Washington Insider -- Wednesday

US Dairy Policy Concerns Downplayed By Canadian Trade Minister

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

US Dairy Policy Concerns Downplayed By Canadian Trade Minister

Criticism leveled by President Donald Trump of Canada's dairy policies were downplayed by Canadian International Trade Minister Franois-Philippe Champagne in an interview with Bloomberg BNA on the sidelines of a World Trade Organization (WTO) meeting in Paris.

He cited the broader benefits of its $627.8 billion trade relationship with Canada. “When you have such a big relationship you will have trade irritants from time to time. The relationship that the United States and Canada enjoys is one that a lot of people look at favorably in the world."

A continuation of current trade policy for dairy would be in the best interest of both countries, he argued. “We are going to continue to make the case that it is something that's working well for both sides and we should be looking at it in that lens."

U.S. dairy exports to Canada represent less than 0.2% — or $631 million — of the $320.1 billion worth of goods and services that the U.S. annually exports to its northern neighbor. Last week the U.S. leveled fresh criticism over Canada's new milk pricing policies in a WTO exchange that could play a role in the forthcoming North American Free Trade Agreement (NAFTA) negotiations.

Complaints that Canada's national ingredient strategy harmed U.S. ranchers by incentivizing Canadian dairy producers to manufacture protein substances using Canadian milk were conveyed by U.S. officials during a June 7 meeting of the WTO agriculture committee.

Plus, USDA Secretary Sonny Perdue labeled the Canadian program "underhanded" after recent talks in Canada.

USTR extends deadline on NAFTA renegotiation input

Public comments on the renegotiation of NAFTA are now due at 11:59 p.m. ET Wednesday night, according to the Office of the U.S. Trade Representative.

High interest in the issue was cited by the agency in setting the extension.

Those critical of the trade deal indicated they submitted a high number of comments just ahead of the prior Monday deadline of 11:59 p.m. ET. Public Citizen and an associated group, the Citizens Trade Campaign, estimated that more than 50,000 comments had been filed.

Washington Insider: Progress on Beef to China

Well, it certainly comes under the heading of good news for ag. Bloomberg is reporting today that restart of beef shipments to China is coming amid a broader U.S. push on trade—after a 14-year hiatus. The report says that access to the Chinese market “took another step closer after the U.S. Department of Agriculture announced that new trade rules have been finalized.”

The latest development was announced by USDA Monday, and follows the agreement reached last month by the U.S. with China to promote market access for American products including beef as part of a broader effort to reshape the trade relationship between the countries. China halted beef shipments in 2003 amid concerns about mad cow disease.

The new Chinese rules are fairly tough, experts say. Beef destined for China must be sourced from cattle that were born, raised and slaughtered in the U.S., or from animals that were imported from Canada and Mexico before being slaughtered domestically. Cattle must be traceable either to their birth farm or, if initially imported into the U.S., to the first place of residence or port of entry.

Additionally, beef and beef products must be derived from cattle less than 30 months of age, under the requirements stated in the AMS Export Verification program. The USDA Food Safety and Inspection Service has also updated its online Export Library specifying China's requirements for certifying U.S. beef being shipped there.

“Eligible beef products exported to China should not contain growth promotants, feed additives and other chemical compounds including ractopamine, prohibited by China's law and regulation,” the online Export Library said. “Beef shipments detected with prohibited substance or compounds at the port of entry will be rejected, returned to the U.S. or destroyed.”

The initial results of the joint U.S.-China 100-day action plan, announced in May, included promises to open China's market to U.S. beef.

Secretary Perdue commended, in addition to the USDA staff, Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin for help on reaching the deal—which stems from the U.S.-China Comprehensive Economic Dialogue co-chaired by Ross and Mnuchin for the U.S. and Vice Premier Wang Yang for China. Perdue also cited the work of U.S. Trade Representative Robert Lighthizer.

China is now the world's second-largest importer of beef, accounting for nearly 11 percent of the world's total beef imports in 2016, according to the U.S.-China Economic and Security Review Commission in the June edition of its Economic and Trade Bulletin.

"About 10 percent of U.S. cattle may meet traceability requirements," Derrell Peel, an agricultural economist at Oklahoma State University in Stillwater, told Bloomberg. "If we see a noticeable increase in sales volume by the end of the year, that will be promising. It takes time to develop trade."

Some trade groups and companies have been skeptical that U.S. beef exports to China will be significant. An executive at Brazil’s JBS SA, the world’s largest beef supplier, said last month that the deal won’t be a game changer for the U.S. industry. The U.S. Meat Export Federation has said that U.S. shipments may see a slow start, while the market shows promise in the long term. There will be a period of adjustment and added costs involved with the new requirements, the group said in a Monday statement.

“We hope that by getting our foot in the door we can develop a long-lasting and mutually beneficial relationship with China,” Craig Uden, president of the National Cattlemen’s Beef Association, said Monday in an emailed statement.

So, this looks like a trade policy win for an administration that has been notably skeptical about trade. For the ag sector, it also would seem to be a win in their efforts to “convert” officials to an understanding of the importance of trade to the sector.

Now, it appears to be up to the sector to show that it can accommodate the product rules the Chinese have described—an adjustment many in the beef sector have been reluctant to make in the past. And, for the United States which is critical of some of the product specifications, it will be important to convince this huge market that U.S. beef products are widely reliable and safe. Thus, much work remains to be done, but any progress is welcome and should be watched closely by producers as the process continues, Washington Insider believes.

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