Washington Insider -- Friday

Red State Voters Largely Shrug Off Trade War

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

Labor Announces H2A Changes

Proposed changes to the H-2B and H-2A temporary worker visa programs aimed at modernizing and streamlining the recruitment process were announced by the Department of Labor (DOL) November 8.

The H-2A program allows employers to higher foreign workers on a temporary basis to fill positions for agricultural work they are unable to secure domestic labor to do. The H-2B program does the same but for non-agricultural work.

The H-2A program is used extensively for more labor intensive seasonal agricultural work like picking fruits and vegetables. Often it proves impossible for producers to find Americans workers to fill the needed positions.

In order to fill the labor shortage typically encountered, producers must bring workers in from abroad. According to DOL, the department granted over 240,000 H-2A visas for Fiscal Year (FY) 2018, a record number and a 21 percent increase from last year.

Current rules require employers to first advertise any job they are seeking temporary labor certifications for by publishing two print ads in a newspaper of general circulation in the area of intended employment. The aim of the rule is that employers must first seek to fill the position using any interested American workers before seeking foreign labor for the role.

Things on Track for Nov. 30 USMCA Signing

The U.S., Mexico and Canada intend to sign the updated NAFTA agreement November 30 at the G20 summit, according to Mexico Economy Minister Ildefonso Guajardo.

The current plan is for ministers from the three countries to sign the U.S.-Mexico-Canada Agreement (USMCA) Nov. 30 at the summit in Buenos Aires, Argentina.

Nov. 30 is the earliest date the agreement can be signed and it will allow the accord to be signed by the outgoing Mexican administration.

The attention in the U.S. will then shift to the congressional approval of the deal, expected to come in early 2019.

Washington Insider: Red State Voters Largely Shrug Off Trade War

In its analyses of the outcomes of the midterm elections, the New York Times this week reported that voters in red states “largely shrugged off concerns about the economic effect of President Trump’s global trade war.”

In fact, the Times said, “in a series of high-stakes Senate races in states exposed to the administration’s tit-for-tat tariffs, voters ousted three incumbent Democrats who tried, in varying degrees, to tie their Republican opponents to the president’s tariffs."

The Times focuses on three incumbents who tried to seize on the issue and notes that all of them lost, and badly.

In North Dakota, Sen. Heitkamp, D-N.D., was defeated by Kevin Cramer who mildly criticized the tariffs but praised the President’s overall approach. Heitkamp lost by nearly 11 points. Republican Josh Hawley unseated Claire McCaskill, D-Mo., and Mike Braun trounced Joe Donnelly, D-Ind., who did not back away from their support for the tariffs by nearly 10 points.

“People are willing to deal with some short-term pain to serve a long-term goal,” said Eric Branstad, a former administration official in the Commerce Department who ran Trump’s campaign in Iowa two years ago.

“The fact that Trump concluded a deal with Canada and Mexico gave people a sense that things were moving in the right direction,” Branstad said.

Republicans did lose two House seats in Iowa, which has also been hit by retaliatory tariffs. But those losses had less to do with trade than with suburban gains by Democrats in more affluent and educated areas adjacent to midsize cities like Des Moines and Davenport, NYT said.

In North Dakota, where soybean farmers have struggled with China’s retaliatory tariffs, 93% of Republican voters supported the president’s positions on trade, about the national average for Republicans, according to exit polls from CNN.

Nationally, less than a third of all voters said that Trump’s trade policies had hurt them.

It is nearly impossible to quantify the individual influence of trade policies, especially in industrial states like Wisconsin, Pennsylvania and Michigan, where support for Democrats surged significantly, the Times reported. “But Democratic consultants in those states said the tariffs contributed to a general anti-Trump sentiment, but were not a central issue in the midterm elections.”

The Times overall conclusion was that Republicans continued to perform strongly in agriculture-rich House districts — which helped create a rural firewall that largely limited the party’s losses to suburban areas. Republicans held onto 17 of the 25 districts that are the most dependent on agricultural jobs. Democrats retained the four they held, with two seats held by Republicans yet to be decided at the time the report was published on Thursday.

In fact, NYT said that President Trump’s overall popularity in rural America seems to be growing, stoked by the tactic, employed by China and other trading partners, of targeting retaliatory tariffs at Trump-friendly districts.

On Wednesday, at a White House news conference, the President signaled he would continue his pugilistic approach to trade. He heralded the revised NAFTA agreement, which still needs to be approved by Congress and expressed hope that Democrats, who now control the House, will help shepherd it through.

And he reiterated his threat to impose tariffs on automobiles from countries that do not agree to trade deals that benefit the United States, suggesting that tariffs on Japanese cars could soon be in store.

Still, the trade issue, so central to Trump’s 2016 presidential campaign and appeal to voters in the Midwest, was little more than background noise in states like Indiana and Missouri, overshadowed by the fierce and polarizing debates over health care, immigration and Trump himself.

And even in North Dakota, where farmers are reporting a sharp decrease in Chinese demand for soybeans, the political consequence was barely detectable.

President Trump, who authorized a $12 billion bailout in July for farmers hit by China’s tariffs, made a point of playing down his own responsibility for the pain felt by local businesses and farms, repeatedly placing the blame on Beijing.

“China was very attuned to our internal politics, and they tried to maximize the angst that was felt in some of these Trump areas, but they clearly missed the mark,” said Joseph Parilla, a fellow at the Brookings Institution who has analyzed the patterns of retaliatory tariffs in red states.

Resistance to Trump’s trade policies from Republican lawmakers and business leaders is unlikely to abate even if his voters are willing to weather them, NYT said. For example, on Wednesday, Henry M. Paulson Jr., who was Treasury secretary under President George W. Bush, warned about the prospects of an “economic iron curtain” and said that he feared that large parts of the global economy would be closed off to free trade and investment.

“Nobody wins a trade war,” said Paulson, who remains close with Steven Mnuchin, the Treasury secretary.

So, we will see. Certainly, there is anxiety across the farm bill about the trade fight—but there are many issues now and it is very hard to evaluate each. In addition, if the trade fight lingers, especially if it intensifies and positive results emerge only slowly or not at all, producers may pay more attention to lost ag markets than they have to date, Washington Insider believes.

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