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