Washington Insider -- Tuesday

The Next Trade Fight Over Metal Tariffs

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

Sen. Feinstein Expresses Opposition to New Green Deal Resolution

The Green New Deal resolution expected to get a vote in the Senate soon is not something that Sen. Diane Feinstein, D-Calif., said she can agree with.

Feinstein indicated she may simply vote "present" when the measure comes up for a vote, possibly this week. She also predicted the measure would not make it through the Senate anyway since all Republicans oppose it. "It’s not a good resolution," Feinstein in her San Francisco office in a video posted on line by the Sunrise Movement. The group confronted Feinstein in her office and recorded the video.

While the advocates argued that there are only 12 years to prevent the worst impacts of climate change, Feinstein said it "is not going to get turned around in 10 years." Further, she objected to the group's stance.

"You come in here and you say it has to be my way or the highway," she said. "I do not respond to that. I have gotten elected. I just ran. I was elected by almost a million vote plurality and I know what I am doing. Maybe people should listen a little bit."

Bloomberg: Biofuel Companies Hit By Lack of Tax Credit

No action has taken place in Congress to extend the lapsed biodiesel credit, with a Bloomberg report signaling the demand for biodiesel is suffering due to the lack of the tax credit.

The $1-per-gallon credit is utilized in the industry to help encourage blending of the fuel into regular diesel fuel. But the credit lapsed at the end of 2017 and repeated attempts by some lawmakers to get the credit extended retroactively for 2018 have not been successful.

Lincoln Energy Solutions Inc., a South Carolina-based retail and wholesale fuel distributor, has stopped buying and selling biofuel for this year because of of the lack of the tax credit, said CEO Jim Farish. "We cannot sell at a loss that is required to make the numbers work for all parties again,” Farish told Bloomberg Tax. “Our banks are aware of situation but they like us are not happy.”

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, has repeatedly tried to get the tax credit put back in place, but was unable to get its reauthorization included in measures including the Republican tax reform package passed at the end of 2017, any of the many continuing resolutions to keep the government open, and most recently the massive package to get the government reopened.

Washington Insider: The Next Trade Fight Over Metal Tariffs

Most media attention this week is riveted on the administration’s decision to delay its planned tariff boost for U.S. Chinese imports on the basis of “progress in the ongoing U.S.-China trade talks,” and what that might mean. However, Bloomberg is reporting that there are other major trade battles underway on and that one of the most significant concerns the administration’s tariffs on metals.

Recently, White House economic adviser Larry Kudlow told the press that said he’s “working to remove U.S. tariffs on steel and aluminum imports from Canada and Mexico.” Canada, especially, hates this tariff and a Canadian minister signaled on Sunday that his government may not ratify a new North American trade agreement if the duties remain.

Kudlow made the comments on a panel at the National Governors Association’s winter meeting in Washington on Sunday. His talk followed Marc Garneau, Canada’s transport minister, who said “I don’t know if we are going to get there” in approving the deal if the tariffs aren’t removed.

The duties are no longer needed now that the two countries and Mexico have wrapped up most recent U.S.-Mexico-Canada Agreement, Garneau argued. Kudlow also noted that U.S. Trade Representative Robert Lighthizer is working toward having the tariffs removed.

“Ambassador Lighthizer and his group, we are working on that, we are hard at work on that, to solve that issue,” Kudlow said of the metals tariffs after Garneau spoke. Earlier in the panel discussion, Kudlow said the new three-nation agreement was “very strong” and that Trump taught him tariffs can be a good negotiating tactic to break down trade barriers.

Canada retaliated dollar-for-dollar against U.S. tariffs last year and Garneau’s comments on Sunday were some of the sharpest about the dispute since then as Prime Minister Justin Trudeau leads his government toward an October election. Garneau said that while political energy may shift to other issues in coming months, the tariffs alone are a major stumbling block to ratification.

“Those tariffs are an unnecessary tax which is weighing down on both countries,” said Garneau, a former astronaut who served on U.S.-led space missions. He also said the original U.S. justification for tariffs on national security grounds was never credible.

“This will present us with real challenges as we begin the process of ratification in Canada – I don’t know if we are going to get there,” Garneau said.

Canada would quickly drop its metals tariffs and ratify the agreement in response to a U.S. move, Garneau said. “We want to go ahead and do it because this is very good for both of our countries,” Garneau said of ratifying the trade agreement.

Garneau appealed to the governors in the audience to push the Trump administration to drop the tariffs, noting that Canada is the top export market for many U.S. states. The U.S. also has a $2 billion surplus in steel trade with Canada and the bilateral deficit on aluminum merely reflects the fact that “America needs more of that metal than it can produce,” Garneau said.

Mexican officials have also called for the metal tariffs to be removed, Bloomberg says. It notes that a coalition of business, agricultural and trade groups, including the U.S. Chamber of Commerce wrote a letter in January asking the same of Lighthizer and Commerce Secretary Wilbur Ross.

Kudlow touted the new trade agreement on Sunday before Garneau spoke, saying it was a “template” for other pacts and would bring $62 billion of auto investment to the U.S. Such agreements are better than broad, multilateral trade pacts that sink to the “lowest common denominator,” Kudlow asserted.

Approving the USMCA would also be helpful as a “show of unity” by North America against other trade competitors like China, he said.

The metals tariffs have been extremely controversial and constitute significant risks to markets for ag products, among others, opponents say. They are sometimes touted as revenue sources but they are basically significant taxes on imports of raw materials that affect a broad range of consumer products throughout the economy, experts say.

Kudlow’s comments are being watched closely and taken by many as a sign that the metals tariffs may be pulled back — a decision the producers should watch closely as it is debated, Washington Insider believes.

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