Washington Insider -- Tuesday

Trade News and Confusion

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

WTO Clears US Retaliation Against EU Over Airbus Subsidies

The special meeting Monday at the WTO requested by the U.S. saw the U.S. granted approval to impose sanctions on $7.5 billion in goods from the European Union (EU).

The EU continued to contend the U.S. action was unfair while the U.S. maintained the position that the dispute has been ongoing for some 15 years without any changes on the part of the EU.

Incoming EU Trade Commissioner Phil Hogan said he would seek a negotiated settlement with the U.S. and said the block would likely finance and aid plan for olive farmers as they are among the sectors that will be hit by tariffs.

The U.S. intends to hit the full $7.5 billion slate of products with tariffs, setting them at 10% for large commercial aircraft and 25% on agricultural and industrial goods.

The tariffs will take effect October 18.

Florida Tomato Exchange Calls for Reopening of Antidumping Probe

The Commerce Department is being asked to reopen its antidumping investigation on imports of tomatoes from Mexico, with the request from the Florida Tomato Exchange (FTE) coming as they maintain that Mexico could walk away from the recently reached deal.

Both sides had welcomed the deal when it was reached, but FTE said that Mexican tomato growers have been threatening to either launch legal challenges to the deal or seek to renegotiate the pact.

Given the situation, FTE said they had “no choice” but to ask that Commerce reopen the investigation.

It is not clear yet whether Commerce will take the step requested by the FTE.

Washington Insider: Trade News and Confusion

The good news for the trade outlook with China reported over the weekend seems to have been at least somewhat premature. Later, on Monday, the media began to say that China had not actually confirmed elements of the deal earlier touted by the administration. A little later, Bloomberg reported that “China wants to hold more talks this month to hammer out the details of the phase one trade deal … before Xi Jinping agrees to sign it.” The report cited “people familiar with the matter.”

Confusion exploded into press speculation almost immediately. “Beijing may send a delegation led by Vice Premier Liu He, China’s top negotiator, to finalize a written deal that could be signed by the presidents at the Asia-Pacific Economic Cooperation summit next month in Chile, Bloomberg said.

Another report said China also wants the U.S. to scrap a planned tariff hike in December in addition to the hike scheduled for this week, “something the administration hasn’t yet endorsed.” Mainly, these sources are cited as “asking not to be named discussing the private negotiations.”

Bloomberg summed up with “The U.S. and China have emerged from last week’s talks with different takes on what’s in the accord and how close they are to signing a document.” President Donald Trump said “we’ve come to a deal, pretty much, subject to getting it written” and indicated it might take several more weeks of negotiation.

China’s Ministry of Commerce merely said that “the two sides have made substantial progress” and “agreed to work together in the direction of a final agreement.” The state-run Xinhua news agency didn’t mention “a deal” at all, Bloomberg said.

Hu Xijin, the editor-in-chief of the Global Times, said in tweet that “China-U.S. trade talks made breakthrough last week and the two sides have the strong will to reach a final deal.” Bloomberg noted that the tabloid is “run by the People’s Daily, which is the flagship newspaper of the Communist Party.”

Treasury Secretary Steven Mnuchin said Monday on TV that he expects officials to work in coming weeks to get the first stage ready for both sides to sign. If that doesn’t happen, the new U.S. import taxes on Chinese products will be imposed starting Dec. 15, he said.

Taoran Notes, a state-affiliated blog that focuses on the trade talks, said that the difference in tone struck by Chinese media was due to “cultural and language” differences and both sides are in consensus over the deal.” President Trump is scheduled to meet with Liu He on Oct. 11.

China’s Ministry of Commerce did not immediately comment on the spate of confusing reports. Geng Shuang, a foreign ministry spokesman, reiterated on Monday that both sides had made progress and said he hoped “the U.S. will work with China and meet each other halfway.”

Investors have struggled to determine whether or not the U.S. and China did reach a breakthrough in the 18-month trade war. Worse-than-expected September trade figures in China underscored the growing pressure on both Trump and Xi to reach a deal to avert a wider slowdown in the global economy.

Bloomberg also noted that “China has become increasingly wary of any statements from President Trump.” Trust between the two sides suffered a big blow in May 2018, when President Trump put a stop to a deal for China to buy more energy and agricultural goods to narrow the trade deficit. The U.S. president further sowed distrust in August when he claimed that Chinese officials had called and requested to restart trade talks.

For Xi, observers suggest that it is politically infeasible to accept a final deal that doesn’t remove the punitive tariffs altogether. Nationalists in the Communist Party have pressured him to avoid signing an “unequal treaty” reminiscent of those China signed with colonial powers.

“The U.S. must concede on its December tariff threat if they want sign a deal during APEC summit, otherwise it would be a humiliating treaty for China,” said Huo Jianguo, a former Chinese commerce ministry official who is now vice chairman of the China Society For World Trade Organization Studies. “The U.S. has definitely shown some good gestures but we shouldn’t exclude the possibility of another flip-flop.”

So, we will see. While there were numerous concerns voiced about the remaining gap between the U.S. and China following last week’s reports, few observers seem to have understood how preliminary — and, fragile — the perceived progress actually may have been. Certainly, the administration has considerable explaining to do if in fact there was very little agreement in spite of claims that there was—and what all that means for the future of crucial overseas markets and opportunities for U.S. producers and many others in these very tense political times, Washington Insider believes.

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