Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
China Makes Soyoil Buy And Ups Purchases Of Corn, Soybeans, Other Products
Sales of U.S. ag goods to China continue for several commodities, with the country showing up as a buyer of U.S. soyoil for the first time in the current marketing year.
For the week ended October 15, USDA reported net export sales for 2020/21 of 433,521 metric tons of corn, 195,804 metric tons of sorghum, 1.22 million metric tons of soybeans, 11,000 mt of soyoil, and 47,513 running bales of upland cotton.
No new sales of wheat or rice were reported.
For 2021/22, USDA reported net sales of 17,160 running bales of upland cotton.
For 2020, net sales of 3,667 metric tons of beef and 1,802 metric tons of pork were also reported.
GOP Senators Call On EPA to Waive RFS Requirements For 2021
EPA should consider a general waiver of biofuel requirements under the Renewable Fuel Standard (RFS) in a bid to help refiners with the impacts of the pandemic.
The lawmakers said that EPA should use its authority to make sure that RFS obligations for refineries provide “regulatory certainty for 2021, do not exceed the 'blend wall' of ethanol's proportion of actually marketable fuel blends, and—perhaps most pressingly—account for the unprecedented collapse in demand for gasoline, diesel and jet fuel resulting from the economic downturn associated with the COVID-19 crisis.”
The lawmakers said the downturn in demand means Renewable Volume Obligations (RVOs) for 2021 “must be reduced to prevent outstripping the 'blend wall,' an unprecedented rise in the cost of Renewable Identification Number (RIN) offset credits, or both.” They maintain that keeping current RVO levels or expanding them would impose “severe economic harm,” one of the conditions that indicate the need for a general waiver of RFS requirements. They also called on EPA not to reallocate any volumes linked to small refinery exemptions (SREs) and to set 2022 biodiesel and 2021 advanced and cellulosic biofuel levels at marks that ensure compliance.
“Put simply, EPA must not mandate blending too much biofuel into a dwindling fuel supply,” the lawmakers concluded, noting that any increases in the 2021 RVOs would impact consumers and shift economic hardships to refiners from ethanol producers.
EPA has not yet finalized the 2021 biofuel and 2022 biodiesel levels with its proposed rule still shown as being under review at the Office of Management and Budget (OMB). EPA Administrator Andrew Wheeler has signaled the COVID pandemic has prompted the agency to take a new look at the proposal and now the focus is on whether the agency will meet the November 30 deadline to finalize those levels.
Bloomberg is reporting this week that U.S. industrial jobs are continuing to move offshore — and that “major U.S. losses have been eating at the U.S. industrial core for decades, rather than simply the economic carnage caused by COVID-19.”
The report also says that these trends highlight “a particularly stark example of how the administration has struggled to live up to its promises to end a decades-long migration of American factories overseas.”
President Trump built a political brand around “America First” trade and tax policies that were meant to repatriate U.S. jobs. From the renegotiation of the North American Free Trade Agreement to the trade war with China, the administration is claiming that it has ended an era of offshoring and laid the foundation for an industrial renaissance.
Bloomberg thinks the reality is more complicated—and that when it comes to offshoring, the data point to an enduring trend rather than a revolution. It argues that this can be seen in the applications for Trade Adjustment Assistance, the federal program that is the best available barometer on the effects of corporate disinvestment on employment.
In the first three and a half years of the current administration, the U.S. Department of Labor approved 1,996 petitions covering 184,888 jobs shifted overseas. During the equivalent period of President Barack Obama's second term, 1,811 petitions were approved covering 172,336 workers.
The report notes that stopping the outflow of factory jobs is a bipartisan priority in this election year and that former Vice President Joe Biden is proposing a tax credit for U.S. companies that bring production home and a 10% surtax on profits linked to new factories built overseas. He also has pledged to tighten Buy American provisions in government procurement and wants to close loopholes in the administration's tax reforms that he says encourage some industries to continue offshoring.
But the past four years have shown that the policy levers presidents have available don't erase the lure of overseas markets where the consumer class is growing at a faster clip than in the U.S. and the costs of running a factory are lower. “At the end of the day it's hard through trade agreements to push back against these much larger economic forces,” says Edward Alden, a senior fellow at the Council on Foreign Relations.
The administration rebranded NAFTA, the U.S.-Mexico-Canada Agreement (USMCA), and now requires automakers to use more parts made in North America. That agreement includes a provision to have at least 40% of components come from factories paying at least $16 an hour. The industry consensus is that these rules, which do not go fully into effect until 2025, may eventually prod automakers and their suppliers to channel more of their investment into U.S. plants, particularly as production of electric vehicles ramps up.
Administration officials say that's already happening. As evidence, they cite the $2.3 billion joint venture General Motors Co. and Korea's LG Chem Ltd. announced last year to build a battery plant in Ohio.
“We clearly reversed a long trend of jobs moving away from the U.S. in this industry and are bringing new investment and jobs back,” Trump's trade czar, Robert Lighthizer, wrote to Bloomberg. “The notion that companies are moving to Mexico now is ridiculous.”
Labor Department data tell a different story, Bloomberg says. In the first six months of 2020 alone, the agency approved 25 petitions for trade aid related to auto parts factories going overseas. Fifteen involved relocations to Mexico.
According to Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research, the new NAFTA has not provoked an investment surge. From 2013 through 2016 automakers announced investments worth $47.3 billion in the U.S., she says. From 2017 to 2019 the equivalent figure was $38.3 billion. “Investment goes along with growth in the market,” Dziczek says, and auto sales in the U.S. peaked in 2016.
The report also says that plant closures like International Automotive Components in Huron, Ohio, leave the administration vulnerable to criticism of USMCA, which it sees as one of its signature economic achievements. “They tried to give it this new name and burnish it, and shine it up a bit. But it's just NAFTA 2,” said Rep. Marcy Kaptur, D-Ohio, whose district includes Huron. She voted against the USMCA last year.
In written responses to questions, IAC would say only that the Huron plant was closing after 30 years because customers were ending vehicle programs. The company has been more explicit about other plants. The loss of 145 jobs in Dayton, Tenn., came because “production will be shifted to a foreign country,” IAC told the Department of Labor. In Madisonville, Ky., 111 jobs were cut because contracts “are being shifted to productions facilities in Canada and Mexico,” according to another filing.
In the eyes of former workers at the Huron IAC plant, the blame for its demise lies somewhere between a management team that wasn't aggressive enough in chasing down new business and an administration that didn't live up to its promises.
So, we will see. Certainly, U.S. trade policy will be front and center in political debates for the duration of the current campaigns, and beyond. These are often controversial and bitter fights that producers should watch closely as they proceed, Washington Insider believes.
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