Washington Insider-- Friday

Trade Policy Outlook

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

WOTUS Rule Revisit Expected By Biden Administration

Revisiting the Waters of the United States (WOTUS) rule is part of coming Biden administration regulatory agenda, according to an analysis by Hogan Lovells. The Obama administration had issued a revision to WOTUS in 2015, which was the subject of extensive litigation.

The Trump administration issued a repeal and revision of the Obama era rule, which has also drawn litigation for removing groundwater, ephemeral and intermittent streams, and certain agricultural operations from federal oversight.

“The Biden administration will likely repeal the Trump regulation, but may modify the 2015 approach to stave off litigation exposure or seek a bipartisan solution in Congress,” the report stated.

Some have downplayed that expectation, but this is now expected to be one of the areas focused on by the Biden administration. But any such effort will closely monitored by agriculture and they will no doubt spring to action to fight the effort if it is viewed as trying to reinstate the Obama-era plan.

Meat Company Sues To Stay Open After State-Ordered COVID Closure

Stampede Meat has filed suit to block an order by the state of New Mexico to close a production facility where more than 100 workers have tested positive for COVID-19. The company supplies to Walmart and Costco and is arguing it should stay open under the executive order issued by President Donald Trump in April that ordered meat plants to stay open to protect the U.S. food supply.

New Mexico last week ordered Stampede Meat to shut for 14 days after identifying six COVID-19 cases at the plant during a five-day period in late October. But the closure is unconstitutional and could force the company to destroy millions of pounds of meat destined for grocers and food service customers like Denny's and Applebee's, the company said.

“Allowing the Department of Health to ignore the President's Executive Order and close Stampede Meat and other meat and poultry processing companies will lead to similar food shortages and rationing," the lawsuit said. According to Reuters, a spokeswoman for New Mexico's health department said they were unaware that Stampede had halted operations and that at least 11 workers tested positive over two weeks when the state ordered the shutdown and more than 100 employees have tested positive during the pandemic.

Stampede also reached out to USDA and a USDA spokesman said the agency offered to help New Mexico manage the pandemic and ensure food supplies. It is not clear what the court will rule, but this will be closely followed in the industry.


Washington Insider: Trade Policy Outlook

When President Donald Trump was elected in 2016 and took his “America First” campaign into government, many of the world's pundits declared the end of the western-led trade order and globalization. Four years on, there are still plenty of thinkers who see reasons for gloom. However, Bloomberg asserts that “the reality” is also that the trading system looks remarkably resilient,” albeit a little wounded.”

What exactly that means remains to be seen. But Bloomberg reports several things being discussed by key advisers, including that “dealing with China and its economic rise will color everything,” said Wendy Cutler, a veteran trade warrior who now leads the Asia Society Policy Institute. In addition, the Biden team believes that “manufacturing isn't going away as an American obsession.” The trade-transition team named this week “is replete with people with a background in manufacturing or the labor movement.”

Jason Miller, the head of the team, once looked after manufacturing policy from the National Economic Council during the Obama administration, at a time when it had set a goal of doubling U.S. manufacturing exports.

The report also notes that the current administration and economic generals such as U.S. Trade Representative Robert Lighthizer have “scrambled the American politics of trade, opened the door to a new suite of tactics and tariffs and brought to the fore what in many cases have been long-standing and bipartisan U.S. grievances.

“The system's resilience should not be the end to a comforting story; it should be the starting point of a badly needed effort to reinforce and update the international order and address the real threats to its long-term viability,” Jake Sullivan, one of Biden's closest policy advisers, wrote in a 2018 Foreign Affairs article.

The new team also will focus on “the importance of bringing home critical supply chains” and pledges to “build a strong industrial base,” Bloomberg says. These are policies that fit with the president-elect's plan to make sure the U.S. approaches its relationships with everyone from China to allies in Europe from a position of domestic economic strength.

However, rather than relying on new defensive trade barriers as President Trump has done, the new policies are expected to hinge on encouraging investment at home via tax incentives and government spending on infrastructure and alternative energy to boost demand. The underlying idea is that a stronger, more confident U.S. — rather than a belligerent one — can turn around the narrative that it's a declining superpower, Bloomberg said.

The new team is emphasizing that perhaps the top trade issue it faces is what to do about relationships with China, including decisions on whether to retain or lift tariffs and national security-driven bans on companies such as Chinese-owned Huawei Technologies Co., as well as whether to build on the current administration's “phase-one” deal with Beijing.

Among these decisions is the question of whether to go down the “seemingly unlikely” path of rejoining the Trans-Pacific Partnership, which doesn't include China. The TPP has long been seen by strategic thinkers in Washington as a way to strengthen the U.S. position in the Asia-Pacific and to help counter China's economic rise.

President Trump abandoned the pact on his first full workday in office. Many Asian allies would love for the U.S. to come back. In addition, the new administration also must address a brewing trade war with Europe related to a long-standing dispute between Airbus SE and Boeing Co. over industrial subsidies and plans by France and other countries for new digital-service taxes aimed at American tech giants such as Alphabet Inc.'s Google and Facebook Inc. Attention will also turn toward negotiations with countries such as Kenya and a post-Brexit UK, though none of those appear close to a conclusion.

Bloomberg also notes that President Trump and USTR Lighthizer have shown what's possible on Capitol Hill by prying at least parts of the Republican Party away from free-trade orthodoxy. For decades, Republicans carried trade agreements over the finish line allied with only a small number of moderate Democrats—alienating those in the Democratic Party who felt trade deals left too many U.S. workers behind.

In the process of hammering out an updated trade deal with Canada and Mexico, Lighthizer won influential Democratic allies ranging from House Speaker Nancy Pelosi, D-Calif., to Senators Sherrod Brown, D-Ohio, and Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee. He also won over a decidedly pro-Biden labor movement.

There are those who also see a lesson relearned on the pitfalls of protectionism, Bloomberg points out. Douglas Irwin, a Dartmouth College historian of U.S. trade policy, argues that future administrations are likely to pause before using tariffs again in the way the current administration has. “We had an experiment for four years about what it's like to use tariffs for all sorts of objectives, and I don't think it's going to be viewed as a success,” Irwin says.

These questions include the uncertainty that will continue shaping investment and trade and which will remain even if the new president moves away from the use of tariffs. Add to that a pandemic that's caused many countries to look inward and the task rebuilding the global trade order “only grows,” and it indicates the coming rebuilding will require more than just physical repairs, Bloomberg says.

So, we will see. Trade policy has long been a challenging area for U.S. producers who were highly skeptical of the current administration's “get tough” tariff policies aimed at important and growing ag markets — and it will continue to be an area that should be watched closely as efforts to implement proposed changes are considered, Washington Insider believes.

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