Washington Insider -- Friday

Trans-Atlantic Trade Truce Tested

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

WOTUS 2019 Timeline

The Trump administration's regulatory agenda released this week indicates they will not issue a new waters of the U.S. (WOTUS) rule until March 2019.

The agency is continuing work on a parallel process to replace the rule and will release a draft version of the replacement within the coming days, said acting chief Andrew Wheeler. It is possible the federal courts hearing challenges to the 2015 WOTUS rule will act to overturn it before the EPA’s repeal is actually complete next year, said Ellen Steen, the American Farm Bureau Federation’s general counsel.

EPA acknowledged that the court decision from earlier this year means WOTUS is in effect in some states but not others. Agency spokeswoman Tricia Lynn said the EPA is working with the Army Corps of Engineers, which also handles water jurisdiction issues, to answer questions on a “case-by-case basis” about whether a body of water is covered by federal law.

“The agencies recognize the uncertainty this decision has created and are committed to working closely with states and stakeholders to provide updated information on an ongoing basis about which rules are in place in which states,” Lynn told Bloomberg.

US Suspends Pork Imports from Poland on ASF Concerns

Poland has been wrestling with African swine fever (ASF) since 2014 but has until now been able to supply the U.S. with pork from regions unaffected by the disease. But USDA’s Animal and Plant Health Inspection Service (APHIS) said it was now suspending market access following a routine review of ongoing operations.

“During these checks, it emerged that one Polish facility exporting pork to the U.S. had done so in contravention of the stringent requirements in place to prevent the spread of serious diseases of livestock, like ASF,” the agency explained.

APHIS said a preliminary assessment suggested there is minimal animal health risk posed by any pork products imported recently into the US from Poland. There is no human health risk, as humans are not susceptible to ASF.

APHIS said it is also reviewing the protocols for a second Polish facility.

Poland exported 68,649 metric tons of pork to the U.S. in 2017.

Washington Insider: Trans-Atlantic Trade Truce Tested

There has long been concern about the durability and effectiveness of the July “trade truce” between the U.S. and the European Union (EU) and now there are growing worries that it could come apart. U.S. Commerce Secretary Wilbur Ross challenged the “fragile deal” by accusing the European Union of “dragging its feet over market-opening pledges,” Bloomberg is reporting this week.

Secretary Ross lashed out at European Trade Commissioner Cecilia Malmstrom for her statement that the onus is on the U.S. to come up with proposals to lower tariffs on industrial goods. At a briefing in Brussels on Wednesday, Ross said the 28-nation bloc needed to act on product standards, which he described as equally important.

“Discussing tariffs in the absence of discussions of standards is a useless exercise,” Ross said a day after he held a meeting with Malmstrom to take stock of EU-U.S. commercial relations.

The discussion was aimed at moving forward with the July deal between U.S. President Donald Trump and European Commission chief Jean-Claude Juncker that put on hold possible U.S. automotive duties based on the same national-security grounds the White House used to impose controversial levies on foreign steel and aluminum.

The two leaders agreed then to work toward the elimination of tariffs and non-tariff barriers on industrial goods traded between the EU and the U.S. and establishing a working group that had its political kickoff in September.

Now, however, the U.S. is pushing for more movement. “We really need tangible progress,” Ross said on Wednesday. “The president’s patience is not unlimited.”

At the same time, the warning highlights the “ambiguity” of the July pact and the lingering threat of U.S. duties on European cars and auto parts, Bloomberg said. Such a step would mark a significant escalation of trans-Atlantic tensions following the American metal levies and tit-for-tat retaliation by the EU.

The value of EU automotive exports to the U.S. is about ten times greater than that of the bloc’s steel and aluminum exports combined, meaning European retaliatory duties would target a bigger amount of American exports to Europe.

While Ross said the administration would refrain from imposing new tariffs against the EU as long as their market-opening talks are going “satisfactorily,” he made clear the option of American automotive levies based on national-security grounds remains.

Ross said he pressed Malmstrom in their exchange for fast results.

“Our purpose in the meeting was to stress the need for speed and for getting to near-term deliverables, including both tariff relief and standards,” Ross said. “This is not meant to be a five-year project. This is meant to be something that was to move quickly and in a cooperative fashion.”

On Tuesday after the meeting, Malmstrom said there was “nothing really” notable about it and an EU official said she used the occasion to reiterate the bloc’s objections to the U.S. metal tariffs as well as to a separate set of American duties on Spanish olives.

At a press conference earlier on Wednesday, Malmstrom repeated the EU’s willingness to seek a “limited” market-opening accord with the U.S. covering tariffs on industrial goods while saying “so far the U.S. has not shown any big interest there, so the ball is in their court.”

Part of the complexity of these issues lies in institutional factors. Malmstrom’s counterpart in Washington is U.S. Trade Representative Robert Lighthizer, while Ross is responsible for an investigation into whether American imports of automotive goods pose a national-security risk.

Beyond stressing the need to focus on product standards, Ross signaled a desire to tackle European barriers to agricultural trade. However, EU officials have insisted that farm products are outside the scope of the July deal between Juncker and Trump (with the exception of a European vow to buy more American soybeans, something market forces are making happen because U.S. shipments to China have been hit by a Chinese tariff imposed as part of an escalating trade conflict between Beijing and Washington).

“We’re interested in exploring all sectors where there are protectionist things,” Ross said.

Gordon Sondland, the U.S. ambassador to the EU, joined Ross at the briefing and was blunter on the question of farm goods. “Agriculture was always part of the discussion and will need to be part of the discussion to conclude an agreement,” Sondland said.

So, we will see. In spite of the July agreement, both sides appear to be firmly dug in at this point. In previous attempts at negotiations, the EU with its very strong green parties has been unwilling back away from its “precautionary” principle that allows trade restrictions on the basis of social or political concerns, rather than on the basis of scientific concerns—rationales that most trade analysts consider highly protectionist. Thus, it is somewhat surprising that Secretary Ross emphasized these concerns in the current setting.

So, we will see. These certainly are high stakes talks that producers should watch closely as they proceed, Washington Insider believes.

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