Washington Insider -- Monday

Ending China's Tariffs Top Priority: Soy Group

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

Stabenow Calls On Lenders To Consider New Dairy Provisions

A key ag senator is imploring lenders to look at benefits of the new Dairy Margin Coverage (DMC) program, approved in the 2018 Farm Bill, as they evaluate a dairy farmer's financial stability.

Senate Agriculture Committee Ranking Member Debbie Stabenow, D-Mich., said last week that while implementation of the program has been delayed due to the recent 35-day partial government shutdown, the new dairy DMC program was to be effective January 1. However, the shutdown means "the work necessary to implement and educate producers" is only now getting underway, Stabenow said.

"Several agricultural economists have analyzed the new DMC program and have concluded that it will provide a significant level of risk protection for smaller dairy farms at a reasonable price," Stabenow observed. "Additional early analysis has shown that the improvements made in the new DMC would have provided much-needed financial support to dairy farmers during the downturn in the dairy economy in recent years -- up to five times as much support for the smallest farms."

Given these improvements, Stabenow urged farm lenders "to take a close look at and take into account the improved safety net as they work with dairy farmers to understand cash flow for their operations and what options are newly available." She asked the regulators to "consider the new risk management options available to dairy farmers and make it clear that lenders are allowed to account for the improvements as they extend credit to dairy farmers around the country."

Ending China's tariffs top priority: Soy group

Resolving the current trade war so that China lifts tariffs on U.S. soybean imports must be a key outcome from ongoing trade talks between the two countries, the American Soybean Association (ASA) said in a release.

"It is heartening that the Administration is keeping soybeans in the conversation during the ongoing 90-day negotiation period with China, and again this week in the President's State of the Union remarks," ASA President Davie Stephens said. He called Chinese Vice Premier Liu's commitment to purchase an additional five million tons of U.S. soybeans "encouraging," but said purchases alone are "not the answer."

Seeing "an agreement at the end of this 90-day period that specifically rescinds the tariff that China has imposed on U.S. soybean imports" remains ASA's top priority, he remarked.

As of February 1, China had purchased only 6.5 million tons of the 2018 U.S. soybean crop -- or just 20% of past annual levels of over 30 million tons, the group pointed out. China's recent soybean purchases "do not come close to offsetting the damage" incurred by the soybean industry over the course of the trade war, the group said. "Nor do they negate the likely long-term damage to a trading relationship that was decades in the making." ASA has concentrated a lot of effort in the Chinese market over the years.

"We still do not know what the longstanding consequences will be to the industry," Stephens added. "Until this tariff is lifted and we can go in and try to repair our relationship with this important China market, we will not know the lasting repercussions."

Washington Insider Obstacles to China Trade Deal Outlined

The Hill is reporting this week that the top U.S. trade official told a bipartisan group of senators in a private meeting last week that "major sticking points remain in negotiations with China," a sign that it is unlikely the world's two biggest economies will strike a deal before a March 1 deadline.

U.S. Trade Representative (USTR) Robert Lighthizer provided the briefing to members of the Finance Committee, as well as members of other committees with a stake in implementing trade deals, including the Agriculture, Judiciary, and Health, Education, Labor and Pensions Committee.

"I got the impression that they're making some progress and there's a feeling that there's negotiations in good faith, but the really big things haven't been tackled yet," Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told The Hill. He added that he did not receive any assurance from Lighthizer that a trade deal would be negotiated before a new round of tariffs take effect at the beginning of next month.

Asked if Lighthizer thinks he can get a deal by March 1, Grassley said, "I don't think I can say yes to that."

President Trump has threatened to raise tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent if no deal is reached.

Lighthizer called March 1 a "hard deadline" during a December appearance on CBS's "Face the Nation." But on Friday the White House reportedly wavered. CNBC cited a White House official saying the March 1 deadline "could change" if the Trump administration thinks there is sufficient progress in the talks.

A U.S. trade delegation is scheduled to travel to China in the upcoming week for another round of negotiations.

The stock market plunged Thursday after it was reported that Trump and Chinese President Xi Jinping would not meet again before the deadline.

Senators on Wednesday pressed Lighthizer over their concern about tariffs and the impact on the economy, which has already taken a hit from the 35-day partial government shutdown that ended on Jan. 25.

"If there's one thing that stood out, it was, 'Gotta get rid of these tariffs,'" Grassley said of the meeting.

The USTR office did not respond to an email request for comment.

If higher tariffs go into effect next month, it would set the stage for Senate action on legislation to curb Trump's future authority on imposing trade penalties. For example, Sen. Rob Portman, R-Ohio, a member of the Finance Committee, this past week introduced bipartisan legislation that would overhaul the administration's power to impose tariffs under Section 232 of the Trade Expansion Act of 1962.

The legislation would require the Department of Defense, instead of the Commerce Department, to justify the national security basis for invoking Section 232.

"I have repeatedly expressed concerns about the misuse of the Section 232 statute to impose tariffs on automobiles and auto parts, and its impact on Ohio jobs and the US economy as a whole," Portman said.

His proposal is co-sponsored by Sens. Doug Jones, D-Ala., Joni Ernst, R-Iowa, Lamar Alexander, R-Tenn., Dianne Feinstein, D-Calif., Deb Fischer, R-Neb., Kyrsten Sinema, D-Ariz., and Todd Young, R-Ind.

Sen. Pat Toomey,. R-Pa., another influential member of the Finance Committee, has proposed competing legislation that would require the president to win approval from Congress before imposing tariffs or quotas under Section 232. Toomey said his measure "reasserts Congress's responsibility in determining whether or not to impose national security-based tariffs."

That bill is co-sponsored by Sens. Mark Warner, D-Va., Ben Sasse, R-Neb., and Maggie Hassan, D-N.H.

Grassley said he favors addressing Trump's tariff authority but has not decided whether to prioritize the Portman or Toomey legislation.

"I'm not going to comment on the Portman bill or the Toomey bill because I haven't got a consensus yet," he said. "All I'm going to say is that I'm very much favor of the principle of recapturing some of the constitutional power that Congress gave away in the 1962 legislation.

So the fight over trade authority may continue during a moment of extreme political tension over another government shutdown. The administration's trade policies appear to face enhanced scrutiny -- especially as the new fight over the debt limit looms in the not-too-distant future. These are very important battles producers should watch closely as they emerge, Washington Insider believes.

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