Washington Insider -- Wednesday

US Proposal on Canadian Dairy Policy

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

USDA's GIPSA Withdraws Interim Final Rule on Livestock Industry Unlawful Practices

USDA is withdrawing the interim final rule (IFR) published Dec. 20, 2016, covering unlawful practices by packers, swine contractors or live poultry deals and said it will also pursue no further action on a proposed rule on conduct considered an unfair practice, according to documents filed by the Grain Inspection, Packers & Stockyards Administration (GIPSA).

In the Federal Register filing to be published today, GIPSA noted the Packers & Stockyards Act (P&S Act) states that it is unlawful for any packer, swine contractor, or live poultry dealer to "[e]ngage in or use any unfair, unjustly discriminatory, or deceptive practice or device." The law also states that it is unlawful for those business entities to "[m]ake or give any undue or unreasonable preference or advantage to any particular person or locality in any respect, or subject any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect."

The IFR, published in December 2016, would have added a section which stated that certain conduct or actions by those business entities "could be found to violate the P&S Act without a finding of harm or likely harm to competition."

GIPSA previously delayed the effective date of the IFR to October 19, saying the delay would allow it to "consider adequately all comments received and to make an informed policy decision."


Washington Insider: US Proposal on Canadian Dairy Policy

Bloomberg said that the U.S. is being accused of offering a "non-starter" on Canadian dairy policy as the latest round of NAFTA talks wraps up. The group said that the U.S. ended the round with a "bombshell proposal to dismantle Canada's dairy policy," adding to a list of demands its trading partners say would be impossible to accept as negotiations grow more fraught.

The proposal delivered Sunday would effectively kill Canada's so-called supply management system by fully eliminating tariffs on supply-managed products over 10 years, Bloomberg said.

The basics of the proposal were later confirmed by U.S.officials. Supply management is a system of quotas and tariffs for milk and other products that Canadian officials argue avoids oversupply and guarantees stable pricing and production. President Donald Trump has called the system "unfair" to U.S.farmers as he threatens to back out of NAFTA.

The proposal comes as warnings mount that the U.S. will have to water down demands on automotive content, dispute panels, government procurement and a sunset clause if it wants a deal.

Meanwhile, the Canadian tone concerning the talks has grown decidedly more pessimistic over the past week, as frustration grows and begins to mirror that of Mexico, long a more public target of the administration. Talk of mere NAFTA "tweaks" is long gone, Bloomberg said.

The U.S. demands "seem to be so extreme, one really has to ask the question whether President Trump wants to have a NAFTA," John Weekes, the former lead Canadian negotiator for the original pact who is now a senior business adviser at law firm Bennett Jones LLP, said in Washington Monday. "Or is he looking for an excuse to get out of it?"

Canada's government flatly dismissed the U.S. dairy proposal, while the Dairy Farmers of Canada called it "outrageous."

John Melle, the lead U.S. NAFTA negotiator, confirmed in a statement Monday that the U.S. requested greater access to Canada's market for dairy, poultry and eggs, "with the goal of expanding export opportunities for U.S. farmers." The Canadians have long rejected changes to supply management programs, which are stubborn trade irritants, with Agriculture Minister Lawrence MacAulay once again backing the status quo on Monday.

"It's a model for the world, and that's in fact where we are. To deal with anything else is simply a non-starter," he told reporters. "We need a 'right' deal, and we're not going to sign any deal." Canadian Trade Minister Francois-Philippe Champagne called the U.S. proposal "obviously unacceptable" to Canada. "I don't know if they're going to change their mind but I can tell you we won't change our mind," he said.

Mexico will not accept the contentious U.S. proposals unless they are watered down, said Antonio Ortiz Mena, a former head of economic affairs at Mexico's U.S. embassy.

"I don't believe they will accept NAFTA at any price, so it would be very dangerous to engage in this brinkmanship tactic," Ortiz-Mena, who is now a senior vice president of Albright Stonebridge Group, said while speaking at the same Washington event on Monday. "The U.S. will have to decide whether to make its positions more flexible, or to withdraw."

Michael Froman, who served as the U.S. Trade Representative under the Obama administration, urged people to treat the U.S.demands as opening offers. "It is a negotiation, I don't think one should look at the strength of the proposals themselves and draw any particular conclusion," he said in Washington.

Warnings echoed out of Canada on Monday. Ontario Premier Kathleen Wynne, whose province is home to most of the country's auto sector, said Canada's vehicle "industry cannot tolerate such extreme, punitive measures, divorced as they are from the economic reality of an integrated continental auto sector operating in a fiercely competitive global economy."

Dennis Darby, head of the Canadian Manufacturers and Exporters industry group, said after a private briefing with Freeland on Monday that the minister remained optimistic, but Darby also used the term "non-starter" in describing a pair of U.S. proposals on autos and a sunset clause. "She didn't speculate on whether it was going off the rails, just that we were in really, really hard negotiations right now," Darby said in a telephone interview.

Robert Azevedo, director-general of the World Trade Organization, met with Lighthizer on a visit to Washington Monday said the world needs a continued push for multilateral trade. "Turning against trade alone is not going to help it, is not going to solve it. In fact it may make things worse," he said. "I don't think is a U.S. phenomenon. I think this is a global phenomenon."

While the tone of the talks continue to be tense in many areas, the three partners made no mention of that in a press release on future rounds. Trade officials from the three countries announced Mexico will host the fifth round of NAFTA 2.0 talks in Mexico City from November 17-21. Additional rounds will now be scheduled through the first quarter of 2018, officials said while announcing the conclusion of the fourth round of talks near Washington, DC.

"Today, United States Trade Representative [USTR] Robert Lighthizer, Canadian Foreign Affairs Minister Chrystia Freeland, and Mexican Secretary of the Economy Ildefonso Guajardo successfully concluded the fourth round of the renegotiation and modernization of the North American Free Trade Agreement (NAFTA)," a joint statement from the officials said. The fourth round lasted seven days in nearly 30 groups, the statement said.

The release claimed progress was made "in several other negotiating groups, including customs and trade facilitation, digital trade, good regulatory practices, and certain sectoral annexes."

Well, the U.S. negotiating team has certainly managed to ratchet down expectations for the talks, and seems to be close to ignoring the push by many ag groups to "do no harm" to existing important markets. So, we will see. Complex trade negotiations can change quickly, but the NAFTA talks are especially important and should be watched closely as they proceed, Washington Insider reported.

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