Washington Insider -- Thursday

Chicken and Trade with Britain

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

Political Calendar Favors Quicker NAFTA 2.0 Deal: Commerce's Ross

Factors signaling that North American Free Trade Agreement (NAFTA) renegotiation should be concluded sooner rather than later include the expiration of trade promotion authority (TPA) in mid-2018, Commerce Secretary Wilbur Ross told the Economic Club of Washington this week.

TPA allows the president to submit implementing legislation for a trade deal to Congress for a straight-up or down vote. The mechanism prevents potentially deal-busting amendments. The current congressional grant of TPA applies to agreements reached before July 1, 2018, with a possible extension to July 1, 2021. Implementing bills may get no amendment consideration if negotiated during the time period for which TPA is in effect.

“You never know. And it's probably a big mistake to set a particular date,” Ross said when asked how long the NAFTA talks with Mexico and Canada would last. “But the political calendar both here and there suggest it should get done pretty quickly,” he said.

Ross also cited the U.S. midterm elections, July 2018 presidential elections in Mexico and provincial elections in Canada as “political calendar” reasons bolstering the proposition that “quicker is more likely to be conclusive than waiting.” NAFTA talks are scheduled to start Aug. 16.

TPP and NAFTA 2.0. The Trans-Pacific Partnership (TPP) would not have garnered enough political votes for passage by the time of the 2016 election, Ross said. Trump pulled the U.S. out of the 12-nation pact shortly after his inauguration. But Ross said there were “some very good features” to the TPP, which also included NAFTA partners Canada and Mexico. “Some of those are features we'll be trying to build upon in subsequent trade negotiations,” he said, without providing further specifics. TPP member Japan has not said it is yet ready to negotiate a bilateral trade pact with the U.S., Ross said.

Clovis Officially Nominated For Key USDA Post

President Donald Trump officially nominated Sam Clovis for USDA undersecretary for research, education and economics on Tuesday. His nomination has been controversial although many farm and commodity groups recently noted their support.

Senate Agriculture Chairman Pat Roberts, R-Kan., said a nominee who regarded crop insurance as unconstitutional "might as well not show up" to his committee hearing. In a 2013 interview with an Iowa talk radio host, Clovis listed crop insurance subsidies as spending that he said was unconstitutional.

Roberts later said "it's too early" to say whether Clovis' expected nomination should be withdrawn. Clovis should have the opportunity to talk with the Agriculture Committee leaders and explain "why in the hell he said that," Roberts said.

Washington Insider: Chicken and Trade with Britain

Bloomberg notes that the UK Trade Secretary’s name is Liam Fox, and that is leading to bad jokes by the UK press concerning foxes among chickens—since chlorine washes for poultry are an important potential U.S.-UK trade issue.

The setting is a trip by Trade Secretary Fox to Washington looking for a trade deal—an effort endorsed over Twitter by U.S. President Donald Trump.

However, Bloomberg says that in spite of Secretary Fox’s willingness to play up the “special relationship” with the Americans, the reality is that “any trade deal will take years and run into all sorts of difficulties.” These range from “clashing regulatory practices to the powerful farming lobby.” It sees the media “storm” back in London over how U.S. hygiene rules rely on chlorine washes to protect chicken as a glimpse of the battles in store.

The differences over chicken put Fox on the spot to the point that he decried the “obsession” with the issue when all he wanted to do was play down government “splits over Brexit” and talk up the potential of the UK leaving the European Union and being a free agent. However, he ended up spending much of his two days in the U.S. insisting that the UK would not be pushed around.

“We’re setting UK conditions, UK standards,” Fox told Bloomberg Television. “We’re neither going to be members of the European Union nor are we totally bound to the United States.”

Fox published an 871-page report in Washington on Tuesday highlighting UK trade and investment in the 435 U.S. congressional districts, pointing out that Britain is one of the top five exports markets for 302 of the districts. He said the UK-U.S. working group on trade would “work to provide certainty for businesses as the UK leaves the EU and look to expand future trading links with the U.S.”

However, the gap between EU and U.S. standards was one of the factors behind the failure to agree on an earlier free trade deal. Britain will want to avoid a similar failure in the future, but its consumers “are especially sensitive about food hygiene following the mad cow disease outbreak in the 1980s,” Bloomberg said.

Agricultural interests have historically held a big sway over U.S. politics, Bloomberg says, and that is especially true on environmental regulation and trade. Farming areas are over-represented in the Republican coalition that elected Trump, Bloomberg thinks, meaning that influence may be even stronger now.

Moreover, when President Trump tweets about a potentially “big and exciting” trade deal, it’s worth noting the countries have very different notions about the scale of exports to each other. The president frequently rails against the trade deficit as evidence that America no longer wins. Fox pointed to the “relatively good trade balance” between the two countries as a reason for optimism and said 700,000 U.S. jobs are supported by trade with Britain.

Trade between the U.S. and the UK amounted to a surplus $48 billion a year as of 2015, according to Britain’s statistics office—although the U.S. Bureau of Economic Analysis calculated a surplus of $11.9 billion in the same year.

“Working on major Trade Deal with the United Kingdom,” President Trump wrote in a Tweet on Tuesday. “Could be very big & exciting. JOBS! The EU is very protectionist with the U.S. STOP!”

Economists and trade specialists have warned any deal will be difficult to deliver. Environmentalists and lawmakers worry about Britain’s strict food regulations being relaxed.

A report by the upper chamber of the UK Parliament said British farmers risk losing out to cheaper, imported food after leaving the EU if ministers don’t retain strict standards for animal welfare. UK farms have some of the world’s highest welfare standards, but also tend to be far less competitive at retail.

U.S. producers have long viewed the EU food policies as heavily protectionist and argued that they result in much higher food cost in both the UK and EU. As a result, the proposed new Food Safety regime raises the prospect of lower EU food costs—while safety maintaining safety standards or enhancing them.

Still, there are concerns in the UK about “rushing” into a deal and forgetting its top priority. Carolyn Fairbairn, director general of the Confederation of British Industry, emphasized, “Our members put the European Union negotiations first.”

So, we will see. It is hard to imagine that the UK will seriously hold out safety worries about products and processes Americans use safely on a daily basis. Still, the Brits have a reputation as hard bargainers and can be expected to push for the best trade deals they can negotiate this time, as well, Washington Insider believes.

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