Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.USDA Again Ups FY 2017 US Agricultural Export Forecast
The value of U.S. agricultural exports in Fiscal 2017 is now seen at $136 billion, up from a prior outlook of $134 billion, according to USDA Chief Economist Robert Johansson at USDA's annual Outlook Forum near Washington, D.C., and USDA's Outlook for U.S. Agricultural Exports report.
"Overall, U.S. agricultural exports are forecast at $136 billion for FY 2017, with a rebound in Chinese demand and strong export sales in the beginning of this year," Johansson said. "In FY 2017, U.S. exports to China are projected at $22.3 billion, up more than $3 billion from 2016 and making it the top export market for U.S. agriculture. Exports to Canada and Mexico are also projected to increase. Together those three countries purchase 45 percent of total U.S. agricultural exports."
Factors in the increase: Strong foreign demand and higher prices help boost livestock, poultry, and dairy exports by $1.6 billion, with beef, pork, and dairy leading the increase from the last report. Grain and feed exports are forecast down $1 billion to $28.6 billion, as declines in feeds and fodders and coarse grains more than offset higher wheat exports. Cotton exports are forecast at $5 billion, a $600 million increase, due to strong demand from most major markets and a larger, higher quality U.S. crop. Oilseed and product exports are forecast at $31.6 billion, up $600 million as strong soybean prices more than offset reductions in soybean meal exports. Horticultural product exports are unchanged at $34 billion
U.S. agricultural imports in Fiscal 2017 are forecast at $114.5 billion, up $2 billion from the November forecast, and would be a new record. Horticultural product imports lead the increase and are expected to reach a new record of $54.4 billion.
The U.S. agricultural trade surplus is forecast at $21.5 billion, unchanged from the level USDA forecast in November.***
Iowa Gov. Branstad: Beef, Corn Traits Key Trade Focuses in China
Getting China to allow in U.S. beef and breaking down barriers to U.S. genetically modified corn traits approved in China will be among issues that Iowa Gov. Terry Branstad said he will focus on in his coming role as the U.S. ambassador to China.
Since bovine spongiform encephalopathy has not been present in the U.S. for years, Branstad, a Republican, said in remarks at the USDA Outlook Forum near Washington that there is "no reason China should restrict U.S. beef." He wants to "serve U.S. beef" at the U.S. embassy in China and to serve it to Chinese officials. "They already buy a lot of pork, I just want to add beef," he added.
China's restrictions on distillers' dried grains (DDGs) are another area Branstad will work on. "I would like to see them eliminated," Branstad said, adding that ethanol production is a key for his state and he also added a push for expanded use of ethanol in the U.S.
On China's failure to approve certain U.S. GMO corn traits, Branstad noted he will focus on food safety said "I intend to do what I can." Branstad will meet with China's ambassador to the U.S. while in Washington, an official he said he has a "personal relationship" with. Those personal relationships are highly valued by the Chinese, Branstad added, something which can "help break down some of the barriers."
Getting a level playing field for U.S. agriculture is another key, Branstad observed, noting he was on a trade mission to Japan and China immediately after the election. "I tried to tell them there is no question that President Trump wants to improved agreements we have in terms of trade. He feels the trade imbalance is too great," he said. Ideally, Branstad said he is hopeful Trump will work to "improve bilateral agreements and enhance our opportunity to export."
Washington Insider: U.S. Left Behind on Trade
There has been a great deal of recent discussion on trade, and on the proposed border tax adjustment scheme. However, this week Politico has an article raising questions about the current assumption about the basic growth of future markets themselves.
Politico says the administration is promising large "wins" for the United States in the global trade arena, simply on the basis of its size and buying power. That may once have been true, Politico thinks, but a closer look at just how global trade has been re-aligning suggests that trade is likely to keep growing with or without us, and "increasingly, it's without."
Globalization is alive and well, Politico argues, regardless of whether the trade routes run through the U.S. And if an "America First" White House does start to retrench, "there's a good chance the biggest loser will be America itself."
Politico says most of the other Trans-Pacific Partnership (TPP) signatories are moving ahead anyway in a "TPP minus one" format. And, more than a dozen Asian countries have rekindled their efforts towards advancing an alternative megadeal -- the Regional Comprehensive Economic Partnership, which differs from TPP only in that it centers on not the U.S., but our economic arch-rival China.
Politico thinks RCEP could integrate Asian markets in a way that American firms will have an even harder time penetrating. It worries that indigenous Asian firms will quickly move up the value chain, and start occupying spots that American companies are used to having for themselves.
That's why America's biggest companies aren't so keen to play ball with the administration's attempts to erect barriers that would keep manufacturing, pharmaceuticals and other sectors at home. Not only would "border adjustment taxes" raise the cost of their imports, but without TPP's push to further open markets, multinational's declining profits abroad mean less capital to invest in competing for high-growth markets where the majority of their revenues come from.
The world has changed, Politico says, even though many Americans assume that global trade still depends on America as the consumer of last resort. In fact, the majority of trade in emerging-market nations is with each other, not with the U.S.
In 1990, emerging economies sent 65% of their exports to developed nations like the U.S. and Europe, and only 35% to other developing countries. Today, that figure is nearly reversed.
It's fashionable among globalization skeptics to point out that global trade growth is decelerating relative to global GDP growth. But given how fast Asian economies are growing in consumption and services, this is not surprising. By most estimates, consumption in China now represents two-thirds of its output and contributes 75% of its growth.
Politico also describes what it calls the largest coordinated investment program in world history -- the construction of "One Belt, One Road," a China-driven infrastructure project to weave many new Silk Roads across the Eurasian landmass, as well as the dozen countries on its western periphery in Central Asia.
It means to turn most of the "Stans" into supply chain colonies and passageways to the Near East and Europe, and to fuse the Eurasian supercontinent into an integrated commercial zone encompassing over two-thirds of the world population.
Already Europe's trade with Asia--including China, Japan, India, ASEAN and Australia--exceeds transatlantic trade, at more than $1 trillion per year, and that's before most of these high-speed railways, pipelines and other corridors are even built. As a result, European governments (and their construction companies) are tripping over themselves to join the Chinese-sponsored Asian Infrastructure Investment Bank despite American objections.
For all of today's uncertainty, Politico thinks this "undercurrent" is clear: Europe and Asia are brushing aside America's unpredictability and getting on with the business of building a new world order. So are the nations of the southern hemisphere.
This is not "balancing behavior" to counteract the economic hegemony of the U.S.; the world still uses the American financial system where necessary and American technology when convenient. So, supply and demand are more powerful than American geopolitical primacy.
Emerging markets' faster growth rates and weaker currencies have inspired some of the world's largest pension funds from Canada to Norway to expand their portfolio allocation to Asia, Latin America and Africa. The long money is still betting on globalization.
Still, American competitiveness isn't enhanced by isolating itself, Politico says. At the same time, it argues that the administration's anti-trade measures are self-defeating because they hinder America from competing in a world of growing opportunity. The U.S. should redouble efforts towards opening markets—and "we must be equally aggressive in reforming our own tax, infrastructure, technology, immigration and education policies so that investing at home becomes more attractive."
This is not a new argument, but it is uncommonly sophisticated. And, it is clear that the recent efforts of the many larger U.S. firms could help change the trade policy debate. Certainly, this is a fight that will have many new skirmishes, and which producers should watch closely as it proceeds, Washington Insider believes.
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