Washington Insider -- Friday

New Policies and Proposed Supports

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

USTR official No Request Yet From China on Phase One Buys

Chief U.S. ag trade negotiator Gregg Doud said that currently there is no way to know if the coronavirus will impact China’s ability to fulfill its purchase commitments under phase one of the agreement between the U.S. and China, and he said China has not requested any consultations to delay those purchases.

“That is the obvious question — and the obvious answer is there is no way to know what the impact of this is, at this time,” Doud told Brownfield Network on the sidelines of the Nebraska Governor’s Ag Conference relative to the coronavirus impact.

But, as USDA Secretary Sonny Perdue and others have noted, Doud said implementation of the Phase One agreement is on schedule. “At USDA and USTR, we are talking to our Chinese counterparts every day, by phone or by email — and so far, everything if going very well,” Doud told Brownfield. “Obviously, this is not the best of circumstances but, so far, everybody is doing everything they can to implement the agreement.”

Reuters reported that China has met another one of their commitments under the phase-one agreement – setting maximum residue levels (MRLs) for three approved beef hormones used in U.S. cattle production.

Doud said China has not asked for a reprieve from their purchase commitments. “No,” he stated. “That is the simple answer. They have not.”

Conflicting Reports on Whether Tariff Cuts at Play for China

Senate Finance Chairman Chuck Grassley, R-Iowa, said China may deserve some flexibility regarding pledges of U.S. commodity purchases under phase one of the trade agreement on difficulties dealing with the coronavirus.

“I think we can say that they are taking the proper steps to carry out phase one, but the subtraction from that would be their economy is in trouble,” Grassley told reporters Wednesday. “And the extent to which their economy is in trouble, I think they would have some flexibility.”

Interestingly, Grassley said there are talks in the White House on potentially lifting some remaining tariffs on China to ease the coronavirus pressure. “I think in order for it to do any good it would have to be reciprocal,” he said.

However, White House trade adviser Peter Navarro Wednesday shot down any suggestion of tariffs being lifted.

Calls for the U.S. to either provide tariff exemptions or to suspend tariffs imposed on Chinese goods entering the U.S. are “absurd,” Navarro told Politico. Such calls for tariff reductions are “simply a fake news gambit by the usual Wall Street suspects who never met an American job they did not want to offshore for the sake of a buck,” he said.

Washington Insider: New Policies and Proposed Supports

Well, most of the over-arching issues being reported late this week concern the coronavirus and the still-evolving U.S. and global policies to counter the outbreak.

In what POLITICO called an unusually somber Oval Office address, President Trump announced a number of anti-virus policies including a 30-day ban on foreign visitors from most of Europe. The report said that the new policies “ratcheted up the his administration’s response after battling criticism for previously downplaying the crisis.”

In a rare address from the Oval Office, President Trump said the European Union had “failed to take the same precautions” as the U.S. had implemented, prompting his decision to temporarily suspend travel between the two continents. The restrictions will not apply to the United Kingdom, where the number of confirmed cases topped 400 on Wednesday.

“We made a life-saving move with early action on China. Now we must take the same action with Europe,” the president said in an 11-minute televised address, referencing his February move to restrict travel from China, where the virus began. “Smart action today will prevent the spread of the virus tomorrow.”

The address marked a dramatic shift in messaging for the President who has spent weeks vowing that the coronavirus would die down quickly, pledging that a vaccine was coming soon and insisting that it was similar to the seasonal flu – all assertions his own health officials have contradicted repeatedly.

But Wednesday night was the second time President Trump had made such a prime time address – his previous Oval Office speech came during the 2019 government shutdown when he used the occasion to attempt to sell the public on his controversial effort to build a southern border wall.

This time, he blamed travelers from Europe for bringing coronavirus to the U.S. “A number of new clusters in the United States were seeded by travelers from Europe," he said.

The speech also generated some confusion, POLITICO said.

After the President finished his remarks, the Department of Homeland Security clarified that the new order would not bar all travelers from Europe, just foreign nationals traveling from Europe to the U.S. The order also doesn't prohibit the travel of legal permanent residents and the immediate family members of U.S. citizens.

The guidance does apply, however, to people transporting cargo from Europe the White House told POLITICO, although goods and cargo will be permitted to enter the U.S., another statement that needed clarification after Trump was finished.

The President also addressed some expected economic measures during his speech, saying he would “soon be taking an emergency action” to provide a financial cushion to business owners and individuals hit by the coronavirus. He said the Small Business Administration would provide emergency capital to impacted companies and vowed to defer tax payments for certain entities that have been hit by the virus.

The president then asked Congress to include a paid sick-leave mandate and payroll tax cut in a stimulus package that is currently being ironed out on Capitol Hill. While lawmakers have coalesced around the sick-leave proposal, the payroll tax cut has been a harder sell.

As the week wound down on Thursday, the political spotlight turned to numerous economic proposals including one from Speaker Nancy Pelosi, D., Calif., who has been pressing ahead with plans for an early vote on emergency legislation including expanded paid sick leave and unemployment benefits as well as free coronavirus testing.

The White House doesn’t back much of that plan as currently drafted, though it supports many of the overall policies, an aide told Bloomberg on Thursday.

Timing for any of these proposals, or a combination of them, is also an issue. Congress moves on a schedule that’s completely different from fast-paced markets and it’s about to go into a week-long recess. However, Senate Majority Leader Mitch McConnell, R., Ky., announced the Senate would still be in town next week to work on the aid package.

Still, Bloomberg noted that there may be more consensus on the need for budget action now than there was in the earlier downturn in 2008. The idea of helping out struggling households and businesses in a health crisis – unlike the support for Wall Street banks that was part of the earlier Bush proposal – commands broad support.

The president is also trying to browbeat the Fed into cutting interest rates once again – and there may be other steps, like tax-deadline moves that the administration can take on its own, although the most powerful tools will require a congressional vote. However, “it’s obvious the Fed’s ammunition is low-powered,” one observer told Bloomberg. “Fiscal policy needs to carry the football.”

So, we will see. Clearly, the virus outbreak and the market collapse have drawn almost everyone’s attention. How and when those threats will prove adequate to support strong economic measures remains to be seen and should be watched closely by producers as the debate continues, Washington Insider believes.

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