Washington Insider - Friday

Global Trade Review

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

US Still Open To Multilateral Trade Deals

The U.S. is still open to multilateral trade agreements, despite an initial Trump administration preference for bilateral deals, Commerce Secretary Wilbur Ross said during a speech at the World Economic Forum in Davos, Switzerland. While the Trump administration has been criticized for its lack of engagement in multilateral deals, including its withdrawals from the Trans-Pacific Partnership (TPP) and the Paris climate accords, Ross said the administration's desire to make changes to current practices did not mean it would no longer be a world leader. Ross stressed the administration's willingness to participate in multilateral agreements provided member countries are open to equitable tariffs.

"If China or the EU or anybody else is willing to match our tariffs, we’ll pull" for an agreement, Ross said. Specifically on the European Union (EU), Ross pointed out the U.S. has not pulled out of the Transatlantic Trade and Investment Partnership (TTIP), a sign of that openness to multilateral deals, Ross noted. "When we dropped from TPP, we did not drop from TTIP," he said. "It wasn't an accident that we didn't walk from TTIP." However, there have not been any additional talks via TTIP.

USDA's Perdue More Involved In USDA Budget Plan, But Silent on Potential Crop Insurance Cuts

USDA Secretary Sonny Perdue, who was confirmed after the Fiscal 2018 budget plans by the Trump administration were put forward, told reporters in Pennsylvania Wednesday that he is more involved in this year's process. However, he would not say whether there will be sizable cuts to crop insurance proposed in the Fiscal 2019 plan. Some in Washington expect even bigger cuts for the program may be proposed in the Fiscal 2019 budget plan.

If that is the case, expectations are Congress once again will not follow the administration's proposed cuts. However, some expect that a big crop insurance cut proposed by the administration could be used to back amendments during the upcoming farm bill debate. And, with Congress unlikely to agree on a Fiscal 2019 budget any time soon, that could mean the new farm bill is likely to be written to the 2018 budget that requires no cuts to the farm bill or crop insurance.

Washington Insider: Global Trade Review

The urban media is increasingly paying attention to the evolving U.S. trade policy these days. For example, the New York Times reported this week that President Trump is arriving at the World Economic Forum in Davos, Switzerland, to explain his “America First” approach at a moment when the world is moving ahead with a trade agenda that no longer revolves around the United States.

The Times noted that the world “marked a turning point in global trade on Tuesday,” when 11 countries agreed to join the Trans-Pacific Partnership. They announced the completion of the pact and expected to sign a deal on March 8 in Chile.

As the world’s largest economy, and architect of many international organizations and treaties, the United States remains an indispensable partner. But as the global economy gains strength, Europe and countries including Japan and China are forging ahead with deals that do not include the United States the Times warned.

Thirty-five new bilateral and regional trade pacts are under consideration around the world, the Times says. The United States is party to just one of them, with the European Union, and that negotiation has gone dormant. At the same time, theU.S. is also threatening to withdraw from one of its existing multilateral agreements—the North American Free Trade Agreement with Mexico and Canada—if it cannot be renegotiated in the United States’ favor.

“Maybe there was some sort of presumption on the part of the president and his team that if the U.S. said stop, this process would come to a halt,” said Phil Levy, a senior fellow at the Chicago Council on Global Affairs and an economist in the George W. Bush administration. “What this shows is that’s not true. The world just moves on without us.”

So now, business interests in the United States are “watching with alarm as other countries strike agreements that exclude American exporters,” the Times says. It notes that ranchers in Canada and Australia will be able to sell beef at lower prices in Japan than their American competitors, who will be subject to higher tariffs because the United States is not party to the Trans-Pacific Partnership.

The Trump administration has pushed back against claims that the America First doctrine is isolationist. While advisers have continued to criticize global institutions, they insist their goal is to improve, not destroy, them. Mr. Trump and his advisers say that the United States will be pushing ahead with new trade deals — ones that will ultimately be better for American companies and their workers.

Yet the willingness of countries to engage with the United States is unclear, as global leaders observe the Trump “administration’s approach to renegotiating trade pacts with Canada, Mexico and South Korea.

In Davos, at a forum long considered the center for globalization, the administration’s America First message has not been entirely well received. On Wednesday, comments by Wilbur Ross, the commerce secretary, that American troops were “coming to the ramparts” in what he called a continuing global trade war prompted blowback from other state leaders.

Chancellor Angela Merkel of Germany warned on Wednesday that “protectionism was not the answer” and called right-wing populism a “poison,” in a speech largely seen as a rebuttal to Mr. Trump before his expected speech today.

So far, it is unclear which countries the United States could be courting to create new trade deals. Britain has expressed interest in a bilateral deal with United States, but talks could not begin until it finishes extricating itself from the European Union, which does not look likely to be resolved soon.

Japan, the preferred partner for many American businesses, appears to have spurned the United States’ offer to forge a trade deal one on one, after Mr. Trump pulled the United States out of the Trans-Pacific Partnership.

And China has positioned itself as a global leader — a sharp change from the early 1990s, when the leader at the time, Deng Xiaoping, cautioned his countrymen to “hide your strength and bide your time.”

In addition, China has set about building its own vision of an international order, including an Asian investment bank to rival the World Bank, and its global infrastructure project, One Belt One Road.

The Trump administration’s more aggressive stance toward allies and adversaries may shift this balance in China’s favor. At an event on Tuesday in Washington, Juan Gabriel Valdés, the Chilean ambassador to the United States, contrasted Chile’s now warm relationship with China with the United States’ more combative stance on trade, especially in its negotiations over NAFTA.

“The United States continues to be, and will probably be in the next 10, 20 years, the main partner of the Latin American region,” he said. “But change is there. It’s written on the wall if this continues like it is.”

So, the administration’s trade policy will continue to be tested in Canada and Mexico, and elsewhere, and with China and other global trading partners as the economy strengthens—developments producers should watch closely as they emerge, Washington Insider believes.

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