Washington Insider -- Thursday

Deepening Fog of Political War

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

Sen. Bennet: No NAFTA 2.0 Deal Without Dairy Changes

The Trump administration should not conclude NAFTA 2.0 negotiations without having reached a deal with Canada to expand market access for U.S. dairy producers, Sen. Michael Bennet, D-Colo., wrote in a letter to U.S. Trade Representative Robert Lighthizer this week.

“American dairy producers have faced both falling prices and unfair Canadian policies that are undermining their ability to sell into the Canadian market,” Bennet said. “I urge you not to miss this opportunity to support American agricultural exports, particularly for the American dairy industry as it faces a precarious moment.” He also noted Trump’s own promise in Wisconsin last year to “stand up for our dairy farmers” and his criticism that the current dairy trade between the two nations marked “another typical one-sided deal against the United States.”

GAO: Market Factors, Not Manipulation, Led To Cattle Futures Fluctuations In 2015

Supply and demand factors were at play and competition levels among packers that process cattle for slaughter did not appear to affect cattle prices in 2015 is the conclusion of a report from the Government Accountability Office (GAO) on price downturns that happened that year.

GAO pointed out that the Commodity Futures Trading Commission (CFTC) also found no evidence of trading irregularities in cattle futures in 2015. "However, to better align futures contracts with the actual fed cattle market, CFTC reviewed changes to contract terms and will continue to monitor those changes," GAO said.

In analyzing USDA data on the cattle market, GAO said, "we found that while less competition among packers did not appear to result in lower national cattle prices from 2013 through 2015 on a national level, it did account for variations in prices in different parts of the country." GAO had been asked to determine, among other things, if the lack of packer competition led to the price decline.

Washington Insider: Deepening Fog of Political War

Bloomberg and others are reporting this week that the fog of political war concerning ag-trade issues is deepening now—and just when you thought it couldn’t get any more opaque.

Increasingly, media reports indicate that new lobbying groups are forming almost constantly to weigh in on the US-China conflict. For example, one new group is a coalition of business groups banded together to fight the proposed tariffs, arguing they will hurt U.S. consumers and the economy.

Retail, agriculture, technology, manufacturing and other industries say the tariffs on $150 billion in Chinese goods are counterproductive to the goal of holding Beijing accountable for intellectual property theft and other trade practices, Bloomberg says. The groups are working to keep specific products off the U.S. list and trying collectively to keep levies from being imposed at all.

Bloomberg says the message they’re sending is that the U.S. tariff proposals are “nuts,” citing David French, senior vice president for government relations at the National Retail Federation, which hosted a recent meeting of the coalition.

The administration’s surprise request for an additional $100 billion in tariffs on Chinese goods April 5, two weeks after proposing $50 billion, was “the alarm-bell that woke up every sector of the U.S. economy,” said Hun Quach, vice president of international trade for the Retail Industry Leaders Association.

The next day, a meeting of the coalition at the NRF in Washington started with "Here we go again," French said, referring to being buffeted by the second, unexpected round of proposed tariffs. Participants shared information and technical analysis and coordinated group outreach efforts, he said.

The coalition consists of more than 40 trade organizations, including the U.S. Chamber of Commerce. The different industries have come together to argue that the tariffs are the wrong approach, said Jose Castaneda, spokesman for the Information Technology Industry Council, which represents companies including Amazon, Google, Facebook and IBM.

The coalition sent a joint letter to President Trump on March 18 opposing the tariffs before they were announced and followed up with the April 6 meeting at the NRF.

"Tariffs become trade wars, and trade wars have no winners,” said Steve Lamar, executive vice president of the American Apparel & Footwear Association, told Bloomberg.

This particular skirmish is just the latest battle bringing companies to lobby Washington since the 2016 election, Bloomberg says. Between the corporate efforts against the proposed border-adjusted tax in 2017, renegotiation of NAFTA and the new tariffs, Lamar said companies that may have only made one trip to D.C. in the past 10 years have now visited 10 times in the last 15 months. New companies and industries are also entering the fray, he said.

The existential trade threats, in general, that have been moving their way through Washington have really gotten a lot more people to focus on Washington as a place they have to pay attention to,” Lamar said.

A total of 34 clients registered lobbyists on issues related to NAFTA since the beginning of 2017, compared with none in 2016–before this administration came in--according to filings with Congress. Lobbying reports mentioning NATFA increased from 26 in the fourth quarter of 2016 to 427 in the same period last year.

On trade as a general issue, registrations increased by 133% from 2016 to 2017, and the number of lobbying reports were up by almost 20% in the fourth quarter last year compared with the same period a year earlier.

Also, in something of a new dimension to the current Washington fight, Senator Pat Roberts, R-Kan., weighed in this week against efforts to “make farmers whole” after the trade battle. That theme has come from very high up in the administration—including the President--and from secretary Sonny Perdue. However, Senate ag chair Roberts said he is quite skeptical.

In fact, he may well remember when President Carter said about the same thing during the embargo of U.S. ag shipments to Russia in 1980—and what happened under that policy. Now, he says, “We don’t need a make-up program to try to offset” strains on agriculture because of trade disputes with China. And he raised a very pointed question.

The main issue is, he thinks, is “Where are we going to get that money? We have our baseline and there’s no new money. Are you going to increase reference prices and take away from something else? Very difficult to do” More than that, he says, “I don’t think it’s possible”

Larry Kudlow, Trump’s top economic adviser, has said he doesn’t think there will be a trade war as China and the U.S. try to negotiate an agreement that forestalls the tariffs. But Trump has said there could be some short-term “pain.”

“We certainly hope they’re going to negotiate their way out of this,” Jonathan Huneke, advisor to the United States Council for International Business, said. “We certainly hope they’re going to negotiate their way out of this, but I wouldn’t put it past either party to go to the mat and impose the tariffs and see what happens next,” he told Bloomberg.

So, the tension is rising as the debate rages on. This certainly is a fight producers should watch especially closely as it evolves, Washington Insider believes.

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