Washington Insider--Wednesday

China and GMOs

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

RFS 2017 Mandates Info Sent to OMB

EPA's proposed Renewable Fuel Standard (RFS) mandates for 2017 could be out in July. The agency on Friday sent the standards to the White House Office of Management and Budget (OMB) for review, a process that typically takes 90 days.

The EPA already released its 2017 biodiesel mandate, at 2 billion gallons. Sens. Chuck Grassley, R-Iowa, Amy Klobuchar, D-Minn., and 17 other senators recently urged EPA to set high blending targets under the RFS for 2017.

In a letter to EPA administrator Gina McCarthy, the senators said the EPA’s last target was lower than it should have been because the agency relied on concerns about "distribution infrastructure," which Congress explicitly rejected as a reason to justify lower blending targets. “A strong RFS makes our country more energy secure, increases competition and consumer choice in our transportation sector and ultimately strengthens our economy,” the senators wrote.

“We need a strong RFS, and we need more biofuels. We expect that you will get the program back on track, and we look forward to seeing a proposed rule released on time that removes the distribution waiver.”


Cuban Barriers May Hinder Trade, Investment

Barriers linked with Cuba's state-controlled economy may make it hard for foreign partners to trade or invest in the country, but the lifting of restrictions could expand US exports, the International Trade Commission (ITC) said in a report released this week.

The report, requested by the Senate Finance Committee, will likely be an important tool as the Obama administration continues to call for an end to the decades-old US trade embargo on Cuba.

U.S. sanctions on Cuba have “largely prevented” U.S. companies and investors from entering the Cuban market, the report said. If restrictions are lifted, U.S. exports could be expanded, but “Cuban nontariff measures, institutional and infrastructural factors, and other barriers, including those associated with a non-market, state-controlled economy, still exist and may affect the ability of foreign partners to trade with or invest in the country,” according to the ITC.

U.S. agricultural exports to Cuba could see significant gains from the removal of trade restrictions, the ITC said.

“For manufactured goods,” the agency said, “exports would likely increase somewhat after the removal of U.S. restrictions, with prospects for larger increases in the longer term, subject to changes in Cuban policy and economic growth.” Cuba imports many of the manufactured items it once produced. The U.S. can ship most items at a lower cost than competitors, the ITC said. US services exports probably wouldn't grow significantly in the near term, but could increase over a longer time span, the agency said.

Factors that could hinder U.S. trade and investment include the Cuban government's control of trade and distribution, limits on foreign investment and property ownership, dual currency and exchange rate systems, as well as politically motivated decisions. Customs duties and procedures and sanitary and phytosanitary measures on agricultural imports don't appear to significantly affect trade, according to the ITC.


Washington Insider: China and GMOs

It is not strange that China’s massive markets attract almost constant attention from the Western press. So, it was unsurprising that the Wall Street Journal would notice that a Chinese agriculture official recently offered a rare public endorsement for mass-producing genetically modified farm crops. That leads to the next question concerning China’s readiness for this advanced technology.

In fact, China hasn’t allowed any GMO staple foods to be commercially produced domestically although in 2009, the Journal says, it did certify the biotechnological safety of a handful of homegrown rice and corn strains.

Now, however, China’s agriculture ministry seems to be warning that producers should be prepared for change.

“We will further focus on strategic priorities in the 13th Five Year Plan,” said Liao Xiyuan, a senior ministry official, referring to China’s development blueprint that runs through 2020. Among of these priorities, he said, were “strengthening the research on cotton and corn as an industrialization strategy for cash crops, and promoting the industrialization process for new pest-resistant cotton, corn and other major commodities.”

As it interprets Mr. Liao’s comments, the WSJ says they “might have been just another mass of bureaucratic jargon,” were it not for a handful of other signals that China might indeed be ready to move more aggressively on GMOs.

In late January, the central government and Communist Party’s “No. 1 Central Document” – a blueprint setting out Beijing’s most important agricultural policies – made a reference to GMOs, only the second time that its authors have included the term in the annual tome, the Journal notes. This year, it called for Beijing to “strengthen research and regulation on GMO agricultural technique, carefully promoting it on the basis of protecting safety.”

Last year, the No. 1 document briefly mentioned GMOs, but did not include a phrase the Journal thinks is key; “carefully promoting.”

Parsing the No. 1 document provides clues to how Beijing will move on the policy, which potentially affects planting plans for millions of metric tons of new cash crops in China, as well as potential large changes in the global agricultural trade, the Journal says.

“The language in the No. 1 document indicates we are still quite slow in the development of GMOs, and that we should really accelerate it,” observed a corn analyst for the agricultural consultancy Shanghai JC Intelligence Co. “That’s what the agriculture ministry official is saying as well, though he’s not confirming that the government will definitely permit commercial production by 2020.”

Analysts suggest part of the reason for the change might be that China has solved the biggest conundrum in its search for the technology: How would it control the source? The Journal sees the possibility that the February offer by state-owned China National Chemical Corp. of $43 billion to buy Swiss GMO giant Syngenta AG is a significant part of the nation’s policy shift. This deal, if completed, would put Beijing in control of some of the world’s biggest GMO brands, including those for corn and cotton.

Syngenta recently told the Journal that the decision to commercialize GMOs rests with China’s government but that, “We believe that Chinese farmers should have access to the full suite of technologies to improve productivity and this can include GM crops,” said Andrew McConville, the company’s Singapore-based head of corporate affairs in Asia.

In general, the new Chinese efforts are unsurprising, the Journal says. In many high tech areas, from artificial intelligence to space exploration, “China has underlined time and again that it wants to join the global race, but on its own terms.”

They also have been at work on GMOs, but as American and European companies raced ahead, China appeared to pull back, the Journal notes.

Now, that appears to be changing. In the fall of 2014, Chinese President Xi Jinping set out his priorities. China, he said, has to own its GMOs. “We must boldly research and innovate, dominate the high points of GMO techniques, and cannot let foreign companies dominate the GMO market,” he said. Thus, the journey toward homegrown domination of GMO markets looks set to begin, a very significant development in both Chinese and Global agricultural markets, WSJ suggests.

It is interesting that this apparent new policy comes at a time when Westerners appear to be increasingly skeptical of ag technologies and more than a few “thought leader groups” even less concerned about providing abundant food for the future. If the Chinese follow through on their embrace of GMOs, that certainly has potential to dramatically change markets. Whether it will affect views of Western foodies regarding potential impacts on global market positons remains to be seen, but should be watched carefully by producers, Washington Insider believes.

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