Tag Archives: Trade

A bipartisan group of lawmakers is demanding the Trump Administration force the European Union to include agriculture in upcoming trade talks. A group of 114 lawmakers penned a letter this week to U.S. Trade Representative Robert Lighthizer stating, “an agreement with the EU that does not address trade in agriculture would be, in our eyes, unacceptable.”

The U.S. and EU recently reached a tentative agreement to allow the U.S. access to the EU hormone-free beef quota, but the EU is pushing back against talking ag in a broader trade negotiation. The group of lawmakers say any agreement between the EU and the U.S. without agriculture “would be deficient, significantly jeopardizing Congressional support.” USTR Lighthizer does seem to agree, telling lawmakers earlier this week that the U.S. “cannot have a trade deal with the EU without agriculture,” adding “we’re at a stalemate and we’ll see how that develops.”

The letter was organized by House Republicans Jackie Walorksi and Virginia Foxx, along with House Democrats Ron Kind and Angie Craig.

Imports of canola, a Canadian oilseed crop, will now undergo more thorough inspections in China, the country’s customs agency said Thursday, amid what appears to be a retaliatory move amid a diplomatic row over the arrest of a Chinese executive.

Relations between Canada and China have been tense since December, when Canada arrested Chinese tech executive Meng Wanzhou in Vancouver at the request of the U.S. China warned of “grave consequences” if Canada did not immediately release Meng Wanzhou, the chief financial officer of Huawei.

U.S. prosecutors have filed charges accusing Meng, who is the daughter of Huawei’s founder, of lying to banks about dealings with Iran. Huawei denies any wrongdoing.

Apparent targets of China’s ire have included two Canadians detained on suspicion of harming national security, a third Canadian sentenced to death, and now the Canadian staple canola.

Canola is grown in China, Japan and many other countries.

However, the website for the Canola Council of Canada calls the crop “Canada’s greatest agricultural success story” and the world’s only “Made in Canada” crop. According to the Canola Council, canola was developed by Canadian researchers using traditional plant breeding techniques, resulting in a bright yellow variety of rapeseed whose seeds can be harvested for vegetable oil.

China’s customs administration said in a statement posted to its website Thursday that four customs offices in China found pests such as fungal pathogens in canola imports. It confirmed that it revoked the export permit held by Richardson International Ltd., one of Canada’s largest grain processors.

The agency said stronger inspections and lab testing while canola imports are in quarantine were needed.

Canadian Agriculture Minister Marie-Claude Bibeau said in a statement Wednesday that the Canadian Food Inspection Agency conducted investigations after China issued notices of non-compliance on canola seed imports, including nine since January. She said the agency had not identified any pests or bacteria of concern.

China buys about 40 percent of Canada’s canola exports, and the revocation of Richardson’s permit hurts the entire chain of industries involved in the market, the Canola Council of Canada said.

Meanwhile, the dispute centered on Huawei is simmering.

Huawei announced Thursday that it is challenging a U.S. law that labels it a security risk and would limit its access to the American market for telecom equipment.

Backing out of the Trans Pacific Partnership (TPP), renegotiation of the North American Free Trade Agreement (NAFTA), an ongoing trade battle with China and resulting retaliatory tariffs against the United States are all trade policies that are costing U.S. farmers dearly, according to an updated Purdue University analysis released on Monday.

An initial analysis was completed by Purdue economists Maksym Chepeliev, Wallace E. Tyner and Dominique van der Mensbrugghe in October 2018. The updated study said a U.S. re-entry into TPP would turn a current agriculture trade loss into a gain. In addition, the study says that backing out of NAFTA and failure to implement the USMCA, would lead to an additional $12 billion in annual losses in agriculture export revenues.

After the U.S. pulled out of the TPP, the remaining 11 countries including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, negotiated the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Speaking at a Farm Foundation event on Monday in Washington, D.C., Don Buckingham, an attorney with the Canadian Agrifood Policy Institute, said work done between the U.S. and Canada on trade agreements laid the groundwork for a possible re-entry of the U.S. into the TPP.

“Obviously it’s nice to be in the club,” Buckingham said.

“How do we determine a fair entry point? There is a market dynamic to take into consideration. A lot of provisions in the USMCA were first negotiated in TPP. In agriculture there is always sensitive sectors. It is always difficult. That may be where negotiation bogs down.”

The Purdue analysis said there still would be a significant benefit to the U.S. if it joined that partnership. If the U.S. continues its current trade stance, however, U.S. agriculture exports would continue to fall in the next four to five years.

“If the United States were to rejoin the TPP, the agreement would significantly benefit U.S. farmers — the loss of $1.4 billion would turn into a gain of $2.9 billion in additional agricultural exports,” the report said.

