Washington Insider -- Tuesday

Japan Trade Policy Efforts Intensify

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

February data shows imports slide more than exports

The value of U.S. ag exports fell to $10.87 billion in February, down from $11.93 billion in January, but the decline in the value of imports was even greater – imports were valued at $9.95 billion compared with $11.36 billion in January.

That elevated the U.S. ag trade surplus to $929 million, up from $564 million in January.

So far in Fiscal Year (FY) 2019, U.S. ag exports total $57.9 billion, down from $62.01 billion at this point in FY 2018, while imports are at $53.21 billion, up from $52.24 billion at this stage in FY 2018. That puts the cumulative trade surplus at $4.69 billion so far in FY 2019, down more than 50 percent from the $9.78 billion at this point in FY 2018.

This marked three months in a row where the U.S. trade surplus was under $1 billion.

This also was the first month since September that the value of U.S. ag imports has been below $10 billion.


China expects surge in pork imports

Pork prices are likely to see "drastic" increases in 2019 in China due to African swine fever (ASF) and imports of pork are expected to rise more than 40% from last year and hit 1.7 million metric tons, according to a report released at the China Agricultural Outlook Conference. The conference is sponsored by the Agricultural Information Institute which is a part of the Chinese Academy of Agricultural Sciences.

Xinhua said the report also indicated that the area planted to rice, wheat and corn will remain around 95.87 million hectares (237 million acres) in 2019, with soybean area to increase by about 666,666 hectares (1.6 million acres).

The report said imports of cotton, edible oils, sugar and dairy products will continue to rise this year, but the Xinhua recap did not specify any tonnages.


Washington Insider: Trade Policy Efforts Intensify

Bloomberg is reporting this week that Japan’s Prime Minister Shinzo Abe is heading to Washington and the U.S. ag industry is unusually active in pushing efforts toward “more open” markets in Japan.

Bloomberg’s report notes that the Prime Minister will be hosted by President Trump at the White House April 26-27.

The report commented that President Trump is under strong pressure from the agriculture industry, among others, to reach a deal soon that will can “crack open” Japan’s market—and to reduce a $60 billion trade deficit. Abe wants to avoid tariffs or quotas on lucrative auto exports.

U.S. farmers, including beef and pork producers, are urging quick action and argue that the Japan-U.S. talks are critical in light of the administration’s decision to abandon the Trans-Pacific Partnership shortly after taking office.

U.S. producers are particularly worried about losing Japanese sales now that competitors enjoy a tariff advantage under the new 11-member Comprehensive and Progressive Trans-Pacific Partnership. “That’s a real political problem for President Trump, because those interests are concentrated in a lot of the states that he won” in 2016, said Matthew Goodman, a senior adviser for Asian economics at the Center for Strategic and International Studies.

A first round of talks earlier this month in Washington focused on agriculture and cars with digital trade set to be discussed at a later date, Japan’s economy minister Toshimitsu Motegi told reporters after the discussions. He said negotiations will now take place at an accelerated pace.

In fact, the discussions with Japan are only one of several important trade related efforts underway just now. For example, trade watchers are looking for a vote in the Mexican Congress to clear labor overhaul legislation, which is critical for advancing the U.S.-Mexico-Canada Agreement (USMCA), Bloomberg says.

The Mexican Senate is reviewing the labor reform provisions in the proposed deal and lawmakers expect to vote on it this week, according to a Mexican embassy official.

The bill, which recently passed the lower house, would require the Mexican government and companies protect workers’ rights to vote for independent unions through a secret ballot process and recognize their right to strike. Other provisions would prohibit violence against workers and forced labor.

However, Democrats in the U.S. Congress say the USMCA’s labor provisions are inadequate without action from Mexico. U.S. House Speaker Nancy Pelosi, D-Calif., recently said treatment of Mexican workers is an issue that must be resolved before the USMCA can be considered.

Also on the calendar in Congress this week, Senate Finance Committee Chairman Chuck Grassley, R-Iowa, will convene his committee to review the International Trade Commission report on the USMCA. The discussion will be with Republican committee staff and will focus on the report’s conclusions. Grassley said he is in the process of reviewing the ITC report and along with other studies of the USMCA’s potential impact.

Supporters say the report illustrates the need to move quickly. Opponents and those yet to take a formal position are arguing that the new pact will fail in Congress without improvements.

In addition, the deal is approaching a critical juncture as the administration decides when to submit implementing legislation to Congress. Mexico’s ambassador to the U.S., Martha Barcena Coqui, is in this country now, participating in a conference at Georgetown University’s Center for the Advancement of the Rule of Law in the Americas that is exploring whether and how Democrats’ demands on labor, environment, and access to medicines can be addressed, including whether they can be included in the implementing bill or as additions to the agreement.

The administration is courting labor support for the pact, but AFL-CIO President Richard Trumka warns against rushing the pact through, adding the federation opposes congressional approval without labor and environment enforcement improvements.

Trumka will participate in an interview with Economic Club President David Rubenstein on Tuesday. USMCA and global trade are among the topics.

Trade policy has been a central issue all through the administration’s tenure and many of the key decisions have been both extremely aggressive and highly controversial. As a result, the further intensifying discussions of issues old and new this spring are extremely important and should be watched closely by producers as those debates proceed, Washington Insider believes.


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(GH\SK)