Washington Insider-- Wednesday

Toxic Struggle Coming Over Trade

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

CFAP 2 Payouts Over $10 Billion

Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) now total $10.08 billion as of November 15 with 616,103 applications approved. Acreage-based payments account for the largest share at $4.99 billion, followed by livestock ($2.74 billion), sales commodities ($1.34 billion), dairy ($980.8 million) and eggs/broilers ($28.3 million).

Payments for corn ($2.76 billion), cattle ($2.21 billion), sales commodities ($1.27 billion) and soybeans ($10.6 billion) are at $1 billion or more, followed by milk ($980.8 million), wheat ($550.0 million), hogs/pigs ($459.0 million) and upland cotton ($229.2 million).

By state, Iowa still leads at $953 million, with Nebraska at $687.7 million), Minnesota at $665.5 million, Illinois at $637.8 million, California at $618.2 million, Kansas at $526.3 million, Texas at $482.3 million, South Dakota at $462.9 million, Wisconsin at $441.4 million and North Dakota rounding out the top 10 at $370.2 million. Signup for the effort continues through December 11 and USDA continues to solicit producer enrollments.

Payments under the CFAP 1 effort stand at $10.42 billion with USDA seeking to wind that program down, calling on those producers who have not submitted requested forms to so by November 20.

GAO Report: USDA Needs To Do More On Verifying Farm Program Payments

A Government Accountability Office (GAO) report on USDA farm program payments shows that while USDA has improved its compliance reviews on eligibility for farm program payments, more oversight is still needed.

Sen. Chuck Grassley, R-Iowa, long backing tightening farm program payment rules to make sure those dollars go only to producers that have “dirt under their nails,” requested the review and said it shows that there needs to be more done on that front.

“Congress must fix this broken system in the next Farm Bill,” Grassley said. “I look forward to continuing to work with the USDA as they address much-needed changes to FSA office operations to implement these recommendations.”

GAO said that the issues are focused mostly on state FSA offices, pointing out that there no systematic monitoring of performance compliance reviews. The report said that 19 of the top 20 farms that received payments in 2016 and 2017 are in the south. GAO made an additional five recommendations for USDA and FSA to implement so that only those actively engaged in farming are utilizing the payments and the program is used for its original purpose.

This will keep the matter as an issue as the next farm bill is developed, with that process expected to get underway in 2021.


Washington Insider: Toxic Struggle Coming Over Trade

The New York Times reported this week that “in addition to a deadly pandemic and a weakened economy, the next president will inherit a toxic relationship with the world's second-largest economy, China."

President Trump has placed tariffs on hundreds of billions of dollars of products from China, imposed sanctions on Chinese companies and restricted Chinese businesses from buying American technology — a multiyear onslaught aimed at forcing Beijing to change its trade practices as punishment for its authoritarian ways.

The coming hard choices for the U.S. will include whether to maintain tariffs on about $360 billion worth of Chinese imports, which have raised costs for American businesses and consumers, or whether to relax those levies in exchange for concessions on economic issues or other fronts, like climate change.

The choices will be challenging, the Times says, and critics are demanding smarter approaches that combine working with the Chinese on some issues like global warming and the pandemic, competing with them on technological leadership and confronting them on still other issues like military expansionism, human rights violations--or unfair trade.

In a speech on Monday, Biden promised significant investments for American industry, including $300 billion in technologies that he said would create three million “good-paying” jobs.

“We're going to invest in American workers and make them more competitive,” Biden said and then added that he would ensure that labor unions and environment groups were “at the table” in any trade negotiations. And he promises to push for the United States, rather than China, to set the world's trading rules, along with other democracies.

Even if Biden departs from the current punishing approach, his administration will need leverage over China to accomplish its own policy goals and will face pressure from lawmakers in both parties who view China as a national security threat and have introduced legislation aimed at penalizing Beijing for its human rights abuses and economic practices.

Biden has given few details about his plans for U.S.-China relations, but the new administration will face pressure from both parties not to revert to the approach that he and many of his predecessors had earlier embraced in trying to transform China's economic practices by bringing it into the global economy, the Times says.

Like many Democrats and Republicans Biden argued for decades that integrating China into the global trading system would force it to play by international rules. In 2000, he voted to grant China permanent normal trading relations which paved the way for China's entry into the WTO and deeper global economic ties.

In 2016, Trump won the presidency in part by rejecting that approach, arguing that the United States needed to isolate, not integrate, Beijing.

Now, Biden acknowledges that China exploited the international system and he is calling for a more aggressive approach. Congress is also relatively unified on a tough stance on China. Hundreds of China-related bills are circulating, including several bipartisan efforts that echo Biden's emphasis on competing with China by investing in advanced American industries.

One area of focus is the trade deal that the administration signed with China in January. While it has largely kept commitments to open up its markets to American companies and administration officials have continued to defend the pact, Beijing has fallen far behind schedule in its promise to buy an additional $200 billion of goods and services by the end of next year.

Now, the Times expects that the administration will leave the deal intact, said Chris Rogers, a global trade and logistics analyst at Panjiva. But he wouldn't rule out “a scorched-earth policy where China is declared to be in violation of its Phase 1 trade deal commitments and a return to tariff escalation,” the report said.

“We are worried that the administration is going to do some rash things that don't make sense,” said Rufus Yerxa, the president of the National Foreign Trade Council, which represents major multinational companies. “Given the history of President Trump's use of executive authority, we're taking nothing for granted in these next few months.”

Biden's appointments for trade and foreign policy posts will help reveal his approach toward China, the Times says. Similar to Biden himself, many of his closest advisers have a moderate track record on trade and China, believing they can work with Chinese leaders on some issues even as they challenge them on others. But several of his national security advisers are more skeptical.

No matter the trade policy path, business groups, economists and others are hoping for a coherent strategy that does not result in the type of economic brinkmanship the current administration appeared to thrive on. “The administration never did lay out a coherent, comprehensive, engaged trade strategy,” said Thea M. Lee, an economist and the president of the Economic Policy Institute. “It was much more scattershot: Throw up a tariff here, do a deal with China, disparate elements that didn't seem to talk to each other.” “But there are a lot of tools in that toolbox, and I would like to see the Biden administration be thoughtful and strategic about how to use them,” Lee said.

So, we will see. The definition and implementation of the promised new policies, especially, but not solely with China, will be a tough challenge, and many of those fights likely will appear early in the new administration. They certainly should be watched closely by producers as they emerge, Washington Insider believes.

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