Washington Insider -- Thursday

The US Push to Limit Metal Imports

The U.S. demand, reiterated in meetings with Canadian officials this week, has been rejected by Canada and Mexico and is eliciting opposition from American companies that use foreign steel and aluminum. This dispute is further complicating efforts to finalize the new NAFTA which faces a long battle in Congress and must be ratified by legislators in all three nations.
Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Limits on Section 232 national security tariffs

Senate Finance Chairman Chuck Grassley, R-Iowa, expects bipartisan legislation "in the coming weeks" to propose time limits on Section 232 national security tariffs. Grassley's announcement comes days after the one-year anniversary of President Donald Trump imposing 25 percent tariffs on steel and 10 percent tariffs on aluminum via Section 232.

The legislation would impose new consultation and reporting requirements through the investigative process to keep lawmakers informed. It would also allow lawmakers to “weigh in on any action” by potentially limiting the lifespan of tariffs or other trade restrictions unless Congress grants an extension.

The bill would require the White House to provide reports on how any trade actions are achieving national security objectives. It would also require a “transparent and accountable” process for requesting tariff exclusions.

Senate Moves Forward On Disaster Aid Plan

The Senate voted 90 to 10 to move forward to consideration of a $13.46 billion disaster aid package Tuesday, but that plan will not address current flooding in the Midwest. Senate Majority Leader Mitch McConnell, R-Ky., said disaster aid would get approved in piecemeal fashion as the number of disasters multiplies.

"Clearly we will be doing another supplemental here in the near future once we assess the damage in the Midwest," he told reporters Tuesday.

Sen. Roy Blunt, R-Mo., said lawmakers had been trying to expand the aid package to include recent flooding in Nebraska, Iowa and Missouri. But if the price tag for those three states exceeds $8 billion, he said, "you would add money later to that fund."

The government has an indemnity program for livestock killed by storms and flood, but nothing to compensate growers for grain lost to flooding. For privately stored grain, “we do not have anything in place at USDA,” USDA Undersecretary Greg Ibach said earlier this week. “If Congress passes a disaster package, that may or may not be part of that.”

Crops contaminated by flooding cannot be sold for food or feeding because it is considered adulterated. Flood waters may contain sewage, pesticides, pathogens and other toxic substances.

Washington Insider: The US Push to Limit Metal Imports

Amid widespread fights for better access for U.S. exports, the United States is continuing to push for limits on sales of foreign metals, angering allies, the New York Times is reporting this week.

The U.S. demand, reiterated in meetings with Canadian officials this week, has been rejected by Canada and Mexico and is eliciting opposition from American companies that use foreign steel and aluminum. This dispute is further complicating efforts to finalize the new NAFTA which faces a long battle in Congress and must be ratified by legislators in all three nations.

Canada and Mexico had hoped that the administration would remove the metal tariffs last year when the three countries agreed on the United States-Mexico-Canada Agreement (USMCA). That did not happen and Mexico and Canada are now pushing hard for the United States drop the levies as a condition of ratifying the deal.

On Monday, Chrystia Freeland, the Canadian foreign minister, called the tariffs “illegal and unjust” and “completely unacceptable.” Her comments followed a meeting with Robert Lighthizer, the United States Trade Representative, that focused mainly on the tariffs.

Freeland said Canadians would be “really troubled” at the prospect of moving forward to ratify the new pact while the tariffs were still in place. “To a lot of Canadians, it just doesn’t make sense,” she said.

To try to resolve the impasse, the Trump administration has proposed switching Canada’s current 25% tariff on steel and 10% tariff on aluminum to a quota system, in which specific amounts of Canadian metal would be allowed into the United States each year, the Times says.

However, Canada has rejected that idea, as have American companies that use foreign steel and aluminum in their products — from beer brewers to jet makers. They argue that capping metal imports at a specific level would be even more disruptive than tariffs and could result in steep price increases or a scarcity of metals.

The United States and Mexico are locked in similar negotiations. Jared Kushner, the president’s son-in-law and a senior White House adviser, traveled to Mexico last week to discuss the tariffs, the new trade deal and investment.

On Tuesday, associations representing the aluminum industry in all three countries wrote to the president asking for their industry to be exempted from any tariff or quota. “Replacing a tariff with a quota on aluminum imports in North America would be highly detrimental,” the letter said.

However, the president credits the tariffs with reviving the United States steel and aluminum industries and claims that American steel mills are “roaring back to life.” And American giants like United States Steel and Nucor say the tariffs have helped them build new facilities and hire workers.

Still, the Times says that “experts believe those gains have come at a high price.” For example, the Peterson Institute for International Economics recently calculated that the administration’s tariffs would create 8,700 jobs in the U.S. steel industry but at a cost to users of $650,000 for each job created.

“What we hear from our member companies is tariffs are bad and quotas are worse,” said John Murphy, the senior vice president for international policy at the U.S. Chamber of Commerce.

In a recent statement, Canadian leaders of the United Steelworkers called on their government not to ratify the new trade pact until “tariffs and quotas are removed from the equation.”

Aaron Padilla, the senior adviser for international policy at the American Petroleum Institute, said quotas would further hinder the oil and gas industry, which needs steel to build pipelines and other infrastructure and has already been affected by tariffs.

“With surging production of natural gas and oil, the steel needs have increased,” Padilla said. “Quotas can actually stop steel at the border.” That can result in companies having to either store the metal or have it sent back to the factory at great expense, he said.

Traders can also game a quota system, stockpiling metal and then flooding the market when the quota period opens according to the Harbor Aluminum Intelligence Consultancy, the Times said.

The report also concludes that the administration’s strategy has strained American alliances and given allies little room to maneuver. However, although Canada and Mexico repeatedly insisted that they would not negotiate a revised NAFTA with the threat of levies hanging over their heads, the three countries signed their pact in November without the levies being lifted.

The administration continues to threaten to withdraw from the North American trade pact altogether if Congress does not approve the new deal. Increasingly, the metal tariffs appear to be assuming a growing importance in U.S. trade negotiations with important implications for U.S. consumers, a development producers should watch closely as the trade policy fights continue, Washington Insider believes.

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