Editor's Note: Washington Insider will not be published on Dec. 24-25. Have a Merry Christmas!
Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.Trump, Xi Speak by Phone on U.S.-China Trade Deal
President Donald Trump and Chinese President Xi Jinping spoke by telephone Friday about the phase-one U.S.-China trade deal, with Trump describing the exchange as “a very good talk,” in a tweet following the call.
Trump said China “has already started large scale purchases of agricultural product & more,” and added a formal signing of the phase-one trade deal is “being arranged.” Late last week, Treasury Secretary Steven Mnuchin indicated the signing will take place in early January.
For his part, Xi also spoke positively after speaking with Trump, saying the trade deal would benefit both countries and help advance the world economy, Chinese state-run media outlet Xinhua reported. At the same time, Xi warned that China has “serious concerns” about what it views as U.S. interference in Taiwan, Hong Kong, Xinjiang and Tibet.
EPA Releases More SRE Data
The Environmental Protection Agency (EPA) released refreshed data on Small Refinery Exemptions (SREs), showing 16 waiver petitions had been filed for the 2019 compliance year as of Nov. 21. The 2019 SRE total is up six from the agency’s previous report.
So far, all 16 petitions remain pending and there are no petitions pending for any earlier compliance years.
For 2018, EPA granted 31 of 42 SRE petitions it received, while in 2017 it granted the largest number ever at 35 of the 37 total petitions it received.
Biofuel proponents remain focused on EPA’s granting of SREs and whether it follows through on a promise to accurately account for exempted volumes when setting renewable volume obligations (RVOs) in coming compliance years.
Many biofuel groups voiced concern last week after EPA released its final rule for 2020 biofuel and 2021 biodiesel RVOs. EPA’s rule retained language relying on Department of Energy (DOE) SRE recommendations when accounting for the waivers.
In the past the agency has not always followed DOE’s suggestions, particularly in situations calling for only partial exemptions. While the agency said it is “committed to following the DOE recommendations” going forward, many biofuel proponents remain skeptical.
Washington Insider: Brazilian Metal Tariffs Lifted
Amid all the chaos and anger in Washington these days, the New York Times reported on Sunday that President Jair Bolsonaro of Brazil said “Mr. Trump decided not to pursue tariffs on Brazilian steel after a phone call on Friday.”
The Times said the development represented a decision to “back off a threat made this month to impose tariffs on Brazilian metal,” a move that would have broken a previous agreement with the country and risked reigniting trade tensions.
The news came in a somewhat unusual way — NYT said that President Bolsonaro “wrote in a post on Facebook Friday that he had spoken with Mr. Trump who decided not to make good on his plan to impose tariffs on our steel/aluminum. Our commercial relations and friendship are getting stronger every day,” he added.
President Trump appeared to confirm Friday night that he would not be pursuing tariffs, writing on Twitter that he had just had a “great call” with Bolsonaro. “We discussed many subjects including Trade. The relationship between the United States and Brazil has never been Stronger!” he said.
President Trump has routinely threatened—and imposed— tariffs to punish trading partners over practices he has deemed unfair to the United States, NYT said. On Dec. 2, President Trump tweeted that he would impose metal tariffs on Brazil and Argentina, accusing the countries of weakening their currencies and hurting American farmers.
“Therefore, effective immediately, I will restore the tariffs on all steel & aluminum that is shipped into the US from those countries,” President Trump said.
The tariffs have not gone into effect. Last week Larry Kudlow, the president’s economic adviser, told The Wall Street Journal CEO Council meeting that the Trump administration might not proceed with the tariffs. “No decisions have been made,” Kudlow said.
The Dec. 2 announcement appeared to surprise Bolsonaro, a populist president who had gone to great lengths to strengthen personal ties with Trump.
“Aluminum?” Bolsonaro asked when reporters presented him with President Trump’s tweet. “If that’s the case, I’ll call Trump. I have an open channel with him.”
That same day, Brazilian authorities started calling the White House, the Commerce Department and the Treasury Department, as well as some lawmakers, to argue that Brazil does not manipulate its exchange rate.
The Brazil Steel Institute said in a statement at the time that it was shocked by the announcement and warned that the decision would hurt the American steel industry which needs semi-finished products exported by Brazil to operate its mills.
It is unclear if Trump has also backed off his threat to impose metal tariffs on Argentina, the Times said.
The United States had initially exempted Brazil and Argentina from the tariffs placed on global steel and aluminum in March 2018, as the countries continued to negotiate over trade terms. In May 2018, the United States announced that it had reached an agreement with both countries that would cap their metal shipments at a specific volume each year.
Trump and his advisers have lamented the negative effects of a strong dollar which makes American goods more expensive to purchase overseas. Administration officials have accused a wide range of governments of manipulating their currencies, including China and the European Union.
The Treasury Department, which issues an official determination on which countries are currency manipulators, has not placed that label on Brazil or Argentina and neither country is on its list of nations that warrant monitoring. The most recent report, which was due in October, has yet to be released. Administration officials have not clarified when it will be published or the reason for the delay.
Economists say that the value of the Brazilian and Argentine currencies have recently fallen, but that the countries are not intentionally devaluing them, despite what President Trump said. Instead, the two governments have actually been selling foreign currency and buying their own money to try to prop up its value.
Still, the falling value of both currencies has made Brazilian and Argentine products cheaper to purchase abroad — especially in China, where the president had been waging a protracted trade war.
As China imposed tariffs on American farm goods like soybeans and halted purchases in retaliation for President Trump’s tariffs, Beijing switched to buying Brazilian and Argentine products instead. That hurt American farmers and rankled Trump. Those tensions have now eased after the announcement last week that China and the United States had reached a Phase 1 trade deal, in which China has committed to buying large amounts of American farm goods.
Brazilian officials have already made some trade concessions to the United States, including improving the terms of trade for wheat and ethanol. Brazil has also agreed to forgo a special status for developing countries at the World Trade Organization, dropped visa requirements for visitors from the United States and granted permission for United States companies to launch satellites from a Brazilian base.
Carlos E. Abijaodi, director of industrial development at Brazil’s National Confederation of Industry, said he believed tariffs would not be imposed and that the threat mainly served as a signal to administration supporters in the upcoming election.
So, we will see. This trade decision, if it holds, likely will be welcomed by U.S. farm equipment manufacturers and others. Clearly, decisions that support free-market relationships are important to producers and should be watched closely as political fights multiply, Washington Insider believes.
Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.
If you have questions for DTN Washington Insider, please email firstname.lastname@example.org
Copyright 2019 DTN/The Progressive Farmer. All rights reserved.