Washington Insider -- Friday

By DTN's Washington Insider

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

Administration Push on USMCA Continues

The White House has invited the House Republican whip team to meet with President Donald Trump next Tuesday on the U.S.-Mexico-Canada Agreement (USMCA) as their focus on trying to get the deal moved through Congress soon.

U.S. Trade Representative Robert Lighthizer recently meet with congressional Democrats to field their concerns about the trade agreement.

Their stance on the deal looms large with the party controlling the House. Coming out of that meeting, there were at least positive signs by some key members of the party relative to the USMCA pact.

The administration has talked of trying to get the trade deal's implementing legislation approved by Congress in April, but many observers doubt that will be the case.

One key issue that several lawmakers from both parties have identified as being critical for their support – or opposition – to the trade deal are the Section 232 steel and aluminum import duties that the U.S. put in place on Mexico and Canada and their subsequent retaliatory measures. Those included tariffs on ag goods, adding more trade concerns in farm country.

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Argentina in Consultations With Brazil Over Wheat TRQ

The announcement by Brazil and the U.S. that Brazil would open a 750,000 metric ton tariff-rate quota (TRQ) for imports of wheat from the U.S. and other global suppliers is raising concern in Argentina, typically the main supplier of wheat to Brazil.

"Under Mercosur regulations, Brazil must request permission from Argentina, as the main supplier of wheat to the neighboring country, to carry out that operation," said CEC spokesman Andres Alcaraz. CEC is the organization representing Argentine grain exporting countries.

The Argentine government has also become involved, with their foreign ministry issuing a statement that they were giving "special attention" to the TRQ announcement.

"The Argentine government has begun talks with Brazilian authorities and other Mercosur partners to analyze the impact and consequences that this measure could have on bilateral trade," the ministry said.

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Washington Insider: US Policies and Future Asian Markets

Bloomberg is reporting this week that there is wide, global interest in the outcome of the U.S.-China trade talks, but also continuing interest and concerns regarding other Asian markets and regions. For example, Hong Kong’s chief executive cautioned that the Asian financial hub continued to face the risk of collateral damage from the China-U.S. trade war, saying the tensions were one reason why she’s” joined the ranks of those tracking President Donald Trump’s tweets,” at the same time she boosts a strong future for U.S.-Hong Kong relations.

She commented about President Trump’s comments on TV, noting that “last night, he was shouting to the media that things were good,” Carrie Lam said of Trump during a recent interview at the Bloomberg Invest Asia forum in Hong Kong. “I certainly want to see this trade discussion leading to some positive outcome. But I don’t think the problem will go away just like that. We will probably be seeing more tension in other areas.”

“We know that trade issues aside, there are other deep-seated differences between China and the United States,” Lam said. “These will not be easy to resolve, especially in the short term.”

The increased strategic jockeying between the U.S. and China has also fueled questions in Washington about whether the former British colony should continue to enjoy a special trading status as a distinct entity from the mainland. U.S. Consul General Kurt Tong said last month that signs of political encroachment by Beijing had raised cautionary flags for some U.S. observers about the future of Hong Kong’s “high-degree of autonomy.”

In her recent talk, Lam sought to reassure investors that Hong Kong “still adhered to the rule of law and has an independent judiciary.” She emphasized to a visiting congressional delegation that Hong Kong remained an important source of U.S. trade.

“I said, ‘Nothing has changed, come on,’” Lam told Bloomberg. “What have we done to cause that sort of considerable worry to the extent of upsetting this very strong and close relationship between the United States and Hong Kong?”

She commented especially on selected issues, including defending a proposed extradition law, saying it wouldn’t undermine business freedom. Her government in January proposed allowing the transfer of fugitives to Taiwan, Macau, mainland China or any jurisdiction with which Hong Kong does not have an extradition agreement, sparking concerns from the European Union, the local business community and some opposition politicians.

“We don’t want Hong Kong to become a haven for fugitive offenders,” she said. “We are doing this with a very good purpose, and if there are concerns it is obligatory of the government to address those concerns.”

A U.S. congressional delegation to Hong Kong earlier this week said the disqualification of lawmakers from the Legislative Council, the refusal to renew a visa for a Financial Times editor last year and the proposed extradition law all posed a major challenge to the “one country, two systems” principle under which Hong Kong was handed back to Chinese rule in 1997, according to Civic Party lawmaker Dennis Kwok, who met with the American lawmakers.

Last week, Lam also outlined a list of policy priorities for her government -- including new trade offices in Southeast Asia and local tax breaks -- meant to signal that Hong Kong remained an open and global financial hub. She said Hong Kong’s asset-management business could grow, and touted the city’s potential as an offshore hub for trading the Chinese currency.

“The best strategy for Hong Kong is we don’t sit and wait until the external environment either goes up or goes down. We do the right things for Hong Kong,” she said in her interview, including creating more new markets and technologies.

Lam also touted the benefits of the “Greater Bay Area,” Chinese leader Xi Jinping’s plan to better integrate the former European colonies of Hong Kong and Macau with China’s mainland. China’s long-awaited plan to create a high-tech megalopolis rivaling California’s Silicon Valley has generated optimism among Hong Kong’s business community, but thorny issues have so far been left out of the plan--including complex questions about which customs, tax and legal systems will predominate.

“Work on the Greater Bay Area is progressing well and progressing fast,” she said.

So, we will see. There are wide and growing concerns across parts of the United States about future trade relations with Asia, even beyond those with mainland China and especially concerning the handling of the administration’s “get tough,” tariff-based approach. These are policy debates producers should watch closely as they develop, Washington Insider believes.

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