Washington Insider -- Monday

US and China To Restart Trade Talks

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

Sen. Kennedy Puts Hold on 3 USDA Nominees Over Biofuels

Biofuel policy actions by the Trump administration have again become the reason for a hold on political appointees at USDA. The first time that happened under the Trump administration was when Sen. Ted Cruz, R-Texas, did so on the nomination of Bill Northey to be a key USDA undersecretary. Cruz eventually lifted his hold and Northey won Senate approval.

This time it is Sen. John Kennedy, R-La., that is using a hold on USDA nominees over USDA’s role in biofuel policy.

Kennedy told USDA Secretary Sonny Perdue in a letter last week about the hold on the nominations of Scott Hutchins as undersecretary for research, education, and economics; Mindy Brashears as undersecretary for food safety, and Naomi Earp as assistant secretary for civil rights. And he warned Perdue that his hold would be in place until USDA stops interfering with the Renewable Fuel Standard (RFS) program at the Environmental Protection Agency (EPA).

Kennedy said he is “deeply troubled” about reports that Perdue has been trying to influence EPA decisions on Small Refinery Exemptions (SREs), hardship waivers for refiners that face financial difficulty meeting their RFS blending obligations.

Such involvement by USDA violates the Clean Air Act, which “clearly prevents the secretary of Agriculture from consultation on these waivers,” Kennedy told Perdue in his letter.

“Your efforts in this matter not only disregard the congressional intent of the law, but also threaten thousands of jobs in Louisiana and across the country,” Kennedy wrote.

USDA’s McKinney Signals Agriculture has to be in US-EU Trade Deal

The issue of agriculture continues to loom large in coming trade talks between the U.S. and European Union (EU), with USDA Undersecretary for Trade and Foreign Agricultural Affairs Ted McKinney the latest to push the issue.

"I do not think we will reach an agreement if agriculture is not included," McKinney told reporters on a teleconference while in Brussels. EU officials have remained steadfast in insisting that agriculture must be excluded from the trade negotiation. McKinney also highlighted cooperation between the two sides, saying they are working “much more closely” on issues like modernizing the WTO. One of the friction points between the U.S. and EU has long been on biotechnology. He also noted some EU countries were expressing an interest in gene editing. "I have been encouraged," McKinney said. "This is a technology that they do not want to miss out on. How they get there is very much to be determined. It is a not a fait accompli."

The U.S. is ready to help the EU as it works through the process relative to regulation of gene editing, noting the U.S. has seen the value in the technology. Agriculture remains a key sticking point in the prospects for U.S.-EU trade discussions, which keeps an eventual conclusion of the talks further down the road.

Washington Insider: US and China To Restart Trade Talks

President Donald Trump’s decision over the weekend to relax limits on Chinese telecommunications giant Huawei and to delay new tariffs on Chinese goods may revive stalled trade talks with Beijing, the Washington Post reported this week. However, it leaves negotiators confronting the same tough issues that derailed negotiations in early May, the Washington said.

Trump’s move was welcomed by business groups that have been hurt by multiple rounds of tariffs on Chinese goods and who feared greater damage if he proceeded with plans to tax a further $300 billion in imports.

But lawmakers in both parties objected to his decision to allow at least some U.S. companies to continue supplying Huawei, despite last month’s Commerce Department order to halt sales to the company because it imperiled U.S. national security.

“If President Trump has agreed to reverse recent sanctions against Huawei he has made a catastrophic mistake,” Sen. Marco Rubio, R-Fla., said Saturday morning. “It will destroy the credibility of his administration’s warnings about the threat posed by the company, no one will ever again take them seriously.”

The president defended the change saying it would not “impact our National Security.” He also said he was “in no hurry” to reach a deal with Beijing, “but things look very good!”

During a news conference following his meeting with Xi, the president provided scant details of the plan to resume negotiations that collapsed six weeks ago amid U.S. complaints of Chinese backsliding.

Trump announced no date for his chief negotiator, U.S. Trade Representative Robert Lighthizer, to meet with Chinese Vice Premier Liu He, a Xi confidant who helms Beijing’s bargaining team. The president also set no new deadline for reaching a deal.

In exchange for flexibility on Huawei, Trump said China had agreed to large purchases of U.S. farm goods starting “almost immediately.” But he disclosed no specifics and Chinese officials did not confirm the offer.

China’s Foreign Ministry quoted Xi as telling Trump that any “negotiations should be equal and show mutual respect.”

Fresh trade talks could have major economic consequences for both countries and Trump’s reelection hopes. The U.S. president already has had to allocate $28 billion in aid to quell an outcry from farmers who say they are trade war victims.

“They put a pause on further escalation and took the temperature down a little bit,” said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce.

The president’s concessions followed more than a month of acrimony between the world’s two largest economies. Trump expressed hope that the measures would lead to a “very historic” trade deal with China, though major obstacles remain.

“This is a temporary truce,” said Ely Ratner, who was a national security aide to former Vice President Joe Biden. “They’re not on the way to resolving the fundamental issues at the center of the dispute.”

“Both sides are just playing for time,” said Scott Kennedy, a China adviser at the Center for Strategic and International Studies. “I don’t see this as any kind of breakthrough.”

Business groups welcomed the results of the Trump-Xi dialogue. John Neuffer, president of the Semiconductor Industry Association, called the president’s decision “good news for the semiconductor industry, the overall tech sector and the world’s two largest economies.”

The two leaders began negotiating last December at the G-20 summit in Buenos Aires but talks faltered in early May. In response, Trump more than doubled tariffs on $200 billion in Chinese goods and threatened to hit an additional $300 billion in imports with new levies.

Nine days after the impasse, the Commerce Department prohibited U.S. companies from doing business with Huawei without a government license. U.S. officials have said the company has links to the Chinese government and its equipment could be used to disrupt or spy on American communications.

Before the president’s comments, U.S. companies would have been prevented from using Huawei gear in their next-generation 5G networks, a regulatory effort likely to be disrupted by Saturday’s about-face.

In Washington, critics were quick to pounce. Senate Minority Leader Charles Schumer, D-N.Y., said. “If President Trump backs off, as it appears he is doing, it will dramatically undercut our ability to change China’s unfair trades practices,” he said.

Asked by a reporter to characterize the U.S. relationship with China, Trump said: “I think we’re going to be strategic partners. I think we can help each other.”

The trade talks likely will resume against a more confrontational backdrop as public opinion sours on China, the Post says. In a survey for the Chicago Council on Global Affairs, 63% of the public called China a U.S. adversary, up from 49% last year.

Leaving the current tariffs in place means imposing substantial taxes on trade, and will both alter and inhibit that commerce—and could change its longer term structure, experts note. These are trends that producers should watch closely as the promised talks resume, Washington Insider believes.

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