Washington Insider -- Monday

Trade Tensions with Mexico Ease

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

Focus Continues On MFP 2 Situation

USDA Secretary Sonny Perdue did not offer up any new information on the Market Facilitation Program 2 (MFP 2) when he appeared in Florida and Georgia last week.

But the key continues to be whether prevent-plant acres will gain any coverage via the program.

Now the attention shifts to Tuesday with an appearance in Council Bluffs, Iowa, with President Donald Trump.

Perdue and USDA are also mulling how to implement some disaster bill provisions relative to prevent plant acres and language covering stored-grain provisions.

Meanwhile, USDA economists keep working on more details of the MFP 2 package that were not announced when the plan was initially unveiled.


EPA To Publish Final E15 Plan in Federal Register

The final rule from EPA which would allow for sales of E15 fuel year-round and make some changes to the market for Renewable Identification Numbers (RINs) will be published today in the Federal Register.

The rule would adopt a "new statutory interpretation and making corresponding regulatory changes to allow gasoline blended with up to 15 percent ethanol to take advantage of the 1-pound per square inch (psi) Reid Vapor Pressure (RVP) waiver afforded under the Clean Air Act (CAA)," the agency said in a notice filed for public inspection today (June 6). "In doing so, EPA is finalizing an interpretive rulemaking which defines gasoline blended with up to 15 percent ethanol as 'substantially similar' to the fuel used to certify Tier 3 motor vehicles."

EPA is "making regulatory changes to modify certain elements of the Renewable Fuel Standard (RFS) compliance system, in order to improve functioning of the renewable identification number (RIN) market and prevent market manipulation."

Some portions of the final rule are effective immediately, with other parts effective May 30, and still other portions will become effective 30 days after the measure is published in the Federal Register.


Washington Insider: Trade Tensions with Mexico Ease

The most recent trade policy fight with Mexico over immigration seems to be mostly over, at least for now. The story line is that the President pushed Mexico – and his own party – to the brink when he threatened massive new tariffs over illegal immigration and now has a cross-border deal to show for it.

Like many things in the world of politics, the reality seems somewhat complex, regarding the back and forth of the negotiation and who agreed to what when. The President also “added another chapter in his now-familiar pattern on tariffs: threaten to go big, pull back at the last minute, Bloomberg says.

The announcement of the deal comes as the president prepares for a potential high-stakes meeting with his Chinese counterpart Xi Jinping on the sidelines of the Group of 20 meeting in Osaka, Japan, at the end of this month.

The abrupt U-turn on Mexico by the administration in return for what appear to be meaningful yet still relatively modest concessions, is likely to add to confusion in Beijing about Trump’s negotiating goals, Bloomberg thinks.

The administration announced late Friday that it wouldn’t impose a sliding scale of tariffs on goods from Mexico after that nation agreed to take a tougher stance on immigration. Trump tweeted Saturday that Mexico also will buy “large quantities” of agricultural products, a stipulation that was not actually written into the deal, Bloomberg says.

Mexico did commit to doing more – including use of National Guard troops to help curb illegal migration and agree to care for Central Americans seeking asylum in the U.S. indefinitely as their cases wind through the system.

American negotiators had been asking Mexico for this assistance for some time, since the election of Andres Manuel Lopez Obrador in July 2018. But it was only in the past week, under the threat of tariffs, that the U.S. side felt Mexico had begun negotiating seriously, according to a U.S. official.

“Mexico successfully avoided the catastrophe of tariffs but will pay a heavy price,” said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington. Potentially tens of thousands of refugee claimants will have to wait in Mexico while their claims are processed. Mexico will have to house, employ, educate and provide health care for them. This is a huge commitment for the government.

The U.S. originally demanded that Central American migrants apply for asylum in Mexico instead of the U.S., but Mexico beat back that demand. Also, there was no formal language related to increased purchases of U.S. agricultural products as Trump promised on Twitter, in all capital letters, without providing details.

All of this could leave some of those most upset over Trump’s approach, including some Republicans, questioning whether the turmoil of the last week was really worth it.

Separately, President Trump has threatened European and Japanese carmakers with tariffs in the name of national security but then said he’d delay any action by 180 days.

The most recent dust-up is far from the first time the president has faced criticism over his stance on tariffs. What made this time different was just how alone Trump was in his position. The list of opponents to the idea was long: the U.S. Chamber of Commerce, farm groups, automakers and Senate Majority Leader Mitch McConnell, who took the rare step of saying publicly he disagreed with the president.

Even elsewhere in the Trump administration there was little vocal support for the threatened Mexico tariffs. Treasury Secretary Steven Mnuchin opposed them, and so did the senior adviser and son-in-law, Jared Kushner, the New York Times reported.

Republicans, who have grown adept at talking about areas of disagreement without sounding like they disagree, didn’t hold back. “I don’t even want to think about it,” Senator John Cornyn, a Texas Republican, said last week after he was asked about the potential economic harm to his home state.

Republicans quickly rallied around the President for securing the deal, however, and suggested this could clear the way for Congress to approve the “new NAFTA” trade deal between the U.S., Canada and Mexico the No. 2 House Republican, Steve Scalise of Louisiana, said.

Bloomberg pointed out that the President’s approval ratings are underwater in a handful of states where Senate Republicans are running for re-election including Jodi Ernst, R-Iowa, Cory Gardner, R-Colo., Susan Collins, R-Maine, and Thom Tillis, R-N.C.

While Tillis, who faces a primary challenge, was an early backer of Trump’s tariff strategy despite previously calling himself a free trader, others including Cornyn, Ernst and Gardner have been outspoken critics of the President’s trade policy.

The Mexican negotiators told the U.S. press that the two countries will continue discussion for other possible steps in 90 days if needed, an implicit reminder that tensions could flare again if the migrant crisis continues to worsen.

Immigration has long been a very bitter political issue that the administration is expected to emphasize frequently in the coming campaign. It likely will continue to lead to high stakes fights producers should watch closely as they emerge, Washington Insider believes.


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