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.

USDA Announces Program to Reduce Environmental Impact of Farming

USDA Secretary Sonny Perdue announced an initiative to reduce the environmental impact of American farming. He stressed voluntary conservation incentives and efficiency improvements rather than regulation as he joins major farm groups in seeking to shape the public debate on agriculture and climate change.

Some 21 farm groups announced a coalition Wednesday on environmental sustainability.

Perdue set a goal of increasing farm production by 40% while cutting the “environmental footprint” in half by 2050.

The initiative includes goals such as a 50% reduction in food waste by 2030, a 30% cut in fertilizer run-off by 2050 and an overall “net reduction” in carbon emissions by 2050 “without regulatory overreach.”

Perdue also set a goal for biofuels such as ethanol to reach “market-driven blend rates” of 15% of U.S. transportation fuels by 2030 and 30% of transportation fuels by 2050.

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EU Trade Chief Lays Out US-EU Trade Pact Expectations

European Union (EU) trade chief Phil Hogan is working to get a deal with the U.S. by March 18, he told reporters Wednesday night. Hogan said he is preparing a package of several agreements for European Commission President Ursula von der Leyen to present to President Donald Trump in the next few weeks.

The Trump administration’s decision last week not to increase retaliatory tariffs on agricultural products in the long-running Boeing-Airbus dispute was a positive sign that the U.S. is willing to negotiate a deal, Hogan said.

The U.S. Trade Representative instead boosted retaliatory tariffs on Airbus aircraft to 15%, from 10%, and left unchanged a 25% tariff on EU food, alcohol and other products. As for the significance of March 18, Hogan noted USTR Robert Lighthizer suspended the tariff increase on Airbus planes until March 18.

“Between now and then, we are trying our best to have a mini deal based on the terms of reference that was given to us ... by President von der Leyen and Trump in Davos,” Hogan said.

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Washington Insider: Complex Economic Trends

It seems likely that much of the coming political campaign debate will center on the economy, and that there may well be a series of political fights brewing there as the administration seeks to claim a “blue collar boom” across the U.S.

At the same time, others tend to see the recent trends as more complicated. For example, Bloomberg is reporting this week that “in the 11th year of a record expansion the rising tide of the U.S. economy hasn’t been lifting all boats equally — at least when it comes to pay.”

It is true that unemployment is the lowest for half a century and that wages have been picking up steam across the board, the report says — but it also notes that “the biggest rewards from a strong economy are still skewed toward white people, men and high earners.” The report relies on details from an annual study by the Economic Policy Institute.

Administration officials frequently argue that previously left-behind groups are “benefiting from a blue-collar boom.” However, Bloomberg says that while there have been gradual improvements for many “some disparities have actually worsened over time.” It points to the wage gap between blacks and whites, which is wider now than in 2000. And, it points out that along with tight labor markets, minimum wage legislation at the local level has helped deliver some of the gains for low earners.

In the past two decades — encompassing two expansions and a recession — wage growth has been fastest for the highest-paid workers, Bloomberg says. However, it notes that it wasn’t until last year that workers with only “some college education” got back to their pre-2008 wage level.

It also notes that men with a standard college degree are still paid more than women with an advanced one--and black workers with some college education still get paid less than in 2000. Still, most black workers experienced stronger wage growth between 2018 and 2019 than any year since 2000, the report said.

And it notes that Hispanic workers were the only ethnic group to see their wages rise across all education levels from 2018 to 2019--although at almost every level, Hispanic and black workers were paid less than white peers.

Bloomberg also reports wage disparity “even near the top.” For example, men in the 95th percentile saw a 37% wage gain in the last 20 years, about twice that for those just next door in the 90th percentile. As for the median, that indicator ticked up only 3.4%. And among the top 0.1%, earnings grew at more than double the pace of the mere 1%.

Wage rates paid to the lowest-paid men saw faster growth than those in the middle, with the 10th percentile rising 12% and the 20th up 10%. However, the gains among the lowest-paid workers have been concentrated during economic expansions with wages accelerating a few years into boom cycles and then tapering off.

Minimum wage legislation also affected the trends, Bloomberg said. Pay rose 18% for the lowest-paid 10% of workers in states where minimum wage legislation was enacted in the last seven years. It rose just 9% in regions without those laws.

The trend in wage growth is more important than usual just now, since it is one reason Federal Reserve policy makers are comfortable leaving interest rates at historically low levels at this time; Chairman Jerome Powell has cited growth beginning to reach those on the sidelines.

So, we will see. The strong domestic economic trends have been widely welcomed even while there are reports of economic pitfalls ahead, including those facing trade policies as well as the coronavirus outbreak. USDA is emphasizing its belief that China will honor its phase one requirements in spite of the economic pressures it faces — although tensions appear to be growing between the U.S. and Europe.

Clearly, the trends and issues producers face now are increasingly complex and difficult to evaluate. They should be watched closely as the season advances, Washington Insider believes.

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