Washington Insider -- Tuesday

President Upends Global Trade Order

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

Eleven States Win WOTUS Injunction, But Impact Is Muted

A federal judge granted a preliminary injunction on Friday evening against the Obama administration’s Waters of the U.S. (WOTUS) rule to 11 states. Judge Lisa Godbey Wood for U.S. District Court for the Southern District of Georgia ruled that the states have a substantial likelihood of winning at least some of their claims against the 2015 rule.

The injunction covers the states of Georgia, Alabama, Florida, Indiana, Kansas, North Carolina, South Carolina, Utah, West Virginia, Wisconsin and Kentucky. That puts the WOTUS rule on hold in half the country, with a North Dakota district court judge having granted a preliminary injunction to 13 states shortly after the rule was finalized in 2015.

But it may not matter much because the Trump administration has already finalized a rule delaying the effective date for WOTUS until 2020.

COOL Backers Continue Their Quest

Champions for country-of-origin labeling (COOL) are far from giving up on their quest for labels on beef and pork to say where animals were born, raised and slaughtered even after losing a court battle.

A U.S. District Court judge in the Eastern District of Washington on June 5 ruled that USDA did not act unlawfully in 2016 when it repealed COOL, dismissing a lawsuit that R-CALF USA (Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America) and Cattle Producers of Washington (CPoW) had filed in June 2017.

But while the judge ruled in favor of USDA, she also indicated that ranchers were successful in demonstrating that they had suffered significant financial harm after COOL was repealed and that the harm they suffered was “fairly traceable” to USDA’s decision to abolish the mandate.

Washington Insider: President Upends Global Trade Order

The press is trying hard to understand what happened last week at the “rockiest annual meeting of major Western powers in decades” the New York Times is reporting. It said that President Trump criticized the tariffs imposed on American goods as “ridiculous and unacceptable” and vowed to put an end to being “like a piggy bank that everybody is robbing.”

The Times says it is difficult to understand Trump’s outrage. He thinks that the United States is at a disadvantage when it comes to global trade. But to many of the country’s trading partners, the president’s criticisms ring hollow given that the United States places its own tariffs on everything from trucks and peanuts to sugar and stilettos.

“While the system has problems, it is in no way ‘unfair,’ to the U.S., which as a hegemon has set the rules and the exceptions to the rules,” Susan Aaronson, a professor at George Washington University’s Elliott School of International Affairs said.

The Times says that instead of viewing trade as a mutually beneficial relationship, the president has described trading relationships as a zero-sum game, in which the United States loses out when other countries have more favorable terms. Trump has seized on trade policy to prop up industries that he has promised to revitalize, such as manufacturing, by limiting foreign competition.

The President has singled out specific products where American producers face barriers, like Canada’s tariff on imported milk and Europe’s 10% tariffs on American cars. On Saturday night, Trump left the Group of 7 summit meeting and lashed out at Prime Minister Justin Trudeau of Canada once again for his country’s dairy tariffs and for his criticisms of Trump’s trade measures.

However, the Times went on to point out that “on average, American tariffs are on par with those of other rich, developed countries, which tend to be low, according to the World Bank and the United Nations.”

Among the developed nations that make up the Group of 7 that met in a resort town near Quebec City this weekend, the United States has tariffs that are already slightly higher, on average, across all its imported products than Canada or Japan and exactly equivalent to the four European nations in the G-7.

Still, the administration is moving to impose tariffs on nearly $60 billion of steel, aluminum, solar products and washing machines that flow into the United States from around the world.

In addition, he is threatening additional tariffs on foreign goods that would expand his trade penalties significantly, including a tariff on $350 billion of imported automobiles and parts and levies on $150 billion worth of Chinese goods, on the assumption those will force trading partners to drop their own barriers to entry.

The Times argues that this approach risks upending the United States’ longstanding embrace of free trade and its use of trading relationships to help power economic growth in the United States and the world economy writ large.

Since the Second World War, the United States has cut its tariff rates in step with other developed countries. It also gave some less-developed countries access to its markets, with the idea of increasing wages and improving quality of life.

Trump appears ready to change that equation and increasingly views every country as a threat, regardless of its economic strength.

Critics fear the “Trump” approach could potentially harm the very sectors the administration wants to protect.

The president and his supporters argue that the United States must be willing to take drastic action to fulfill Trump’s promise to rewrite agreements to protect American workers.

Still, it is unclear whether the Trump’s approach will convince trading partners to make the concessions he wants.

Smaller countries like South Korea and Argentina have forged agreements with the United States in recent months, but the world’s major powers have so far responded to the president’s criticisms by toughening their resolve. Indeed, Chancellor Angela Merkel of Germany said Sunday that Europe would enact countermeasures against the United States tariffs on steel and aluminum.

The United States has just one trade agreement with the countries of the G-7 — NAFTA, which includes Canada. The remaining countries of the group have recently inked multiple deals among themselves that have left American exporters at a disadvantage in their markets.

In the last year, a trade agreement between Canada and the European Union went into force, and remaining countries of the Trans-Pacific Partnership signed a trade pact, as did the European Union and Japan.

Trump’s advisers have criticized these as bad deals and argued that his “America First” strategy did not mean “America alone.” But with the world’s other leading economies moving ahead with trade pacts and united against Trump’s trade approach, the United States certainly appears to be at odds with many of its former partners.

Increasingly, it seems that the administration is attempting to base far reaching policies on policy concepts that are untested and likely to be severely damaging. These are high stakes areas for producers, who are seeking ways to protect market access developed over years of investment and effort, Washington Insider believes.

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