Washington Insider-- Monday

By DTN's Washington Insider

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

US-Canada Food Safety System Reciprocity Announced

Reciprocal recognition of one another’s food safety systems has been announced by the Food and Drug Administration (FDA) and the Canadian Food Inspection Agency (CFIA).

The agreement marks the second time FDA has recognized a foreign food safety system as equivalent to U.S. standards, the first being New Zealand in 2012. The goal of the agreement is to facilitate cross-border trade in food products.

The systems recognition arrangement includes most food sectors but includes exemptions for USDA-regulated food and certain FDA-regulated foods governed under special food programs, including meat and poultry, processed eggs, farmed catfish, grade “A” milk and milk products, bivalve molluscan shellfish, dietary supplements and infant formula.

U.S. and Canadian food safety officials will collaborate by increasing communications, sharing changes to food safety policies and regulatory approaches, discussing policy approaches when similar food safety issues arise and notifying one another when food safety concerns arise.

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TPP Consideration Needn’t Wait for Lame Duck: White House

Congress should begin consideration of the Trans-Pacific Partnership (TPP) as soon as possible and needn’t wait for a post-election lame-duck session, according to comments by White House Press Secretary Josh Earnest.

“There's no reason we need to wait that long, particularly when you consider that ratifying the TPP would hasten the end to 18,000 taxes that other countries impose on American goods,” Earnest told reporters during a May 5 briefing with reporters.

In recent weeks lawmakers from both sides of the aisle voiced optimism that TPP can be ratified this year, including Rep. Henry Cuellar, D-Texas, and House Ways and Means Committee Chairman Kevin Brady, R-Texas.

Meanwhile, as New Zealand also moves toward TPP ratification, the nation’s Maori indigenous people said that provisions of the TPP adequately protect their treaty rights under the centuries-old “Treaty of Waitangi.”

A specific TPP exception clause states that “nothing in this agreement shall preclude the adoption by New Zealand of measures it deems necessary to accord more favorable treatment to Maori in respect of matters covered by this agreement, including in fulfilment of its obligations under the Treaty of Waitangi”

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Washington Insider: Agricultural Trade Deficit for March

USDA’s Economic Research Service is reporting what it says is a U.S. agricultural trade deficit for March of $35 million, the first such deficit since 2006. While the deficit was relatively small compared with U.S. ag trade that month compared with exports valued at $10.314 billion and imports of $10.349 billion, the red ink was generally unwelcome.

It also shifted the market balance relative to February, down from a positive $1.097 billion that reflected exports of $10.654 billion and imports of $9.558 billion.

In fact, monthly trade deficits are not that unusual even though the March number was the largest since April 2006 when it was $149 million, ERS noted. For U.S. ag overall, there were three monthly deficits in FY 2006.

Part of the cause of the March deficit was a rise in ag imports, ERS said. Overall trade data in March showed imports down 3.6% compared to February but Ag imports, by contrast, moved the other direction and rose 8.3%. During the same period, ag exports fell 3.2%. Overall US exports also fell, but only by 0.9%.

Ag trade is still in the black for FY2016, with cumulative sales of $67.239 billion while imports totaled $56.817 billion, bringing the surplus to $10.513 billion. However, that surplus is only about half of that of FY2015, when exports worth $78.791 billion were reported against imports of $56.808 billion for a surplus of $22.163 billion.

USDA continues to emphasize that it expects ag trade to generate a surplus for 2016 also. Its latest forecast in February called for exports to reach $125 billion and imports $118.5 billion for a $6.5 billion surplus. The agency will update its outlook at the end of this month, ERS said.

Interpreting changes in the ag trade balance is always difficult, especially since the export sales directly affect the value of domestic commodities—while imports tend to be products the United States does not produce advantageously, like coffee and seasonal vegetables, among many others--with less direct impacts on US producers.

Nevertheless, ag trade surpluses play an important role in offsetting the nation’s total trade deficits and there has been some expectation among analysts that overseas sales could become increasingly important as recent large U.S. crops make U.S. commodities more competitive. However, the more competitive prices also tend to diminish export revenues for any given quantity of sales.

Recent increases in global competition also make outlook estimates more difficult, especially since U.S. exports have fallen every month but February in Fiscal 2016. However, import values have tended to peak during March-April in recent years, market behavior some analysts suggest could lead ERS to reduce its import forecasts in its late May review and to boost its trade surplus estimate.

So, ag trade levels and balances reflects many things including global weather, geopolitics and policies, economic competition and currencies, among others. Because of the huge size of these markets, their volatility and the wide variety of crop and livestock products they include emphasizes the linkage between export sales and returns for US producers. Thus, USDA’s May trade balance review and forecasts should be watched closely as these estimates emerge, Washington Insider believes.

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(GH/CZ)

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