Washington Insider - Monday

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

China Ministry of Commerce Confirms 'Symposium' On Imports, Exports, Including Soybeans

A session dubbed as a "symposium" was held in China with export and import companies, a China Commerce Ministry spokesman has confirmed, including discussions on agricultural commodities that included sorghum and soybeans. "The relevant agricultural product companies did mention the trade of agricultural products between China and the United States," the spokesman said. "In particular, some production-oriented enterprises expressed concerns about the impact on imported agricultural products."

Bloomberg first reported a session was held that discussed issues on imports of soybeans and sorghum from the U.S. The spokesman, however, denied the recent investigation on sorghum and the discussion on soybeans was "not related to the Sino-U.S. trade friction."

Next Focus for Agriculture: 199A Fix

One area lawmakers were not able to come to terms on to include in the package approved to keep the government operating was relative to the Section 199A issue created by a provision in the tax reform package. But one of the key players, Sen. John Thune, R-S.D., told reporters they are close to a solution. "We haven't gotten consensus within the stakeholder community on the language, but we have I think probably as good as we're going to get at a solution," Thune stated, without giving any details of the potential solution.

"What we found was trying to satisfy co-ops and private grain operators was a challenge, and trying to get both of them to agree on final language has been a real challenge." Expectations are the measure will be worked out in time to get it into the Fiscal 2018 spending plan that lawmakers will spend the next few weeks developing.

Washington Insider: Ag Increasingly in Trade Crosshairs

One of the lingering concerns regarding the administration’s aggressive trade policies is the possibility that they will lead to pushback from trading partners. Last week, the New York Times reported that the tariffs imposed by the United States late last month are already prompting a wave of litigation from other nations, including Canada and China.

For example, last Wednesday, three Canadian solar companies filed a lawsuit in a New York court over tariffs on solar cells and panels that the United States imposed in late January. The suits claim that the penalties imposed violate American law and the terms of the North American Free Trade Agreement. That same day, the EU became the fourth member of the WTO to request discussions with the United States for compensation for the solar tariffs, following similar requests by China, Taiwan and South Korea.

Chinese officials also said recently that they had launched a separate investigation into whether American exports of sorghum were receiving government subsidies or being sold at unfairly low prices abroad — a measure widely interpreted as a response to the Trump administration’s ratcheting up of trade barriers, the Times said.

With the Trump administration considering further trade actions on Chinese products and foreign metals this year, some analysts say they are concerned that other American products, from soybeans to Kentucky bourbon, could become targets for retaliation.

Darci Vetter, a former chief agricultural negotiator for the United States trade representative, called China’s sorghum case just the latest example of American agriculture landing in the cross hairs as trade tensions rise.

“Unfortunately, the agriculture sector knows from experience that when tit-for-tat trade actions begin, agricultural products are the first to be hit,” Vetter said. “Given the size and importance of China’s market for a variety of U.S. ag products, we are concerned it won’t be the last.”

The administration announced last month that it would impose tariffs of up to 50% on imported washing machines and 30% on imported solar cells and modules, responding to a pair of trade cases alleging that cheap foreign products were degrading American manufacturing capacity.

Those tariffs were not as high as those the companies bringing complaints had requested, or some of the recommendations made by the officials of the United States International Trade Commission. Still, many economists, consumer groups and businesses warned that the tariffs would lead to higher prices and could even end up costing more jobs than they would save, the Times said.

These groups are still waiting to see whether the Trump administration fulfills its most ambitious plans for remaking trade policy, NYT said. In the coming months, the administration is expected to introduce a hefty penalty on China for encroaching on American intellectual property, which could include tariffs on consumer electronics or restrictions on Chinese investment in the United States.

The fate of two separate trade actions, on imports of steel and aluminum, appears less certain.

Last June, President Trump said that the steel industry would be seeing action “very soon.” But the proposed tariffs were met with a swift backlash from industries that use the metals to produce other goods, like carmakers, as well as some Defense Department officials.

Since the Commerce Department submitted its reports on the investigations to the president last month, the cases have not been mentioned in official statements, including the White House’s summary of its current trade actions released after the president’s State of the Union address.

Depending on what happens at the WTO, the United States could see further retaliation against the solar tariff, Allan Marks, a lawyer at Milbank, Tweed, Hadley and McCloy told NYT.

The organization will now consider whether countries like China had sufficient opportunity to consult with the United States before the tariffs were imposed and if the United States followed its rules for creating such temporary safeguards for its industries.

Marks declined to speculate on the potential results, but said that the most recent precedent could be troubling for the United States. The last time that the United States imposed these kinds of tariffs, on steel imports under President George W. Bush in 2002, the World Trade Organization ruled that they were illegal, clearing the way for countries to lawfully retaliate against the United States. Under the threat of retaliation, the Bush administration withdrew the steel tariffs in 2003.

The Times cited Marks as suggesting that “You could see retaliation from exporting countries like China that are hurt by the safeguard action,” and he then commented that “we’ll probably get there. That’s what happened for steel.”

In the meantime, agricultural groups have been flooding the Congress with arguments from trade advocates and USDA officials are saying that they have been making the ag trade establishment aware of the sector’s interest in maintaining producers’ access to important markets, especially in North America and Asia. Also, the administration is very close adding an ag negotiator to its trade team. So, this is a growing fight that producers should watch closely since important ag interests seem increasingly at stake, Washington Insider believes.

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