Washington Insider-- Wednesday

Recent and Future Trade Policy

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

CFAP 2 Payouts Clear $8.7 Billion

USDA has made $8.8 billion in payments under the Coronavirus Food Assistance Program 2 (CFAP 2) as of November 1, including $4.4 billion in acreage-based payments, $2.4 billion for livestock, $1.04 billion for sales commodities, $876.9 million for dairy and $21.7 million for eggs/broilers.

By commodity, the payouts include $2.5 billion for corn, $1.9 billion for cattle, $982.2 million for sales commodities, $946.8 million for soybeans, $876.9 million for milk, $461.9 million for wheat, $418.6 million for hogs/pigs, and $195.2 million for upland cotton.

Iowa continues to lead all states with $870.4 million, followed by Nebraska at $603.8 million, Minnesota at $598.8 million, Illinois at $567.0 million, California at $468.6 million, Kansas at $451.3 million, South Dakota at $406.2 million and Wisconsin at $406.1 million.

CFAP 1 payments total $10.3 billion as of November 1, with payouts of $1 billion or more for three commodities—$4.3 billion for cattle, $1.8 billion for corn and $1.8 billion for milk.

The funds continue to provide a financial infusion for U.S. agriculture, but prospects are uncertain for 2021 as a lack of these ad hoc payments will result in a major downturn in forecast U.S. farm income.

Department Of Labor Releases Final Rule On H-2A Wage Plans

The Department of Labor (DOL) has released a final rule which sets terms for how the agency plans to set the Adverse Effect Wage Rates (AEWR) for H-2A workers in the wake of USDA's decision to halt data collection and release of its Farm Labor Survey (FLS) report.

DOL is putting forth the rule even as court has ordered USDA to continue the survey while a court challenge brought by United Farmworkers unions proceeds, citing USDA's decision as a factor in expediting the process. But some other aspects of the DOL proposed rule on this topic will come at a later time.

DOL's final rule would set AWERs for field and livestock workers through calendar year 2022 on average hourly wages included in the November 2019 FLS. After 2023, the final rule proposes fixing AEWR increases annually for those positions based on the change in the Bureau of Labor Statistics' (BLS) Employment Cost Index (ECI) for wages and salaries for the preceding 12-month period.

Expectations are the DOL final rule could be challenged in court as well plus the ongoing litigation over USDA's decision on the FLS could also impact the final outcome.


Washington Insider: Recent and Future Trade Policy

Bloomberg is reporting this week that the “consensus view” is that since his arrival on the global political scene in 2016 President Donald Trump has rewritten the politics of trade and ended a 70-year march of perpetual trade liberalization and the acceleration of globalization that came with it.

The report then asks readers to set aside the economics and what administration trade policies have – or have not – actually achieved in dollars-and-cents substance. Bloomberg's experts see the administrations greatest achievement concerning trade is the shift away from Republican free-trade orthodoxy – towards a nationalist protectionism illuminated by what it took to garner working-class votes in forlorn industrial swing states.

Bloomberg then suggests that many expect that the political shift means “that Democrats and Republicans alike will heretofore embrace the same trade objectives forever more.”

However, Bloomberg seems not to be persuaded and it questions whether that is really how the administration rewrote the politics of trade.

The report moves to present a “contrarian view” that calls the past four years a “very loud civics lesson in the misguided economics of protectionism and the costs of tariffs and economic nationalism.” The analysis suggests that in this election administration trade policies have actually been a vulnerability rather than a strength.

For example, Bloomberg thinks Americans' view of trade is more optimistic than ever and has only become more so under this administration. In February 2016 when Gallup asked Americans whether they saw foreign trade as more of a threat or opportunity, the optimistic view won 58-33.

By February of this year, those seeing trade as opportunity had grown to 79% of those polled. That's just one poll, the report says, but reminds that “Gallup has been asking the same question annually since 1992 and this year's result is the highest on record.”

Bloomberg also thinks that critics of the administration see the ongoing trade wars as a political vulnerability in swing states. When author Don Winslow teamed up with Bruce Springsteen on an ad targeting voters in the battleground state of Pennsylvania this year, he took direct aim at the administration's trade war with China and his steel tariffs – and notes that by election eve that ad had been viewed 8.8 million times and retweeted almost 100,000 times.

Overall, Bloomberg notes that tariffs aren't well-liked. The president famously called himself “Tariff Man,” and import taxes are the ideological spine of his trade policy. But polls show they actually haven't been that popular, and polls show more Americans believe tariffs hurt the U.S. economy than help it.

The report point out that even though the administration claims its tariffs saved U.S. steel companies, with “production still slumping and jobs near an all-time low, the iconic U.S. industry is seeking a longer-term solution.”

Overall, Bloomberg thinks that considering the range of issues from the taxing of U.S. corporations to the independence of the Federal Reserve, President trump and former Vice President Joe Biden offer voters vastly different economic policy agendas.

For example, it says that a Democratic victory would likely mean rapid delivery of substantial additional support from stimulus programs — and that Republicans under George W. Bush from 2001-2006 and again from 2017-2018 – instituted sizeable tax cuts. Under unified Democratic control in 2009-2010, spending remained high in the wake of 2009 stimulus legislation.

The expansive $3.5 trillion Heroes Act House Democrats proposed in May illustrates the sort of top-line proposal that could yet become law after the election. A big-ticket package also became law just after President Obama's inauguration in early 2009, passed by a Democratic Congress under a similar backdrop of high unemployment.

A Donald Trump win coupled with a divided Congress could prompt a moderation in fiscal hawkishness from Senate Republicans. A $1.5 trillion fiscal package would push 2021 GDP growth up to 4.3%.

One area where the president has a lot of discretion is on how to shape the relationship with China. Bloomberg examines U.S.-China policy in terms of strategy – where administrations operate on a spectrum from engagement to containment – and tactics, which can be narrow and procedural or wide and unpredictable. On strategy, President Barack Obama favored engagement. On tactics, the approach was procedurally predictable and focused on a narrow set of instruments.

Relations during President Trump's first term started bad and looks set to end worse, Bloomberg says. Engagement is out, containment in. The range of policy instruments is wide and their use unpredictable. If the administration wins a second term, Bloomberg expects more of the same. If the Democrats win, Bloomberg thinks, U.S. – China policies would soften but not fundamentally alter America's new focus on the risks in China's rise.

So, we will see. No one is really sure what lies ahead – but the current concerns are intense and producers, like most others, should watch carefully as these fights play out, Washington Insider believes.

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