Washington Insider -- Thursday

Administration Internal Trade Fight

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

Perdue Reveals Target Date for Tariff-Related Farmer Aid

USDA Secretary Sonny Perdue told reporters at the United Fresh trade show in Chicago that he hopes to have a plan for shielding farmers from tariff-related losses in place before the fall harvest.

He later clarified his position in an interview with the Chicago Tribune, saying he’s “probably” going to stick with a Labor Day deadline for making decisions on farm aid.

He stressed all parties involved would like to see some sort of resolution by July 7, the day after the U.S. and China will implement new rounds of tariffs.

In other remarks in Chicago, Perdue said farmers know China has "not been a fair player." He added, "We will not allow agriculture producers to bear the brunt of China's retaliation as we defend our own interests as a nation.

Perdue also confirmed the Commodity Credit Corp (CCC) could be one of the major tools used in any plan to compensate farmers.

Trump Urged to Suspend Mexican Steel Tariffs Slamming US Dairy

President Donald Trump should suspend the steel and aluminum tariffs on Mexican products during North American Free Trade Agreement (NAFTA) negotiations, as U.S. dairy exporters fear Mexico’s new tariffs will swing the door wide open for EU dairy products, said more than 60 dairy companies and trade groups in a letter to the White House this week.

In retaliation for Trump’s steel and aluminum tariffs, Mexico added new tariffs on American-made cheeses and other products, which are expected to reach as high as 25%. Before now, U.S. dairy processors enjoyed duty-free access to the Mexican market under the trilateral NAFTA.

While the companies and organizations praised the president’s tactics in calling attention to market roadblocks for U.S. dairy products in Canada, Mexico is a very different situation.

“Your insistence that Canada, for example, open its closed market to U.S. dairy and halt market-distorting pricing schemes is both commendable and refreshing,” they said. ‘Unlike Canada, Mexico has long been a model for open dairy trade with the United States. Through investment and cooperation with Mexico, we have succeeded in becoming the country’s biggest foreign dairy supplier, with cheese purchases last year alone totaling nearly $400 million,” farmers and cheese makers said in the June 26 letter to Trump.

But the U.S. market in Mexico is in “grave jeopardy.” And, “our competitors in the European Union will use this opportunity in the wake of their recently concluded Free Trade Agreement with Mexico to gain market share,” said U.S. dairy companies.


Washington Insider: Administration Internal Trade Fight

Well, the policy tensions in Washington are near the max as almost everyone awaits the administration’s next steps on trade and investment policies. On Wednesday, tea-leaf watchers at the New York Times said that President Donald Trump “signaled” that he may accept a “softer” plan for new investment restrictions on China.

However, the Times also signaled that this may not be not final and that the President could ultimately decide to move ahead with the tough bans on Chinese investment in American companies that he has been threatening.

The administration, which has already threatened China with tariffs on as much as $450 billion worth of its products, had promised to “outline” proposed restrictions on Chinese investment soon.

Details are expected by Saturday. The constraints on sensitive American technologies could have a significant impact on United States companies since they could limit the ability of American companies to sell a range of products to China, the Times said.

Now, however, the Times says “people familiar with the discussions are saying that, at least on the issue of Chinese investment, the White House is now leaning toward endorsing a current effort in Congress to tighten rules on the Committee on Foreign Investment in the United States (CFIUS) based on a comment the President made Tuesday.

In a Wednesday response, China’s Commerce Ministry said that officials “are playing close attention to it and will assess the potential impact on Chinese companies.” The Times noted that a congressional overhaul to CFIUS would include a list of “countries of special concern” that allow it to review investments from those nations, but stops short of specifically naming China as the target.

If you think this is complicated, you would be right. The meat of the Times story is the interpretation that the President’s decision would be a victory for the administration’s “more moderate economic advisers, including Steven Mnuchin, the Treasury Secretary, who has tried to de-escalate trade tensions with China.

Mnuchin has argued internally that congressional efforts to strengthen current security checks were both sufficient to guard against threats to American technology and targeted enough to avoid disrupting the American economy, the Times said.

Mnuchin tried earlier to prevent the administration from employing aggressive measures against China, including an effort to use the International Emergency Economic Powers Act, which would allow the administration to take broad action against China by declaring a national emergency. Mike Pompeo, the secretary of state, had recently joined Mnuchin in his arguments, the Times said.

Trump had campaigned on punishing China over its trade practices and has been pushed in that direction by his hardline trade advisers, Peter Navarro and Robert Lighthizer. At the same time, Mnuchin, a former Goldman Sachs executive, has counseled Trump against pursuing restrictions that would target China specifically, warning that could create unnecessary diplomatic and legal complications.

The Times says that in late May, Mnuchin helped orchestrate a meeting among the president, top White House advisers and Republican lawmakers, in which he appealed to lawmakers to help make the case that legislation could be a more targeted way to police Chinese investment. But Peter Navarro and Robert Lighthizer, the United States trade representative, who were also at the meeting, objected to that approach, and at that time, the president overruled Mnuchin, saying he supported the congressional legislation but that it alone was not enough.

Congress is expected to vote on the legislation as part of a defense-spending bill this year. On Tuesday, the House passed its version of the bill, which would grant CFIUS broader authority to block investments over national security concerns.

In recent weeks, Mnuchin had maintained a low profile as the White House proposed tough trade measures that he had opposed. But on Monday, amid growing fears that the Trump trade wars could hurt American companies, Mnuchin re-emerged.

At least partly in response to the press reports Secretary fired off a Twitter post “on behalf of” Trump calling the stories “fake news” and hinting that Treasury would support a broader proposal to protect American intellectual property that would not be “specific to China, but to all countries that are trying to steal our technology.”

Then on Wednesday, the White House moved forward with plans to limit Chinese investments but chose a less a confrontational approach, deciding against invoking a rarely used law reserved for economic emergencies. The President embraced the legislation under consideration in Congress to strengthen the CFIUS, so it can prevent companies from violating intellectual-property rights of American companies.

Bloomberg reported that Wednesday’s announcement tamped down fears of an abrupt escalation in the trade war between the US and China that had roiled financial markets on Monday. Stocks in the U.S. and Europe rallied after the announcement.

So, we will see. This “soft news” could cool down some of the growing disputes — or, it could turn out to be yet another bum lead. Certainly, these are conflicts producers should watch closely as they evolve, Washington Insider believes.

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