Washington Insider - Thursday

NAFTA Progress is Slow

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

Commerce Conducting Expedited Review of Canadian Softwood CVD Order at Companies' Request

An expedited review of the countervailing duties (CVD) levied by the U.S. on certain softwood lumber products from Canada is being initiated by the Commerce Department, according to a notice set for publication in the Federal Register March 8.

Commerce officially published the duties January 3 following its investigation of the imports effect on U.S. producers. Between January 10 and February 5, Commerce reports it received requests for an expedited review of the CVD order from 34 companies. The companies making the requests were not selected for individual examination during the initial investigation, which affords them an opportunity to ask for an individual review – potentially resulting in their exclusion from the CVD order.

US Ag Imports Hit a Record in January

U.S. agricultural imports hit their highest level on record in January, nearly wiping out the sector's trade surplus for the month.

U.S. agricultural exports were at $11.387 billion for January, down 6.5% from December and the lowest since September 2017, according to USDA's U.S. Agricultural Trade Data Update. Imports, however, surged to a record 11.082 billion, up 9.5% from December. U.S. agricultural imports have never been at $11 billion or more on a monthly basis, according to USDA data back to October 1975.

The surge in imports also chopped the U.S. agricultural trade surplus for the month to just $305 million, the smallest since August when it was $287 million.

Washington Insider: NAFTA Progress is Slow

POLITICO is reporting this week that NAFTA’s Round 7 made some progress on agricultural issues, although the President’s pledge to impose steel and aluminum tariffs overshadowed the talks. Still, negotiators from the U.S., Mexico and Canada were able to finish a chapter long-described as very important and nearly complete: food safety. It was one of three chapters — along with good regulatory practices and transparency – that were wrapped up during the Mexico City Round, POLITICO said.

The sanitary and phytosanitary chapter, which governs food safety, is the first of its kind to fast-track and prioritize requests between the U.S., Mexico and Canada related to trade and inspections, Mexican Economy Minister Ildefonso Guajardo said. The chapter will help breakdown obstacles to agricultural trade, and it “guarantees animal and vegetable sanitation based on science,” Guajardo told reporters at the close of the talks.

The sector annexes on proprietary food formulas and chemicals were also closed this round. The annex on proprietary food formulas aims to protect the confidentiality of certain mixes and ingredients that are traded in the region. The second annex would make room for more regulatory cooperation in the use of chemicals.

Looking forward, it remains to be seen if the president can actually deliver on his high-profile campaign promise to have a reworked NAFTA completed this year with congressional approval. His chief trade official ticked off many things that could get in the way, including: Mexico’s presidential elections in July, elections in Ontario and Quebec and the looming midterm elections in the United States in November, POLITICO reports.

"We continue to stress the need to act quickly," U.S. Trade Representative Robert Lighthizer said Monday during a trilateral press conference with Guajardo and Canadian Foreign Affairs Minister Chrystia Freeland.

The negotiators said they will continue to meet over the next five weeks, leading up to eighth round of talks that will be hosted in the Washington area in April. The tentative start date is April 8, a source close to the negotiations said.

The goal of the intersessional meetings will be to potentially close some chapters that are close to completion, such as digital trade and energy, Guajardo said.

In the meantime, deputy Agriculture Secretary Steve Censky is heading up a team of aggies making the case within the Trump administration that the proposed steel and aluminum tariffs could result in some pain for the agriculture sector.

"Certainly, we are communicating the concerns," Censky told reporters after speaking at the School Nutrition Association's Legislative Action Conference. "I think everyone was caught a little off guard by the announcement last Thursday.”

He said USDA was letting the White House know about worries among the agriculture sector, which fears the potential for broad retaliation across any number of commodities that rely heavily on trade and have well established overseas markets.

Meanwhile, the National Foreign Trade Council, a U.S. business group, held an emergency meeting to strategize on how getting lawmakers to press Trump to ease up on his tariff plan, POLITICO is reporting. Industry and agriculture groups believe they must get their message out on platforms popular with Trump, such as Fox News and other networks he is known to watch frequently, said one lobbyist source.

"The business community needs different kinds of allies to make the argument to get President Trump to change his mind," said Sam Geduldig, a partner at another lobbying firm, CGCN Group. "Winning on this tariff will require appealing to Trump voters and populist sympathy."

Only a few days ago, numerous trade advocates were making the case for increasing signs that the administration was preparing to back away from its toughest stands on trade—but, now officials including Mr. Navarro and Commerce Secretary Ross, among others, are claiming strong momentum toward tariffs that are designed to overcome trade “imbalances,” but which are widely seen as having the potential to lead to retaliation and damaging trade disputes.

Certainly, USDA’s top trade team has a strong argument to make. But, whether or not it succeeds in convincing the President remains to be seen, and should be watched closely by producers as this fight continues, Washington Insider believes.

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