Washington Insider -- Monday

Trade Policy Criticism Intensifies

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

US February Agricultural Exports Edged Lower While Imports Registered a Sharper Decline

U.S. agricultural exports were at $11.31 billion in February, down from $11.44 billion in January, while U.S. ag imports were at $10.60 billion, down from $11.67 billion in January. That resulted in a trade surplus of $711 million after the sector had a deficit of $234 million in January.

So far in fiscal year (FY) 2020, U.S. agricultural exports total $59.34 billion against imports of $54.25 billion for a surplus of $5.09 billion. In FY 2019, exports were at $57.72 billion against imports of $53.19 billion and a trade surplus of $4.53 billion.

But for all of FY 2019, exports reached $135.54 billion against imports of a record $130.94 billion for a surplus of just $4.6 billion. We are entering into the period when U.S. ag imports typically are the strongest – they typically peak during the March-May period.

In FY 2019, agriculture registered a record trade deficit of $871 million in April and a deficit of $255 million in May.

Biofuels Industry Asks USDA For Help

The biofuel industry is asking USDA for funds from the Commodity Credit Corporation (CCC) to provide help for the industry as they weather negative margins amid slumping demand for motor fuels.

In an April 1 letter to USDA Secretary Sonny Perdue, the Renewable Fuels Association (RFA) and others in the industry are seeking the action by USDA to offset a portion of corn and soybean purchases, or to provide direct assistance to companies to keep staff, according to the letter seen by Reuters.

Those signing the letter argue the industry is facing “collapsing demand” for the biofuels and that about 3.5 billion gallons of annual ethanol capacity has been idled at a quarter of U.S. production facilities.

CCC is a fund that USDA has available that provides the department with authorities to use the funding to aid U.S. agriculture. USDA used the CCC authority in deploying aid to farmers for trade damages – the Market Facilitation Program (MFP).

Washington Insider: Trade Policy Criticism Intensifies

The Trump administration’s tariff-based trade policy has often been criticized, especially by sectors of the economy that have been the primary battlefields in continuing tariff fights.

This week The Hill is carrying an OpEd by Jeff Rathke, president of the American Institute for Contemporary German Studies at John Hopkins University. Rathke served as a U.S. diplomat from 1991 to 2015.

He says that American diplomacy has faced challenges from the start of the president’s administration: how to make his “America First” pledge an operational reality in a world that was “oriented for 70 years around U.S. alliances and American-made multilateral institutions.”

Rathke thinks that clever minds on President Trump’s first national security team -- Defense Secretary Jim Mattis, Secretary of State Rex Tillerson and National Security Adviser H.R. McMaster -- sought to “square the circle” by defining America First as a calling to prevail in a world characterized by great power competition.

This mainly meant China and Russia, though President Trump has never hesitated to throw Europe and other traditional U.S. allies into the basket of foes. “Great power competition” now suffuses American strategic documents and has become the touchstone of statements by officials trying to explain U.S. actions to the American public and the world.

It worked for a time, as officials like Mattis drew from their deep reservoirs of personal credibility and experience to assure friends and allies that international leadership would be central to Washington’s approach to great power competition.

However, Rathke thinks that the coronavirus pandemic exposes this framework as a rhetorical fig leaf rather than a plan for U.S. global action.

He says, “the absence of American initiative to lead the international response to a global crisis is striking, as veterans of past administrations will recognize,” he says and charges that “the United States government is failing to address the systemic political disruptions of the COVID-19 outbreak and shape the world that will emerge from this crisis.”

Great power competition is by definition a 24/7 affair. If the security and prosperity of the United States is threatened by the efforts of rivals to shift the global balance of power and to undermine existing institutions, then Washington’s response to crucial international issues must account for whether they will increase or decrease America’s ability to influence the world of today and the future.

Rathke characterizes the principal U.S. international responses to the pandemic as “a bare-knuckle rhetorical offensive” that consisted—for weeks, such as the State Department putting “China” or “Wuhan” next to the word “virus” in as many sentences as possible. The result was a breakdown of U.S. leadership showcased by the inability of the U.S. to agree with the leading industrialized democracies in the G-7, normally our closest partners on almost any issue, in a Foreign Ministers’ statement last week.

Instead of a U.S.-orchestrated demonstration of resolve and concrete coordinated measures to protect public health and preserve the advanced economies, the message was one of policy disarray. The Federal Reserve has stood out for its bold actions in addressing the financial impact of the pandemic, but that owes to the central bank’s independence and comes despite, not because of, the administration, Rathke says.

He adds that, in recent days, Washington has pivoted to casting doubt on the Chinese government’s transparency on the coronavirus pandemic and criticizing Beijing’s attempts to exploit international opinion through questionable assistance.

Those charges have merit, as the reports of possible data suppression and faulty Chinese equipment and test kits delivered to Europe show. But when the U.S. has been unable to provide crucial material support to its friends and allies, such criticisms have little weight. The crisis will not generate affection for China but it will bolster China’s leverage in ways that will affect world developments for years to come.

Those in the U.S. who purport to see great power competition as the principal national security challenge have been remarkably unable to impact the U.S. government’s response.

The greatest source of U.S. influence for decades has been the belief in Washington’s competence, backed up by American resources and confidence that the U.S. government would seek mutually beneficial outcomes even as it pursued its own national interest.

In the biggest crisis yet confronted by the Trump presidency, American credibility is suffering an enormous blow, even on the terms of great power competition that the administration has set for itself. It will flatten the United States’ influence curve for many years to come.

So, we will see. Rathke’s comments appear to sting, especially among producers who have watched hard-nosed tariff assaults threaten well established and profitable markets that they worked for years to build and expand -- assaults that now appear to be having little beneficial impact on the trade environment.

Rathke’s diplomatic and highly nuanced language seems unlikely to resonate in most ag circles, but his criticism of the recent trade policy objectives may attract attention and should lead to discussion as the season progresses, Washington Insider believes.

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