Washington Insider -- Tuesday

By DTN's Washington Insider

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

Mexico's New, Current Government to be on Same Page RE: NAFTA

Mexico’s incoming and outgoing governments will present a united front in the NAFTA renegotiation, Mexican Foreign Minister Luis Videgaray said on Friday.

A restart of talks between the U.S., Canada and Mexico is expected to take place now that Mexico's July 1 elections brought a win for leftist Andres Manuel Lopez Obrador. Videgaray noted the united Mexico front after a meeting with high-level U.S. officials — including Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin.

He said that President Enrique Pena Nieto’s administration and Lopez Obrador's team will work “as one front, as a joint front for Mexico — that is how we are working on the relationship with the United States.” The new administration will officially take office on December 1.

The current government will work “in close coordination with Lopez Obrador’s negotiating team on the free trade agreement,” Videgaray said, adding that Mexico remains committed to working “at an accelerated pace to reach a successful [NAFTA] renegotiation as soon as it’s possible."

Lingering NAFTA 2.0 issues are market access for dairy, investor-state dispute settlement and a sunset clause.

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Trump Shifts Tone on Potential For US-UK Trade Deal

A day after creating a diplomatic incident in Britain, Trump apologized to his host, Prime Minister Theresa May, on Friday.

The flip-flop followed a report in a British newspaper, The Sun, late Thursday night that quoted him criticizing May’s approach to Brexit. He said the business-friendly plan would leave Britain closely tied to the European Union, ultimately killing the prospect of a trade deal between the United States and Britain.

But at his presser Friday with May, Trump affirmed his commitment to striking a trade deal with the UK. At a joint news conference, May said she and Trump had agreed to pursue an “ambitious” trade deal between the two nations that “works for both countries right across the economies.”

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Washington Insider: Congress Pushes the Administration on Trade

The administration came under pressure on many fronts last week as the trade war between the United States and China showed no signs of yielding, a number of media reports indicated. For example, the New York Times said that Steven Mnuchin, the Treasury secretary, told lawmakers there was no clear path to resolution – and Beijing publicly blasted the administration over its approach.

Mnuchin said that talks with Beijing had “broken down” and suggested it was now up to China to come to the table with concessions.

The Chinese countered that the United States was “acting erratically” and said the administration had “blatantly abandoned the consensuses that two sides have reached and insisted on fighting a trade war with China.”

In one Thursday hearing, Republicans and Democrats on the House Financial Services Committee showed little patience with Mr. Mnuchin’s answers about the lack of progress, repeatedly pressing him about whether there was a strategy to resolve the trade war and expressing concern that it was starting to hurt parts of the economy.

The White House has already hit Beijing with tariffs on $34 billion worth of imports and China has responded with similar levies on American goods, including soybeans, pork and cars. Last Tuesday, the administration outlined tariffs on another $200 billion worth of Chinese products, including many consumer products like furniture, dog leashes and fish.

“Is there a master plan?” asked Representative Mia Love, R-Utah. “I implore you to work to end this thing soon.”

On Thursday, Lawmakers pressed Mnuchin, who is seen as a voice of moderation on trade in the administration, to persuade Trump to back away from the trade war, the Times said.

Representative Jeb Hensarling, R-Texas, and chairman of the committee, told Mnuchin that he was not impressed with the lone trade deal that Trump has struck, with South Korea, and warned that the strong run of economic growth was at risk, the Times said.

In a second Thursday hearing, Republicans and Democrats on the Senate Foreign Relations Committee also “repeatedly — and exasperatedly — pushed another Trump administration official to detail a strategy for prevailing in the trade dispute.”

“The administration needs to explain to Congress where this is all headed,” Sen. Bob Corker, R-Tenn., and the committee’s chairman, told Manisha Singh, an assistant secretary at the State Department, as she prepared to testify.

“To my knowledge, not a single person is able to articulate where this is headed, nor what the plans are, nor what the strategy is,” Mr. Corker said.

The committee’s top Democrat, Senator Robert Menendez of New Jersey, told Ms. Singh at another point that “I don’t understand what the pathway is here, at the end of the day.”

Singh, who leads the department’s Bureau of Economic and Business Affairs, defended the administration’s moves. “Our endgame is for China to change its behavior,” she said.

After Singh tried to explain the administration’s approach, Corker replied, “That enlightened us in no way.”

While Trump prizes unpredictability, his approach to trade agreements is sowing uncertainty that many business leaders, officials, lawmakers and others worry could undercut an otherwise booming economy.

The Trump administration has asked China to make a wide array of changes, including reducing its trade surplus with the United States, stopping what it described as theft of American intellectual property and opening Chinese markets to American business.

But this approach with its “long list of demands,” has encouraged Beijing to focus on those that are easiest to fulfill, Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce said. “Giving the Chinese a choice is not an optimal negotiating approach,” he argued.

China has also had difficulty figuring out who in the administration can close a deal after tentative agreements reached with Mnuchin and Wilbur Ross, the commerce secretary, fell through.

“I think they’re coming to the conclusion that it doesn’t matter whether Mnuchin or Ross or anybody is in the front of the line, that it’s really going to be figuring out what Trump wants,” said Claire Reade, senior counsel at Arnold & Porter Kaye Scholer.

In a sign of the impasse that the dialogue between China and the United States has reached, the Chinese Ministry of Commerce issued a statement on Thursday arguing that it has been unfairly vilified with false claims about its trade practices.

“This is a distortion of facts, therefore groundless,” the ministry said. “For the purpose of meeting domestic political needs and suppressing China’s development, the U.S. has fabricated a set of policy arguments that distort the truth about Sino-U.S. economic and trade relations.”

While Mnuchin claimed success in staving off draconian new Chinese investment restrictions, the tariffs have kept coming and it remains unclear how much influence he really has with Trump. Despite his private reservations, Mnuchin continues to defend the administration’s policies, the Times said.

So, we will see. The administration appears to be facing a growing pushback in several areas reflecting the heavy political pressure members face at home. This is increasingly translating into growing concerns that the administration intends to stay the course on its “get tough” trade policies — leading to an increasingly bitter debate just ahead of the elections that producers should watch closely as it emerges, Washington Insider believes.

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