Washington Insider -- Wednesday

Another View of the Southern Wall

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

Syngenta Says US Extends ChemChina-Deal Antitrust Review

Syngenta AG said the U.S. has asked for more time to review its $43 billion takeover by China National Chemical Corp., adding that it does not expect the protracted scrutiny to delay the companies’ goal to close the deal in the first half.

The Federal Trade Commission (FTC) is seeking more information from the chemical makers in order to complete its review, Syngenta spokesman Paul Minehart said Monday. “Things are going very well and we don’t expect the extension to cause a delay,” Minehart said. He added the deal could still win U.S. approval before the April 12 deadline for a decision by the European Commission. The companies have proposed remedies designed to satisfy any concerns the merger could harm competition, Minehart said, without offering details.

European Union (EU) regulators in January requested more information from the companies over concerns ChemChina’s acquisition of Syngenta, based in Basel, Switzerland, might raise prices or reduce choice for crop protection products sold to farmers. The EU review was extended until April 12 to allow time to discuss remedy proposals submitted by the companies. The deal also still needs approval from the U.S. and Chinese antitrust authorities.

The FTC has jurisdiction over the takeover because Syngenta sells its products in the U.S. It got more than a quarter of its revenue in 2015 from seeds and crop protection in North America. The company also has several research and production facilities in the US. The proposed transaction was cleared by a U.S. national security panel in August, removing what had been seen as the biggest hurdle to the deal. One potential concern was that a Chinese state-owned firm would acquire a Syngenta property in the U.S. that was within close proximity to military facilities.

The tie-up also won antitrust approval in Australia, where there are overlapping products between Syngenta and ChemChina’s Israeli-based generic agrochemical maker Adama. Other suppliers entering the market would provide enough competition, the Australian regulator said in December.

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Mexican Lawmaker Readying Plan to Shift to Argentine, Brazil Corn vs US

A Mexican senator is readying legislation that would shift the country's corn purchases from the U.S. to either Brazil or Argentina, the official told CNN February 12.

"I'm going to send a bill for the corn that we are buying in the Midwest and...change to Brazil or Argentina," Mexican senator Armando Rios Piter, who leads a congressional committee on foreign relations, told CNN's Leyla Santiago at an anti-Trump rally in Mexico City. He said it would be a "good way to tell them that this hostile relationship has consequences, hope that it changes."

Rios Piter's bill is another sign of Mexico's willingness to respond to Trump's threats, CNN said, adding the renegotiation of NAFTA is another factor.

Mexico's economy minister, Ildefonso Guajardo, said in January Mexico would respond "immediately" to any tariffs from Trump. "It's very clear that we have to be prepared to immediately be able to neutralize the impact of a measure of that nature," Guajardo said Jan. 13 on a Mexican news show.


Washington Insider: Another View of the Southern Wall

While there was widespread agreement during the campaign with anti-trade rhetoric on both sides, but now as the new administration is drawing closer to actually defining its new trade positions and rules, new questions seem to bubbling up. For example, the Washington Post said that weekend’s protests in Mexico City were a reminder that the proposed “physical wall on the southern border” has two sides, not one.

In late January, Trump’s executive order on border security called for the construction of the wall, along with increased border patrol activities to control immigration, the Post says. The order requests a full review of all “direct or indirect Federal aid or assistance” to Mexico over the past five years “will be in a form reimbursed by Mexico.” However, the Post flatly says, Under Trump’s plan, Mexico won’t be paying for the wall. You will.

And, the Post says the missing part is that “there’s no mention of cooperating with Mexico to achieve the order’s stated objectives. This executive order, and comments and tweets from the Oval Office, obscure the fact that Mexico is an ally, not an adversary, in border security efforts.

Homeland Security Secretary John F. Kelly understands this point, the Post says. In his confirmation hearing, Kelly asserted that partnerships with countries “as far south as Peru” were more important to U.S. border security than walls. As the former head of the U.S. Southern Command, Kelly has seen firsthand the power of bilateral partnerships.

Developing a U.S.-Mexican border control partnership has been a long and tenuous process. In addition, migration relations with Mexico have been tense historically. For a long time, Mexican leaders preferred to “delink” migration from foreign policy, both out of respect for U.S. sovereignty and because of a constitutional commitment to a “right to exit.”

Since the 1990s, closer economic integration through the North American Free Trade Agreement helped prompt the Mexican government to take a greater role in shared border control issues. The two countries expanded their cooperation on narcotics, but cooperation on migration was always more sensitive.

After 9/11, Mexico and Canada immediately stepped up cooperation on border control and counterterrorism. Both countries quickly signed agreements to develop “smart borders,” with the goal of facilitating trade and travel while simultaneously enhancing cross-border security. Mexico committed to a 22-point plan for cross-border cooperation “at the local, state and federal levels,” including information sharing, smuggling deterrence mechanisms, a law enforcement liaison program and many other measures.

Today, the U.S.-Mexico border partnership is effective on many levels, the Post says.

The two countries have signed 53 treaties that deal with law enforcement cooperation alone. The earliest U.S.-Mexico counter-narcotics agreement still in force dates back to 1930.

The 2010 “21st century border” initiative facilitates the flow of trade while blocking illicit flows, and sets up joint pre-inspection points for cross-border traffic. In 2014, U.S. and Mexican authorities worked to stem the flow of unaccompanied Central American minors entering the United States illegally. The number of entrants fell again in 2015 and 2016.

One significant reason for this decline was increased Mexican enforcement along the country’s other border. Mexican interdictions of unaccompanied children from El Salvador, Guatemala and Honduras increased by 6,638 between fiscal 2014 and fiscal 2015. In the same period, U.S. interdictions fell by 23,318. In other words, nearly 30% of the U.S. decline reflects Mexican interdictions.

The earlier US efforts to deter irregular migration in the 1990s were often seen as a “politically successful policy failure,” and that in response to U.S. deterrence efforts caused in this period, migrants simply shifted their routes. The main effects of the escalation of U.S. deterrence policies were to increase the rates that human smugglers charged, as well as increase the net number of irregular migrants staying in the United States permanently rather than migrating seasonally. They also led to countless deaths at the border, the Post says.

By contrast, border control efforts in the late 1990s and early 2000s seem to have been more effective, and the importance of bilateral cooperation is suggested by evidence that border walls are more effective when guarded from both sides.

Still, the Post worries that there is little scope for cooperation in the current executive order. The negative portrayal of Mexican migrants and his promises to make Mexico pay for a wall put Mexican President Enrique Peña Nieto in a difficult position. Even if Peña Nieto remains constructively engaged, this episode may have empowered candidates for the 2018 Mexican elections who are likely to be much less accommodating.

An uncooperative and antagonistic border relationship would be counterproductive to all of these efforts. Elsewhere in the world, some countries of origin and transit have leveraged their ability to control migration to pressure much more powerful receiving states to do their bidding.

Mexico says it is not unaware of the role that it plays in keeping America safe. However, things could change – Foreign Secretary Jorge Castaneda has threatened to roll back cooperation if Trump rolls back NAFTA: “Let’s see if his wall keeps the terrorists out, because we won’t,” He said.

So, it seems that there at least some modest growing concern regarding a breakdown in the US-Mexican border relationship. This debate is extremely important to U.S/ market access to that nation, and is one producers should watch closely as it emerges, Washington Insider believes.


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