Washington Insider -- Monday

Trump Signals He's Ready to Move on China Tariffs

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

Trump Signals He's Ready to Move on China Tariffs

President Donald Trump instructed aides to proceed with tariffs on about $200 billion more in Chinese products despite his Treasury Secretary’s attempt to restart talks with Beijing to resolve the trade war, according to Bloomberg.

The president also tweeted early Monday, "Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country - and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be “Tariffed!”

An announcement is now expected at the beginning of this week. Trump previously threatened a third tranche of tariffs on another $267 billion of Chinese imports, which would mean levying duties on nearly everything China exports to the U.S.

Trump said those tariffs were “ready to go on short notice,” but the administration has not published a list for public comment.

Meanwhile, on Wednesday, the U.S. Trade Representative’s office holds a meeting on a request for comments and a public hearing on China’s compliance with WTO commitments. On Friday, China is expected to ask the WTO for permission to retaliate against the U.S. due to its failure to modify its various anti-dumping methodologies.

A WTO arbitrator this year determined U.S. must comply with 2017 ruling that found certain aspects of U.S. anti-dumping regime to be illegal. The U.S. acknowledged on Aug. 27 that it hadn’t fully complied with the ruling, and said it "continued to consult with interested parties on options to address the recommendations" of the dispute settlement body.

Turkey Set to Once Again Import US Dairy Products

After a three-year lapse to negotiate a new agreement, Turkey will resume import of U.S. dairy products.

“We’re pleased to learn this hiatus is over and that American dairy companies once again have access to Turkey, a market that was worth $24.2 million for U.S. dairy in 2014,” said Beth Hughes, International Dairy Foods Association (IDFA) senior director of international affairs.

USDA’s Foreign Agricultural Service (FAS) announced Sept. 4, that negotiations over a new health certificate – required by Turkey — for U.S. dairy met with success and that a new agreement is in place. Producers could begin exporting dairy products for human consumption, and sourced from the U.S. from cows, ewes, goats, and buffalo, to Turkey as of July 31, 2018, USDA says.

Dairy exports from the U.S. to Turkey were halted on March 31, 2016, when no further extensions were granted for the use of the previous health certificate and while negotiations for a new certificate were underway.

Turkey is a large dairy producer but also imports around $200 million each year in specialty products such as cheese, butter, infant formula and lactose, USDA says. Turkey imports most of its dairy products from Europe.

Washington Insider: Trade Talks Continue at Technical Level

A great deal of talk is underway on trade policy this week, Bloomberg says, but the policy trade wars continue as well. The report says that U.S.-Japan trade talks, Mexican sugar import discussions and ongoing technical-level discussions for the North American Free Trade Agreement are all on tap this week.

Japan’s Economic Revitalization Minister Toshimitsu Motegi and US Trade Representative Robert Lighthizer will meet Sept. 21 for the second round of “free, fair, and reciprocal” talks, although not even the location where the get-together will take place has been announced.

The aim of the two-day talks is to reach a common understanding of what both countries could accept for a possible trade deal—before Prime Minister Shinzo Abe and President Donald Trump meet the following week in New York City, a former diplomat told Bloomberg.

However, Bloomberg seems to see at least something bubbling in the background and says that observers should “watch for Japan to push for the U.S. to rejoin the Trans-Pacific Partnership as the best way to resolve its trade gap woes and to restate its willingness to purchase more liquefied national gas from the U.S.” Also, U.S. access to Japan’s agricultural markets “will be high on the agenda,” Bloomberg says.

Ellen Frost, a senior adviser at the East West Center and a former U.S. trade official, said she expects to see “some heads bashing,” at the meeting, because of the cultural and institutional barriers to trade in place since the 1970s. Common ground on intellectual property rights and state-owned enterprises should bring the two sides together, she said.

Bloomberg also calls the continuing NAFTA talks “a grind” at the technical level, with the U.S. and Mexico scrambling to finalize the text of the preliminary agreement struck in late August. Canada also is participating in these talks Bloomberg says.

“There are a lot of loose ends,” one private sector source said. Another source said the text still contains brackets, indicating areas where final agreement has not yet been struck.

Canada’s Foreign Affairs Minister Chrystia Freeland is expected to make another trip to Washington, although no date has been announced. An industry source close to the talks said Freeland could be in town Sept. 19, while another source said that the earliest Freeland would travel south would be Sept. 17.

“Not a lot of progress has been made on the dairy market access issue,” another private sector source said. There could be a deal with Canada by Oct. 1, “but they are not on the cusp of announcing anything,” Bloomberg said. Dairy trade is one of several issues that are hobbling the talks. Others include dispute settlement and intellectual property.

Once the U.S. and Canada resolve bilateral issues, top-level Mexican negotiators are expected to return to Washington to make sure everyone is on the same page.

Bloomberg also speculates that a U.S. sugar refiner may get new fuel in its fight against a U.S.-Mexico sugar deal Sept. 19, when the Commerce Department must turn over records of talks surrounding the deal.

U.S. refiner CSC Sugar is fighting the pact with a pair of lawsuits. The company’s president, Paul Farmer, told Bloomberg that the Commerce Department responded “to lobbying from CSC’s U.S. competitors.” The changes in the agreement were specifically designed to disrupt CSC’s sourcing, he said, because CSC’s U.S. refineries are specially designed to process low-impurity sugar.

The Court of International Trade has ordered Commerce to produce previously undisclosed records of pre-deal talks between Commerce officials, including Secretary Wilbur Ross, Mexican officials, and Mexican and US industry. CSC hopes that these records will assist it in its legal challenges to the suspension agreements, Farmer said, and that Commerce will ultimately renegotiate the deal.

In 2017, the U.S. and Mexico announced they had renegotiated their suspension agreements for Mexican sugar. The Commerce Department agreed not to impose anti-dumping and countervailing duties on sugar from Mexico. In return, the deals set minimum prices for these imports.

So, it appears that there is a great deal of talk, but not much commitment to reduced tensions and to better access to international markets. However, continuation of talks likely means a better prospect than the alternative. As year-end trade tensions blend with year-end budget tensions, these are issues producers should watch closely as they emerge, Washington Insider believes.

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