Washington Insider -- Thursday

USTR Talks DST But Holds Off Tariffs

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

USDA Announces New Cover Crop Component for Crop Insurance

USDA this week announced producers who planted cover crops and have coverage under most crop insurance policies are eligible for premium support for the 2021 crop year, part of USDA's broader Pandemic Assistance for Producers (PAP) initiative.

The Pandemic Cover Crop Program (PCCP) offers producers crop insurance premium support of $5 per acre, but not more than the full premium owed. Producers who insured a spring crop and planted a qualifying cover crop are eligible for the support.

To qualify, producers must file an acreage report with FSA by June 15, a month earlier than the normal crop reporting date of July 15.

And, farmers in Illinois, Indiana and Iowa have existing premium benefits for producers who plant cover crops. But USDA said that those producers will receive an additional benefit under PCCP.

China's Liu, US Treasury's Yellen Hold Discussion

Chinese Vice Premier Liu He and U.S. Treasury Secretary Janet Yellen held a virtual discussion Wednesday morning via video as part of the China-U.S. comprehensive economic dialogue.

The discussions took place after Liu last week held discussions with U.S. Trade Representative Katherine Tai.

Liu and Yellen "conducted extensive exchanges on the macroeconomic situation and bilateral and multilateral cooperation, candidly exchanged views on issues of mutual concern, and expressed willingness to maintain communication," according to a report from Xinhua. Both sides agreed China-U.S. economic relations were "very important."

The Treasury Department said in a brief statement that Yellen had discussed U.S. plans to "support a continued strong economic recovery and the importance of cooperation on areas that are in U.S. interest," while at the same time "frankly" talking about issues of concern.

Yellen noted that she looked forward to further discussions with Liu, the statement said.

Washington Insider: USTR Talks DST But Holds Off Tariffs

The Office of the U.S. Trade Representative (USTR) Wednesday announced results of Section 301 investigations of digital services taxes (DSTs) with several countries, reaching the conclusion that the countries' actions were enough to warrant the U.S. to impose sanctions. But, USTR also announced that it would hold off on imposing tariffs on around $2 billion in goods from the countries in question for six months in order to have the issue get worked out in an international forum. USTR found in January that DST actions by Austria, India, Italy, Spain, Turkey, and the UK discriminate against U.S. digital companies, are inconsistent with principles of international taxation, and burden U.S. companies. The list of duties that would have gone into effect was sizable for several countries as they would have targeted goods totaling $887 million worth of UK goods, $386 million of Italian goods, $323 million in Spanish goods, $310 million in Turkish goods, $118 million in Indian goods, and $65 million in Austrian goods. USTR based the levels on what they deemed to be the amount of tax that U.S. companies would have had to pay those countries. So instead of putting the tariffs in place, USTR announced the 180-day suspension is aimed at letting international efforts underway at the Organization for Economic Cooperation and Development (OECD) and Group of 20 (G20) countries to come to an agreement over DSTs.

"The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes," USTR Katherine Tai said in a statement announcing the decisions. "The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes."

However, Tai indicated that the U.S. could still come back an impose tariffs under Section 301 of U.S. trade law "if warranted in the future." A pattern is starting to emerge relative to the Biden trade policy. In areas where they are seeking a deal, they are willing to hold off on imposing new tariffs like the DST issue. They also appear to be willing to suspend tariffs in order to get a deal worked out in other disputes, like the civilian aircraft dispute where the U.S., EU and UK all imposed tariffs that were sanctioned by the WTO. In March, the U.S. and EU and separately the U.S. and UK announced four-month suspensions of the retaliatory actions in the civilian aircraft disputes in order to try and reach a deal. The aircraft dispute has its origins going back some 16 years. Some trade experts question whether suspending the tariffs in hopes of getting a deal will merely provide a period of tariff relief as opposed to getting the issue settled given the length of time and differing officials that have dealt with the issue have come and gone. But their willingness to suspend tariffs is not yet a broad-based U.S. trade policy stance. Take the Section 232 duties on imports of aluminum and steel. Those remain in place and rising numbers of companies and others are calling on the Biden administration to remove those. Their arguments that they are costing U.S. businesses apparently have not reached the point of the administration thinking they could further resolve the steel overcapacity issue if the tariffs were at least suspended for a period of time. That is likely due to the fact they are focusing on China and the overcapacity in steel production that China has built up. It's almost surprising that the tariffs have not been lifted against some U.S. allies in exchange for getting some kind of pledge from those countries that they will get on board and help the U.S. take on China. And then there are the tariffs imposed on China under Section 301 relative to intellectual property. Those tariffs remain in place as do the retaliatory actions that China responded with. And there has been little talk of those tariffs being removed. The Biden administration has made clear those tariffs are not going away soon even as China has called for them to be taken away. So while tariff suspensions are clearly a tool in the U.S. trade policy toolbox, it hasn't been cemented in place as a consistent policy. That makes these trade issues all that more important to follow for agriculture as the sector has been the one hit with tariffs even though their products are not at the heart of the disputes in question. Still, the disputes where these tariff suspensions have taken place will be important to watch, Washington Insider believes.

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