Washington Insider-- Monday

More EU Trade Friction

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

USDA Announces CRP Payments; Acreage Cap Looms

Payments totaling nearly $1.6 billion under the Conservation Reserve Program (CRP) have been issued, according to USDA, on nearly 24 million acres of ground in the program. Sources, however, signal the 24-million-acre cap on the program for Fiscal 2017 looms as a factor ahead for the program.

Data from USDA at the end of August indicated that the agency enrolled 411,000 acres of ground into the program under the last general signup held, 101,000 acres under the new CRP-Grasslands effort and it showed 836,000 acres had been enrolled during Fiscal 2016 under the continuous signup effort.

However, in announcing the CRP payments, USDA said the level of acres enrolled via the continuous signup for Fiscal 2016 was 1.3 million acres, about double the Fiscal 2015 level.

Given that there were 23.9 million acres in the program as Fiscal 2016 wound down, with new entries that have contract starts of Fiscal 2017 via the general signup and grassland effort, plus 1.67 million acres of contracts maturing, sources did not provide a specific total of how much ground is now in the CRP. But, that level is "pretty close" to the 24 million acre limit that is in place for Fiscal 2017, one source advised.

USDA data show contracts on 2.52 million acres of ground will mature as of September 30, 2017, freeing up space in the program. Of those, 1.98 million acres are from general signups and 540,000 are from continuous signups.

China's Soybean Import Growth to Slow: Zulauf

China's steady growth in soybean imports is slowing, and the rest of the world's growth rate could outpace that of the Asian country for the first time since 1995, Carl Zulauf, professor emeritus at Ohio State University, said.

"China is importing so many soybeans because of its rapid economic growth," Zulauf said. "In turn, demand for vegetable oils, including soybean oil, and for meat and animal product has grown rapidly. However, the growth rate of soybean imports is slowing."

As China has been the largest global importer of soybeans for several years, its growth rate as a percentage has slowed. It would take a much larger jump in volume to affect the country's percentage growth.

"The 2016 crop year could be a pivot year. If current projections hold, percent growth in soybean imports will be lower for China than the rest of world for the first time since China emerged as a consistent importer of soybeans in 1995," Zulauf said in an article cited on Farmdoc Daily.

Zulauf said China's soybean import growth rate would be 7.9%, while the rest of the world would be 8.1%.

China might, however, reignite some soybean imports as another source of livestock feed was largely cut off. In September, the Chinese government leveled a 33.8% antidumping tariff on dried distillers grains from the U.S.

Washington Insider: More EU Trade Friction

Now that the Canadian-European Union (EU) trade deal is back on track, at least some thought is going toward a possible agreement with the United States. This weekend Bloomberg is reporting on a series of conversations with EU officials on potential future trade talks. As usual, the EU officials are rushing to lay out what they won't accept.

For example, the Dutch took pains to tell Bloomberg that any deal with the EU "won't move forward unless the U.S. resolves business disputes in a public court instead of private arbitration and opens more government contracts to bidders from the European Union."

This means that the Transatlantic Trade and Investment Partnership must include a more transparent process for companies to sue governments than has been considered in the past, according to Vice Trade Minister of the Netherlands Marten van den Berg. That would require a court with a panel of "accountable" judges, an approach that shifts dramatically away from a history of using an ISDS system preferred by the U.S. that allows the two sides in a lawsuit to appoint their own arbitrators.

"There was a lot of opposition against this arbitration because there was a concern that companies, large multinationals could force governments to accept certain regulations," van den Berg told Bloomberg. "Or if the government should change public regulations, they could be sued before an arbitration panel and they have to pay huge penalties."

Conversely, so-called public courts seem likely to represent local public opinion based on their history of ruling against foreign investors. The United States can be expected to continue to be sensitive to this background, especially for trade investments in the EU where individual countries continue to push politically for policies that are anti-trade in some cases.

Van den Berg said that many undecided issues mean the U.S. and EU are "far from an agreement," which likely would be "impossible" to finalize before President Barack Obama leaves office.

Another EU priority that van den Berg highlighted in the Atlantic trade pact was public procurement. He said governments of the 28 EU members generally apply consistent rules for companies to bid on state contracts, but in the U.S., many cities and states have different "Buy American" requirements that limit government spending on European and other foreign contractors. Washington could use its financial leverage to give the EU more access to subnational projects, according to van den Berg.

"Some public procurement on the state level is financed by federal budgets, and there the federal government has a voice," van den Berg said. "But still it's very hard to get an agreement, I think, on this. So we're still not there."

The Netherlands, whose long trading tradition launched one of the world's first stock exchanges is one of the top supporters of a trade deal with the U.S., according to Henk Darwinkel, sales director at PMJ Duck Processing Technology, a Dutch company. Darwinkel also counts himself among those supporters and said that by the time the TTIP finish-line approaches, he hopes "the European Union will have learned from its way of dealing with Canada."

Darwinkel disagrees with TTIP opponents who say the agreement would flood the EU with U.S. imports of genetically modified organisms and other food that doesn't meet European safety standards. "I think people are smart enough to recognize quality," he told Bloomberg.

Still, van den Berg also said Europe would stick to the "precautionary principle," which means that public policy need not be based on scientific evidence. "Even if we would sign a TTIP agreement, there is no way that the United States can force us to accept any standard," the trade envoy said.

At the current time, the EU is heavily engaged in negotiations with the UK with regard to its future access, and the United States is unlikely to press toward the TTIP until those talks are completed.

In any case the EU seems interested in better access to U.S. markets but to have little interest in making the necessary concessions for any such broad deal. It demonstrated little real interest in the Doha talks and continues to use highly restrictive border measures on a number of products and origins, in spite of being dependent on internal trade.

So, the EU is a large and wealthy bloc and could be a highly attractive for U.S. products in spite of its lack of real interest in market competition. The U.S.-EU talks should be watched closely by producers if and when they resume in earnest, Washington Insider believes.

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