Washington Insider-- Tuesday

US Attacks on China's Trade Policies Escalate

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

Investigation Into The US Cattle Market Structure

House Ag Chairman Collin Peterson, D-Minn., and Ranking Member Mike Conaway, R-Texas, have asked USDA to analyze cattle and beef supply chains, working with university policy research centers to analyze issues related to the cattle industry, especially amid stress related to COVID-19.

The lawmakers want USDA's Office of the Chief Economist to evaluate cattle market structure, price discovery, price reporting, purchasing mandates, and barriers to entry in the packing sector.

They also want the exam to involve experts outside USDA and say want the check to go beyond the issues that USDA has already been investigating relative to cattle market action in the wake of a fire at a beef plant in Kansas and the COVID-19 situation.

Extension of CFAP Signup Called For

A broad group of U.S. ag and commodity organizations are calling on USDA to extend the Coronavirus Food Assistance Program (CFAP) signup deadline beyond August 28.

The groups noted the low level of participation thus far, arguing that it likely reflects a lack of face-to-face interactions at local Farm Service Agency (FSA) offices and the level of producers eligible for aid that have not dealt with the agency previously.

USDA reported Monday that just over $7 billion had been paid out so far under the program that was aimed to pay out a total of $16 billion. USDA has been making payments based on 80% of the projected total payment owed to a producer. Based on that, USDA has made about 55% of the projected initial payments to producers.


Washington Insider: US Attacks on China's Trade Policies Escalate

Bloomberg is reporting this week that the administration's “rapid-fire escalation of attacks on China – from bans of WeChat and TikTok to sanctions on Hong Kong's top official – underscore that it has dropped past restraint and decided to make confronting Beijing a priority less than 90 days before the U.S. election.

The president's increasingly aggressive stance has opened the door for hard-liners in the administration to push policies reflecting their long-held conviction that Communist Party leaders are bent on world domination – and that successive U.S. administrations underestimated the China threat.

“A dam has broken in the administration, releasing all the pent-up ideas about how to escalate that conflict,” said Graham Webster, China Digital Economy Fellow at the New America think tank. “It's both a race to change facts on the ground and cement a durable enmity and a tool to distract from things that could damage Trump re-election prospects.”

The U.S. ordered the closing of China's consulate in Houston in July, alleging that it had become a hub of espionage and intellectual property theft.

Then, Secretary of State Michael Pompeo signaled a new push last week as he urged a “Clean Network” initiative calling for app stores like those run by Apple Inc. and Google to bar any “untrusted” Chinese apps and said U.S. data shouldn't be stored by Chinese cloud-computing companies.

And, on Thursday, the president issued executive orders aimed at barring the Chinese-owned TikTok and WeChat in the U.S. On Friday, the U.S. sanctioned Carrie Lam, the top official in Hong Kong, and 10 other Hong Kong and Chinese officials Pompeo said contributed to “brutal oppression” of the city's people.

Bloomberg also noted that action on a recommendation from a high-powered group of U.S. regulators that stock exchanges set new rules that could trigger the delisting of Chinese companies is still pending. The administration argues that American investors could be exposed to fraud because Beijing refuses to allow Washington regulators to inspect the audit papers of companies based in mainland China and Hong Kong.

In addition, China is sure to be infuriated by the diplomatic trip by Alex Azar, the secretary of Health and Human Services, who is expected to arrive in Taiwan this week in the highest-level visit by a U.S. cabinet official since Washington cut ties with Taipei more than 40 years ago.

The successive moves have brought U.S. policy “a long way from earlier in Trump's term, when he bashed China as exploiting the U.S. on trade policy while often praising the leadership of President Xi Jinping as he sought a new trade deal with Beijing.”

Bloomberg sees “all that as changed as the president – faltering in his response to the coronavirus, no longer able to boast of a surging U.S. economy and falling in polls of his re-election campaign – began to blame Beijing for allowing the global spread of what he calls the China virus.”

The president's new tone dovetails with a deeper determination among hawkish advisers like Pompeo and economic adviser Peter Navarro that now is the time to lock in a laundry list of new restrictions against China. Unspoken is that the rift would endure even if Trump loses in November.

“Securing our freedoms from the Chinese Communist Party is the mission of our time,” Pompeo proclaimed at the Richard Nixon Presidential Library in California. It was effectively a disavowal of Nixon's historic opening to China.

The administration's conviction about China's abuses is widely shared among American analysts, but not among U.S. allies in Europe who haven't been nearly as willing to follow the U.S. in its more antagonistic approach. They argue that the best approach is to confront China where necessary while cooperating where possible – on issues such as counterterrorism, climate change and nonproliferation.

“This endless parade of outrage only serves to highlight the fact that the administration has been unable to induce or coerce China into changing its behavior,” said Daniel Russel, former assistant secretary of state for East Asia and the Pacific, who's now vice president at the Asia Society Policy Institute. “Chinese don't see an incentive in restraint.”

Still, China, which has mostly kept to vague warnings of retaliation for U.S. restrictions, has numerous cards to play. Apple sells many of its devices in China and depends on the country for much of its supply chain. And China holds more than $1 trillion in U.S. treasuries, which it could offload.

“This is a very complicated calculus for Beijing,” said Michael Hirson, an analyst with New York-based Eurasia Group and formerly the U.S. Treasury Department's chief representative to Beijing. He thinks that China would prefer to wait for the election to pass and to start fresh, ideally with a Biden administration but even with Trump in his second term.

So, we will see. Critics of administration trade policy frequently argue that the cascading administration measures are as likely to damage domestic producers and lead to losses of future markets as they are to cause pain in China. Clearly, the toughening of the U.S. position regarding China has strong implications for ag producers and should be watched closely as the emerging policies intensify, Washington Insider believes.

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