Washington Insider -- Tuesday

Trump Inadvertently Strengthening Latin American Trade Solidarity

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

Steel and Aluminum Import Duties

Import duties on steel and aluminum kick in Friday, March 23. Today, the U.S. Department of Commerce announced details of the process for exemptions to the duties and will only grant exclusions in three cases: if the steel or aluminum product “is not produced in the United States in a sufficient and reasonably available amount; is not produced in the United States in a satisfactory quality; or for a specific national security consideration.”

On Friday, the European Union published a 10-page list of American products that would be targets for retaliation if the steel and aluminum tariffs go through, including peanut butter, grains, rice (long and short grain), kidney beans, cranberries, orange juice, tobacco, peanut butter, motorcycles and steel. The EU shipped $6.2 billion of steel and $1.1 billion of aluminum products to the U.S. last year.

Kansas Lawmakers Want Drought Aid for Their Farmers and Ranchers

Sens. Pat Roberts and Jerry Moran and Rep. Roger Marshall, all Kansas Republicans, sent a letter Friday to USDA Secretary Sonny Perdue, thanking him for the assistance already being provided in the form of FSA loans, but also asking for additional aid.

Kansas Governor Jeff Colyer, a Republican, has already declared drought in all 105 counties in the state. Lawmakers are asking Perdue to allow for emergency haying and grazing of Conservation Reserve Program (CRP) acres.

Washington Insider: Trump Inadvertently Strengthening Latin American Solidarity

It looks like the U.S. trade policy efforts may well be leading Latin American nations to move in closer sync as they worry how to confront the U.S. effort to “protect Americans from the ravages of other countries making our products, stealing our companies and destroying our jobs.”

The New York Times is reporting that the new U.S. policies and efforts worried Latin Americans significantly — but, have mainly resulted in governments across the hemisphere forging stronger commercial ties with one another and paring back some of their own protectionist policies, embarking on a course reminiscent of what the United States itself had proposed in the 1990s but which failed to materialize: a free trade area reaching from Canada to Chile.

The Times suggests that one result of Washington’s protectionist stance has pushed leaders in the region to turn increasingly to Asia, and for China in particular, to expand trade, obtain loans and finance infrastructure projects.

“Trump has inadvertently done more for commercial integration in Latin America than many Latin American leaders managed to accomplish,” said Patricio Navia, a political scientist at New York University.

Trump’s policies and disparaging remarks about immigrants, Navia added, have forced other countries to say, “We have to help each other out and look for alternatives among ourselves.”

Members of Mercosur — the Latin American trade bloc have also jump-started trade negotiations with the European Union, which officials say are closer than ever to a breakthrough after languishing for years.

Canada, which is worried about the potential unraveling of the North American Free Trade Agreement, also has begun negotiating a free trade deal with Mercosur.

“There’s never been a better time to diversify,” said François-Philippe Champagne, Canada’s minister of international trade. “It would mean opening a market of some 300 million people, a rising middle class, an economic powerhouse in this part of the world.”

Chile hosted the signing of a trade agreement this month that 11 Pacific nations, including Mexico, Peru and Canada, salvaged after the Trump administration walked away from the agreement, originally known the Trans-Pacific Partnership.

For all of the recent advancements, economists and government officials say that significant obstacles stand in the way of substantive commercial integration in the Americas. These include competition among exporters of the same commodities and poor infrastructure that makes cross-border value chains impractical. Despite moves to lower trade barriers, protectionist policies remain entrenched in some of the largest countries, including Brazil and Argentina.

And voters in several of the region’s largest economies, including Brazil, Mexico and Colombia, will elect new leaders this year, which could diminish the appetite for free trade and integration in some corners.

But the president’s imposition of new tariffs on steel and aluminum this month, and his appearing to relish the prospect of initiating a trade war, makes him an outlier in the region.

“I think the region as a whole — but especially Brazil and Argentina — has learned to recognize that protectionism is a lose-lose strategy,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics. “Countries saw perverse effects of trade barriers play out in their own economies, and will now get a chance to observe what they are likely to do to the most important economy on the planet.”

In 2002, Brazil was among the key naysayers to the Free Trade Area of the Americas, the deal intended to span two continents, which was championed by the Clinton and George W. Bush administrations.

“Our vision is the opposite of what is happening in the United States,” said Marcos Jorge de Lima, Brazil’s minister of industry and foreign trade. “We want more and more trade openings.”

Perhaps none has worked harder to charm and cajole the White House than President Mauricio Macri of Argentina, who was among the first Latin American leaders to get an Oval Office meeting. “The United States has bludgeoned Argentina in trade matters in a way that is utterly inconsistent with the diplomatic approach to the government,” said Benjamin Gedan, a fellow at the Woodrow Wilson Center who worked on policy toward South America in the Obama administration.

Macri was elected in 2015 after promising to open up Argentina to the world following more than a decade of center-left governments. The prospect of aluminum and steel tariffs could deal a significant setback to Macri, who called Trump this month to plead for an exemption.

“These blows to the Argentine economy are coming at a moment of great fragility, both politically for Macri and economically for the region as a whole,” Gedan said.

“I think that with this attitude the United States is leaving a void, and that void may be filled by China,” President Sebastián Piñera of Chile. “The president of the United States was defending protectionism, and the president of China was defending free trade,” Piñera said. “It felt a little like the world upside down.”

So, the trade negotiations—and, the future decisions about steel and aluminum tariffs are taking on increasing importance, with implications for agricultural trade across the board. Certainly, these are discussions producers should watch very closely as they emerge, Washington Insider believes.

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