Washington Insider-- Tuesday

Potential Impacts of TPP Failure

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

US Again Delays Preliminary Decision on Mexico Sugar Trade Pact

The U.S. government on Nov. 4 again and as expected extended its deadline to issue preliminary results of a review of a 2014 sugar trade pact with Mexico.

The Department of Commerce said in a notice it is extending its deadline by 2-1/2 weeks to November 23 to issue its preliminary decision on a review of the agreements, which ended a trade battle with Mexico.

The U.S. and Mexico agreed on a deal in late 2014 which suspended large duties on U.S. imports from Mexico. The deal also established reference prices and a quota for imports, after a Commerce Department probe showed the domestic industry was being harmed by cheap, subsidized sugar.

The administrative review, which has already been postponed three times from an initial deadline of September 1, was requested by interested parties, the Commerce Department said in the notice.

Based on evidence collected during this legal review, U.S. sugar producers have asked the Dept. of Commerce to make a preliminary determination to terminate the agreements when it issues its preliminary ruling later this year.

If the suspension agreements are ultimately terminated without being renegotiated, Mexican sugar imports would be subject to antidumping duties of more than 40% and countervailing duties of more than 38%.

House Republicans Plan November 15 Leadership Elections

House Republicans reportedly plan to vote on conference leaders, including a GOP nominee for speaker, the week after the election.

A candidate forum will be held November 14, while ratification of the conference rules and Steering Committee structure are planned for November 16.

Meanwhile, the House Freedom Caucus discussed in a private meeting November 3 making a play for a slot in GOP leadership in return for backing Paul Ryan, R-Wis., for another term as speaker.

Though the position would be likely be low in the leadership pecking order, it would be the first time a member of the group of hardliners became part of official party governance.

It's not clear when the Senate's leadership contests will take place, though Democrats will have a new leader regardless of the election outcomes as Senate Minority Leader Harry Reid, D-Nev., is not returning to the Senate for another term. Expectations are that Sen. Charles Schumer, D-N.Y., will take over the top leadership post, whether that will be the minority or majority leader will be determined, ideally, with today's elections.

Washington Insider: Potential Impacts of TPP Failure

Amid the chaos of today's vote, the administration is increasing the emphasis on the importance of the Trans-Pacific Partnership (TPP), Bloomberg is reporting this week. The White House has stepped up its emphasis on the prospect that the United States will "likely lose jobs to China if TPP isn't approved." It is citing a recent report by the President's Council of Economic Advisers in the new effort.

A key theme of the report is that U.S. companies would continue to face trade barriers without the 12-nation TPP in place but that other countries would likely strike market-opening trade deals across the region, as they are continuing to do.

China in particular stands to benefit if it can conclude the Regional Comprehensive Economic Partnership, a trade deal that involves Japan and many other TPP countries, Bloomberg said. The council report focused on the consequences for U.S. and Chinese trade with Japan if the TPP does not go into force but RCEP does. Japan, of course, is a long-standing, vital market for U.S. agricultural products.

"Nearly 5 million people work in U.S. goods-exporting industries that could face a direct loss of competitive position relative to China if RCEP were to give its member countries preferential access to the Japanese market over U.S. firms," the report said. "Losses to these industries would compound the foregone benefits of TPP for US firms who would have benefited from improved market access."

Jason Furman, chairman of the Council of Economic Advisers, said in a conference call with reporters that 35 industries in the U.S. that sell a combined $5.3 billion in goods exports to Japan annually would see an erosion of their market access to Japan relative to Chinese firms due to tariff cuts under RCEP. These U.S. industries include 162,000 business establishments, he added.

Agriculture is one of the affected industries, Bloomberg noted. It quoted Kevin Kester, vice president of the National Cattlemen's Beef Association who participated in the recent call and said that, thanks to a bilateral trade pact, the Australian beef industry already has a 10 percent tariff rate advantage with Japan over U.S. beef producers. The U.S., he said, "can't afford to wait any longer to get the TPP tariff cuts in place."

In an obvious effort to counter assertions that trade costs US jobs, U.S. Trade Representative Michael Froman said two-thirds of the TPP's benefits for the U.S. would go to workers, both skilled and non-skilled, through higher wages, citing studies by the Peterson Institute and the International Trade Commission as the source of his statistics. He also said the pact would set a new standard for trade deals by having multiple countries sign onto rules covering new areas, such as the digital economy and state-owned enterprises.

Froman also stressed the strategic importance of the pact, an argument U.S. industry representatives are telling Bloomberg they expect will be heavily emphasized if the TPP is taken up by Congress during the lame duck session of Congress.

During the coming push to approve the TPP, lawmakers can expect to be repeatedly asked whether the US can afford the hit to its credibility in the Asian-Pacific region if the United States fails to pass the agreement, industry sources told Bloomberg.

If is doubtful if anybody much is listening specifically to arguments for more open markets at this moment during the vote. However, the administration is attempting to emphasize recent efforts among trading partners in the Pacific Region, including the Philippines, but also others, to reach out to Beijing and otherwise strengthen political and trade ties there while the US is heavily engaged with domestic issues.

Better access to Asian markets is especially important to agricultural interests, and the recent anti-trade rhetoric during the election debates has been bad news for the current trade initiatives. Adding the geopolitical aspect of the coming US debate on trade deals is expected to strengthen the administration's position, but the outcome of those efforts clearly remains in doubt and should be watched closely by producers as it proceeds, Washington Insider believes.

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