Washington Insider -- Wednesday

Trade Truce Puts Focus on Next Steps

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

USDA Forwards Hemp Interim Final Rule to OMB

USDA’s much-anticipated, interim final rule that would set up a domestic hemp production program under the 2018 Farm Bill was sent to the Office of Management and Budget (OMB) on June 27.

USDA’s Agricultural Marketing Service (AMS) has been tasked with crafting a rule that sets requirements for state hemp plans and for growers in states that do not enact their own regulatory frameworks.

USDA Secretary Sonny Perdue and AMS officials predicted the regulation would be in place by the end of the year in time to approve state plans and certify growers for the 2020 growing season. USDA also signaled an August publication date for the landmark regulation in its Spring 2019 Unified Agenda.


Lawmakers urge Trump to rein in USDA’s Perdue on small refiner exemptions

The focus on small refiner exemptions (SREs) continues, with 13 Republican senators calling on President Donald Trump to “prohibit the Secretary of Agriculture from influencing or interfering” with EPA decisions on SREs.

The lawmakers cite where the Renewable Fuel Standard (RFS) does call for input from the USDA chief, but point out that SREs is not one of them, noting the Clean Air Act “only authorize the [EPA] Administrator to consult with the Secretary of Energy on petitions for hardship relief from small refineries.”

Lawmakers are taking exception to recent comments by USDA Secretary Sonny Perdue that he was seeking to address the SRE issue, one that farmers and some other biofuel backers have flagged as reducing demand for ethanol.

But the lawmakers contend that the Trump administration has been correct in expanding the granting of SREs. Given that, they noted, “We would view any decisions to further delay, reduce, or deny hardship relief to small refineries, or reallocate the obligations of small refineries to other refineries, as the result of the Secretary of Agriculture’s impermissible interference. We are confident that others, including the federal courts, would do the same.”

EPA has continued to insist that SREs are called for by law.

Washington Insider: Trade Truce Puts Focus on Next Steps

The Hill, together with much of the urban press, is emphasizing that President Donald Trump's trade truce with Chinese President Xi Jinping last weekend brought a temporary pause to dueling tariffs between the world's largest economies, “but the two leaders will soon need to forge a path toward a final deal to ensure the economic gains aren’t short-lived.”

Trump and Xi on Saturday did not announce a timeline for further trade talks, nor did they appear to make significant progress over the stickier points of a broader agreement. And while Xi reportedly agreed to boost purchases of US agricultural goods, Beijing has not committed to the host of economic reforms Washington has demanded in exchange for tariff relief.

The president said Saturday after meeting with Xi that the US is “going to work with China on where we left off, to see if we can make a deal."

For some economists, that message wasn’t strong enough, The Hill said.

Businesses in the crosshairs of the President’s trade battles praised the pause in economic hostilities while also questioning the wisdom of the conflict and the costs that come with it.

“Pumping the brakes on any further tariffs is good news for US consumers, American farmers, and our industry’s 1.3 million men and women,” said Kip Eideberg, vice president of government and industry relations for the Association of Equipment Manufacturers. “The protracted trade war fueled by dueling rounds of tariffs has so far not accomplished anything other than making it more expensive to manufacture in the United States,” he added in his statement.

Trump faced immense pressure heading into Saturday’s meeting with Xi at the Group of 20 summit in Japan. For months, lawmakers and industry have been anxious for progress toward a deal to end the US-China trade war, which began its second year Monday.

While Trump and Xi were not expected to strike a deal Saturday, the summit was seen as a crucial step toward a long-sought final agreement. The immediate risk of escalation appeared to ease after Trump and Xi emerged with a deal to hold off on the additional tariffs.

Trump’s tariffs have been successful in forcing China to the negotiating table, The Hill argues. But the import taxes have failed to yield commitments from Beijing to halt alleged intellectual property theft, forced technology transfers and other anti-competitive practices the administration pushed for in trade talks.

“They’ve got a fair amount of work ahead of them if this is going to lead to some sort of negotiated deal,” said Warren Maruyama, a partner at the law firm Hogan Lovells who served as US Trade Representative general counsel from 2007 to 2009.

“It could end up in a long-term stalemate. I don’t think either party benefits from that.” he added.

The Hill argued that “failing to clinch a trade deal with China poses its own political challenges for the President as he seeks reelection in 2020. His pledge to restore industrial jobs through new trade terms with China was crucial to his appeal in Midwest states that paved his road to the White House.”

“Without progress on his trade agenda, the President may be vulnerable to losing the support of blue collar workers in Ohio, Michigan, Pennsylvania and Wisconsin — all states that he won in 2016.” Maruyama said.

The President on Saturday touted Xi’s commitment to purchasing US crops, which have fallen drastically with Beijing’s tariffs. “Our farmers are going to be a tremendous beneficiary,” he said as he hailed US farmers, who’ve largely stood by Trump amid the high costs of the trade war, as “great patriots.”

But the uncertain fate of a deal with China and concern about what comes next could complicate Trump’s support in farm states. Chinese tariffs on US crops have cost American farmers billions in sales. The trade war has hit soybeans growers and hog farmers particularly hard as China has turned to Brazil and Mexico to satisfy its demand for pork and pig feed, The Hill said.

"I worry that even if there's a trade agreement, that from a Kansas point of view, that we will now have a lot of work to regain the markets that we've lost," said Sen. Jerry Moran, R-Kan., on Thursday.” China is a hugely important market and particularly in regard to soybeans, which we raise a lot of. So there's a lot of challenges in the absence of trade,” he said.

The Trump administration is continuing to push its program of payments in compensation for ag product market casualties, an approach that traditionally has not succeeded in offsetting the political impacts of market interventions. In spite of the current relief at the announcement of continued talks rather than immediate boosts in tariffs, the path to a robust new trade deal seems long and perhaps painful—and the renewed talks should be watched closely as they emerge, Washington Insider believes.

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