“If the current U.S. trade policy were to continue towards protectionism (i.e., with the U.S. withdrawal from TPP, with the global retaliatory tariffs and if the United States were to entirely withdraw from NAFTA), U.S. agricultural exports would drop by $21.8 billion. These negative trade impacts would be reflected in lower incomes for U.S. farmers, reduced agricultural land returns and farm labor displacement.”

The study said that, on average, the loss of those exports would lead to a reduction in income for workers in the agricultural and food sectors of about $4,000 per person.

“This scenario would also result in an aggregate welfare loss of $42.5 billion to the U.S. economy, or over $500 per U.S. household,” the analysis found.

“What does all this mean? It suggests that U.S. agriculture is entering a volatile period in international trade. The data suggests the sector currently risks losing much of the trade gains achieved over the past three decades. The analysis predicts that if the USMCA is approved, if the trade war ends and if the United States rejoins TPP, U.S. agriculture could see not only the gains of the past decades reinforced, but could also realize the potential for additional trade gains.”

Purdue economists said if the U.S. joins the TPP agreement with the other 11 countries, U.S. food and agriculture exports would increase by around $2.9 billion annually.

“Dairy products experience the largest relative increase in exports at 17.5%, which is equivalent to $1 billion,” the study said. “Similar increase in export values — around $1.1 billion — is observed in other food products sector, while exports of other agriculture and all other food products grow between $600 million and $700 million.”

NAFTA, USMCA

Though Congress is expected to vote on USMCA sometime in April, Democrats in the U.S. House of Representatives have indicated they may make changes to the agreement before approving.

“In summary, for the U.S. food and agriculture sector, the current shape of trade policies, including steel and aluminum tariffs and the corresponding retaliatory tariffs, is leading towards an export loss of $9.8 billion, with slight gains from the USMCA notwithstanding,” the analysis concludes.

No matter the outcome, the economists said agriculture already may have suffered lasting trade damage.

“Even if the trade liberalization situation transpires, there may be a lasting impact to U.S. agriculture export markets, as newcomers solidify their newly acquired market access,” the report said.

Retaliatory tariffs implemented by Canada and Mexico after the U.S. imposed 25% and 10% tariffs on steel and aluminum imports erased any U.S. gains expected from the USMCA, according to the analysis.

“The retaliatory tariffs implemented by Canada and Mexico on U.S. agricultural exports will reverse the modest export gains from USMCA — a decline of $1.8 billion (annually) rather than a gain of $454 million,” the economists said.

“In a broader trade context, with all measures and counter-measures (including tariff retaliation by China and the European Union), U.S. agricultural exports will decline by around $8.4 billion.”

In moving away from a policy of multi-lateral free trade toward protectionist policies, the Trump administration’s actions on trade are “likely to have significant implications for U.S. farmers as these actions target three of the largest markets for U.S. agricultural exports — Canada, China and Mexico — accounting for some 44%, and representing an average of $63 billion of U.S. agricultural exports 2013 to 2015,” the economists said.

SPECIFIC SECTORS

The Purdue study examined the effects of trade policy on particular segments of agriculture. In particular, the study said it would lead to a loss in agriculture land values and significant losses in exports from terminating (instead of replacing) NAFTA.

“With falling output and decreasing demand for land, land prices decline by 1.6% in the ‘raw milk’ sector and by around 1% in the ‘other agriculture,'” the analysis said.

“The quantitative assessment shows that the termination of NAFTA would result in an aggregate U.S. agricultural and food exports drop of over $12 billion (annually).”

That termination would lead to an estimated decline in pork and poultry exports by about 35%, or around $4.6 billion; dairy products by about 16%, or $950 million and other food products by about 15%, or $4.9 billion.

The World Trade Organization found that China exceeded its agreed-on limits for government subsidies on multiple crops.

Politico notes that U.S. Trade Representative Robert Lighthizer says the case could indeed become part of the negotiations and hoped-for trade deal with China. Lighthizer says there’s another WTO challenge in process that targets how China administers its import quotas on multiple agricultural products.

Lighthizer told the House Ways and Means Committee last week that they’re trying to resolve those issues with China within the context of a potential agreement.

White House Chief Economic Adviser Larry Kudlow told CNBC that the outlook for a deal with China is “very positive.” That’s a different outlook than the one Lighthizer had during testimony to the Ways and Means Committee in which he said, “there’s still substantial work that needs to be done.”

President Trump did say last week that they’ve made “major progress” in talks with China but also acknowledged the possibility things could still collapse. During a press conference in Vietnam, Trump said, “I’m never afraid to walk away from a deal. I would do that with China, too, if it didn’t work out.”

Also, on the trade front, the Trump Administration published its key objectives for a potential agreement with the United Kingdom, the first step in the process of beginning trade negotiations.

