Washington Insider -- Thursday

TPP Pullback and Farmers

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

WTO Establishes Dispute Settlement Panel on China Farm Supports

A panel has been established to examine China's domestic supports to its corn, wheat and rice producers by the World Trade Organization's (WTO) Dispute Settlement Body, a move that was widely expected.

The panel is the next step in the U.S. complaint on domestic supports provided by China to producers of wheat, Indica rice, Japonica rice and corn, with the U.S. contending China provides domestic support in excess of its product-specific de minimis level of 8.5% for each of the four products in question, as specified in China's 2001 Protocol of Accession to the WTO.

An initial request for a panel was blocked by China, as is its right under WTO rules, on Dec. 16, 2016, but they were unable to block this second request from the U.S.

At issue is the claim that this domestic support distorts trade in these agricultural commodities by influencing market prices or production. This is known in the WTO as aggregate measurement of support (AMS), usually called 'Amber Box' support.

In response to the establishment of the panel, China said it regretted the U.S. request and that it was particularly disappointed by the "unprecedented and unjustified step" by the US in challenging China's "legitimate and WTO-consistent" domestic support. WTO members have the right to provide necessary and essential support to their respective domestic agricultural sectors, China said.

The European Union, Japan, Korea, Saudi Arabia, Colombia, Brazil, Australia, the Philippines, India, Egypt, Vietnam, El Salvador, Canada, Singapore, the Russian Federation, Paraguay, Turkey, Chinese Taipei, Pakistan, Norway, Kazakhstan, Thailand, and Indonesia have all requested third party rights in the proceedings.

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Roberts, Stabenow to Hold New Farm Bill Field Hearings

The Senate Agriculture Committee will begin the first of several farm bill field hearings in Manhattan, Kansas on February 23. Both Committee Chairman Pat Roberts, R-Kansas, and ranking member Debbie Stabenow, D-Mich., will attend to take questions from farmers and other agriculture industry stakeholders as lawmakers get ready to draft another multi-year farm bill reauthorization. The hearing will be streamed live on the committee's website.

"Our producers have had time to employ the programs in the current farm bill, and they have a lot to say," Roberts said in a statement. "We need clear direction on what is working and what is not working in farm country, and we will be listening to see what needs to be adjusted."

Lawmakers are expected to hold several hearings on the farm bill throughout 2017, and the deadline for Congress to pass the measure is in late 2018. House Agriculture Committee Chairman Mike Conaway, R-Texas, has said he will hold similar meetings in farm states as well, though he said they will not be official field hearings.


Washington Insider: TPP Pullback and Farmers

Although the administrations pull-back from the Trans-Pacific Partnership (TPP) cannot have been much of a surprise to anyone, there are more than a few press reports of disappointed farmer-constituents. The decision affects a key piece of the president's rural coalition: farmers and ranchers who especially supported the president's promise of less regulation and lower taxes.

Bloomberg cites American Farm Bureau Federation numbers that the decision will cost the agriculture industry as much as $4.4 billion a year in potential sales—bad news for one of the few sectors of the American economy with a net trade surplus. And it quotes Ron Heck, a central Iowa corn and bean producer with 4,000 acres of crops who said, "I know that President Trump has concerns with manufacturing and he didn't take this step lightly, but now we have to wait and see what better deals can be negotiated."

Exports of corn, cotton, soybeans and other goods in the year that started Oct. 1 are estimated at $134 billion, USDA projects. Bloomberg notes that the recent campaign was "something of a mixed bag for farm groups" with positions restricting immigration and trade less popular, while hopes for reductions in regulations were much more so.

In addition, while farmers and their groups have declined in numbers over the past few years, they remain politically powerful because they "give more dollars to candidates than the defense and transportation industries," Bloomberg says.

And, these voters often have complex positions. For example, the National Grange, the oldest nationwide farm organization, claims that it opposed TPP "for the sake of its neighbors" even though "as a farm group, we understand the value" of TPP, its president, Betsy Huber, said. Still, she added, "the Grange also represents the interests of residents of rural areas and small communities, who produce other products and may not expect to fare as well."

Among many ag groups, the response to the anti-trade policy has been a concerted effort to "remind the White House about the importance of agriculture to the rural vote." There's a feeling—perhaps a hope -- that once the administration "puts two and two together" they'll realize that trade is both important to agriculture and to rural job development" Bloomberg said.

After Trump dumped TPP, the Farm Bureau, the nation's largest farm group, noted its disappointment in the decision and its president, Zippy Duvall, a Georgia farmer and friend of the president's Agriculture secretary nominee, said that the administration needs to work "immediately to do all it can to develop new markets for U.S. agricultural goods."

In lieu of TPP, the administration says it will pursue bilateral trade deals with individual countries that Trump believes will result in better deals for Americans. "We do understand that trade and TPP specifically were a campaign issue," said Tracy Brunner, president of the National Cattlemen's Beef Association, and a fourth-generation rancher in Kansas. Cattle and beef producers overwhelmingly supported Trump, even with his protectionist stance on trade, because they believed he was much more likely to lessen regulations, Brunner said. Still, not having a trade deal like TPP costs the cattle industry $400,000 in sales a day lost to other countries with lower tariffs, such as Australia, according to the cattlemen's group.

Trade is key both for commodity-crop groups, with as much as a third of products like soybeans and corn going to China, and the meat industry, where countries included in the TPP and NAFTA account for more than 60% of foreign purchases for US red meat, according to the U.S. Meat Export Federation.

Still, not every farm group said leaving TPP was a bad idea. The National Farmers Union, the second-largest farmer group and a long-time trade agreement critic, professed to be pleased with the Trump administration's move.

For now, farmer groups are telling the press that they still have hope in the new president, and look forward to working for "what's good for them" in administration policies while trying to change the president's mind on the less favorable. "We will work with the hand we were dealt, and we will continue to try to explain the benefits of trade in every avenue we have," Brunner of the cattle group said.

Trade has long been one key area of bi-partisan support for agriculture, since it has benefits for both buyers and sellers, as well as for the industry in general, and has never been accused of costing American jobs. Furthermore, many ag groups have invested their own dollars in developing markets overseas—the sector's main source of overall growth. Agriculture, especially new USDA Secretary Sonny Perdue, have their work cut out for them in selling the administration on the proposition that ag trade is especially valuable and deserves greater consideration than it has received to date, Washington Insider believes.


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