Washington Insider -- Tuesday

Rural America, Trump and Trade

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

Key Lawmaker Says Administration Has Missed NAFTA 'Deadline'

Congress will now not likely have time to approve any NAFTA 2.0 deal this year, according to Senate Majority Whip John Cornyn, R-Texas.

"Yeah I think so," Cornyn said when asked if getting the trade pact through Congress was not likely now in 2018. “It looks like they are kicking it over to 2019. I wish it had been handled earlier.”

This comes on the heels of House Speaker Paul Ryan, R., Wis., setting a May 17 "deadline" for the notification to go to Congress to get it done yet in calendar 2018, only to later say that there was some "wiggle room" on that front.

But now that the calendar has flipped to June, the comments by Cornyn are the latest sign that getting any completed NAFTA 2.0 deal through Congress yet this year is something that will not happen.

The Trump administration has to notify Congress of its intent to sign a trade deal 90 days in advance of doing so. Once signed, then the U.S. International Trade Commission (ITC) has to do a study on the impacts of the trade plan, and can take up to 105 days to do so.

Trump Again Talks of Separate Canada, Mexico Trade Deals

President Donald Trump is again mentioning the possibility of bilateral trade deals with Canada and Mexico.

Trump noted they are “two very different countries,” in comments to reporters. He added, “[I] wouldn’t mind seeing NAFTA where you’d go by a different name ... a separate deal with Canada... a separate deal with Mexico.” The U.S. and Canada have a bilateral free trade agreement dating to the Reagan administration that was superseded by NAFTA in 1994.

Trump emphasized his common refrain that the U.S. loses “a lot of money with Canada” because of NAFTA as it stands, and loses “a fortune with Mexico."

Finally, he remarked on a decision to place metal tariffs on Canada, Mexico and the European Union (EU). Trump stressed that he believed the U.S. was being taken advantage of, and that the tough approach was warranted. “I believe in the word reciprocal,” he observed.

Washington Insider: Rural America, Trump & Trade

It's no secret that rural America was key for President Donald Trump taking the White House in November 2016. It's also no secret that those in rural America have continued to show support for Trump even as he has taken steps on trade that have provoked harsh responses from key trading partners like China and now Mexico, with those countries suggesting they will hit imports of products produced by those very voters that put Trump in office.

But even Trump's pledged support for U.S. farmers via Twitter may not hold that support forever.

The situation with ethanol may prove to be one of those points that becomes a major issue ahead with Trump in the heartland. The National Biodiesel Board (NBB) is warning that shifts on U.S. biofuel policy could be tantamount to Trump breaking promises he made back on the campaign trail and in his initial time in the White House.

Add the trade disputes that are targeting U.S. agricultural products, and Bloomberg reports that some like Jon Doggett with the National Corn Growers Association (NCGA) are seeing the potential for that support to wear thin. "There was strong support for the president,” Doggett said. “There continues to be strong support for the president. However, some of that support is wavering because of the trade issue and ethanol."

Trump opened the week by taking to Twitter to proclaim that farmers have "not been doing well for 15 years." Plus, he pledged to end "massive trade deficits" even as U.S. agriculture is one of the few sectors that still registers a positive trade balance.

USDA forecasts the Fiscal Year (FY) 2018 U.S. agricultural trade surplus will total $21 billion. Yes, that is down from some lofty figures of prior years, but it still means the sector is a positive contributor to that trade picture that gives Trump such heartburn.

While much attention has been focused on trade by Trump and his team, the biofuels situation has seen some seven meetings at the White House take place, with each seemingly ending without a unanimous view on what should happen. It has pitted "big corn" against "big oil," which each side holding fast to their positions. Those backing current biofuel policies argue no changes are needed, except to make the fuel more available nationwide. But primarily refiner interests have howled about the costs of complying with the Renewable Fuel Standard (RFS).

Indeed, getting broader sales of ethanol by making E15 available year-round would appease biofuel backers. But the prospect that making the Renewable Identification Numbers (RINs) on exported biofuels count toward RFS requirements is one that refiners like as it would bolster the level of RINs on the market and drive those costs lower. Refiners can purchase RINs to show they are complying with the RFS requirements if they do not blend enough biofuels into the nation's gasoline supply.

More than 80% of voters in Iowa, Minnesota and Missouri said it was important that Trump maintain his promise to defend federal biofuel mandates, according to a survey by the National Biofuels Board. A "substantial majority" of respondents say the EPA’s Pruitt isn’t reflecting the president’s promises, the Jefferson City, Missouri-based board said.

And one key lawmaker in this situation is Sen. Chuck Grassley, R-Iowa. He's expected to keep pushing the administration if they do propose shifts in the RFS that would allow RINs from exported biofuels to count toward RFS requirements. And Iowa, of course, looms large for 2020, particularly if Trump wants to pursue another term in the White House.

But others maintain that support for Trump in the Midwest in particular will not disappear due to policy shifts on trade and biofuels. Farmers have welcomed what they see as an administration that is scaling back regulations and regulations have long been despised by agriculture as the government messing with their business.

So as the Trump administration moves ahead with trade and policy actions that would seemingly target the very base that put him into office, it appears he and his advisers are counting on that regulatory side to keep U.S. agriculture interests in the support column. That could be the case. But if the actions by Trump start translating into price declines for key commodities, their calculations could prove false and is an area that needs to be watched in the coming months as several issues come to a head, Washington Insider believes.

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