Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.China says in-depth talks going on with US
The U.S. and China are holding in-depth discussions on Phase One of a trade deal, with the cancellation of tariffs a key issue, according to Commerce Ministry spokesman Gao Feng.
"China has emphasized many times that the trade war began with additional tariffs and should end with the cancellation of additional tariffs," said Gao. “If both sides reach a 'Phase One' deal, the degree of tariff cancellation should fully reflect the importance of the 'phase one' deal; and its importance should be appraised by both sides together. Both sides are conducting in-depth discussions on this now.”
However, Gao did not appear to have addressed the issue of increased buys of U.S. commodities, a U.S. demand in the negotiations in the Phase One deal and a component of the deal that the Wall Street Journal reported Wednesday was the latest sticking point.
China sources indicated the country was reluctant to put specific dollar amounts into the agreement. But it is clear that getting tariffs removed is a key for the Chinese.
"Cancelling tariffs is in the interests of producers, consumers, China, the U.S., and the world," Gao stated.
President Donald Trump Wednesday indicated the talks between the two sides were going “rapidly” and he did not reprise his threat to raise tariffs on China in the event an agreement is not reached.
China Lifts Bird-Flu Linked Import Restrictions On US Poultry
China announced it will lift its ban on imports of poultry meat from the U.S., making official the plan that was announced by China’s Commerce Ministry in late October.
The measure has now been published by the country’s Customs Administration.
The move comes after USDA’s Food Safety and Inspection Service (FSIS) published a rule in the Federal Register that would allow cooked/processed poultry products from birds slaughtered in China to come into the U.S.
U.S. poultry has not had access to the Chinese market since the U.S. bird flu outbreak.
The market could result in around $1 billion or more in sales of U.S. poultry to China, particularly with demand for protein sources other than pork rising in the wake of African swine fever.
Washington Insider: Powell on Interest Rates and Economic Stability
Bloomberg is reporting this week that Fed Chair Jerome Powell told the Joint Economic Committee of Congress on Wednesday that interest rates are “probably on hold after three straight reductions,” while signaling that the U.S. central bank could resume cutting if the growth outlook falters.
“We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook,” Powell said. However, he emphasized, “noteworthy risks to this outlook remain.”
Bloomberg noted that Powell’s comments on Wednesday largely echoed his message on Oct. 30 after the Fed’s third rate cut this year. He cited slowing global growth and trade developments as “ongoing risks.” And, he added that persistently low inflation could lead to an “unwelcome” slide in the public’s longer-run expectations of inflation.
Powell said the Federal Open Market Committee cut the policy rate, which is now in a range of 1.5% to 1.75%, to support growth and move inflation back to the 2% target. He said the committee was prepared to respond to a “material reassessment” of its outlook, and the tone of his remarks suggest that downside risks for now outweigh the possibility of economic overheating.
Explaining why wages haven’t moved up with the unemployment rate at 3.6%, Powell said it could be a sign that there is still slack in the labor market. “It also may be that the neutral rate of interest is lower than we have been thinking and that therefore our policy is less accommodative than we have been thinking. We are letting the data speak to us.”
The comments suggest that the rate cuts this year weren’t entirely about insuring against a global slowdown but also about recalibrating interest costs to an economy where inflation has remained stubbornly low.
“We continue to hear from him that they can run the economy with lower rates of unemployment than they thought they could,” said Michael Gapen, chief U.S. economist at Barclays Plc. “That underscores that they expect there to be a high bar to raising rates.”
Asked if he meant to signal that policy was on hold through next year, Powell responded “I wouldn’t say that at all” before repeating the line from his opening remarks on policy likely to remain appropriate as long as the economy stays on track.
“We do think monetary policy is in a good place, but we’re going to be watching very carefully incoming data,” he said.
Yields on 10-year Treasury notes were steady around 1.87% following the testimony while U.S. stocks were higher in New York trading, Bloomberg said.
Powell and the Fed have been relentlessly criticized by President Trump, who has blamed the central bank’s policies, rather than the U.S.-China trade war, for a slowdown in the U.S. economy as he increasingly focuses on the 2020 re-election campaign.
“We’re paying actually high interest. We should be paying by far the lowest interest,” Trump said Tuesday in New York, complaining that by shunning the negative interest rates deployed by other central banks, the Fed “puts us at a competitive disadvantage.”
Powell argued that “politics played no role whatsoever in the Fed’s policy decisions,” which were based on the analysis of the data. He also said that negative rates “would certainly not be appropriate in the current environment.”
U.S. economic data have continued to show strength among households and financial conditions have eased with stocks touching record highs on Wall Street this month. Consumer sentiment improved for a third month in November, according to the University of Michigan’s preliminary sentiment index, while employers added 128,000 new jobs in October. Powell said the Fed expected some easing in the pace of job gains after last year’s strong pace.
Manufacturing and business investment continue to lag, however. A gauge of U.S. manufacturing signaled the sector contracted for a third straight month with the weakest production level since the last recession.
“The outlook is still a positive one. There is no reason this expansion can’t continue,” Powell said. “There is a lot to like about this rare place of the 11th year of an expansion and we’re certainly committed to [support].”
So, we will see. Chairman Powell has been eager to deny that any political pressure is reflected in ongoing Fed policy in spite of the president’s criticism — a posture that may become more difficult to defend as the 2020 election approaches. That tension also could involve high stakes for producers and should be watched closely if it intensifies, Washington Insider believes.
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