Washington Insider -- Tuesday

Global Trade Negotiations and Fights

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

Tariff Hike Deadline Looms As US-China Talks Continue This Week

Negotiations between the U.S. and China resume this week in Washington after both sides reported progress during last week’s talks in Beijing, but a March 1 deadline looms over the talks.

Following talks last week, Chinese officials and the White House both confirmed the plans for more mid- and high- level talks this week in Washington. The White House said it "hopes to see additional progress" as negotiations continue.

U.S. Trade Representative (USTR) Robert Lighthizer and Treasury Secretary Steven Mnuchin led the U.S. delegation during the Beijing talks. Vice Premier Liu He headed up the Chinese side and President Xi Jinping also dropped in at the conclusion of negotiations.

“Extensive technical exchanges between the professional staffs of both countries" lead to "detailed and intensive discussions,” White House Press Secretary Sarah Huckabee Sanders said in a statement following the talks. While "progress" was made, "much work remains" to resolve outstanding issues before a March 1 deadline when the U.S. is set to increase tariffs to 25% on $200 billion in Chinese goods, she noted.

"Structural issues, including forced technology transfer, intellectual property rights, cyber theft, agriculture, services, non-tariff barriers and currency" continue to be the focus for U.S. negotiators, Huckabee said. Reports suggest a significant gap remains on those issues, which the U.S. has insisted be part of any final agreement. Meanwhile, Huckabee noted commitments by China to purchase more U.S. goods and services are also a factor in negotiations and any such commitments will be included in a Memoranda of Understanding (MOU) between the two countries.

US Again Questions India's WTO Domestic Ag Support Notifications

The U.S. and Canada are raising more questions about India's World Trade Organization (WTO) notifications for domestic support for agricultural products.

The two countries delivered what is known as a counter notification on supports by India for pulse crops. The action was submitted to the WTO's Committee on Agriculture (COA) by the U.S. and Canada, according to a joint announcement from U.S. Trade Representative (USTR) Robert Lighthizer and USDA Secretary Sonny Perdue.

This is the third time the U.S. has issued counter notifications, having done so twice last year on India's market price support (MPS) notifications for crops – one on India's notification for cotton and another challenging those notifications on rice and wheat. Meanwhile, Australia has also issued a counter notification over India's MPS for sugarcane.

India "substantially underreported its market price support for chickpeas, pigeon peas, black matpe, mung beans and lentils," Lighthizer and Perdue said, based on U.S. calculations. The U.S. alleged that when support for the crops is calculated according to WTO COA methodology "India’s market price support for each of these pulses far exceeded its allowable levels of trade-distorting domestic support." For India, MPS is bound by the "de minimis" limit of 10% of total production allowed for developing countries.

Washington Insider: Global Trade Negotiations and Fights

Well, it seems that international trade maneuvering is reaching into almost every corner of commerce and politics these days.

For example, Bloomberg is reporting this week that Canada is seeking support from House Speaker Nancy Pelosi, D-Calif., against U.S. metal tariffs. Canadian Foreign Minister Chrystia Freeland said she met Pelosi and other Democrats on the sidelines of a global security conference in Munich on Saturday and that they took the opportunity to discuss President Trump’s tariffs on Canadian steel and aluminum imports, Canada’s retaliatory tariffs and the ratification path for the countries’ new trade deal.

“I explained why Canada is so strongly opposed to them and why Canada believes they must be lifted,” Freeland told reporters. Canada has said it’ll lift its retaliatory tariffs, affecting about C$16 billion ($12 billion) in U.S. goods ranging from steel to ketchup, when the U.S. cancels its measures.

Freeland delivered a similar appeal last week to Senator Chuck Grassley, R-Iowa, who chairs the chamber’s Finance Committee. She said she told him “that now that we have concluded our trade negotiation with the United States, that is all the more reason why those tariffs must be lifted.”

Grassley said after meeting Freeland that he believes Canada won’t advance legislation to ratify the successor to the North American Free Trade Agreement if the steel and aluminum tariffs remain in place.

Freeland declined to comment, while saying Canada is moving forward and that she’s in touch with cabinet colleagues and lawmakers about ratification.

“We are very seized of the issue and we are working on it. In due course, we will present our plan for ratification of the new NAFTA,” she said. “Canada is definitely focused on our domestic ratification process and we feel we have it well in hand.”

Canada has an election in October, meaning the current crop of lawmakers will likely adjourn in June.

Freeland said she also spoke to Pelosi about two Canadians detained in China, Michael Kovrig and Michael Spavor. She also met with the president of the International Crisis Group, Kovrig’s employer, after he was seized by Chinese authorities on Dec. 10. Kovrig is on leave from a position in Canada’s foreign service.

Kovrig and Spavor were detained after Canada, acting on a U.S. request, arrested Huawei Technologies Co.’s Chief Financial Officer Meng Wanzhou on Dec. 1 in Vancouver. Canada has since been trying to rally international support for their release, arguing that China arbitrarily seized Kovrig and Spavor in retaliation.

The Canadian commentary was not the only trade-based development this weekend. U.S. markets had reacted favorably to reports of progress in U.S.-China talks late in the week. At that time, the overseas press as well as the U.S. administration reported progress in the negotiations.” For example, Chinese state media expressed cautious optimism a day after President Xi Jinping said a week of discussions in Beijing had produced "step-by-step" progress.

Mr Xi made the comments at a meeting on Friday with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

The People's Daily, the official paper of the ruling Communist Party, said in a commentary that Mr Xi's meeting with U.S. negotiators had affirmed progress made in previous talks and "injected new impetus into the next stage of the development of Sino-U.S. trade relations."

The talks "have made important progress" for the next round of negotiations in Washington next week, the paper said in its domestic edition. "It is hoped the two sides will maintain the good momentum of the current consultations and strive to reach an agreement within the set time limit," it added.

U.S. duties on $200 billion in imports from China are set to rise to 25% from 10% if there is no deal by March 1 to address U.S. demands that China curb forced technology transfers and better enforce intellectual property rights.

An English-language editorial in the Global Times, which is published by the People's Daily, said news that China had consulted on the text of a memorandum of understanding (MOU) "shows the two sides have made unprecedented progress. The MOU and next week's talks both show that the seemingly endless China-U.S. trade negotiations, like a marathon, are making a final sprint," it said.

The newspapers cautioned that any trade agreement reached would have to be in the interests of both countries.

"There are still obstacles to be overcome and no one should underestimate how daunting a task the two sides face trying to resolve all the differences that have long existed between them in one clean sweep," the official English-language China Daily said in an editorial.

Over all, political tensions over many things including budgeting for border barrier construction are at or near an all-time high, so only the most courageous are willing to forecast agreements in most economic areas. However, the fact that the U.S. and China can agree about even a negotiating process seems like good news, even if it faces future hurdles of many kinds. These are discussions producers should watch closely as they proceed, Washington Insider believes.

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