Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.Structural Reforms Essential For A US-China Deal: Lighthizer
"Significant structural changes" must be part of any trade deal with China and there must also be an enforcement mechanism to ensure China sticks to its commitments, U.S. Trade Representative (USTR) Robert Lighthizer told a House hearing today.
Lighthizer testified before the House Ways and Means Committee, receiving a largely favorable response from lawmakers who generally agreed that China's unfair trade practices – especially forced technology transfer, intellectual property (IP) theft and industrial subsides – remain a major problem for U.S. businesses.
"What we want is fair trade and that requires structural change," Lighthizer said. He stressed that enforceability is key to any agreement, noting China has made commitments in the past and not followed through on them.
Asked if he expected a broad package addressing all of the major issues to emerge in the coming weeks, Lighthizer demurred, saying he was "not foolish enough to think that there's going to be one negotiation that’s going to change all the practices of China or our trade relationship with them."
An agreement that meets those criteria could serve as the foundation for further work, he noted. "If we can complete this effort — and again I say 'if' — and can reach a satisfactory solution to the all-important outstanding issue of enforceability as well as some other concerns, we might be able to have an agreement that turns the corner in our economic relationship with China," he said.
"Much still needs to be done, both before an agreement is reached, and more importantly, after it is reached,” he stressed.
EU cheese GIs could cost US dairy sector $20 Billion
The U.S. dairy industry could suffer as much as $20 billion in lost revenue over three years if the European Union were to succeed in claiming exclusive rights to use cheese names with protected geographical indications on global dairy markets.
These losses would ensue mainly from the lower retail prices which U.S. dairies would have to charge if they were no longer able to market their cheese using familiar, but Geographical Indication (GI)-protected, product names, a new study suggests.
The study was carried out by Informa Agribusiness Consulting on behalf of the U.S. Dairy Export Council (USDEC) and the Consortium for Common Food Names (CCFN) – the latter being a U.S.-based group which campaigns against the misuse (as it sees it) of GI protection by the EU.
If commonly-used but GI-protected cheese names such as "feta" or "parmesan" were to be widely appropriated, the U.S. dairy sector could lose out not only as a result of reduced sales on the U.S. domestic market, but also through lower exports to those markets which had agreed to extend GI protection to their territories as part of free trade agreements (hence preventing non-EU countries from using these product names on those markets).
The study measures the possible scale of such impacts in Japan, Korea, Mexico, Canada and China, all of which have either signed agreements with the EU on GIs, or are planning to do so.
Washington Insider: Humble but Valuable Markets; Chicken Feet for China
It is easy to forget that a lot of very humble products account for pretty important markets—including, Bloomberg notes, chicken feet. It reports this week that while U.S. consumers don’t use this product, it is an important market for the “third-largest U.S. chicken producer, Sanderson.” Bloomberg notes that “the firm used to ship a lot of wing tips and chicken feet, also known as paws, to China.” But the Asian country banned U.S. poultry in 2015 due to an outbreak of highly pathogenic avian influenza (HPAI), costing Sanderson about $50 million a year in gross pre-tax profit.
Now, amid record low chicken prices in the U.S., a glimmer of hope may be appearing for this product as well as others in the U.S.-China negotiations. Poultry is among the commodities “on the table’’ in the U.S. and China trade talks, USDA Secretary Sonny Perdue said during an event in Illinois on Saturday.
Poultry “certainly has been discussed in a very positive way,” Perdue said, with one idea being making any disease-based ban regional rather than nationwide.
Nearly all nationwide bans following the outbreak have been lifted except for China’s. Lifting the so-called HPAI ban there would mean “China is wide open” again for sales of chicken paws, Chief Operating Officer Lampkin Butts said after Sanderson reported a fiscal-first quarter loss that was smaller than the average expected by analysts.
“They need to lift the AI ban,” Butts told Bloomberg on Tuesday.
Reopening the market could also open up the potential for exports of products, especially those for “lower cost products,” such as dark meat from leg quarters, he said. China wasn’t a huge market for legs before the ban and bought mainly when prices fell below 25 cents a pound, he said.
“That could change and we’ve always been hopeful that it would because of a large population base, the emerging middle class,” Butts said. “If per capita consumption of chicken would increase there, that could be a huge market for U.S. poultry.”
Chicken prices in China have risen in recent months, reflecting its status as a competitor with pork at a time when the country’s hog herds have been culled to control African swine fever, Erin Borror, an economist for the U.S. Meat Export Federation, told the USDA’s Outlook Forum last week. A drop in China’s pork supply may reduce consumption but also could mean greater pork imports, as well as greater reliance on imports of competing proteins, including poultry and beef.
Other commodities that have been discussed during the talks with China include beef, corn, ethanol, dried distiller grains with solubles, sorghum and rice, Perdue said Saturday. Any potential exports are dependent on a deal between the two countries, he said. China and the U.S. have expressed optimism in recent days that substantial progress is being made toward ending their trade war.
Chief Executive Officer Joe Sanderson Jr. told Bloomberg. “We appreciate that [poultry] is part of the negotiations.” Even before the ban, U.S. exports to China had declined following the imposition of Chinese duties on American poultry in 2010. The duties were lifted a year ago but the ban remained. U.S. poultry exports to China had reached 797,161 tons valued at $721.9 million in 2008, Bloomberg noted.
Anything to do with Chinese exports tends to be interesting because that market is so vast. And even the niche markets are areas where U.S. products compete especially well – but are of little interest to most producers. However, chicken paw sales affect the demand for chicken and that affects the demand for grain and soy and so even humble products deserve producers’ careful attention in heavy duty trade negotiations, Washington Insider believes.
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