Washington Insider - Monday

More Trade Initiatives Coming

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

Judge Halts Payments to NPPC for Pork Trademark and Logo

A federal judge in Washington ruled Thursday that the National Pork Board should stop sending annual payments to the trade group National Pork Producers Council for use of the trademark and the logo design for “Pork. The Other White Meat.”

The pork board has 15 members appointed by the USDA secretary and administers the pork checkoff program. In 2006, the board agreed to buy the trademarks for about $34.6 million, by paying $3 million a year for 20 years. The nonprofit group Humane Society of the United States (HSUS) sued to challenge the decision to approve the board’s purchase of trademarks. According to the ruling, 30 percent of the NPPC's budget comes from the contract.

EPA's Pruitt Keeps Talking RIN Reform

Reform of the accounting system used for Renewable Identification Numbers (RINs), the credits refiners must purchase to prove compliance with the Renewable Fuel Standard (RFS) if they do not blend enough biofuels into gasoline, continues to be a focus of EPA Administrator Scott Pruitt. The bankruptcy of the Pennsylvania refiner remains a backdrop for the attention, with Pruitt telling Fox Business News Thursday, "We need RIN reform. It's something I've talked to Congress about."

However, Pruitt is mindful of biofuel-backing lawmakers, saying the effort is not about "getting rid" of the RFS requirements, but rather is "about the accounting mechanism to ensure that we have a certain percentage of our fuel actually has ethanol." Biofuel supporters are already pushing back, reminding EPA of commitments they have made on the RFS and some believe the Pennsylvania refiner's issues were linked to their business model, not RFS obligation costs.

Washington Insider: More Trade Initiatives Coming

Well, ag producers were hoping for some reassurance on trade policy in last week’s State of the Union message, but now things seem a little more threatening. The administration still seems to be threatening to withdraw from NAFTA and Canada has announced recently that they won’t accept “just anything” in the current talks, and will pull out if they are not satisfied.

In addition, Bloomberg is reporting that the administration is working on trade measures that will make the “recent tariffs on solar panels and washing machines look minor by comparison.” At best, these potential measures could protect the U.S. from unfair foreign competition. At worst, they could ignite trade wars that end up harming everyone, the group said.

China in particular is in Trump’s crosshairs and might well fight back against any effort to restrict its exports. “I have been told by certain officials that yes, definitely, there will be retaliation” from China if the U.S. slaps new tariffs on Chinese-made products, William Zarit, chairman of the American Chamber of Commerce in China, said at a briefing in Beijing on Jan. 30.

In his State of the Union address, the President emphasized, “The era of economic surrender is over. From now on, we expect trading relationships to be fair and to be reciprocal.”

He has asserted that China condones intellectual property theft and coerces foreign companies into transferring crucial technology to Chinese joint-venture partners. The administration is also discussing the possibility of invoking national security as a justification for imposing tariffs on foreign-made steel and aluminum, arguing that U.S. industry and the military can’t risk being overly dependent on foreign sources for the two industrial metals.

In another developing issue, China has sued both the U.S. and the European Union at the World Trade Organization, claiming that it should have been treated as a market economy starting in December 2016, 15 years after its accession to the WTO. The designation, which the U.S. and EU haven’t accepted, would require countries to accept China’s own data in determining the size of duties on Chinese companies for “dumping” products below cost. The U.S. case is on hold while China goes after the EU. “It is clearly the most important case before the WTO right now,” says Timothy Brightbill, a partner in the Washington law firm of Wiley Rein LLP.

Any one of these pending cases could roil the international trading system more than the U.S. tariffs imposed on Jan. 22, says William Reinsch, a senior adviser at the Center for Strategic & International Studies in Washington.

The Trump administration slapped import duties starting as high as 30% on solar panels and 50 percent on washing machines under a provision of international trade rules that allows countries to “safeguard” domestic industries that suffer an import surge. Such tariffs must decline each year and last no more than four years. The U.S. doesn’t need to prove that the foreign competition was unfair, and the tariffs aren’t country-specific. South Korean washing machine makers and Chinese solar panel manufacturers, which will be affected most, are likely to lose if they appeal to the WTO because “countries taking actions are given a lot of discretion,” predicts Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics.

The WTO allows countries to restrict imported products on national security grounds, but major trading nations have long refrained from invoking the provision for fear of collapsing the WTO entirely.

The problem: If one country does it, others could quickly follow suit. Sweden came under intense pressure when it invoked national security to limit imports of army boots in the 1970s, says Schott. “The Trump administration needs to put forward a rationale” if it’s going to make a national security claim, says Stephen Kho, a partner at the law firm of Akin Gump Strauss Hauer & Feld LLP. “I’d be curious to see what it is.”

Then again, Trump is no fan of the WTO. His administration has blocked the appointment of replacements to its appellate body while complaining that it’s “set up for the benefit of taking advantage of the United States.” The question is whether the President can win concessions for the U.S. without wrecking the whole system, Bloomberg says.

So, we will see. Ag interests, along with Secretary Perdue, are attempting to argue that NAFTA ag markets, unlike some other trade areas, are working well and have become quite important to U.S. producers--and their loss would further damage an industry already under price pressure. This argument seems to have fallen short of impressing at least some administration officials in the past, but may pick up political momentum in the future as the farm-bill debate begins in earnest, Washington Insider believes.

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