Washington Insider -- Tuesday

Working to Smooth USMCA Passage

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

US-China Trade Talks to Continue

Officials from the U.S. and China will continue their trade talks this week, with sessions taking place via videoconference.

Both sides noted progress in three days of talks last week in the U.S. but also noted there are still difficult negotiations ahead. “The remaining issues are all hard nuts to crack,” China's Xinhua news agency said in a commentary on Friday.

Chinese state media said significant progress had been made during the different rounds of talks, but a deal could not be rushed through.

In a statement, White House spokeswoman Sarah Sanders said the two sides had discussed intellectual property, forced technology transfers, non-tariff barriers, agriculture, services, purchases and enforcement.

Indonesia, Malaysia Protest EU Move on Palm Oil in Biofuels

Indonesian President Joko Widodo and Malaysian Prime Minister Mahatir Mohamad signed a joint letter to the European Union (EU) objecting to the bloc's plan to phase out palm oil in renewable fuel, according to an Indonesian official.

This comes as an Indonesia delegation arrived in Brussels for an official visit this week to address the "EU's discriminatory policy," according to a statement from the Indonesian Coordinating Economic Ministry. Indonesia is part of the Council of Palm Oil Producing Countries, which is leading the mission.

"The main purpose of the joint mission is to convey disappointment and to fight the delegated act that has been adopted by the European Commission," the statement said.

Reuters reported that some European makers of spirits were indicating they were having difficulty exporting their products to Indonesia in the wake of the palm oil conflict.

U.S. biodiesel interests are monitoring the situation closely in the event that Europe were to turn their attention to soybeans and soyoil used to make biodiesel here as some European officials have indicated they may take such a look.

Washington Insider: Working to Smooth Trade Deal Passage

Bloomberg is reporting this week that Democratic “trade skeptics”, including Sen. Sherrod Brown, D-Ohio, are working to craft a labor enforcement proposal that could help ease the way for passage of the U.S.-Mexico-Canada Agreement (USMCA).

Brown of Ohio and Ron Wyden, D-Ore., are floating ideas to address their party’s concerns about the proposal and to help build a consensus that could boost it through the Democratic-controlled House. The proposals include measures that would bar Mexican exporters from benefiting from the deal’s reduced tariffs if they violate workers’ collective-bargaining rights.

“The Wyden-Brown proposal is a positive sign that Democrats are looking at the USMCA agreement seriously and trying to find ways to get to ‘yes’ on it,” said Bill Reinsch, a senior adviser at the Washington-based Center for Strategic and International Studies.

However, Bloomberg opines that passing the USMCA will still be an uphill battle in Washington’s politically toxic environment. Further, Trump’s repeated threat to close the U.S. border with Mexico and impose tariffs on U.S. car imports is worrying members of his own party.

The White House wants Congress to approve the USMCA before a month-long August recess, but lawmakers have flagged a number of issues they say need to be addressed first. Those include labor and enforcement rules, environmental standards and a provision on pharmaceuticals that Democrats fear will lead to higher drug prices.

“I’m hopeful that we could get a trade agreement, but it has to be one that is real and that works,” House Speaker Nancy Pelosi, D-Calif., told reporters last week. On the matter of workers’ rights, she added that “exploiting workers in Mexico is not good for workers in the United States.”

The Brown-Wyden framework borrows from existing provisions in U.S. trade agreements on matters including Peruvian timber exports and imports of textiles and clothing. It would require additional Mexican labor enforcement personnel and would create some U.S.-Mexican labor compliance initiatives. Also, the US and Mexican governments could audit and inspect facilities suspected of violating the trade deal’s labor standards. If a certain facility wasn’t complying, goods made there wouldn’t get duty-free treatment, Bloomberg said.

The proposal would be negotiated as a side agreement that’s incorporated into the main text of the deal and wouldn’t require reopening the broader agreement.

Aides for Brown and Wyden said the plan is subject to revision, including which industries could be affected by labor law inspections—and that it hasn’t been discussed with Senate Finance Committee Chairman Chuck Grassley, R-Iowa. But the fact that the model is based on precedent is seen as helping win support from Mexico, Republican lawmakers and House Democrats, the aides said.

The Trump administration is aware of the proposal and Brown presented it to U.S. Trade Representative Robert Lighthizer a year ago, one of the aides said. Asked whether the administration supports the effort, the aides deferred to Lighthizer’s office, which did not comment.

Pelosi spokesman Henry Connelly said House Democrats are also involved in the talks.

“House and Senate Democrats have a shared interest in ensuring that Mexico fully implements the promised changes to its labor regime,” Connelly said. “We’re engaging with key stakeholders and members on both sides of the Capitol, looking at a number of avenues to make sure the proposed agreement lives up to Democrats’ standards.”

Wyden is the top Democrat on the Senate Finance Committee, which has jurisdiction over trade. And Brown’s decision to try to improve the USMCA rather than fight it is seen as a positive sign, given his reputation as a critic of past trade deals and claims that they hurt American workers. If he decides to back the agreement, he could provide political cover to other Democrats in both chambers to vote yes.

Brown has long opposed the North American Free Trade Agreement and other trade deals. On trade, he’s found a rare alliance with Trump, even backing the president’s levies on steel and aluminum imports from Mexico, Canada and the European Union. Brown took Trump’s side on trade in 2018 while successfully campaigning for a third Senate term in Ohio, a manufacturing state battered by decades of job losses. Trump carried Ohio by 8 percentage points in the 2016 election.

So, even if the labor framework were adopted, there’s no guarantee that Brown would support the agreement which includes many moving pieces, Bloomberg said.

The administration’s “get tough” trade policies with China and others continue to face strong criticism among business groups, especially across agriculture — a fact that is expected to become increasingly important as the 2020 election cycle looms closer, Washington Insider believes.

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