Washington Insider -- Wednesday

Evolving Trade Policy Fight Over NAFTA

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

Bracing For More China Tariffs

Announcement of additional tariffs on Chinese goods over their intellectual property actions and forced technology transfers could arrive yet this week, according to House Ways & Means Chairman Kevin Brady, R-Texas. He says the administration is "right to go after China for its theft of intellectual property and forced technology transfer."

But the challenge for any president in imposing tariffs, he added, "is to ensure that, ultimately, you don't punish Americans for China's misbehavior. That's the challenge anytime tariffs are imposed, plus [the prospect of] retaliation." The package of tariffs is at $60 billion, according to the Washington Post, matching what some reports signaled late last week when others indicated it would cover $30 billion in goods.

US Ag Exports Potentially At Risk via Steel, Aluminum Import Duties, Says USDA's Perdue

Retaliatory actions by U.S. trading partners hit by the coming import duties on steel and aluminum could hurt U.S. agricultural exports, USDA Secretary Sonny Perdue told reporters at the sidelines of the National Grain and Feed Association (NGFA) meeting in Phoenix.

"There's certainly some trade disruptions based on aluminum and steel tariffs," he noted. Perdue also used a phrase he has previously on this topic, calling food/agriculture shipments the "tip of the retaliatory spear," adding, "Retaliation is tit-for-tat and retaliation is possible, but it's not up to us how other countries will react," Perdue said.

Washington Insider: Evolving Trade Policy Fight Over NAFTA

Nathan White is a row crop and cattle farmer who lives outside of Stet, Missouri. He is a member of both the Missouri Farm Bureau and the Missouri Corn Growers Association. He wrote for The Hill recently that every four years, politicians descend on small towns in Iowa, New Hampshire and other early primary states across the country to kick off presidential campaign season. After those seeking the White House attend near-endless events and make countless promises, it is still “up to rural voters to decide who best represents their views.”

After years of disappointment and broken promises, many voters have had good reason to be skeptical. But when now-President Trump visited these communities as a candidate and vowed to stand up for the agriculture industry, farming families were instilled with a new sense of hope.

It is why rural voters turned out in huge numbers to vote for the Trump-Pence ticket, with three-quarters of their votes supporting the Republican nominees, The Hill says. President Trump promised to bring back rural jobs, protect those that already exist and help solve problems, such as the opioid epidemic that has hit rural communities especially hard.

Few issues are as important to rural America than preserving the North American Free Trade Agreement, and White thinks that is something President Trump and his cabinet members understand—although the president was always critical of NAFTA deals. In general, producers think NAFTA has been a good deal. For example, NAFTA first took effect, agricultural exports to Canada and Mexico have grown by 450%.

Increased agricultural activity — more crops grown, more equipment manufactured and more jobs created — is part of the $127 billion in annual economic activity in the U.S. that is estimated to result from NAFTA.

Now, The Hill says that “while his administration negotiates a better deal with Mexico and Canada that modernizes the agreement for the 21st century, we have concerns about whether this critical trade deal will remain in place based on recent tariffs levied on steel and aluminum imports.”

In announcing his administration would implement a 25% tariff on steel imported to the U.S. and a 10% tariff on imported aluminum, America’s farmers could be the target of retaliatory measures by other countries restricting the export of products or losing markets altogether.

According to USDA, 33% of American agricultural exports went to the top aluminum-producing nations in 2017, and 39% went to the top steel-producing countries. This creates a prime target for countries looking to retaliate against the United States.

Rather than buying American-grown corn or soybeans, for instance, other countries can be expected to turn to other suppliers, with American farmers paying the price. This is why Senate Agriculture Committee Chairman Pat Roberts, R-Kansas, said recently that “the president’s actions are favoring the Rust Belt over the Farm Belt.”

The president surely understands voters in the heartland remember the commitments he made on the campaign trail when he asked for their votes, White says “Facts are facts,” and pulling out of NAFTA would erase years of economic progress that has benefited rural communities across our nation, The Hill says.

These communities are already facing numerous challenges and withdrawing from NAFTA would directly harm the communities and voters President Trump promised to protect.

US food and agricultural industries support 43 million American jobs, and they need President Trump to employ his negotiating skills and secure improvements to NAFTA without abandoning the deal, The Hill says.

While recent events raise concerns among America’s rural voters, they frequently tell the press that they “still believe the faith we placed in President Trump will serve us well.”

So, White says the administration “can improve NAFTA and ensure any tariffs do not result in retaliations against the agriculture industry that is feeding the world and helping drive America’s economy, which is just what farming families deserve and expect.”

Well, there is considerable disagreement over how transparent the President’s trade policies were during the campaign and after, but it is not exactly clear how the administration will eventually resolve the numerous trade issues now emerging.

However, there is no disagreement over the strong producer support for maintaining the access to overseas markets developed under NAFTA and other trade deals. And, while it remains to be seen how rural voters will react if some of the tough current trade proposals are actually implemented, it seem clear that the sector is significantly worried about potential impacts on ag markets. However, that is a fight that remains to be worked out, and one that producers should watch closely as it emerges, Washington Insider believes.

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