Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
USDA Seeking Public Input to Compile Report On Supply Chain Issues
USDA is calling for public comments through May 21 on actions to "secure and strengthen" U.S. supply chains as it seeks to prepare a report on supply chain issues for agriculture commodities and food products.
The request for comments, published in the Federal Register April 21, covers a host of topics and USDA said they will also use feedback provided to shape their thinking on "how stimulus relief programs and spending related to food supply chain resilience as authorized by the Consolidated Appropriations Act, 2021 (CAA), and the American Rescue Plan Act of 2021 (ARPA) can help to increase durability and resilience within the U.S. food supply."
The request covers a broad range of issues for the supply chain in food and agriculture, including on issues such as "market concentration and consolidation," on crops or products not produced here that could be, transportation systems, digital products, risks posed by climate change, and "how to best target support for socially disadvantaged producers and processors, tribal communities, small businesses, beginning farmers and ranchers, and other key stakeholder groups." USDA also wants commenters to offer any "specific policy recommendations important to transforming the food system and increasing reliance in the supply chain for the sector."
USDA is to provide a report within one year of the executive order signed February 24 by President Joe Biden on "America's Supply Chain," and the comments it is seeking are aimed at providing information to compile that report. The broad nature of the request also outlines the administration's policy thinking moving forward which appears to be less focused on mainstream production agriculture.
Revised Climate Solutions Measure Reintroduced
A bipartisan group of senators reintroduced the Growing Climate Solutions Act Tuesday, a bill that would establish a federal program to help agriculture producers access carbon credit markets. Senate Ag Chair Debbie Stabenow, D-Mich., joined Sens. Mike Braun, R-Ind., Lindsey Graham, R-S.C., and Sheldon Whitehouse, D-R.I., spearheading the legislation.
The American Farm Bureau Federation is one of more than 60 agricultural and environment organizations to back the measure. Farm Bureau President Zippy Duvall called the bill an "improved" version of the one introduced in the last Congress.
Washington Insider: New Digital Weapon for China
Bloomberg is reporting this week that in spite of China's economic and military power "perhaps nothing reveals Beijing's weaknesses more than the U.S. control of the global financial system."
Recently, China has sought ways to counteract U.S. sanctions after President Trump targeted Chinese officials and companies over policies from the South China Sea to Xinjiang. Hong Kong's leader can't access a bank account and a top executive at Huawei Technologies Co. is detained in Canada. Even China's state-run banks are complying with U.S. sanctions.
That's one reason the Biden administration is starting to study whether China's development of a digital currency will make it harder for the U.S. to enforce sanctions, Bloomberg said. The digital yuan, which could see a wider roll out at the 2022 Winter Olympics is also spurring the U.S. to consider creating a digital dollar.
But instead of challenging U.S. dollar dominance and neutralizing sanctions, the digital yuan appears potentially more geopolitically significant as leverage over multinational companies and governments that want access to China's 1.4 billion consumers. Clearly the United States has a lot of power through our Treasury sanctions," Matt Pottinger, former U.S. deputy national security adviser in the Trump administration said. "That currency can be turned off like a light switch."
So far China has mostly resisted hitting foreign firms in response to U.S. actions on companies like Huawei. But Beijing has gone after companies like Hennes & Mauritz AB for statements on human-rights issues, even while government officials have been careful to avoid directly endorsing a boycott.
Controlling access to China's massive market remains the best way for Beijing to hit back at the U.S. As long as Chinese companies still want access to the broader financial world dominated by the U.S. and its allies, Washington can effectively wield sanctions against nearly anyone who doesn't operate exclusively in China's orbit.
While President Xi Jinping has called for greater self-sufficiency in key technologies like advanced computer chips, a financial decoupling from the U.S. would only hurt China's economy and potentially leave the Communist Party more exposed to destabilizing attacks. After Xi effectively ended Hong Kong's autonomy last year with a sweeping national security law, the U.S. refrained from cutting off the territory's ability to access U.S. dollars due to the potential devastation to the global financial system.
Widespread use of the digital yuan -- also known as the e-CNY -- could potentially give China's central bank more data on financial transactions than the big tech giants, allowing the Communist Party to both strengthen its grip on power and fine-tune policies to bolster the economy. However, while that level of control may boost growth in the world's second-biggest economy, it also risks spooking companies and governments already wary of China's track record on intellectual property rights, economic coercion and rule of law.
China's ability to see every transaction may make it difficult for foreign banks to use the digital yuan and still comply with confidentiality rules in their home countries, according to Emily Jin, a research assistant at the Center for a New American Security. But, she added, the currency might appeal to some regimes that prioritize control over privacy protection.
The digital yuan would serve as a back-up to Ant Group Co.'s Alipay and Tencent Holdings Ltd.'s WeChat Pay, which together make up 98% of the mobile-payments market, according to Mu Changchun, director of the central bank's Digital Currency Research Institute. Last month he said the electronic yuan has the "highest level of privacy protection" and the central bank wouldn't directly know the identity of users, but the government could get that information from financial institutions in cases of suspected illegal activity.
Chinese policy makers have also repeatedly emphasized that the digital yuan isn't meant to challenge the dollar. People's Bank of China Deputy Governor Li Bo said last weekend the motivation for the e-CNY is primarily for domestic use.
The Chinese currency now makes up about 2% of global foreign exchange reserves compared with nearly 60% for the U.S. dollar and most of Beijing's trade and loans in Xi's Belt-and-Road Initiative are disbursed in dollars.
"The dollar is not the dominant reserve currency because the Americans say it must be," said Michael Pettis, finance professor at Peking University and senior fellow at the Carnegie-Tsinghua Center in Beijing. "The dollar is the dominant reserve currency because the Chinese, the Europeans, the Japanese, the South Koreans etc. say it must be. It's the rest of the world that imposes that because they think its the safest place to park money."
China began research on the digital yuan back in 2014. It has begun technical testing with Hong Kong for cross-border payments and is working with Thailand and the United Arab Emirates on real-time foreign exchange settlements. Authorities are also studying how the digital yuan can be combined with 5G networks and the internet of things.
Josh Lipsky, director of the Atlantic Council's GeoEconomics Center, said. "China is really leading in this area and it should be a wake-up call to the U.S. and to Europe," he said. "There is a serious first mover advantage not because of what China will do, but what other countries are doing.
So, we will see. There is a strong hope across agriculture that the massive financial control systems can be made to accommodate trading needs -- and that new deals to help supply China's growing food needs can be made, as well. These are among the world's most promising markets and should be redeveloped and expanded to the extent that is possible, Washington Insider believes.
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