WASHINGTON (AP) — President Donald Trump said Sunday he will extend a deadline to escalate tariffs on Chinese imports, citing “substantial progress” in weekend talks between the two countries.

Trump tweeted that there had been “productive talks” on some of the difficult issues dividing the U.S. and China, adding that “I will be delaying the U.S. increase in tariffs now scheduled for March 1.”

Trump said that if negotiations progress, he will meet with Chinese President Xi Jinping at his Florida resort to finalize an agreement.

U.S. and Chinese negotiators met through the weekend as they seek to resolve a trade war that’s rattled financial markets.

Trump had warned he would escalate the tariffs he has imposed on $200 billion in Chinese imports, from 10 to 25 percent, if the two sides failed to reach a deal. The increase was scheduled to take effect at 12:01 a.m. EST on March 2.

The reprieve is likely to be greeted with relief by financial markets.

The world’s two biggest economies have been locked in a conflict over U.S. allegations that China steals technology and forces foreign companies to hand over trade secrets in an aggressive push to challenge American technological dominance.

The two counties have slapped import taxes on hundreds of billions of dollars of each other’s goods. The conflict has unnerved investors and clouded the outlook for the global economy, putting pressure on Trump and Xi to reach a deal.

“Trump clearly wants a deal and so do the Chinese, which certainly raises the probability that the two sides will come to some sort of negotiated agreement, even if it is a partial one, in the coming weeks,” said Cornell University economist Eswar Prasad, former head of the International Monetary Fund’s China division.

On Twitter, Trump said the two sides had made headway on issues including protection of trade secrets, forced technology transfer and U.S. agricultural sales to China. But the administration did not immediately provide details.

Business groups and lawmakers in Congress want to see a comprehensive deal that forces the Chinese to change their behavior and that can be enforced. The U.S. has accused China of failing to meet past commitments to reform its economic policies.

“Encouraging news from @POTUS that progress is being made in a trade deal with China. Hopefully this leads to an agreement that stops China’s theft of US intellectual property and avoids a full blown trade war,” tweeted Republican Sen. Pat Toomey of Pennsylvania

But critics worry that the president has given up leverage. “They now have lost the advantage of a deadline,” said Philip Levy, a senior fellow at the Chicago Council on Global Affairs and a White House economist under President George W. Bush, adding that “I see the odds tilting” in China’s favor.

China is proposing additional purchases of U.S. agriculture products of $30 billion a year in trade talks with the United States. Bloomberg reports the offer would be on top of pre-trade war levels and continue for an undefined period of time. Agriculture Secretary Sonny Perdue told reporters Thursday it was “premature” to comment on the proposal, adding he didn’t want to raise expectations.

But, if an agreement is reached, Perdue says the U.S. structural reforms can “recover markets very, very quickly.” The proposal is part of the talks between trade officials from the U.S. and China taking place in Washington, D.C. this week. In response, Arlan Suderman of INTL FCStone, expressed caution, noting “China will say what needs to be said to get a deal, but the key component will be in the verification and enforcement.” The talks face a March 1 deadline, although President Trump has recently suggested he would consider extending the deadline.

A new report out from the National Bureau of Asian Research warns the Trump Administration to temper its expectations on China significantly changing its economic policies.

The bureau says China can’t make deep structural reforms to its economy in the 10 days before the March 1 deadline to produce a trade deal. The report says the better strategy may be to keep tariffs on Chinese goods in place, potentially for years.

The bureau also wants the U.S. to work with allies like the European Union and Japan to crank up international reform pressure on Beijing. “We don’t think inflicting collateral damage on the U.S. economy is a good thing,” says former Louisiana Representative Charles Boustany, one of the co-authors of the report. “All we’re saying is hold the line for now on tariffs, short of any kind of major breakthrough.” The report’s authors say a good idea in the interim is to work on what they call “interim agreements.” An example would be the Chinese lifting tariffs on U.S. farm goods in exchange for Trump removing tariffs on Chinese electronic goods.

Trade talks between the U.S. and China resumed Tuesday as both nations seem optimistic to reach an agreement that would mark the end of a tit-for-tat trade war.

Mid-level talks are ongoing, with higher-level talks expected Thursday that will include U.S. Trade Representative Robert Lighthizer and Secretary of Commerce, Wilbur Ross, according to the Washington Post. The two sides “made headway” on “important and difficult” issues last week, according to Lighthizer. An agreement would be welcomed by U.S. agriculture, as China targeted U.S. farm goods throughout the trade war, including soybeans.

However, more long-term damage may be lurking. China has been working to overhaul its agriculture structure in recent years, and a recent policy statement by China announced the nations intent to stimulate its rural economy. The policy statement includes increased farm subsidies and the promotion of increased plantings of soybeans and other oilseeds. The statement is seen as another measure by China to increase domestic production of soybeans to reduce dependence on foreign nations.

