Washington Insider -- Thursday

Criticism of Administration Trade Policy Growing

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

USDA Working on Second Aid Package of Up To $20 Billion

USDA Secretary Sonny Perdue told reporters Wednesday that the agency was working on a second aid package for $15 billion to $20 billion.

Speaking to reporters from South Korea, Perdue said the aid plan is being modeled by the effort covering 2018 crops -- the Market Facility Program (MFP). USDA last year pledged up to $12 billion in assistance for 2018 production.

"Our calculations initially probably range between $15-and-$20 billion," Perdue said.

Regarding the price tag, Perdue said it is based on an "early estimation of the trade damage based on our calculations from last year," adding, “We’ve asked our economists at USDA to be very precise" and that the total will be "legally defensible."

Perdue stressed USDA was taking into account feedback from last year's trade aid package, including feedback from corn, wheat and other commodity groups, some who were not pleased with the amount of assistance their farmers received under MFP.

Regarding when the aid plan will be announced, Perdue did not provide an estimate, but said USDA was "expediting" its work at President Trump's request.

USDA Announces Continuous CRP Signup

USDA’s Farm Service Agency (FSA) will accept applications beginning June 3 for certain practices under the continuous Conservation Reserve Program (CRP) signup and will offer extensions for expiring CRP contracts.

FSA stopped accepting applications last fall for the continuous CRP signup when 2014 Farm Bill authority expired. USDA said that after examining the provisions in the new farm bill, a limited signup prioritizing water-quality practices furthers conservation goals and makes sense for producers as FSA works to fully implement the program.

A general signup will be coming in December. A one-year extension will be offered to existing CRP participants who have expiring CRP contracts of 14 years or less.

Washington Insider: Criticism of Administration Trade Policy Growing

For some time, it has appeared that support from the Republican base, even concerning administration trade decisions has been strong. However, the Washington Post is reporting this week that Senate Republicans “expressed growing concern Tuesday” that President Trump’s escalating trade war with China is hurting their rural constituents. The Post sees this trend as ratcheting up tension between the White House and Congress on a “signature issue.”

Senate Finance Committee Chairman Charles Grassley, R-Iowa, has emerged as one of Trump’s chief critics on trade.

In addition, faced with the prospect that the administration will continue its adversarial approach, Republicans are looking for ways to provide a taxpayer bailout to farmers, perhaps by adding funds to a disaster bill that has languished in Congress for weeks.

Fueling the concerns on Capitol Hill is the impression that the administration may not have a clear endgame, the Post says. “Ultimately, nobody wins a trade war unless there is an agreement at the end, after which tariffs go away,” said Senate Majority Leader Mitch McConnell, R-Ky.

On Tuesday, the President offered conflicting forecasts of what would happen next, predicting that a deal could be reached in a few weeks but also saying the showdown could last much longer.

Before that, on Monday, he sought to reassure the public and investors spooked by the stock market’s worst one-day performance in months, saying that he would strike a deal with China “when the time is right.”

However, he also indicated that he was unsure what might ultimately happen. “Hopefully China will do us the honor of continuing to buy our great farm products, the best, but if not, your Country will be making up the difference based on a very high China buy,” he wrote.

The resulting impression was that trade policy was sharply zigzagging between calls for a return to the table and more negotiation -- and preparation for further tariff pain, the paper said.

Until last week, many Republican senators supported the tougher approach on trade with China but the new decisions to increase tariffs has led to angry calls to GOP lawmakers, the Post says. Soybean farmers, pork producers and a growing number of other agricultural interests across a range of states -- including cherry producers, corn growers and lobstermen -- have complained that they are collateral damage caught in the middle of the escalating trade battle.

Vice President Mike Pence met with Senate Republicans on Tuesday to try to assure them that Trump’s approach would result in a comprehensive trade deal benefiting US farmers and businesses. But key lawmakers said they were still waiting for more information.

“We all want to know how this story ends,” Sen. John Cornyn, R-Texas, told reporters.

Sen. Pat Roberts, R-Kansas, on Tuesday was asked by a reporter about the level of patience among farmers with the trade standoff. He held his thumb and index finger an inch apart. “I’m very hopeful we can get back to the table,” he said. “There’s too much at stake.”

While the President has routinely vowed to find a way to placate farmers, initiatives have been slow to materialize. He has said, that the United States could buy crops from farmers and then donate them to poor countries. He has also talked about cash assistance and other measures, though he has not offered specifics. Cornyn said the plans so far are “inadequate.”

Trump last year directed USDA to spend $12 billion on programs to help American farmers affected by the trade war, and White House officials are now working with GOP leaders to find a way to extend an additional $15 billion.

The President has appeared unmoved by many of the business groups that have complained about his trade approach, but he has frequently promised to appease farmers.

“The question of how this would be done, whether it would apply to wheat and corn and other crops and not just soybeans, is going to be a question that’s going to have to be answered,” said Sen. John Thune, R-S.D.

US companies exported $9.3 billion in agricultural products to China last year, making it one of their largest markets. The biggest exports were soybeans, cotton, hides and skins, pork, and coarse grains like corn.

In addition, Grassley indicated that there are strict limits on how US officials can donate to poor countries. He said the way the president has discussed could violate World Trade Organization rules.

“It’s fair to say that I want to point out that there’s problems with what he’s planning to do, and he ought to take those into consideration,” Grassley said.

Trade policy interventions that threaten established ag markets tend to have far-reaching negative political impacts, as was demonstrated in 1980 after the embargo on shipments to the Soviet Union was imposed. Thus, the debate about how to compensate groups for the current trade policies will be important and contentious and should be watched closely as it proceeds, Washington Insider believes.

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