Washington Insider -- Monday

More Complicated Pacific Trade Deals

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

US Steel, Aluminum Import Tariffs Continue As Question Mark

A senior Mexican trade official said Thursday that no talks have been scheduled with the U.S. on lifting the Trump administration’s steel and aluminum tariffs.

“No, we have not started that discussion,” said Juan Carlos Baker, Mexico’s undersecretary for international trade. U.S. trade officials reportedly want Canada and Mexico to agree on a hard cap on the amount of steel and aluminum they could ship to the U.S., so far Canada has said it will not accept quotas.

Canadian Foreign Minister Chrystia Freeland and incoming Mexican Foreign Secretary Marcelo Ebrard met this week and the two officials called for the tariffs to be lifted as soon as possible. Both countries have retaliated against the U.S. duties with tariffs on US farm goods and other products.

Trump administration officials continue to see this issue is separate from the US-Mexico-Canada Agreement (USMCA), but veteran watchers see a two-fold U.S. process seems likey. First, they want hard caps on Canadian and Mexican steel and aluminum shipments and it could possibly ben leverage to get congressional votes for USMCA once that matter comes for a vote in Congress.

US Lifts Most Restrictions on Pork From Poland Over ASF Concerns

USDA has agreed to lift some restrictions on imports of fresh and frozen pork from Poland linked to concerns over African swine fever (ASF), according to the Animal and Plant Health Inspection Service (APHIS).

"After an expeditious review of export protocols, APHIS has notified Poland that we are lifting restrictions on all establishments located in the contiguous free zones," APHIS said. "We are retaining restrictions on raw product and heat treated, but not fully cooked, product from two establishments while we complete a more thorough review."

Reports out of Poland indicate the restrictions were lifted on 16 plants but remain in place on two plants. The US has been a key destination for Polish pork.

Washington Insider: More Complicated Pacific Trade Deals

Tariff cuts expected to kick in soon under an 11-nation trans-Pacific deal underscore the urgency to US-Japan trade talks and leave the U.S. at a competitive disadvantage, industry insiders said last week.

While the Obama Administration was key player in finalizing the original effort, U.S. farmers and businesses are being excluded from reaping the benefits, U.S. Chamber of Commerce Vice President for Asia David Gossack told Bloomberg.

With the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership, “American exporters are left with a sharp competitive disadvantage in global markets,” he said.

Meat exports to Japan are a case in point. “Japan is the market where the most significant tariff reductions on red meat would have occurred,” US Meat Export Federation spokesman Joe Schuele told Bloomberg. Japan’s tariffs on imported frozen beef from most suppliers is 38.5%, he said.

Tyson Fresh Meats Inc. and Swift Beef Co. are among U.S. companies that export beef products to Japan, USDA says.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is the successor to the Trans-Pacific Partnership, which President Donald Trump exited in his first days in office. It now is slated to take effect after six of the 11 signatory countries ratify it. Australia may do so by Nov. 1 and Canada is set to do so on Oct. 29. Mexico, Singapore, Japan, and New Zealand have already ratified the deal. If Australia ratifies by Nov. 1, the initial six signatories that ratify will enjoy two rounds of tariffs cuts by April 1.

Most U.S. exporters have seen ratification coming and have prepared for the deal taking effect so there shouldn’t be any immediate crises, William Reinsch, senior adviser at Kelley, Drye & Warren LLP and senior adviser at the Center for Strategic and International Studies, told Bloomberg.

“Over the long term, however—meaning years, not months—you will see some shifting of supply chains to inside the CPTPP area in order to take advantage of the duty-free status,” Reinsch, who is a former president of the National Foreign Trade Council, said.

“Industry groups are looking forward to talks with Japan to achieve concrete new market access,” an industry source told Bloomberg. The Trump administration officially notified Congress that it will start trade negotiations with Japan, which had been originally resistant to bilateral talks.

The CPTPP deal taking effect sooner than expected underscores the “pressing need” for the Trump administration to start negotiating trade agreements with countries in the fast-growing Asia-Pacific region, beginning with Japan, the National Pork Producers Council told Bloomberg.

The U.S. Council for International Business told Bloomberg it hopes the move sets the stage for future US trade pacts that build on the best in the TPP. “We hope the Trump Administration continues to move quickly in pursuing its plan for the region, including carrying forward key provisions from the TPP to help American companies and workers compete,” the USCIB said.

Key Republican lawmakers who backed the TPP signaled that they support the administration’s plan to move forward bilaterally.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, supports the administration’s plan to pursue such agreements that open overseas markets for U.S. agricultural and manufacturing products, as well as for entrepreneurs, a spokeswoman for Hatch told Bloomberg.

Sen. John Thune, R-S.D., has been a longtime supporter of TPP and other multilateral trade deals that would open up markets to US products. “Absent multi-lateral trade deals, I’ve encouraged the administration—and am still encouraging officials—to pursue bilateral deals so the United States can continue to make economic progress in markets around the globe,” Thune told Bloomberg.

So, we will see what happens. The pre-election politics largely preclude any significant trade related move ahead of November 6 and both sides are collectively holding their breath regarding possibilities after the elections. Ag trade and the administration’s “get tough” trade policies appear to be important political factors, but nobody seems to have a clear fix on how important that may be. Certainly, this is a high stakes issue for producers and one they should watch closely as it is debated and considered, Washington Insider believes.

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