Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.Other Senate Panels to Consider USMCA Legislation
Passage of the U.S.-Mexico-Canada Agreement (USMCA) by the Senate Finance Committee Tuesday, via a 25-to-three vote, is the first consideration of the deal by Senate Committees.
The Senate parliamentarian determined Monday that the USMCA legislation will also have to be considered by the Health, Education, Labor, and Pensions Committee; the Environment and Public Works Committee; the Senate Appropriations Committee; the Foreign Relations Committee; the Budget Committee; and the Commerce, Science, and Transportation Committee.
Several of those committees have indicated they will hold their votes next week.
Their action on the bill does not have to take place in any particular order and the measure cannot be amended – it is an up-or-down vote in each panel.
Under U.S. trade law, the USMCA legislation will be discharged from the panels within 15 days whether they act on it or not.
But the process of getting their markups scheduled and completed will add additional time to the USMCA approval process. Indications are the initial consideration by the full Senate may not come until late next week at the earliest.
USMCA is still fully expected to easily clear the Senate, but the combination of additional committees considering the implementing legislation and the still-pending impeachment trial in the Senate clouds the exact timing at this point.
API Uses Annual Energy Report to Continue Its Attack On Biofuels
The American Petroleum Institute (API) utilized a portion of its State of American Energy 2020 report to reiterate its complaints about U.S. biofuel policy.
“Biofuel mandates distort the marketplace to use products that can damage vehicles,” API sated.
API maintained that the Renewable Fuel Standard (RFS) of reducing U.S. crude oil imports is now “obsolete given growing domestic oil production, and its goal of producing commercially viable cellulosic biofuel has never materialized.” They commented that around 70% of vehicles on the road weren’t designed to run on E15 fuel and that no boats, small engines or motorcycles can use the product.
While API makes that claim, EPA approved E15 for any vehicle make from 2001 or newer. Since IHS Markit tracks the average age of vehicles, it shows there are roughly 278 million autos on the road. Of those, nearly 221 million are from model year 2003 or newer.
The arguments laid out by API are nothing new and signal that the refining industry will continue their challenges to U.S. biofuel policies ahead.
Washington Insider: Americans Paying Trump Administration Tariffs
American businesses and consumers, and not China, are bearing the financial brunt of President Trump’s trade war, the New York Times said this week, and new data is undermining the president’s assertion that the United States is “taxing the hell out of China.” The Times cites a number of studies.
For example, “U.S. tariffs continue to be almost entirely borne by U.S. firms and consumers,” Mary Amiti, an economist at the Federal Reserve Bank of New York, wrote in a National Bureau of Economic Research working paper. The other authors of the paper were David Weinstein of Columbia University and Stephen Redding of Princeton.
Examining the fallout of tariffs in data through October, the authors found that Americans had continued paying for the levies — which increased substantially over the course of the year. Their paper, which is an update on previous research, found that “approximately 100 percent” of import taxes fell on American buyers.
The findings are the latest evidence that voters and American businesses are paying the cost of the administration’s penchant for using tariffs to try to rewrite the terms of trade in favor of the United States.
For one thing, manufacturing is slumping, a fact economists attribute at least partly to uncertainty stemming from the trade spats and business investment has suffered as corporate executives wait to see how — or if — the tensions will end. The United States and China have reached a trade truce and are expected to sign an initial deal this month, but tariffs on $360 billion worth of Chinese goods will remain in place. The levies, which are as high as 25%, have forced some multinational businesses to move their operations out of China, sending operations to countries like Vietnam and Mexico.
Tariffs may have worked as a negotiating chip to get China to the table, the Times says, but recent academic research shows that leverage has come at a steep price for some American businesses and consumers.
The authors of the latest study used customs data to trace the fallout, examining import values before and after the tariffs. The research showed that the tariffs had little impact on China.
“We’re just not seeing foreigners bearing the cost, which to me is very surprising,” Weinstein said in an interview.
The authors also found a delayed impact from the tariffs, with the decline in some imports roughly doubling on average in the second year of the levies. That is because “it takes some time for firms to reorganize their supply chains so that they can avoid the tariffs,” the authors write.
Reaction to the tariffs has varied across business sectors, however. In the steel industry, for example, companies that export to the United States have dropped their prices—suggesting that other countries are in fact paying “close to half” of the cost of tariffs, according to the paper.
“The steel industry isn’t getting that much protection, as a result,” Weinstein said.
In previous research, the authors found that by December 2018, import tariffs were costing United States consumers and importing businesses $3.2 billion per month in added taxes and another $1.4 billion per month in efficiency losses. They did not update those numbers in the latest study.
Their analysis joins a growing body of research examining the effects of the escalating tariffs Trump has imposed since the beginning of 2018.
A study released in late December by two economists at the Fed, Aaron Flaaen and Justin Pierce, found that any positive effects that tariffs offered American companies in terms of protection from Chinese imports were outweighed by their costs. Those costs include the higher prices companies must pay to import components from China and the retaliatory tariffs China placed on the United States in response, the economists said.
Another study, published in October by researchers at Harvard University, the University of Chicago and the Federal Reserve Bank of Boston, also found that almost all of the cost of the tariffs was being passed on from businesses in China to American importers.
The October study found that the situation was not the same for the tariffs that China has placed on American goods in retaliation. The researchers found that American businesses had less success passing on the costs of those tariffs to Chinese importers, most likely because of the types of goods being sold.
Many of the products that the United States sells to China are undifferentiated commodities like agricultural goods but China sends many specialized consumer goods to the United States.
Amiti’s colleagues at the New York Fed have traced the costs of tariffs in other research and similarly found that import prices on goods coming from China had remained largely unchanged as tariffs rolled out and argued that already-narrow profit margins that leave no room for cutting and a dearth of competitors could be among the factors insulating Chinese exporters.
So, we will see. In general, it appears that U.S. industries are increasingly opposing the imposition of higher tariffs as evidence of their impact on domestic consumers and markets has grown, Washington Insider believes.
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