Washington Insider -- Monday

Impact of China Trade Fight

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

China Accused the US of Throwing Its Weight around In the Trade Arena

The latest exchange between the U.S. and China on trade have China the U.S. advocates principles of fairness but is not living up to them.

Foreign ministry spokeswoman Hua Chunying responded last week to reports the U.S. Treasury Department is considering using an emergency law to curb Chinese investments in sensitive technologies. “The U.S. is thinking and acting like a bully — only it can have high tech and others cannot. With regard to the high-tech restrictions, they are citing the reason of national security, but their motivation is protectionism. Is the U.S. really that fragile?” Hua said at a ministry daily briefing.

The U.S. Treasury Department is considering using an emergency law to curb Chinese investments in sensitive technologies as the Trump administration looks to punish China for what it sees as violations of American intellectual property rights. A law that may be used is known as the International Emergency Economic Powers Act, passed in 1977, which could affect foreign investment in industries like semiconductors and 5G.


Bayer Says Russia Has Now Cleared Their Takeover of Monsanto

Russian antitrust agency FAS has now given a green light to the Bayer purchase of Monsanto, Bayer has announced. "Bayer has agreed to enable the transfer of defined technologies to Russian recipients in the area of seeds breeding and digital farming for a period of five years," the company said in a statement.

Bayer will share some of its genetic expertise on corn, wheat rapeseed, soybean and vegetable seeds, Bayer said, along with giving "non-discriminatory" access to digital farming technologies once they were available in Russia. The firm has already gained approval from the European Union (EU) and reports have indicated there has been an agreement in principle reached with the U.S. Department of Justice for the deal to go through.


Washington Insider: Impact of China Trade Fight

This week POLITICO reported that a forthcoming report from Purdue University says that U.S. soybean exports to China could fall very sharply if the trade battle between the world’s two largest economies prompts Beijing to slap on retaliatory tariffs.

The study comes after China announced earlier this month that U.S. soybeans could be hit with a 25% tariff increase if the administration “pulls the trigger” on planned tariffs to punish Beijing for its forced technology transfers.

The report says that Brazil would come out as the big winner and China turns there increasingly for soybeans. Brazil is the largest soybean exporter to China, a title it gained from the United States seven years ago.

The implied trade adjustment would be complex, and U.S. growers could find some substitutes for its loss in business by expanding in other markets that now buy from Brazil. “Brazil will take a big chunk of our market with China, and we’ll take a chunk of Brazil’s market elsewhere,” Wally Tyner, a professor of agricultural economics at Purdue and author of the report, told POLITICO. The European Union, Mexico, Indonesia and Japan are among the nations likely to increase imports from the US, Tyner added.

However, the worst news is that even by cutting into Brazil’s other markets, “there is no combination of alternative routes available that could sufficiently make up for a major loss of business with China – a market that accounts for roughly 61 percent of U.S. exports and is worth nearly $14 billion.”

Other analysts agree. For example, “Even assuming these other markets can grow, they probably can’t grow to match what China used to do,” said Chad Hart, an associate professor of economics at Iowa State University. “China is such a dominant player. You can’t even put together the rest to add up to China in the market right now.”

Furthermore, the coming farm bill fight looks increasingly difficult, POLITICO says. Democrats have gone so far as to suggest that the House Agriculture Committee’s approach to SNAP policy is being heavily influenced, if not driven by, House Speaker Paul Ryan, R-Wis., That view appears to have been bolstered this week.

On Thursday, Ryan highlighted the farm bill as part of the GOP's "next big push" — a new focus on "workforce development."

"What we believe will help get people from welfare to work is to have a work requirement," Ryan said during an interview with conservative radio host Hugh Hewitt, who asked the speaker about how much there is to get done this year. Hewitt ticked off lingering Republican priorities, including another round of tax changes, cutting regulations and getting appropriations bills passed.

Ryan immediately brought up the stricter work requirements for the Supplemental Nutrition Assistance Program that are proposed in the House farm bill draft, along with its call to ramp up investment in SNAP employment and training programs.

The bill would invest the savings you get from a work requirement into making sure you can give people that transition training they need to get the skills they need to get the careers they want," Ryan said, ostensibly referring to the bill's call to increase SNAP Employment & Training spending tenfold in three years.

Ryan argued that while there are nearly 7 million open jobs in the United States, there are also “millions of able-bodied adult recipients of SNAP who aren't working and aren't looking for a job.”

"We want to get them into careers," he said. "And that, along with career and technical education reform, so that people can get skills they need and want to get careers that are out there, that is the final big installment of Our Better Way agenda."

Democrats who are critical of the House bill disagree sharply, and there is considerable talk in Washington that the majority will face a significant challenge in passing the bill with only Republican votes, largely because of efforts to impose tougher work requirements on the nutrition programs.

When asked about whether Ryan is calling the shots on the nutrition title, House Agriculture Committee Chairman Mike Conaway reminded reporters that he began his recent review of SNAP before Ryan was speaker and John Boehner held that position. Ryan supports the committee’s work, but isn’t the driving force, Conaway told POLITICO.

So, we will see. This year’s farm bill debate is expected to begin in earnest early next month and continue to be both bitterly contentious and highly focused on national social issues as well as on those of immediate concern to producers, Washington Insider believes.


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