Washington Insider -- Wednesday

NAFTA Talks Begin

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

US Milk Producers Counter Canada Statements on Dairy Policy, Trade

Statements by Canadian Trade Minister Chrystia Freeland that Canada would protect its dairy programs in upcoming NAFTA negotiations are being met with criticism by U.S. dairy producers. "For too long, Canada has relied on government controls on farm milk production to boost prices, while minimizing dairy imports to limit competition," National Milk Producers Federation President and CEO Jim Mulhern said in a statement. "By comparison, the United States has slashed its government involvement in dairy markets and relies on exporting its products to global customers to a greater degree than ever before."

As for her assertion trade is weighed toward the U.S. in dairy, Mulhern said, "Much of what the United States exports to Canada is ultimately shipped back out under Canadian import for re-export programs. Canada has been refusing to share details of imports and exports under those programs, but the reality is that much of the dairy the United States ships to Canada doesn't stay in Canada."


India Will Challenge Any US Action in WTO Poultry Dispute

Indian trade officials are prepared to challenge any U.S. effort at the World Trade Organization (WTO) to impose trade sanctions on New Delhi over the poultry dispute between the two countries. The topic could be decided on August 19 at a WTO meeting where India plans to block a U.S. request to retaliate with sanctions on $450 million annually until India complies with a 2015 WTO ruling.

India and some other WTO members are concerned the U.S. request for retaliation before seeking a compliance investigation does not adhere to the proper sequencing of the WTO dispute process.


Washington Insider: NAFTA Talks Begin

The media is eagerly awaiting word from the NAFTA negotiations that begin today amid suggestions that the negotiators may “find out how hard it is to get an agreement that satisfies workers and the interests benefiting from cross-border sales,” Politico says.

The group has been examining “finer points and nettlesome issues” as the United States, Canada and Mexico revisit NAFTA. It notes that the President constantly called NAFTA the worst trade deal in history and promised “to get a better deal for our workers.”

Top trade officials from the United States, Canada and Mexico will sit down on today to begin thrashing over hundreds of issues as distinct as Canadian dairy barriers and digital trade issues affecting both countries.

Skepticism abounds in many quarters concerning the talks, Politico says. Then, even if negotiators from all three nations are able to come to consensus quickly on a new deal, the agreement still must pass the Congress, “which past votes on trade issues have shown is no easy task.”

“This whole business of renegotiating NAFTA was a campaign pledge in search of a constituency,” said Scott Miller, a former lobbyist for Procter & Gamble now at the Center for Strategic and International Studies. “No business community member, no enterprise, no farm group ever asked for this.”

Miller said he sees at least a 5% chance that the administration would become so frustrated that it will “make good on a campaign threat to withdraw from the pact,” which would damage the economies of many predominantly rural states that voted for him last year. That could divide the party headed into the 2018 midterm election, potentially increasing the chances of Democratic Party gains.

Another possibility is that Trump strikes a deal, but there’s so little support in Congress that he never submits it for a vote and the pact is left as is, Miller said, an outcome that would also make him appear weak.

Although many Democrats share Trump's negative view of NAFTA, they are setting a high bar for what needs to be changed to get their support. They have also criticized, for example, borrowing provisions from the Trans-Pacific Partnership, which he discarded on his third day in office.

On the Republican side, if the White House brings Congress what the party considers to be a bad NAFTA agreement, it could face stiff opposition led by Sen. John Cornyn, R-Texas, the No. 2 Senate Republican, who has urged Trump to modernize the pact, not end it.

Still, the White House seems to have gotten the message that it needs to tread carefully in talks with Canada and Mexico. "We should keep the parts that work, especially for much of American agriculture, but fix the parts that don’t," White House chief economic adviser Gary Cohn said. "Working together, we will modernize this agreement to meet the needs of today’s economy, just as the president promised."

The administration also could face a revolt from business and farm groups that typically round up support for trade agreements. They are the ones who have the most to lose from drastic changes to the pact.

U.S. Chamber of Commerce President Tom Donohue said earlier this year, “First and foremost, do no harm. We must not disrupt the $1.3 trillion in annual trade that crosses our borders.”

Meanwhile, labor and environmental groups that have long clamored for changes to NAFTA and other trade agreements are already complaining that Trump’s proposed reforms don’t go far enough. “These objectives largely replicate those of the failed Trans-Pacific Partnership and won’t satisfy the expectations the president created for a revival of America’s manufacturing heartland,” Richard Trumka, president of the AFL-CIO, said shortly after the administration rolled out its goals for renegotiating the pact.

Trump's best hope for passage, one lobbyist told Politico, is to craft a revised NAFTA agreement that hews closely to traditional Republican priorities; ignores demands from those Democrats who are unlikely to vote for the pact; and takes the best pieces from the TPP while strengthening other areas, like intellectual property protections, that could muster enough votes for bipartisan approval in both chambers, Politico thinks.

But for every concession made to pick up Democratic votes, Trump’s chief negotiators will have to calculate how many he loses on the Republican side, one congressional aide said.

Further complicating matters, Mexican voters go to the polls next July to elect a new president. That means Mexican negotiators have a window between now and possibly February to make significant concessions, Miller said. After that, talks could shut down and not resume until the new Mexican president takes office in December 2018, he said.

However long it takes, the administration will be graded on his work when NAFTA 2.0 is complete. Politico suggests the President risks the possibility that he may not find much to tweet about in the results. So, this is a negotiation producers should watch closely as it proceeds, one that could immediately affect important markets that are crucial to U.S. ag sales, Washington Insider believes.


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