Washington Insider -- Wednesday

Allies Annoyed by US Tariff Announcement

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

USTR Lighthizer Hopes for Pre-Election NAFTA Vote

The NAFTA 2.0 negotiations need to be completed in the next week or two to be able to facilitate a vote in Congress before the November US elections, according to US Trade Representative Robert Lighthizer.

"We're going to meet again on Monday [May 7], and we'll see if we can get a good agreement. I'd like to get it done a week or two after that. If not, then you start having a problem,” Lighthizer said at a U.S. Chamber of Commerce event in Washington. If not, then it will be "thin ice" to get a vote in Congress before the mid-term elections.

"It's my ambition that this not be a Republican vote in the Congress," he said. "I think it's got to be a bipartisan vote. We want to have a big vote." He added that hopefully there would be 65 to 70 votes for the plan in the U.S. Senate.

Sen. Grassley Now Focusing On Appropriations to Address RFS Waivers

Failing to convince EPA to temper their use or even halt the use of waivers for small refiners relative to their Renewable Fuel Standard (RFS) obligations, one key lawmaker is now eyeing the appropriations process to impact the agency on this front.

EPA and the Department of Energy have pointed to language that accompanied appropriations measures for Fiscal Year (FY) 2015 and 2016 and a court case as reasons why the use of the small refiner waivers has increased.

But that's where Sen. Chuck Grassley, R-Iowa, wants to focus – the appropriations process. "But the next opportunity to do that will be when the appropriations bills come out this summer or fall," Grassley told reporters.

Indications are that the waivers granted thus far have totaled at least 1 billion gallons of RFS obligations, perhaps more. Grassley indicated that President Donald Trump is aware of the situation even as other issues are jockeying for his attention.

"I think this president is trying to keep every campaign promise he made, and I think Pruitt is undermining the campaign promise of 15 billion gallons of ethanol through these waivers," Grassley said.

Washington Insider: Allies Annoyed by US Tariff Announcement

The New York Times is reporting from Frankfurt this week that U.S. allies are not bothering to conceal their annoyance with the Trump administration’s last-minute decision to delay punitive aluminum and steel tariffs by a month. They see the policy as “leaving a sword of Damocles hanging over the global economy,” the Times said.

Whatever the administration hoped for, the reprieve was seen in Europe, not as an act of conciliation or generosity but instead as another 30 days of precarious limbo that will disrupt global supply networks and undermine what has been an unusually strong period of growth.

European leaders, normally circumspect, are openly irritated that the administration’s protectionist assault is aimed at them despite decades of military alliance and shared values. And the European Union’s cautious, often ponderous approach to policymaking is clashing directly with President Trump’s unpredictability and aggressiveness, the report said.

“The U.S. decision prolongs market uncertainty, which is already affecting business decisions,” the European Commission, the European Union’s executive arm, said in a statement on Tuesday.

The commission said it was willing to continue negotiating with US representatives, but it was hard to see how the two sides would find common ground.

The White House wants to reduce what it maintains is the United States’ trade deficit with the 28-member European Union and is seeking concessions, such as lower tariffs on American cars sold in member countries.

The Europeans, however, say they will discuss the Trump administration’s concerns only after the bloc receives a permanent, unconditional exemption from the tariffs, which they regard as illegal. “We will not negotiate under threat,” the commission said in the statement Tuesday.

Trump’s provocative approach has fueled anxiety in Europe that a long-awaited economic recovery is losing momentum. The threat of a trade war adds to a list of risks that are making businesses less willing to invest and create jobs, including the imminent end of European Central Bank stimulus, Britain’s planned exit from the bloc and political deadlock in Italy.

The European Union regards the planned tariffs on steel and aluminum as a violation of international treaties and has already complained to the World Trade Organization, normally the arbiter of trade disputes.

While officials in Brussels have said they do not want to reward the Trump administration’s breach of international rules with concessions, Germany, the country with the most to lose, has indicated a willingness to be more flexible. Steel accounts for about one-fifth of German exports outside the European Union, and German carmakers like BMW and Daimler would be hit the hardest if Trump acts on threats to penalize vehicle imports.

Martina Fietz, a spokeswoman for the German government, said in a statement Tuesday that it was important for the European Union to continue talks with the United States and “develop a trade agenda that is in the interests of both sides.”

Peter Altmaier, the German economics minister, went further. “Personally I believe we should make an offer, something concrete, that would be the basis for further talks,” Altmaier said in an interview with Deutschlandfunk radio before the extension of the exemptions was announced.

Altmaier’s statement was at odds with the European Commission’s refusal to negotiate until the Trump administration removes the threat of steel and aluminum tariffs. The potential for a rift between Berlin and Brussels raised the possibility that Trump would succeed in rattling European unity.

Some German business groups have begun calling for Europe to use the dispute with the United States to reopen negotiations about a broad trade agreement that would largely eliminate tariffs and reduce regulatory impediments, for example by agreeing on common safety standards for cars.

The statement by Fietz on behalf of the German government hinted at that theme, saying, “both the U.S.A. and European Union would profit from further deepening of the trade relationship.”

But the chances for such talks are probably slim given Trump’s disdain for the European Union and his complaints about German cars. Trump said in March that if Europe retaliates against American products, he would tax imports of European vehicles into the United States, which in practice would hit the German automotive sector.

China, whose support for state-owned firms and restrictions on outside investment has long frustrated politicians on both sides of the Atlantic, presents another opportunity for Europe and the United States to make common cause.

Europe would be happy to cooperate with the United States to press China on some issues such as protection of intellectual property. But in the current climate it seems unlikely that the European Union and United States are capable of joining forces.

“The way Trump is going about it may not be the most effective, but he’s put it on the agenda. There is some sympathy for that,” Rahman said. “But it’s very difficult. The process seems completely broken.”

So, trade tensions seem greater now, with pressures growing from many directions—and with high stakes confrontations with China and the NAFTA talks also underway. These are fights producers should watch closely as they emerge, with a growing gap between positions of at least some administration officials and farmers and producer groups and issues with little up-side for agriculture but major risks of market losses, Washington Insider believes.

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