Washington Insider -- Friday

Mexico May Make a Trade Example of Ag Products

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

Senate Panel Hears From Trump Trade Official

Several Senate Finance Committee members said they remain confused on the Trump administration’s trade strategy even after meeting with the director of the newly created White House National Trade Council. Peter Navarro, the former University of California-Irvine economist, spent about an hour with Democratic and Republican Finance Committee members Wednesday and laid out several trade principles. In a separate meeting Tuesday, GOP committee members spoke with White House international trade negotiator Jason Greenblatt.

Navarro “offered few details about the administration’s objectives on trade and no strategy for how it plans to achieve them,’’ Finance ranking member Ron Wyden, D-Ore., said in a statement about Wednesday’s presentation. “In some cases, the officials’ message conflicted with recent statements made by the president regarding his trade policy. In other cases, the message appeared to contradict Congressional directives on trade that became law in 2015.”

President Trump has said Navarro and Commerce Secretary nominee Wilbur Ross will set the administration’s trade agenda while working with the U.S. trade representative. Trump’s USTR nominee is Robert Lighthizer.

Sen. Pat Roberts, R-Kan., chairman of the Senate Agriculture Committee, said he stressed agriculture’s need for strong export markets. He said trade is especially important since USDA has forecast a drop in net farm income for a fourth year. Roberts suggested that Navarro, Greenblatt and eventually Lighthizer pursue trade in several markets such as Japan, and avoid policies that could harm agricultural sales overseas.

House Agriculture Panel Approves Two Measures on Pesticides

Two measures regarding the regulation of pesticides were approved Feb. 16 by the House Agriculture Committee.

HR 953, the Reducing Regulatory Burdens Act, would clarify Congressional intent regarding pesticide regulation in or around waters of the United States.

Background. A 2009 court decision in the US Court of Appeals for the Sixth Circuit erroneously applied the provisions of the National Pollution Discharge Elimination System (NPDES) permitting process under the Clean Water Act (CWA) to pesticide applications that were already fully regulated under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). This resulted in costly and duplicative burdens for many farmers, ranchers, water resource boards and public health professionals involved in mosquito control, all without providing quantifiable public health or environmental benefits.

“The Agriculture Committee has now passed the Reducing Regulatory Burdens Act five times. This unnecessary permitting process has not only cost American farmers time and money, it has also had implications for public health. It was never Congress’ intent to create two different permitting requirements. It is time for Congress to finally act to correct a misguided court decision and give farmers and pesticide applicators much needed relief from this costly and duplicative regulation,” said House Agriculture Chairman Mike Conaway, R-Texas.

HR 1029, the Pesticide Registration Enhancement Act, reauthorizes the Pesticide Registration Improvement Act (PRIA). PRIA was intended to create a more predictable and effective evaluation process for affected pesticide decisions by coupling the collection of fees with specific decision review periods. It also promoted a shorter decision review period for reduced-risk pesticides.

Washington Insider: Mexico May Make a Trade Example of Ag Products

It seems everybody is worried about trade now, and Mexico is taking advantage of the increasing internal U.S. tension over that fact. Bloomberg is reporting this week that agricultural products from the U.S. could be on the firing line in the growing trade tensions with Mexico.

And, it could be more than just talk. Mexican Sen. Armando Rios Piter says he is putting together a bill requiring Mexico to buy corn from Argentina and Brazil rather than the U.S., according to spokeswoman Natasha Uren. “We are pushing very hard into different aspects of the bilateral relationship in this new Trump era,” Uren told Bloomberg.

“Our thought is, let’s start talking about buying corn from Argentina and the other countries -- with the price of the dollar so high, it doesn’t sound as terrifying as it once did. That gives us an option to start opening other markets,” she said.

Rios plans to introduce the legislation possibly this week or early next. It intended to highlight the current benefits of the trade relationship under the North American Free Trade Agreement, which allowed U.S. growers to sell $2.4 billion of corn to Mexico in 2015.

And, the effort is getting at least some response. For example, Sen. Charles Grassley, R-Iowa, in a recent interview with Radio Iowa, talked about raising the issue with Peter Navarro, who heads the White House National Trade Council, and other senators. “That’s one of the points I’m going to make, that you’ve got to be pretty cautious about these renegotiations of trade pacts that we don’t get retaliation against agriculture,” he said.

On twitter, Grassley said the Mexican bill would hurt U.S. agriculture. “U.S. Ag Must enter Mexico negotiations w eyes WIDE OPEN Consequences will hurt farmers first,” Grassley tweeted.

During the radio interview, Grassley said: “Every American would back a better deal for America but you got to take into consideration what the consequences are of your renegotiation.” Agriculture could be one of those negative consequences, he said.

U.S. Grains Council Communications Director Melissa Kessler told Bloomberg that Mexico is the biggest corn market for U.S. exporters.

Last year, the U.S. exported 523.5 million bushels, along with 1.9 million metric tons of DDGS (an ethanol by-product that is used as animal feed) and 23.6 million bushels of sorghum, she said.

In fact, the U.S. and Mexican agricultural economies are highly integrated, and NAFTA has proven extremely beneficial to the U.S. grains industry over the past 20 years, she said. “We are concerned that this is the type of rhetoric that could create an environment in which Mexican buyers feel they need to look at alternate suppliers, which could affect U.S. market share.”

Grains Council staff in Mexico City and Monterrey as well as in the U.S. say they are following the issue closely and in “constant conversation” with Mexican traders and members of the feed industry about the trading relationship, she said.

The Mexican Senator’s threat has picked up considerable US media coverage, and CNN said it is another sign of Mexico’s willingness to respond to Trump’s threats, and the list is growing.

For example, Mexico’s economy minister, Ildefonso Guajardo, said in January Mexico would respond “immediately” to any new U.S. tariffs. “It’s very clear that we have to be prepared to immediately be able to neutralize the impact of a measure of that nature,” Guajardo said Jan. 13 on a Mexican news show.

Still, it is not clear what the importance of the “redirected grain purchases” effort would be. Market experts note that such market interventions do not have a strong record of achieving their objectives. While they might make costs higher for Mexico and returns lower for the U.S. shippers who share an important transportation advantage, corn is highly fungible and if Mexico turns to Brazil and Argentina for their supplies, that could divert U.S. corn to markets they formerly supplied.

Still, the Mexican purpose might be served in any case, since such actions are at the minimum a psychological negative for the U.S. corn market, Washington Insider believes.

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