Washington Insider -- Tuesday

By DTN's Washington Insider

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

US/China Talks 'At The Highest Levels,' Says NEC's Kudlow

National Economic Council Director Laurence Kudlow told reporters recently that the U.S. and China have been talking. “Talks have stalled but in recent days I can report that there has been some communication for the first time in a good while…at the highest levels.”

U.S. Treasury Secretary Steven Mnuchin and President Xi’s economic envoy, Liu He, and their teams have been in conversations about a possible meeting, but the talks remain at a preliminary stage. “China is not going to dominate our economy,” Kudlow said. “They are the ones with the lousy economy… Look at their stock market. Look at their currency. They are the ones in trouble, not us. We’re doing great.”

Kudlow said Trump will not back off after Beijing said it plans to slap tariffs on $60 billion worth of American goods should the Washington follow through with its latest trade threats.

Commerce Secretary Wilbur Ross has signaled more pain ahead unless China changes tact.

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US Beef Exports Hit Record in June While Pork Shipments Slipped

The U.S. exported a record 272.6 million lbs. of beef in June, just slightly behind the all-time high for any month of 272.8 million lbs. in May. Beef exports surged 36.8 million lbs. (15.6%) from year-earlier levels. During the first half of the 2018 calendar year, the U.S. exported 1.529 billion lbs. of beef, up 196.3 million lbs. (14.7%) from last year.

Pork exports totaled 454.3 million lbs. in June, which was the second highest on record for the month behind 2008’s 461.3 million lbs. and up 6.0 million lbs. (1.3%) from last year. But pork shipments declined 61.4 million lbs. (11.9%) from May, as exports dropped 25.0 million lbs. (15.5%) to Mexico (the top market) and 17.1 million lbs. (25.3%) to South Korea (the third largest market) from the previous month.

The decline in pork exports from May to June is seasonal, but it’s still attention-getting when two of the top three export markets drop that significantly. Plus, shipments to Japan (the No. 2 market) were also down month-over-month, just not as significantly.

Pork sales to foreign markets totaled 3.034 billion lbs. during the first half of the year, up 17.6 million lbs. (6.2%) from last year’s record pace.

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Washington Insider: Criticism for Administration Lack of Infrastructure Support

The political ups and downs of the trade and immigration issues seem to have sucked much of the energy from another major administration promise, the program to rebuild America’s crumbling infrastructure, Bloomberg reported this week. So, in an effort to jumpstart that effort, companies that make equipment for construction and other industries are mounting a campaign on the place he’s most likely to hear them: Fox News.

It's not major news in most cases when a trade association runs a campaign, but Bloomberg says this is a little different. It says the Association of Equipment Manufacturers is airing a 30-second ad starting Monday on “Fox and Friends” and other programs President Trump is known to watch. Bloomberg calls the campaign “the cornerstone of a Mission Not Accomplished campaign urging Washington to make upgrading public works a priority.”

While the White House has said no action on a bill is likely this year, the group wants to get the discussion re-started by nudging Trump and congressional leaders to keep a campaign pledge that was central to the president’s economic agenda.

“When you go out there and you campaign and you say you’re going to make a difference by infrastructure investment, we want to hold people accountable,” said Dennis Slater, president of the association that represents more than 950 companies including Caterpillar Inc., Volvo Construction Equipment Corp. and Link-Belt Cranes. “Let’s get back to what you promised here.”

It is true that President Trump made fixing U.S. roads, bridges, airports and other public works a pillar of his campaign, Bloomberg notes. The American Society of Civil Engineers has estimated that planned spending on infrastructure from 2016-2025 is $2 trillion short of what is needed. The group says substandard public works cost the economy trillions.

However, the infrastructure plan released in February did not stimulate the level of support hoped for by the administration. For one thing, it would have provided only $200 billion in federal funding over 10 years to spur states, localities and the private sector to spend the balance of $1.5 trillion -- with no identified way to pay for it. The plan stalled amid Democratic criticism that the budget proposal would cut more than the $200 billion amount from other transportation programs.

The association said it is holding town halls, using social media and running ads using outlets that Trump and congressional leaders are known to watch and read, including newspapers in specific markets and the TV commercial on Fox that features workers in factory settings.

In the ad, the workers say that while there were many promises in the campaign, they definitely remember one -- as a television in the background plays a clip of the candidate saying during his election night victory speech, “We’re going to rebuild our infrastructure.”

“It hasn’t happened,” one worker says in the ad, which ends with the message: “Let’s make infrastructure a priority.”

Campaign spokesman David Ward said that a July poll showed that while 74 percent said it’s important for Trump to follow through on his promise to invest $1 trillion in infrastructure, 51 percent aren’t confident he will.

In fact, several groups of administration supporters say they are disappointed that the promised trillion-dollar plan has stalled because infrastructure appeared to be the one thing that could generate bipartisan support and boost spending and jobs, said Jeff Schwarz, group president of Aggregate & Mining - USA for Tennessee-based Astec Industries Inc.

“I thought it would be a win for the Trump administration,” Schwarz said. “It’s absolutely needed.”

It appears that the administration was ready to push for infrastructure spending earlier this year, before the school shooting in Florida and other matters took it off the agenda, said Rep. Bill Shuster, R-Pa., Chairman of the House Transportation and Infrastructure Committee.

Shuster, who is leaving Congress at the end of the year, released his own proposal July 23 to spur discussion about fixing infrastructure and shore up the Highway Trust Fund, which is projected to become insolvent by 2020.

His plan includes raising the federal gas tax by 15 cents a gallon over three years and the diesel tax by 20 cents, with a goal of replacing the fuel levies by 2028 with a per-mile-traveled fee or other sources.

Representative Peter DeFazio, D-Ore., the top Democrat on the committee, has said there is “zero expectation” there will be action this year.

However, Shuster thinks it is possible a bill could be considered in a lame-duck session after the election. Regardless of who wins, Democrats won’t want to vote on a tax increase next year, and Republicans should deal with the issue now so they’re not blamed in the 2020 presidential campaign, he said. “I guarantee you they’re going to use this like a sledgehammer against Republicans and against the president,” Shuster said.

Well, this is a somewhat strange issue with its broad support based on widely agreed need that extends across the political aisle. Still, it involves big spending that many want, but few are willing to advocate. Since it is important to the ag industry that the infrastructure be upgraded, this is a debate that producers should watch closely as it proceeds, Washington Insider believes.

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