Washington Insider-- Friday

Increasingly Murky National Outlook

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

Ag Biotech Issues With Mexico, Dairy Access To Canada Raised

The Alliance for Trade Enforcement is raising issues on ag biotech in Mexico and Canadian pharmaceutical actions as areas that need to be enforced under the U.S.-Mexico-Canada Agreement (USMCA). The full enforcement of intellectual property (IP) commitments under USMCA is key, the group said in a letter to U.S. Trade Representative Robert Lighthizer.

“The Government of Mexico's failure to approve these products threatens both trade with Mexico and U.S. farmers' access to important technologies. This could have a devastating effect on U.S. farmers and their customers in Mexico,” the group said.

Dairy issues were also raised by the group, with the letter pointing to Canada's announcement on distribution of dairy tariff-rate quotas (TRQs) “runs counter to various USMCA commitments including discouraging high-value food service or retail products from entering the market.” The group also said they are concerned Canada will not live up to eliminating their Class 7 pricing program and will “manipulate its agreed-upon trade obligations to protect its tightly controlled dairy market are unacceptable.”

The group also called out Canada's Patented Medicine Prices Review Board, saying it “continues to develop and implement unfair pricing and reimbursement regulatory schemes that do not fully account for the cost of research and development of innovative treatments.”

Eight Candidates To Lead WTO

The nomination period for those seeking to become the next Director General of the WTO closed Wednesday with eight candidates – Jesus Seade Kuri (Mexico); Ngozi Okonjo-Iweala (Nigeria); Abdel-Hamid Mamdouh (Egypt); Tudor Ulianovschi (Moldova); Yoo Myung0hee (South Korea); Amina C. Mohamed (Kenya); Mohammad Maziad Al-Tuwaijri (Saudi Arabia); and Liam Fox (UK).

The listing of five men and three women all have trade and/or WTO experience. The WTO has not seen a leader from African nor has it been led by a woman, prompting some to up the odds for a candidate that meets those criteria.

Mexico's Seade and South Korea's Yoo are also seen by some as top-level candidates given their experience on the world trade front.

The WTO is seeking a new leader in the wake of current WTO chief Roberto Azevedo announcing he would leave the post a year early, setting off the process to find a new leader.

The next step will be for the candidates to meet with members at a special General Council meeting July 15-17 where they will present their views and take questions from members.


Washington Insider: Increasingly Murky National Outlook

Most aspects of the national outlook are increasingly murky these days because so many things are in flux. First, there's the virus; then, there's the economy; then, there's trade policy, and much more.

Bloomberg reports on a comment by the Fed's Cleveland bank president, Loretta Mester, who said “recent data on the reaccelerating spread of the coronavirus in the U.S. has raised additional downside risks for the economic recovery. I don't think any of us thought it would necessarily be a smooth path to increasing activity – but the numbers are troubling,” she told Bloomberg. “These are not good statistics.”

She cited confirmed cases in the U.S. that crossed 3 million Wednesday as the virus surged across many southern and western states. Examples include Texas that set a record for daily cases, California where hospitalizations hit a new high and Arizona with a record number of deaths. She concluded that news from the virus and health-care front “will likely prove damaging to the economy even if state and local officials don't reimpose restrictions on commercial activity.”

Her Atlanta Fed colleague Raphael Bostic made a similar point earlier on Wednesday, telling reporters that more policy action may be needed if the recovery levels off.

Still, the Cleveland Fed chief, who is a voter this year on the policy-making Federal Open Market Committee, said she doesn't think the central bank needs to rush into providing fresh guidance on the future path for interest rates and asset purchases.

Policy makers lowered the benchmark rate in mid-March to near zero and began large-scale purchases of Treasury and mortgage-backed securities. They also signaled they would keep policy in that setting for an extended period.

“The time may come when we want to use forward guidance, but right now I think everyone understands we want to keep interest rates low for a long time,” she said.

Once the Fed reaches the point where it concludes that more guidance is needed, its form will depend on circumstances at that time, she said—a position that made Mester appear less enthusiastic than many of her colleagues about embracing a particular strategy for forward guidance in the committee's next one or two meetings.

Bloomberg also noted this week that China's top diplomat had blasted U.S. policy toward Beijing – but at the same time, proposed “a blueprint for getting spiraling relations between the world's biggest economies back on track.”

“Current U.S. policy toward China is based on strategic misjudgments that lack factual evidence, and are full of emotional catharsis and McCarthy-style paranoia,” Chinese Foreign Minister Wang Yi said during a pre-recorded address for a China-U.S. think tank and media forum. He added that “artificially creating various 'China threats' may eventually lead to self-fulfilling prophecies.”

Wang thinks China is willing to resume dialogue mechanisms at all levels with the U.S. at any time and proposed the two countries group outstanding issues into three lists – cooperation, dialogue and differences – with think tanks taking the lead in researching the issues. He also called for cooperation on the coronavirus, saying that China is willing to communicate further on treatment, vaccine research and economic recovery.

Already strained ties have gotten worse after China imposed a national security law on Hong Kong, prompting the U.S. to revoke certain trade privileges and threaten sanctions against Chinese officials. The two countries are also sparring on many other things from the South China Sea to technologies like 5G networks.

Earlier, the U.S. announced visa restrictions for officials over China's actions in Tibet and Hong Kong, which sparked retaliation from China. The president's national security adviser Robert O'Brien told reporters to expect “a significant roll-out of measures with respect to China over the coming days and weeks.”

Wang called the U.S. moves “unreasonable” and said that the two powers should not seek to transform each other. However, U.S. Secretary of State Michael Pompeo on Wednesday continued to slam the Chinese government and President Xi Jinping. He said the U.S. would start a dialogue soon with the European Union on ways to meet the challenge from China.

Pompeo held secretive talks last month in Hawaii with top Chinese diplomat and Politburo member Yang Jiechi that failed to stem the attacks on both sides. That meeting showed that Wang's proposals to restart the dialogue were likely “too romantic and too idealistic,” according to Shi Yinhong, an adviser to China's cabinet and a professor of international relations at Renmin University in Beijing.

So, we will see. It is certainly true that there are threats of many kinds from many directions – and that it will be difficult to avoid policies that make things worse. Especially as the fall elections come closer, producers should watch these many processes very closely as the season progresses, Washington Insider believes.

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