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.

Senate Ag Leaders Question ERS, NIFA Move Out of Washington

Plans to move the Economic Research Service (ERS) and National Institute for Food and Agriculture (NIFA) outside of Washington, D.C., are being questioned by Senate Agriculture Chairman Pat Roberts, R-Kan., and Ranking Member Debbie Stabenow, D-Mich.

"Given that these agencies conduct invaluable research and economic analysis critical to the strength of our agricultural and rural economy, we respectfully request that the department provide responses to the following questions as soon as possible," they write.

The lawmakers raise several questions about the USDA plan, including what the goals are for the moves, whether stakeholders have raised questions about the current structure, what the benefits are from the proposed moves, what alternatives were considered in developing the move, what savings will be realized and what cost-benefit analyses showed about the move.

They request USDA provide current hiring plans for both NIFA and ERS and lay out how USDA determined it has the legal authority for the move while the law puts the Undersecretary for Research, Education and Economics as being authorized for the USDA functions relative to economics and research.

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USDA's Perdue Insists Canada's Class 7 Milk Pricing System Has To Go

USDA Secretary Sonny Perdue said in an interview broadcast by C-Span that the Class 7 milk pricing system has to disappear relative to the U.S.-Canada trade talks under NAFTA.

"Our farmers don't have access to the Canadian markets the way that they have access to us. Class 7 has to go," Perdue declared. "It can't be renamed something or called something else."

The program has allowed Canada to "export milk solids on the world market and below prices that cut into our opportunity for our dairy people to have access to that world market," Perdue said.

Plus, National Economic Council Chief Larry Kudlow last week said milk was the main issue standing in the way of a NAFTA deal.

Meanwhile, Perdue also said he has been “pleasantly surprised” by just how much farmers and ranchers are sticking by the Trump administration amid an onslaught of retaliatory tariffs aimed at agriculture. “I have been so surprised, and, I guess, pleasantly surprised, about how strong the support has been from the agriculture community," he noted.

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Washington Insider: Book Details White House Internal Trade Fights

A good bit of the to-do in Washington this week concerns Bob Woodward’s new “tell all” book and involves disagreements on trade policy, Bloomberg says.

A key section says that the President “made a sweeping decision in August 2017 that could have rocked the global economy: the U.S. would pull out of NAFTA, the World Trade Organization, and its trade deal with South Korea, Bloomberg says citing Woodward.

This proposal, it seems, alarmed several of Trump’s top staffers who scrambled to stop him, Bloomberg cites a pre-release copy of the book, which is being released today.

The story is dramatic. It says that then-top economic adviser Gary Cohn and staff secretary Rob Porter pulled chief of staff John Kelly into the Oval Office to convince the President to back down. Soon, Secretary of State Rex Tillerson and Defense Secretary James Mattis were brought into the conversation and painted a dire picture of the national security and economic consequences of such a move. The president acquiesced – but only temporarily, Woodward says.

The episode was one of several in the book in which Trump’s top advisers managed to thwart his efforts to make sudden, drastic changes to U.S. trade policy by arguing the time wasn’t right, distracting him with other matters, or sometimes sneaking documents off his desk.

Bloomberg asserts that the early excerpts of the book comprise part of a “one-two punch of revelations that cast doubt on the loyalty of Trump’s closest advisers” — and perhaps the judgment of others.

Bloomberg says a second political blow landed a day later, on Sept. 5, in the form of an op-ed in the New York Times by an unidentified senior administration official who said some of Trump’s closest advisers are working in secret to confound the president’s “more misguided impulses.”

These accounts told a similar story of a White House in chaos, a portrayal Trump has found tough to shake, Bloomberg said.

Many of the advisers cited by Woodward have since left the administration, leaving fewer moderating voices in Trump’s inner circle, even as trade tensions with China and Canada continue to escalate. Since the start of the year, he’s imposed steep tariffs on steel and aluminum and sparked a tit-for-tat tariff battle with China. He’s in the middle of renegotiating a trade deal with Canada, and trade relations with the European Union are fragile, Bloomberg says.

Days after aides convinced Trump to back down from his August 2017 threat, the president began discussing a draft letter giving the required 180-day notice to pull out of the South Korean agreement. The letter, according to Woodward, was likely drafted by White House adviser Peter Navarro or Commerce Secretary Wilbur Ross — both of whom clashed frequently with Cohn and Treasury Secretary Steven Mnuchin over trade policy.

According to Woodward, the President said in Sept. 2017, that he was ready to pull the trigger on quitting the agreement, known as KORUS. Again, several aides urged caution and ultimately Secretary Mnuchin made a breakthrough by claiming that the move would jeopardize efforts to pass massive tax cuts by upsetting free trade Republicans in Congress. The President agreed to hold off, but only until the tax legislation was passed.

Efforts to avert the U.S. withdrawal from major trade accords began soon after Trump’s inauguration, Woodward says, and that one of his first acts as president was to pull the U.S. out of the Trans-Pacific Partnership.

Then, about three months into his administration Trump told staff he wanted an executive order withdrawing the U.S. from the North American Free Trade Agreement with Mexico and Canada so he could announce it on his 100th day in office.

Porter contacted then National Security Adviser HR McMaster to make the case that the move would create a national security nightmare. And, the following day, an emergency meeting of the cabinet secretaries and top advisers was convened. There, Navarro pushed for withdrawal while Kelly, who was then director of Homeland Security, painted a grim picture of the economic and security consequences that would follow.

Still struggling to convince Trump, Porter brought Agriculture Secretary Sonny Perdue into the Oval Office. Perdue laid out for Trump the benefits to farmers from NAFTA and showed the president a map of the states that would be hurt the most, emphasizing that those included swing states and others with his biggest base of supporters.

Trump eventually decided he wouldn’t send the 180-day notice – but would ratchet up the rhetoric instead.

Cohn, Woodward notes, was frustrated that neither Trump nor Navarro cared much for facts. It was a 180-degree turn from Cohn’s life as president of Goldman Sachs Group Inc., where arguments were won by whoever mustered “more hard, documented information than anyone else in the room.”

On trade and other economic issues, Cohn was often aligned with Mnuchin – also a former Goldman Sachs partner – and Porter, who controlled Trump’s access to most policy documents. The group was generally at odds with Navarro, Ross and top West Wing aides Stephen Bannon and Stephen Miller.

So, we will see. Initially, at least, Woodward does not give much comfort to producers who are watching the escalating trade war with China – among others. In addition, it seems that the number of key officials who are promoting trade fights even at the cost of losing important, profitable U.S. markets overseas remains significant and well placed and should be watched closely as trade policies are debated, Washington Insider believes.

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(GH)

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