Washington Insider -- Wednesday

Trade Policy and COVID-19

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

Perdue Defends USDA’s MFP, Says Aid Via COVID-19 Package To Be ‘Fair’

USDA Secretary Sonny Perdue continues to insist that USDA’s efforts to help farmers via the Market Facilitation Program (MFP) have been fair.

In a letter to Senate Ag Committee Ranking Member Debbie Stabenow, D-Mich., Perdue also noted that USDA will work “swiftly” to develop aid efforts via the third COVID-19 stimulus package. “We will again seek to implement a national program in a fair and equitable manner,” Perdue said.

Stabenow has been openly critical of USDA’s MFP effort, arguing it has been regionally biased to southern growers.

In the letter, Perdue points out that Stabenow’s reference to payment-rate inequities by county between regions is not on the mark as two thirds of the payments have gone to Midwest farmers.

Ag Groups Highlight Transportation Issues Linked To COVID-19

Ships are getting hit with steep fees as the coronavirus slows trade and forces shipments to idle at docks, according to 80 groups representing ag and food shippers who want the White House to intervene.

“These fundamentally unfair fees are frequently exorbitant in nature, even exceeding the negotiated freight rates in some cases, and render U.S. agriculture exports less competitive in the global markets,” the National Grain and Feed Association, National Chicken Council, U.S. Apple Association and other groups said in a letter to National Economic Council Director Larry Kudlow and USDA Secretary Sonny Perdue.

Washington Insider: Trade Policy and COVID-19

There has been considerable attention recently paid to the administration’s handling of the COVID-19 claims of shortages from hospitals on the front lines, Bloomberg says this week. This intensified last Friday when the administration imposed a ban on exports of N95 masks, surgical gloves and other protective equipment.

Then, in response to global pushback, President Donald Trump said his administration was working to make sure that products made in the U.S. were used first to address the needs of Americans, but then later he reversed course on the protective gear.

He said he had ordered the ban on exports after clashing with 3M over the company’s export of masks needed in the U.S. The company then warned that limits on its exports could lead to retaliation by other countries.

The move to restrict exports came after dozens of other countries including China and the European Union have done the same in recent weeks. Bloomberg said that the U.S. standing as the world’s largest economy gave its actions greater weight. Allies also complained that America was simultaneously waging an aggressive campaign to out-bid other countries for supplies internationally.

Together, the moves amount to new skirmishes in an economic war at the very time when international cooperation to combat the virus should be ruling the day. Also, Canadian officials scrambled over the weekend to try to convince the Trump administration to exempt their nation from any export ban. Those talks continued Monday with Secretary of State Mike Pompeo speaking with his counterpart.

That move has drawn particular outrage in Canada because that country provides raw materials for masks made by American producers such as 3M and Honeywell.

Ontario’s premier, Doug Ford, complained Monday that most of an order of 4 million masks that the Canadian province had placed with 3M was blocked at the border between the two countries after leaving the company’s plant in South Dakota. Only 500,000 masks were allowed into Ontario, which would cover the province’s needs for another week.

Ford said he spoke with U.S. Trade Representative Robert Lighthizer about the issue Sunday and was continuing to press U.S. officials. “We’re putting pressure on the U.S. government from all sides. It’s absolutely critical that they exempt Canada from this presidential order,” he said.

The European Commission, which imposed its own restrictions on exports March 15, has its own limits on exports, which require special permits for any protective equipment or ventilators leaving the bloc which is due to expire soon.

In an interview with Bloomberg, the head of the World Trade Organization, Roberto Azevedo, said he was worried that the introduction of restrictions on trade could lead to others. “If one is in place, others copy,” he said. He also warned that such measures can cause “serious problems in the poorer and more vulnerable countries that typically rely heavily on imports for medical equipment.”

WTO rules contain a key exception that permits its members to impose discriminatory trade restrictions as necessary to protect human health. But Azevedo said G20 nations needed to stick to a commitment made last month to keep any such measures “targeted, proportionate, transparent and temporary.”

Chad Bown, a trade expert at the Peterson Institute for International Economics, said the administration’s move risked backfiring as the U.S. is still dependent on imports of protective equipment, which other countries could decide to hold back.

In 2019, U.S. exports of N95 masks and other products covered by the ban amounted to about $1 billion, Bown said. Imports were worth about $6 billion. “This is just an incredibly short-sighted policy,” he said. “Of course, we need to acknowledge that there are shortages and other problems out there. But this policy is only going to exacerbate the shortages.”

While the administration has blamed the shortages on the U.S. dependence on foreign manufacturing supply chains, critics of the administration’s initial slow response to the crisis say it has more to do with lack of planning and poor maintenance of strategic reserves meant to deal with a situation like a pandemic.

Rep. Stephanie Murphy, D-Fla., on Monday said the Trump administration’s trade wars over the past two years had hurt the U.S. ability to access badly needed supplies and that those calling for additional trade measures risked damaging the American economy further. Murphy has called for the administration to lift tariffs on steel and other products, arguing that would help soften the blow of the recession now underway.

The U.S. has repeatedly denied hijacking any cargoes destined for other countries.

So, we will see. While the U.S. has moved recently to open up trade with China, the administration continues to feature a number of protectionist officials, including some very hard liners. Such policies are widely seen as threats by many ag producers who depend heavily on overseas markets and which should be watched closely as these debates emerge, Washington Insider believes.

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