Washington Insider -- Wednesday

Various Industries Searching for Tariff Relief

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

USDA Announces $12 Billion in Farmer Tariff Aid

USDA will deploy a $12 billion package of help for farmers negatively impacted by retaliatory tariffs put in place by foreign countries in response to trade actions by the Trump administration.

USDA officials unveiling the effort labeled it a "one-time" package that will focus on three areas – direct payments to farmers of soybeans, sorghum, corn, wheat, cotton, dairy and pork. USDA will also purchase fruits, nuts, rice, beef, pork and dairy for distribution to food banks and other nutrition programs. A third component will be to assist the private second with developing new markets for ag products overseas.

Producers will have to harvest their crops before being able to collect the payment, officials said.

Reactions to the plan can be described as mixed at best, with some openly hostile to the announcement.

“What’s the strategy, what’s the end game here? At what point do we start seeing things move out of the chaotic state they are in now and to where we actually see new trade agreements?” asked Sen. Mike Rounds, R-S.D.

Sen. Heidi Heitkamp, D-N.D., said more aid might be needed if Trump continues imposing tariffs and other countries retaliate. “Twelve billion [dollars] sounds like a lot of money, but we’re going to be losing literally hundreds of millions of dollars in every state” due to the trade disputes, she said.

Republican lawmakers from farm states said they will meet this afternoon with Trump, following his meetings with European officials.


EPA's Wheeler Pledges Biofuel Policy Shifts

Acting EPA Administrator Andrew Wheeler said Tuesday he would push ahead with biofuel policy reforms that Administrator Scott Pruitt had been pursuing prior to his departure from the agency.

Specifically, Wheeler said he would move forward with plans to sell E15 year-round, to allow renewable identification numbers (RINs) generated on exported biofuel to count toward Renewable Fuel Standard (RFS) requirements and to looking requiring larger refiners to blend more ethanol into motor fuel to make up for obligations waived for small refiners.

However, Wheeler said the biofuel policy changes would come in a package and would not be done on a piecemeal basis. "When everyone is complaining about the program, we need to look at ways to change the program," Wheeler said. That could be a challenge for Wheeler since his predecessor had failed to find a solution that made both biofuel backers and bashers happy.

Biofuel backers will be cheered by two of the three proposals Wheeler talked about but will no doubt chafe at the potential for RINs on exported biofuel to count toward RFS requirements.

EPA finalized its proposal for a fuel pathway for biofuels made from refined sorghum oil, finalizing an effort it proposed back in late-2017.

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Washington Insider: Various Industries Searching for Tariff Relief

Bloomberg and others are reporting this week that U.S. companies and industry groups are returning to Washington this week in “an increasingly futile effort to secure exclusions from President Donald Trump’s tariffs on Chinese imports.” The administration already has imposed tariffs on $34 billion of products on July 6, after similar hearings in May.

The Office of the U.S. Trade Representative (USTR) has also identified an additional $200 billion of goods slated for a 10 percent duty after China retaliated in an escalating trade war, and Trump has said he’s “ready to go” with tariffs on $500 billion in imports – roughly the value of China’s annual goods exports to the U.S.

While companies successfully lobbied to remove some consumer goods from the administration’s initial list of targets and the USTR will act in good faith, there’s less flexibility now because items removed must be replaced to reach Trump’s total, said John Veroneau, a partner at Covington & Burling in Washington and a former deputy U.S. trade representative under President George W. Bush. “Finding replacements is becoming more challenging,” Veroneau said.

On Capitol Hill, the House Ways and Means trade subcommittee reviewed the “broken” process for companies to request exclusions on the duties Trump slapped on steel and aluminum imports from March. The Commerce Department has been flooded with requests and drawn criticism for the cumbersome process.

Ways and Means Chairman Kevin Brady, R-Texas, told reporters recently that he is pressing Commerce Secretary Wilbur Ross to make changes to the process for exclusions. Among the things on lawmakers’ wish list are “grandfather exclusions” for major projects, such as infrastructure construction, that were under way before the tariffs were put in place, Brady said. They also want to see changes to the duration of product exclusions that are granted and changes to the appeals process for requests that are rejected, he said. In addition, the requests should apply broadly across the economy and not just to specific companies and the administration should allow for joint submissions, Brady said.

In addition to all the ongoing ferment over trade policies, a new question is bubbling up — concerning the nature and amount of the administration plan to help shield farmers from the impact of a trade war in which agriculture is a main target for retaliation, Bloomberg said.

The supports are intended to be “a balm to producers” who are seeing prices drop and inventories rise because of disputes with China, Canada and other trade partners who are significant purchasers of US pork, soybeans and other crops.

Farmers are a key part of the rural political base that elected President Donald Trump, who has promised them they will emerge from a trade war better off. Many farmers are accepting that assurance, but an extended trade dispute that lingers into the fall — and the elections — holds the potential to shake that support. Trump also has been under pressure from farm state lawmakers, Bloomberg said.

So, at least part of the debate likely will turn to assessing the new farm aid. Stocks of farm equipment makers including Deere & Co. gained on reports of the planned announcement of aid to farmers, Bloomberg said.

Agriculture is the rare U.S. industry that runs a trade surplus, with a projected $21 billion this year. Canada, China and Mexico are the three biggest buyers of U.S. farm goods, accounting for 43 percent of purchases in 2017. All three are embroiled in conflicts with the U.S.

Soybeans, the second-most valuable U.S. crop after corn, have been especially hard-hit — exports to China accounted for about one-third of the oilseed’s revenue last year. The USDA projected earlier this month that average soybean prices paid to farmers would decline next year.

Farmer organizations including the American Soybean Association have called the impacts of tariffs on agriculture "devastating."

It is likely that at least part of the trade debate will shift to the nature of the farm aid offered and the amount. The amount announced by the administration is significant but may not be adequate to offset the political conviction about the tariff impacts—and then, there is the fact that not everyone is pleased with the prospect of a large boost in farmer support. For example, Sen. Rand Paul, R-Ky., says “tariffs are taxes that punish American consumers and producers. If tariffs punish farmers, the answer is not welfare for farmers — the answer is remove the tariffs," the Senator said.

So, pressure for additional farmer supports will immediately attract the attention of congressional ag leaders who are beginning to work in earnest on the farm bill conference and it certainly will attract the undivided attention of both U.S. producers and the national budget hawks, Washington Insider believes.


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