Washington Insider -- Wednesday

New Dimension to Trade Fight

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

Wheeler Sheds More Light on Coming Details of Biofuel Plan

In an interview with the Red River Farm Network on Tuesday, EPA Administrator Andrew Wheeler offered some additional explanation on what the Friday announcement means. The action, he explained, strikes a balance so that EPA can continue offer the small refinery exemptions (SREs).

“We will estimate what that number will be and add it to the RFS for next year so that after the small refineries are exempted, the final number will still end up being 15 billion gallons.” For corn farmers, he noted, that means there will be a “15-billion gallon certainty” and also means that the SREs will be preserved for “those refineries that truly are in jeopardy of going out of business because of the RFS.”

EPA will come out with the supplemental plan for the 2020 biofuel and 2021 biodiesel levels in the “next week or so,” Wheeler said, with a 30-day comment period.

Asked if the action is to account for the SREs that have been granted so far, Wheeler stressed, “It is not retroactive. It is going forward.” He noted EPA has already proposed the Renewable Volume Obligations (RVOs) for 2020 biofuel.

“We will go out for a supplemental proposal in the next few days and increase that for 2020, so that in 2020, the number will be set somewhere above 15 billion gallons knowing that we will be providing some small refinery relief so that we net out at 15 billion gallons.” That way the 15 billion gallons of conventional ethanol that is in statute will be met “so we provide that certainty so that corn farmers will be able to produce up to 15 billion gallons of ethanol.”


Trump Again Dashes Talk of Partial Trade Deal with China

President Donald Trump at the White House Monday said that was not what the U.S. was looking for in the talks. “I think it’s not what we prefer at all,” he noted. “They are starting to buy a lot of our agricultural products. You see that. They’re coming in very strong on pork.”

Trump said he did not know if the ag purchases would be considered a “partial” agreement. “My inclination is to get a big deal. We have come this far. But I think that we will just have to see what happens. I would much prefer a big deal. And I think that’s what we are shooting for.”

But Trump also injected his brand of humor into the situation, noting both sides have top people in the negotiations. “If I do not think they are doing a good job, I will fire them and I’ll go over and take their place.”

The situation remains uncertain on the prospects for a deal and some observers remain downbeat on whether the U.S. and China can bridge their differences and come to terms on an overall package.

Washington Insider: New Dimension to Trade Fight

Bloomberg is reporting this week that the Trump administration has placed eight of China’s technology giants on a blacklist over alleged human rights violations against Muslim minorities—and that China says that it may retaliate.

Asked Tuesday about Chinese reactions, foreign ministry spokesman Geng Shuang told reporters “stay tuned.” He also denied that the government abused human rights in the far west region of Xinjiang.

“We urge the U.S. side to immediately correct its mistake, withdraw the relevant decision and stop interfering in China’s internal affairs,” Geng said. “China will continue to take firm and forceful measures to resolutely safeguard national sovereignty, security and development interests.”

The administration’s move, which was announced after U.S. markets closed, came on the same day negotiators from the two sides began working-level preparations for high-level talks set for Thursday in Washington. A U.S. Commerce Department spokesman said the “action is unrelated to the trade negotiations,” and China confirmed Vice Premier Liu He would lead the delegation as planned.

Bloomberg reported that U.S. equity-index futures fell, reversing an earlier gain, while European stocks slipped to snap a two-day advance. U.S. futures fell after China said it strongly opposed the “blacklist” decision. Equity benchmarks across Asia had climbed earlier as trading showed little concern about ongoing unrest in Hong Kong.

The blacklist, first reported by Reuters, takes the president’s economic war against China “in a new direction,” marking the first time the administration has cited human rights as a reason for action, Bloomberg said. Past moves to blacklist companies such as Huawei Technologies Co. have been based on national security.

Companies on the blacklist include two video surveillance companies – Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co. – that by some accounts control as much as a third of the global market for video surveillance and have cameras all over the world.

Also targeted were SenseTime Group Ltd. – the world’s most valuable artificial intelligence startup – and fellow AI giant Megvii Technology Ltd., which is said to be aiming to raise up to $1 billion in a Hong Kong initial public offering. Backed by Chinese e-commerce giant Alibaba Group Holding Ltd., the pair are at the forefront of China’s ambition to dominate AI in coming years.

Entities on the list are prohibited from doing business with American companies without a government license, although in the past, some U.S. operations have maintained relationships with banned companies through international subsidiaries, Bloomberg said. Hikvision and Dahua were suspended from trading Tuesday.

“Specifically, these entities have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups” in Xinjiang, the U.S. Commerce Department said on Monday.

The foreign ministry’s Geng accused the U.S. of having “sinister intentions.” “The measures taken by China to eliminate extremism from the roots are fully in line with Chinese law and international practice,” he said.

“Hikvision strongly opposes today’s decision by the U.S. government. It will hamper efforts by global companies to improve human rights around the world,” the company said.

Megvii said the U.S. had “no grounds” to put it on the list, and noted that Human Rights Watch had corrected a report that implicated the company. It added that it hadn’t earned revenue from Xinjiang in the first part of the year and the impact on its business from the designation was minimal.

The blacklist comes as the administration faces growing pressure at home to support pro-democracy protests in the Chinese-controlled territory of Hong Kong.

The administration’s move targets Chinese surveillance companies involved in the crackdown in Xinjiang, where as many as a million Uighur Muslims have been placed in mass detention camps, prompting global criticism. The White House in May had readied the sanctions package for surveillance technology companies accused of human rights violations but decided to hold back because of the trade negotiations.

In June, the administration again considered the sanctions and had planned to roll them out with a human rights speech by Vice President Mike Pence on the anniversary of the Tiananmen Square massacre, Bloomberg reported. The speech was postponed indefinitely, so that Trump could secure a meeting with Chinese leader Xi Jinping in Osaka, Japan.

Also to be placed on the Commerce Department’s “entity list” are the Xinjiang region’s public security bureau and 18 other municipal and county public security bureaus as well as the province’s police college.

So, we will see. The move against China’s surveillance companies is likely to generate strong support some quarters of the U.S., observers note, but if it also blows up this week’s trade talks, it may also prove to be a high political hurdle for U.S. groups already facing sharp reductions in important overseas markets, including China, Washington Insider believes.

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