Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.New Report Details Negative Impacts Of NAFTA Withdrawal
Farm groups have sent a steady stream of comments and predictions of what an end to NAFTA could mean for U.S. agriculture. A new report from AT Kearney, in partnership with the Food Marketing Institute, the National Retail Federation and the Retail Industry Leaders Association, finds the costs to consumers and retailers from a U.S. NAFTA withdrawal would be substantial as well.
Around $182 billion in cross border trade takes place between the U.S., Canada and Mexico annually thanks to the trade pact, the report noted. The report said a withdrawal by the U.S., which President Donald Trump has threatened to pursue if satisfactory changes to the agreement cannot be reached, would cost consumers $5.3 billion annually and weigh on retailers' bottom lines to the tune of $15.8 billion per year.
Ultimately, a withdrawal would negatively affect U.S. economic growth, the report said. "The loss of tariff-free access across North America would have a negative impact on GDP growth, which would in turn translate to more woes for retailers. We estimate that retail spending would drop by $290 per year per U.S. household." Mexico and Canada currently account for 34 percent of all U.S. exports.
Retail-related employment would also suffer, according to the report. NAFTA withdrawal "could spell the loss of 128,000 retail-related jobs within the next three years." President Trump has long criticized NAFTA as killing U.S. jobs, so it is notable the report quantifies retail job losses that an exit would incur.
Trump Taps Brashears For Long-Vacant USDA Food Safety Position
After a key food safety position at USDA was left vacant for many years, stakeholders are pleased that President Donald Trump on Friday (May 4) named Mindy Brashears to be USDA's Undersecretary for Food Safety.
This is arguably the highest-ranking food safety position in U.S. government, but has remained vacant since the departure of Elizabeth Hagen in December 2013. Experts have long pushed for the position to be filled. The nominee must be confirmed by the Senate.
Brashears was one of two potential candidates floated for the position last fall. A professor of food safety and public health and the director of the International Center for Food Industry Excellence at Texas Tech University, Brashears has conducted research on interventions in pre-and post-harvest environments and on the emergence of antimicrobial drug resistance, USDA said in a May 4 statement. Her work has also resulted in the commercialization of pre-harvest feed additives that reduce E. coli and Salmonella in cattle.
In addition, Brashears has led international research teams to Mexico, Central and South America to improve food safety and security and to set up sustainable agriculture systems in impoverished areas. She is past-Chair of the National Alliance for Food Safety and Security and of the USDA multi-state research group.
Brashears came into public view when she testified as an expert witness for Beef Products Inc. (BPI) in its closely watched defamation suit against the ABC television network. The lawsuit centered on the company's signature product, the lean beef product which was dubbed "pink slime." Brashears told the jury that BPI's product was 100 percent beef and entirely safe to consume, and the suit was settled in June 2017.
Tue. May 8 Argentine Currency Problems
Argentina is struggling to avoid economic destabilization, the New York Times reported this week. Problems are worsening there in spite of efforts by President Mauricio Macri to reconnect Argentina to the global financial system, after years of isolation.
It's a lesson in how complicated economies are, and how efforts to shore up one issue can exacerbate the overall economic health.
Macri's strategy was to emphasize lower tariffs, accurate economic data, trade pacts and the freer flow of capital to coax foreign investment back to Argentina and end the economic exile that followed the country's default in 2001.
However, it is now employing drastic action to stabilize its currency. On Friday, policymakers lifted the benchmark interest rate to 40 percent after days of intervening heavily in financial markets.
While these emergency measures were seen to help settle the markets, they also weigh on the prospects for the president's ambitious economic overhaul, and could crimp growth, adding to political discontent, the Times said.
The rate increase, a day after the Argentine peso fell 8.5 percent against the dollar, was the third in a week. The central bank said it would use "all the tools at its disposal" to slow inflation, which in March was up sharply from a year earlier, to 15 percent this year, a goal most analysts now see as unrealistic.
In parallel, officials announced plans to cut government spending, and reduce the primary budget deficit to 2.7 percent. This strategy came in response to criticism from investors that the government had not been cutting spending quickly enough.
Macri has been in office since December, 2015. The country had been closed to international markets for more than a decade amid a long-running legal fight with bondholders that followed a default on its debt.
Early on, Macri's policies were greeted with widespread optimism by financial markets as bond prices rose, pushing interest rates lower—policies that helped to stimulate economic growth. However, this led to "overconfidence on the part of policymakers about how much could be done given the constraints they had," according to Alvaro Vivanco, a strategist covering Latin American bond and currency markets for the Spanish bank BBVA.
As doubts about the government's ability to push through changes intensified, the Argentine central bank cut interest rates and increased its inflation target, a decision interpreted by some as weakening the government's commitment to getting consumer prices under control.
This was a wake-up call for international investors,' Gabriel Gersztein, head of Latin American strategy at BNP Paribas said. The global economy shifted as the U.S. economy regained solid footing and short-term interest rates rose. A stronger dollar resulted in a slide for the peso which accelerated recently as foreign investors began to see their returns diminished by the falling currency.
At the same time, a new income tax on foreign investment weakened investor interest, and the country faced a currency run.
To shore up the peso the government increased interest rates sharply. While such increases mean potentially stronger returns for investors, they also mean higher economic costs for business and consumer barrowers. A pullback in spending can slow growth sharply.
So, Argentina is struggling to keep rates high just long enough to inspire confidence that policymakers have halted the currency run, but not so long that the increase drains the economy—a difficult challenge, the Times said.
Politically, the problems and threats put Macri in a precarious position and his popularity has declined. An April poll found that 43 percent of Argentine voters had a negative view of the government, compared with 34 percent with a positive view -- a sharp shift from November, when nearly 52 percent had a positive image.
Unions are worried that workers are losing purchasing power amid high inflation and a broad increase in public utility rates, a part of the government's efforts to slash subsidies—and many are protesting.
The higher utility costs also are hitting the manufacturing sector hard, particularly companies that compete against imported goods.
What happens next with the economy may translate into whether Mr. Macri's coalition can win re-election next year or whether discontent will give rise to an interventionist government that will undo many of his changes. Although the economy as a whole is growing — expanding 5.1 percent in February, on the year, the latest measures are prompting some analysts to revise their forecasts downward. The outcome of this struggle is modestly important to the U.S. economy since the United States had a goods and services trade surplus with Argentina of $10.5 billion in 2016.
So, we will see what happens in this important market and ag competitor country as desperate economic measures are tried, and which could have effects across the region, Washington Insider believes.
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