Washington Insider -- Tuesday

US, China Clashes Continue

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


Vilsack Talks Food Inflation, Livestock Regs

USDA Secretary Tom Vilsack predicted the rise in U.S. food prices seen in June will start to moderate despite the concerns over inflationary pressures in the U.S. economy.

"There are certain selective items in the grocery store folks may see for a period of time increased costs," Vilsack said Friday in an interview on Bloomberg Television's Balance of Power with David Westin. "We think this will even out as we begin to recover, as we begin to get the supply and demand in better balance."

Meanwhile, Vilsack signaled USDA would soon announce proposed regulations to provide more protection to livestock producers in their dealings with the highly consolidated meatpacking industry. President Joe Biden's executive order on competition instructed the USDA to consider stronger regulations. "I think we will see significant action on that in the very near term," Vilsack said in the session.


China Warns EU Carbon Border Tax Violates Trade Principles

Plans outlined by the European Commission to implement a Carbon Border Adjustment Mechanism (CBAM) from 2026 would force companies sending carbon-intensive products into the European Union (EU) to pay carbon costs on such shipments.

"CBAM is essentially a unilateral measure to extend the climate change issue to the trade sector," said Ministry of Ecology and Environment spokesman Liu Youbin. "It violates WTO principles ... and (will) seriously undermine mutual trust in the global community and the prospects for economic growth."

The U.S. has also raised questions about the potential EU carbon tax, with U.S. Trade Representative Katherine Tai indicating the U.S. would not shy away from confronting the EU on the matter.


Washington Insider: US, China Clashes Continue

The U.S. and China have moved into a contentious stance as the Biden administration has unfolded, and this week has indicated that relationship has not shifted a great deal.

The week opened with U.S. Deputy Secretary of State Wendy Sherman holding in China with top officials, including with Vice Foreign Minister Xie Feng. Interestingly, while that session was still going on, Chinese state media released a statement from Xie contended the U.S. had created an "imaginary enemy" in China to divert attention from domestic U.S. issues.

"The United States wants to reignite the sense of national purpose" with state media reporting that there would be "serious consequences."

Xie urged the U.S. to lift visa restrictions on Communist Party members, their families, and Chinese students; lift sanctions imposed on Chinese leaders, government officials and agencies; remove restrictions on Confucius Institutes and Chinese companies; cancel rulings determining Chinese media as foreign agents; and dropping its request to extradite Huawei financial chief Meng Wanzhou from Canada.

Sherman's meeting with State Councilor and Foreign Minister Wang Yi was labeled "frank and open" relative to "a range of issues, demonstrating the importance of maintaining open lines of communication between our two countries. They discussed ways to set terms for responsible management of the U.S.-China relationship, according to the U.S. State Department.

Sherman "underscored that the United States welcomes the stiff competition between our countries -- and that we intend to continue to strengthen our own competitive hand -- but that we do not seek conflict with the PRC [People's Republic of China]."

While that was unfolding in China, the U.S. and China butted heads at the WTO. The issue is the same one where they recently clashed at the world trade body -- over China's operation of their tariff rate quotas (TRQs) for wheat, rice and corn.

At a meeting of the Dispute Settlement Body, China contested the U.S. request for permission to impose trade retaliation on China over the TRQ issue. That means the matter is now headed to arbitration.

But China also submitted a request for a dispute panel to look at whether it had come into compliance with the WTO ruling on its TRQs which dates back to 2019. The U.S. blocked the request but will not be able to block a second request. The U.S. believes that the retaliatory actions can move ahead while the two sides are in arbitration, but China said the arbitration should be suspended until the determination is made on whether they have changed their TRQ program and come into compliance with the WTO ruling.

China not only contends that it has come into compliance with the WTO ruling but they are also taking issue with the level of retaliation sought by the U.S.

And China has also made clear that it wants the U.S. tariffs imposed by the Trump administration to be removed. But so far, there has been no sign from the Biden administration that they are ready to take that step either.

So we will see. The level of acrimony continues to rise between the two countries, though no major actions have been taken by either side. Still, the situation should be watched closely in the coming weeks and months, Washington Insider believes.


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