Washington Insider-- Thursday

Trade Deals Versus Isolationism

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

US Ag Staff in Brazil: US GMO Corn Shipments Eyed for Sept.-Nov.

Brazil's Ag Ministry will request approval of imports of US GMO corn and expects those shipments could take place in Sept.-Nov., according to a report from the U.S. ag officials in Brazil.

"On August 3, 2016, the Ministry of Agriculture, Livestock, and Food Supply (MAPA) announced that they will request the approval of the National Biosafety Technical Commission (CTNBio) to allow imports of genetically modified corn from the United States," the U.S. ag office said. "Minister of Ag, Blairo Maggi, stated that he is committed to meeting the requests of the industry and wants to ensure the supply of grain in the country, but only for animal feed used by breeders of poultry and pork and milk producers until December 2017."

As for timing, the U.S. ag office said, "CTNBio's next meeting to discuss the issue will be held September 1, which, if they approve the measure (there is a lot of political pressure to do so), would leave a window of imports from the United States from Sept-Nov. The pork and poultry industry is pushing to extend the reduced tariff in 2017."

Brazil has already imported 500,000 metric tons of corn since January, the attaché noted, mostly from Argentina and Paraguay.

The situation is prompted by a downturn in Brazilian corn production, the attaché noted, prompting fears the country could run out of corn by 2017. "The second 'safrinha' crop is looking worse and worse as the harvest continues," the attaché said. "The high price of domestic corn is putting a lot pressure on pork and poultry producers, which is impeding exports and driving prices up for consumers. Prices dipped slightly as harvest began on the second 'safrinha' crop in the Central West, but as it became evident that yields were much worse than anticipated, domestic prices rose again."

EIA: US Ethanol Plant Capacity Increased for 3rd Consecutive Year

Fuel ethanol production capacity in the US was nearly 15 billion gallons per year, or 973,000 barrels per day (bpd), at the beginning of 2016, according to the Energy Information Administration's (EIA) most recent US Fuel Ethanol Plant Production Capacity report.

Total capacity of operable ethanol plants increased by more than 500 million gallons per year in January 2016 compared with January 2015.

The majority of the 195 ethanol plants, and most of the U.S. fuel ethanol production capacity, are located in the Midwest region. Midwest capacity was 13.5 billion gallons per year (883,000 barrels per day), an increase of more than 500 million gallons compared with 2015. Of the top 13 fuel ethanol-producing states, 12 are located in the Midwest.

Actual U.S. production of fuel ethanol reached a total of 14.8 billion gallons (966,000 bpd) in 2015. In EIA's August Short-Term Energy Outlook (STEO), U.S. production of fuel ethanol was forecast to reach 15.1 billion gallons (982,000 bpd) in 2016, equivalent to slightly more than 100% utilization of reported capacity as of January 1, 2016.

Nameplate production capacity, the measure of capacity that EIA tracks, is the plant manufacturer's stated design capacity to produce denatured (made unfit for human consumption) fuel ethanol during a 12-month period. However, nameplate capacity is not a physical production limit for many ethanol plants.

By applying more efficient operating techniques, many ethanol plants are capable of being operated at levels that regularly exceed their nameplate production capacity, if market conditions provide an incentive to do so. This level of operation, called maximum sustainable capacity, is inherently subjective.

Washington Insider: Trade Deals Versus Isolationism

If you thought that both major candidates are in opposition to trade deals, you would be right. However, the Washington Post argued Wednesday that those positions deserve much greater clarification and that the Democratic candidate has "not yet addressed fully Trump's non-Republican views on trade and his isolationism."

The second part of Trump's most recent economic plan, the Post says, repeats his views about trade, which was "far from GOP orthodoxy." It notes that the Wall Street Journal calls his proposal "progress on taxes and regulation" but a "trade policy jobs killer."

In fact, trade policy, more than tax policy, has animated Trump's thinking for decades, the Post says. "It was part of his first speech as a candidate and has been a core economic message throughout the campaign. His Monday speech was another full-throated assault on the trade policies of presidents from both parties that date back decades," it asserts.

It notes that "at one level, Trump and Clinton are in agreement." They both oppose the Trans-Pacific Partnership (TPP). "Her opposition represents a clear break with President Obama, who noted last week that, wherever she stands, he still wants to see it approved before he leaves office."

Still, the Post takes the stance that Trump's view is not simply anti-trade but one of the most direct assaults on the net effect of globalism delivered by a major party candidate. He has denounced globalism as something that has benefited Wall Street and elites but that has left workers behind.

The view of most politicians, the Post says, is that, on balance, globalism is good for the world economy and nations. According to this view, there are winners and losers in a global economy, but the benefits outweigh the costs and that "there can and should be policies to cushion the effect on those who have been harmed by the movement of jobs and capital."

Trump seems to take the opposite view that on balance, globalism has produced more losers than winners, or at a minimum that those who have gained the most have ignored those who have been harmed; he has tried to turn the debate upside down, seeming to reflect the views of his core constituency of white, working-class voters whose wages have stagnated and many of whom have seen their jobs moved elsewhere.

So, the Post wants to know what Clinton really thinks about this aspect of economic policy. And, it asserts that Trump has presented her with a challenge on the question and asks whether she is prepared to take it up.

Bill Clinton never shrank from the same challenge, according to the Post, in spite of Democratic opposition. President Obama, too, has been a strong advocate of trade and globalism just as Sen. Bernie Sanders and Trump have been consistent opponents of a string of trade agreements and of the overall effect of globalism. The Post asks "where exactly is Clinton in this debate?"

To some extent, the Post provides an answer to its own question. It says "her position on trade and global economics has remained suspect to those on the left," and that while her anti-TPP views got her safely through the convention, she has avoided answer questions about her views about trade and globalism. It asserts that Clinton owes the public a fuller explanation of her views on a topic "that her rival has made central to his candidacy."

Well, we will see. Certainly, the trade debate has been one of the murkiest issues in a fight that is among the bitterest in history. In fact, many of the claims about the benefits of isolation, and its potential to bring back jobs lost to new technologies have been unconvincing, to say the least.

But, while the questions the Post raises cut across the debate, they also need to include the potential damages of growing isolation in Europe and Asia, including potential geopolitical costs. The debate seems to be aiming at the fringes of such issues now but needs to rise above the anger and rhetoric—and, the deliberate obfuscation.

So, it might have been more useful if the Post had couched its requests in terms of evidence regarding the potential effectiveness of proposed initiatives on both sides and for greater fact-based clarity rather than the corroding emotionalism now used by all of the parties involved, Washington Insider believes.

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