Washington Insider -- Thursday

Trying to Reverse Anti-Trade Rhetoric

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

Democratic Lawmakers Urge Streamlined Food-Safety Programs

Streamlined food-safety programs across federal agencies were urged by Democratic lawmakers in a February 14 letter to President Donald Trump – following the release of a related report from the Government Accountability Office (GAO).

The GAO report released February 13 found federal agencies have reduced fragmentation in food-safety oversight, but said more needs to be done. High-level administration officials should establish a plan to increase collaboration among agencies, the report urged.

The findings were seized on by Democratic Sens. Richard Blumenthal of Connecticut, Dick Durbin of Illinois, Dianne Feinstein of California and Kirsten Gillibrand of New York, who called the dozen-plus agencies administering food safety a "fragmented legal and organizational structure."

A broader, more cohesive approach to food safety is being urged by the lawmakers. "The safety and quality of the U.S. food system is governed by a highly complex system that has evolved on a piecemeal basis over many decades, typically in response to either health threats or economic crises," they noted.

The letter and GAO report are the latest developments in a long-fought campaign to reorganize the federal food-safety system. In the previous Congress, Rep. Rosa DeLauro, D-Conn., and Sen. Durbin unsuccessfully pushed the Safe Food Act, with companion bills that would have unified food-safety oversight under a single entity.

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China Reportedly Targets June Approval for Syngenta-ChemChina Deal

China’s Ministry of Commerce and other government arms have been told to begin reviewing China National Chemical Corp.’s planned takeover of Swiss herbicide and pesticide maker Syngenta AG, with the goal of giving the $43 billion deal a green light by the end of June, according to Bloomberg, citing people familiar with the matter.

While final approval cannot be guaranteed, the people said, its chances of success are high once a review begins. The Commerce ministry previously has blocked only two deals in the past eight years. The transaction would also need approval from other Chinese oversight bodies as well, and it faces regulatory review in the U.S. and European Union (EU).

The takeover is one of three mega-deals that would significantly impact the global agrochemicals industry. The others are Dow Chemical Co.’s bid to merge with DuPont Co. and Bayer AG’s agreement to buy Monsanto Co. On Monday, Syngenta said the US had asked for more time to review the takeover, adding that it does not expect the scrutiny to delay the companies’ goal to close the deal in the first half.

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 choices 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. Australian regulators approved the deal in December.


Washington Insider: Trying to Reverse Anti-Trade Rhetoric

Fairly suddenly, it seems, Corporate America's widespread hope for slashing taxes and regulations is “crashing into the harsh reality of a nationalist agenda focused on reducing immigration and dismantling a generation of liberalized trade rules,” according to a report this week by Politico.

At the moment, the report says, top chief executives and some of the nation’s largest business groups are “clinging to hope that more moderate economic voices inside the Trump administration will eventually win out in favor of the globally focused approach from recent White Houses. But early signs are already emerging of potentially titanic battles between Trump and some of America's largest industries.”

These views were emphasized when the President restated his plan to renegotiate NAFTA on Monday during a joint press conference with Canadian Prime Minister Justin Trudeau while pledging to go easier on Canada than Mexico. “We’ll be tweaking it,” Trump said of the 23-year-old trade deal. “We’ll be doing certain things that are going to benefit both of our countries. It’s a much less severe situation than what’s taking place on the southern border.”

Trump adviser Peter Navarro, a sharp critic of free trade deals, recently said the administration’s goal is to overturn a global supply chain that has allowed American companies to assemble products in the U.S. using parts from Mexico, China and other nations.

Pursuing that kind of agenda could hit all kinds of U.S. businesses large and small including major automakers, oil refiners, apparel makers and retailers who rely on materials from abroad to make finished products.

Trump’s pledge to renegotiate NAFTA, a deal that eliminated or greatly reduced most tariffs on goods shipped between Canada, Mexico and the United States, has companies worried.

“It’s an enormous problem. You have cars being assembled in Mexico but many of those parts are made in the USA by American workers,” said Bill Hammond, a Texas-based consultant and former CEO of the Texas Association of Business. “Just here in Texas you’ve got thousands of businesses large and small that export products to Mexico and they would be hurt. Don’t forget that a lot of people blame the Smoot-Hawley trade tariffs for the Depression.”

Many big U.S. employers also feel burned by Trump’s decision to immediately withdraw the U.S. from the Trans-Pacific Partnership (TPP), a sprawling trade deal intended to remove thousands of tariffs on U.S. exports to Japan and 11 other Pacific Rim countries, Politico says.

This is a big deal for U.S. agriculture, since hundreds of U.S. beef and dairy companies, along with many other industries, pushed hard for TPP’s adoption. TPP was also intended to include a renegotiation of NAFTA with new labor and environmental rules for Mexico and Canada. All that work is now lost.

The administration is also expected to abandon the Transatlantic Trade and Investment Partnership (TTIP), a prospective deal intended to ease barriers to trade with Europe. A serious disruption of trans-Atlantic trade ties would hit big American companies hard. In 2014, companies in the S&P 500 index earned just 52% of their revenue in the United States. The rest came from abroad with Europe and Asia each counting for about 14%.

Big tax cuts and fewer regulations could offer American companies a boost to offset some of the hit from potential trade restrictions. But the general posture of the Trump administration is leading Wall Street to downgrade expectations for growth, Politico says.

“Following the election, the positive shift in sentiment among investors, business, and consumers suggested that the probability of tax cuts and easier regulation was seen to be higher than the probability of meaningful restrictions to trade and immigration," Goldman Sachs Group Inc. economists wrote in a recent note to clients. “One month into the year, the balance of risks is somewhat less positive in our view."

Corporate lobbyists privately say they expect that more strident views on trade and immigration inside the White House, championed by top advisers including Navarro, Stephen Miller and Steve Bannon, will eventually give way to more moderate approaches favored by National Economic Council Director Gary Cohn and Steven Mnuchin at Treasury.

But Trump himself has long favored immigration restrictions and punitive trade actions and made both central to his campaign. People who know the president say it is wrong to assume he will ever change his approach.

“Cohn and Mnuchin are both free-traders at heart and they understand how corporate America and business work,” said one Trump confidant. “Navarro and Miller and Bannon have no business experience whatsoever but they are influential. There is a huge battle for the heart and mind of the president and it is not even close to over.”

So, we will see. Clearly, the level of anxiety across the business sector has grown, as it has in agriculture. Whether the confirmation of Ag Sec nominee Sonny Perdue will make a difference remains to be seen, but should be watched closely as the trade policy debate intensifies, Washington Insider believes.


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