China’s President will meet with U.S. trade leaders Friday as the U.S. and China seek a trade deal before an early March deadline. The South China Morning Post reports China’s President Xi Jinping is scheduled to meet with a U.S. trade delegation in Beijing, which includes U.S. Trade Representative Robert Lighthizer.

China and the U.S. face an early March deadline set by the Trump administration to reach an agreement that could end the tit-for-tat trade war between the two nations. However, President Trump said this week he is open to extending the deadline, saying he could let the deadline “slide for a little while.” Trump is expected to meet with China’s President sometime in March in what some say could be a move to close an agreement between China and the United States.

The trade war served a blow to U.S. agriculture as China slapped retaliatory tariffs on U.S. farm commodities, most notably, soybeans and pork.

SPOKANE, Wash. (AP) — Washington farmers can expect a tougher year covering expenses even if political leaders finalize trade agreements with the countries that import apples, beef and wheat from the Evergreen State, a Washington State University professor said.

Randy Fortenbery, an agriculture economics professor, delivered the economic forecast Wednesday at the Spokane Ag Expo and Pacific Farm Forum. He spoke at length about the troubling overall picture of the forces grinding against what has been a robust U.S. economy.

“I think commodity prices, except for sorghum, are going to be a little bit better than last year. But we are talking dimes not dollars,” Fortenbery said. “I don’t think the price increase will offset the cost increases.”

He openly contradicted President Donald Trump, who last year said trade wars are good and easy to win.

“The biggest issue . is making some assumptions about the trade environment. It really needs to get stabilized,” Fortenbery said. “I don’t care whether it’s big tariffs or no tariffs. People can adjust to tariffs if they know they are there permanently.

“What becomes difficult is changing the rhetoric on a weekly or monthly basis about what we are or are not going to do. That’s not just a risk in agriculture, that is a risk in what has been a really healthy U.S. economy in general.”

When last year Trump began threatening to place tariffs on U.S. imports of steel and aluminum, Fortenbery said, China immediately targeted two things Americans export the most: agricultural commodities and airplanes.

“We have, I’m going to argue, probably one of the most aggressive trade realignment programs since maybe the 1920s,” he said. “What I mean by that is we are addressing every one of our trading partners simultaneously. We haven’t done that in decades.”

The problem is that large companies have operations in several countries. Some steel companies produce raw material in one place and then ship it to the U.S. to produce finished products. As a result, some face 25 percent tariffs on the same steel twice, which gets passed on to consumers.

“Winning trade wars is not easy. They don’t really work,” Fortenbery said. “It’s one thing to go to a country and say we have some problems with the way we are trading. Going after everybody at the same time and expecting a positive outcome in the short run, that’s a real challenge.”

Trump has announced agreements with leaders from Canada and Mexico to replace the North American Free Trade Agreement. But until Congress ratifies the new deal, Mexico has withheld buying the same amount of American wheat and other commodities.

“This is a huge deal because we were told (NAFTA) was the worst trade deal ever. We were told the new one is an excellent trade deal, but until it actually gets ratified by Congress, it doesn’t go forward,” Fortenbery said. “In the current political environment, you can imagine we might have some political challenges.”

Trump has also suggested he would pull out of NAFTA completely if Congress refuses to ratify the new deal, Fortenbery said.

“That would be a bad thing for agriculture. Mexico and Canada are really important trading partners for us on the ag side,” he said.

Even if old trading partners settle the current trade war, U.S. producers have no guarantee that other countries will import as many American goods as before.

“The problem with trade disruptions is they last longer than one year,” Fortenbery said. “Even if we come back as price competitive with a new deal . it doesn’t mean that Mexico comes back and buys from us in the same volume, because they have already established a new relationship with someone else.”

The top crop in Washington in terms of value is apples. The Evergreen State produces about 67 percent of nation’s apple crop, he said.

“Our two biggest buyers are Mexico and Canada,” he said. If the new deal isn’t ratified “then the fruit sector of Washington is significantly at risk. How this resolves itself will have a lot to say about what really does happen in 2019 and 2020.”

One bright spot has been high beef prices.

“Demand has really grown. We have exported a lot more beef than projected,” Fortenbery said. “But a large part of that demand is from international customers. We have these huge inventories if the demand starts to decline because we are having trouble moving product into other countries.”

Along with the trade wars, the value of the U.S. dollar has increased. That means a company in France or China will have less purchasing power to import Washington-grown apples or cherries.

“If we continue to have significant uncertainty in terms of what our trade opportunities are going to be this coming year,” Fortenbery said, “then we might see a significant decline in farm income.”