Washington Insider -- Thursday

Mysteries of Trump Trade Policy

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

More Challenges To US Steel, Aluminum Tariffs at WTO

U.S. Section 232 steel and aluminum tariffs continue to draw fire at the World Trade Organization (WTO), with more countries granted dispute panels to probe the duties' propriety under international trade rules.

Dispute settlement panels in matter were already granted by WTO's Dispute Settlement Body (DSB) for the European Union (EU), China, Canada, Mexico, Norway, and Russia during a November 21 meeting. Two additional panel requests were granted for India and Switzerland during the body's December 4 meeting.

Targeted nations are allowed to block the establishment dispute panels the first time. Subsequent requests, however, are automatically granted. India and Switzerland made their initial requests during the November meeting, but the U.S. exercised its right to block them at that time.

Like other members requesting panels, India and Switzerland both contested U.S. claims the metals duties were exempt from WTO review as they were imposed on national security grounds – via Section 232 of the U.S. Trade Act. India and Switzerland also deemed them safeguard measures and thus are eligible for dispute settlement proceedings under WTO rules.

India said reactions by WTO members reflect "the serious concern of the WTO Membership over the United States’ actions." Further, "It also reflects trust and confidence in the WTO as a forum for resolving international trade disputes."

According to a translation of the statement from Switzerland, it warned that if the U.S. is allowed to exempt the metals duties from review under national security exceptions, it would open the door to any member "unilaterally" invoking the same privileges, even for trade measures that are commercial in scope. Exempting those measures from review "would undermine the multilateral system, based on the rules as a whole, to the detriment of all its members," the Swiss wrote.

Delauro Seeks Data from USDA on Expanded Beef Recall

Rep. Rosa DeLauro, D-Conn., has asked USDA Secretary Sonny Perdue for testing records after USDA announced another 5 million pounds of raw beef products have been added to a national recall because of concerns about possible Salmonella contamination.

The move expands the total recall of raw, non-intact beef from JBS Tolleson to more than 12 million pounds.

At least 246 individuals in 25 states have been sickened by the Salmonella Newport outbreak linked to the Arizona-based subsidiary of the Brazilian-owned JBS, according to the latest information from USDA's Food Safety and Inspection Service (FSIS) and the U.S. Centers for Disease Control and Prevention.

The initial recall, announced Oct. 4, included some 7 million pounds from JBS and covered meat packaged from July 26-Sept. 7. At that point only 54 individuals in 12 states had fallen ill from exposure.

FSIS said the additional recall is in part because of concern that consumers may have some of the meat in their freezers.

But DeLauro criticized FSIS for taking two months to expand the recall and charged USDA with failing to take its responsibility seriously.

"That is unacceptable and has put people across the country at unnecessary risk to foodborne illnesses. As a result, I have requested the Salmonella testing records associated with the JBS Tolleson facility from the last 52 weeks. This request should help to shed light on the inadequacies of USDA’s testing standards that have led to the scale of this outbreak," she said. DeLauro requested the testing records in a Dec. 4 letter to Perdue.

Washington Insider: Mysteries of Trump Trade Policy

President Donald Trump turned to a familiar playbook after his high-stakes dinner with Chinese President Xi Jinping on Saturday: he boasted of a big victory first, and let a more nuanced reality sink in later.

He had followed the same script after trade talks with the European Union and Canada and his nuclear summit with North Korea’s Kim Jong Un. His optimistic comments can send markets soaring, before investors realize the president’s claims of success may have been exaggerated, analysts say.

The pattern played out again with auto stocks this week. Shares of General Motors Co., Ford Motor Co., Daimler AG and BMW AG surged Monday after Trump tweeted: “China has agreed to reduce and remove tariffs on cars coming into China from the U.S.” But by late Tuesday morning, Trump not only acknowledged there was no deal but questioned whether one was possible. He declared himself “Tariff Man.”

Shares reversed course Tuesday as investors grew skeptical that the U.S. and China made any meaningful breakthrough on trade. The Dow Jones Industrial Average plunged almost 800 points and the S&P 500 lost 3.2% – the biggest rout in almost two months.

It’s not the first time Trump has whipsawed markets, especially for carmakers. Trump claimed victory after a July meeting with the European Union’s Jean-Claude Juncker, as he agreed to hold off on imposing tariffs on auto imports from Europe as long as progress was made in negotiations over a limited trade deal. He also claimed that the EU agreed “to purchase almost immediately large amounts of American soybeans” as exports of the commodity were hit by the trade war with China.

The EU Rose Garden truce prompted a bounce in the shares of European carmakers that was short-lived. And the EU’s soybean commitment turned out to be no more than modest bargain-hunting. The small increase in purchases of American beans that followed was attributable to a collapse in prices caused by the trade war with China, not a new deal with the U.S., Bloomberg said.

The larger trade negotiations with the EU are expected to begin in earnest only next year. Trump has resumed his threats to impose tariffs on European cars, calling German automakers in for a summit at the White House on Tuesday.

Trump is in a similar position with Japan. He portrayed as a major accomplishment an agreement with Japanese Prime Minister Shinzo Abe to start trade talks early next year. But one key condition of a deal is that Tokyo won’t give U.S. farmers any more access to the Japanese market than it negotiated with the Obama administration as part of Trans-Pacific Partnership (TPP) talks that dragged on for years.

After November’s midterm elections, President Trump returned to issuing threats. He greeted a Japanese reporter with: “Say hello to Shinzo. I’m sure he’s happy about tariffs on his cars.”

Even when he finalized a deal, Trump seems inclined to embellish. After he signed a replacement deal for NAFTA, Trump declared it “a model agreement that changes the trade landscape forever.”

While it included some significant changes, particularly to auto content rules, the final deal amounted to a rebranding exercise – it is now called the U.S. Mexico Canada Agreement. It also borrowed heavily from another deal that Trump scorned, the 12-country Trans-Pacific Partnership from which he withdrew in one of his first acts in office.

Republican and Democratic lawmakers scoffed at Trump’s portrayal of the NAFTA replacement, Bloomberg says.

The president’s hyping of his trade deals echoes his nuclear diplomacy with North Korea’s Kim. At a historic June summit in Singapore, Trump repeatedly described the document he and Kim signed as “comprehensive,” and he hailed the North Korean leader’s commitment to remove nuclear weapons from the Korean peninsula.

But few meaningful details, such as a timeline, were ever provided. And since then, talks have appeared to stall. The most recent sign of trouble was the test of a new “advanced tactical” weapon by Pyongyang last month – the first such demonstration in almost a year and a pointed signal to the U.S. and South Korea.

Yet Trump is publicly unfazed. He has continued to claim that Pyongyang is no longer a threat and said on his way back from his meeting with Xi in Buenos Aires that he is planning a summit with Kim as soon as January.

The fact is that the administration’s trade policies are being questioned widely now, by supporters and opponents alike. Most recently, he returned from a “profitable” meeting with Chinese leaders, and then immediately announced that his key “hardliners” on trade, including USTR Robert Lighthizer, would be in charge of the follow-up negotiations, leading to what some observers called “headscratching in high places.”

In addition, the administration says China is committed to purchase large amounts of ag products, including soybeans. But farmers say this deal appears to be unfolding slowly, perhaps too slowly to provide the price lifts U.S. producers say they need.

So we will see. At least the trade talks with China are on the agenda now – we think – and those talks should be watched closely by producers as they proceed, Washington Insider believes.

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