Washington Insider -- Friday

Cuban Embargo Retightens

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

American Sugar Alliance Drop Opposition to US-Mexico Sugar Deal

A small change made to the U.S.-Mexico sugar deal and assurances by the Trump administration that it will rigorously enforce the pact helped the American Sugar Alliance drop their opposition to the trade deal.

"We've had productive conversations with Commerce Secretary Wilbur Ross over the past week, and we recognize that he is 100% dedicated to ending the job loss and injury caused by Mexico's predatory trade practices," Phillip Hayes, a spokesman for the American Sugar Alliance, said in a statement.

The change that helped ease sugar grower concerns was that negotiators agreed to shorten the period when Mexico could ship refined sugar in to the U.S. when there are additional needs, Hayes noted. The period was shortened by one month via a change in the start date to May 1.

Further, the group talked with USDA Secretary Sonny Perdue and said he had expressed to them he will manage the sugar policy in an effective way and ensure that Mexico does not utilize unfair trade.

This comes after Commerce Department Wednesday announced that the deal had now been finalized and would be signed June 30 after two rounds of public comments.


New Trump Plan Would Allow Imports of Chinese Chicken

The Trump administration is proposing a rule to allow imports of chicken from China of birds slaughtered in that country, expanding on a separate rule that will soon permit China to send cooked chicken products made from poultry slaughtered in the United States.

USDA's Food Safety and Inspection Service said it is proposing the latest poultry action because it has determined that China's laws, regulations and poultry slaughter inspection system are equivalent to the system in the United States.

The proposed rule that would allow imports of cooked chicken products from China that are made from poultry slaughtered in the U.S. is expected to be published by July 16, according to initial actions laid out in the 100-day plan between the two countries.


Washington Insider: Cuban Embargo Retightens

It appears now that that the administration will move to end efforts to open Cuba—and, thus chill the U.S. farm export push. However, Bloomberg says that agriculture group lobbying continues, even as hopes for reform fades.

U.S. Secretary of State Rex Tillerson signaled Tuesday that changes could come as soon as today when President Donald Trump visits Miami and may announce new limits on travel and investment policies.

Bloomberg says that while there is no indications of a clampdown on agricultural sales, which have been allowed on a cash-only basis since 2000 but cooled relations may drive buyers elsewhere, Bob Young, chief economist for the American Farm Bureau Federation in Washington, told Bloomberg.

The ag sector has long advocated an end to the trade embargo that has been in place since Fidel Castro consolidated power in the early 1960s. Companies including agricultural equipment maker Deere & Co. and soybean processor Bunge Ltd., along with the Federation, the biggest U.S. farmer group, have supported full farm trade. "If we make it tougher on Cuba, there are other folks ready to line up and say, ‘We can help you with that,’" Young said.

U.S. agricultural exports to Cuba rose to $221 million in 2016 after three consecutive annual declines, according to USDA, but sales so far this year are outpacing last year’s by 19%, Bloomberg said.

Boosting trade with Cuba has symbolic significance for farmers beyond any financial benefit. The country lies only 90 miles from Florida, and had traded sugar and grain with its larger neighbor for decades before the embargo.

Normalized trade with Cuba could add $1 billion in sales for U.S. farmers, USDA estimated last year. Even under trade restrictions, the U.S. was the country’s leading source of imports from 2003 to 2012. However, the President may crack down on illicit travel to Cuba and dissuade U.S. companies from interacting with Cuban businesses that are owned or controlled by the military, John Kavulich, the president of New York-based US-Cuba Trade and Economic Council told Bloomberg.

Comments from the administration have already "caused pain to the Cuban government" by spurring companies and financial institutions to pull back from the island nation as an investment destination, he said.

Supporters of the embargo point to Cuba’s poverty and poor human-rights record as reasons why agriculture groups should attach less importance to markets.

Since 2014, when Obama moved to re-establish normal diplomatic ties, agriculture groups have streamed south to scope out investment partners. They’ve found little success, claims Jaime Suchlicki, director of the University of Miami’s Institute for Cuban and Cuban-American Studies.

"Traditionally Cuba has been an enemy of the United States and an ally of Venezuela, Iran and Russia that has done significant mischief," he said. "If you grow rice in Texas and want to sell to Cuba, this is important to you, but in the context of the overall relationship, it’s a pittance," he said.

However, the administration’s tough line on Cuba isn’t deterring legislators and lobbyists. Senators including Mike Enzi, R-Wyo., and Jeff Flake, R-Ariz., along with Amy Klobuchar, D-Minn., and Patrick Leahy, D-Vt., introduced anti-embargo legislation last month.

"Instead of eating American-grown food, Cubans and tourists will be eating food from other countries,” unless trade is opened, Klobuchar said. A House bill limited to food exports would create an excise tax that would be used to compensate people whose properties were confiscated by Cuba’s government.

"Agricultural trade is an area where we can get the support we need to effect change in Cuba." And the doggedness of the agriculture lobby itself may be its best hope of preserving market share, William Messina, a professor at the University of Florida in Gainesville said. Ties forged during a 20-year slog will count with the Cuban government, he said.

"I think they appreciate the efforts of those agricultural industry associations in the U.S. that are trying to get regulations relaxed," Messina said. "Out of respect for that, I don’t think they’ll make a big turn away."

A key issue concerning Cuban policy is the fact that many U.S. observers believe that embargoes, especially for agricultural products that can be readily found in many global markets, do little to further economic or social policies, in spite of their appeal in some political circles. Still, it looks as though the administration is intending to move in that direction—likely, once again, with negative impacts primarily on U.S. exporters. Certainly, this is a policy issue producers should watch closely as it is more clearly defined, Washington Insider believes.


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