Washington Insider-- Thursday

Stronger Outlook for Trade

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

Federal Maritime Commission Expands Check On Ocean Carriers, Including On Ag Shipments

The Federal Maritime Commission (FMC) will expand its Fact Finding 29 effort, the International Ocean Transportation Supply Chain Engagement, to now include practices that have arisen relative to the return of empty containers and other questionable practices.

The expanded effort comes in the wake of several industries, including the U.S. agriculture industry, complaining that foreign carriers are rejecting exports of ag products in favor of sending empty containers back to China to be used to send Chinese goods back to the U.S. The situation arose, according to reports, after Chinese transportation officials met with major carriers and called on them to cut rates and reinstate some sailings that had been cancelled.

Indications are the rejection of agriculture shipments is linked to costs and time associated with such shipments to China — they are cheaper to move and take longer to unload. By sending the empty containers back to China to be filled with Chinese goods, carriers can then charge higher shipping rates. The original Fact Finding 29 investigation was launched to “identify operational solutions to cargo delivery system challenges related to recent global events.”

The expanded investigation is looking at “practices and regulations that are having an unprecedented negative impact on congestion and amplifying bottlenecks at these ports and other points in the Nation's supply chain,” FMC said. The expanded check is focusing on “alliance carriers who call on the Port of New York and New Jersey or who call on the Port of Long Beach and the Port of Los Angeles are employing practices or regulations” that are restricting U.S. exports via “practices and regulations related to demurrage and detention, empty container return” and “practices related to the carriage of U.S. exports.”

It is not clear what results of the expanded effort will be, but actions involving agriculture shipments which have increased demurrage charges and other costs due to shipment rejections have caught the attention of U.S. shipping regulators.

House Democratic Steering Committee Backs Rep. Scott To Head Ag Panel

The House Steering Committee Thursday cast votes on who they back to lead the various standing committees in the 117th Congress, with Rep. David Scott, D-Ga., emerging as their choice.

He received 32 votes to 19 for Rep. Jim Costa, D-Calif.

While Costa has touted the backing of several agriculture groups for him to take the Ag panel gavel, Scott importantly received the support of currently House Ag Committee Chairman Collin Peterson, D-Minn., who was defeated in his bid for re-election. Scott is also the second ranking Democrat on the panel in terms of seniority, something which Peterson noted when he endorsed Scott for the chairman's spot.

The full House Democratic caucus will make its choices Thursday on who will lead the committees.

The House Republican Steering Committee on Wednesday also recommended the House GOP Caucus elect Rep. Glenn Thompson, R-Pa., as the ranking member for the House Agriculture Committee.


Washington Insider: Stronger Outlook for Trade

Bloomberg is reporting that in press interviews this week the president-elect indicated a “better than expected outlook for trade.” The report highlighted an interview first reported by the New York Times' Thomas Friedman that said that the transatlantic alliance fractured by President Trump's unilateral trade policies appeared headed for repair – as both President-elect Joe Biden and Europe signaled an urgency to rejoin a united front against China's ascendancy in the global economy.

“The best China strategy, I think, is one which gets every one of our – or at least what used to be our – allies on the same page,” Biden was quoted as saying. “It's going to be a major priority for me in the opening weeks of my presidency to try to get us back on the same page with our allies.”

Meanwhile, in Brussels, the European Union is making a sweeping proposal for cooperation with the incoming Biden administration to counter the influence of countries like China and Russia.

“This combined power and influence is indispensable to anchor global cooperation in the 21st century,” the European Commission, the 27-nation EU's executive arm, said in a strategy paper published Wednesday.

The Trump administration and the EU have been at loggerheads over issues ranging from digital taxes on large tech companies, to aircraft subsidies and the leadership of the World Trade Organization. High on the list of potential economic risks in a second Trump term was a tariff war between the U.S. and Europe.

In his recent public remarks, President-elect Biden is confirming interest in a renewed multilateral approach to address trade imbalances with America's traditional allies. For the EU, the aim is to bring the U.S. back into the multilateral system that the country was instrumental in forging after World War II and to leverage transatlantic unity to shape global developments in policy areas ranging from trade to health.

Biden told the Times that he wouldn't immediately scupper the trade agreement Trump reached with China in January but will review it before making any decisions.

“I'm not going to make any immediate moves, and the same applies to the tariffs,” Biden said, according to the report. “I'm not going to prejudice my options.” Biden said he will first conduct a full review of the phase-one deal and consult with allies in Asia and Europe “so we can develop a coherent strategy.”

The yuan weakened against the dollar immediately after the news.

As part of the trade deal signed in January, China agreed to increase its purchases of U.S. goods by $200 billion through 2021, but it is now nowhere close to meeting those targets. The latest data through the end of October shows China had only bought about 44% of the promised amount for this year. Both the U.S. and China left tariffs on billions of dollars worth of goods in place after the deal was signed.

China's Foreign Ministry reiterated its previous comments when asked about Biden's views, with spokeswoman Hua Chunying telling reporters in Beijing Wednesday that resolving trade disputes with the U.S. requires mutual respect from both sides. Biden had said he hoped to tackle China's “abusive practices,” including “stealing intellectual property, dumping products, illegal subsidies to corporations,” as well as forcing “tech transfers” from American companies to their Chinese counterparts.

But the U.S. needs “leverage” to deal with China, Biden said, adding “in my view, we don't have it yet.” To build that, the U.S. needs a bipartisan consensus at home for government-led investments in research and development, infrastructure and education to better compete with China, he said. “I want to make sure we're going to fight like hell by investing in America first,” he said, citing industries such as energy, biotechnology, advanced materials and artificial intelligence as key ones for large-scale investment in research.

On the campaign trail, Biden's advisers described “a gradual approach on China tariffs,” saying he'd prioritize domestic issues like investing in research and development and U.S. manufacturing to compete with Beijing from a position of strength.

The president-elect's latest comments suggest a cooling off of tensions between the two nations as he focuses attention on more immediate problems facing the U.S. economy, like the coronavirus pandemic.

“Most likely the new U.S. president would spend his first year in office on domestic issues,” said Larry Hu, head of China economics at Macquarie Group Ltd. “It could give a respite to both sides, whose relationship has deteriorated a lot since 2018.”

Still, Biden's pledge to work with allies could signify a broader threat to China, Bloomberg said. “After the past four years, it is difficult to expect a normalization of the bilateral relationship immediately,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group.

However, “as long as China continues to buy more from the U.S. and commit to the phase one agreement, the U.S. will say “why not”. Nonetheless, as most people expect, Biden's administration will work closely with allies in his China policy.”

So, we will see. Clearly, promises to “get tough with China” have been effective politics – but efforts to maintain and expand trade there are also very popular. As a result, the new administration's “trade reset” will be eagerly debated and should be watched closely as details emerge, Washington Insider believes.

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