Inside D.C.

It’s all about trade, MFP in run-up to November

It’s tough to tell whether USDA’s recent projection of an expected “return to normal” on ag exports is wholly legit or election year “happy talk.” It’s also tough to get excited over President Trump’s pledge last week to pony up more federal aid in the form of round three of Market Facilitation Payment (MFP) checks if that’s what it takes to keep tariff-pummeled producers happy, especially when the president’s agriculture secretary keeps saying he doesn’t think it’s going to happen.

At USDA’s Annual Outlook Forum last week, Chief Economist Bob Johansson identified “more hopeful signs” for the overall farm economy this year, calculating exports will edge up from 2019’s $135 billion, to around $140 billion in 2020.  He also warned global competition, particularly from Brazil, is heating up.  Agriculture Secretary Sonny Perdue made sure reporters understood USDA’s 2020 projections don’t include promised “phase on” Chinese ag purchases this year, nor do they account for disruptions that will ensue from the global coronavirus crisis.

In any event, it seems clear, the White House believes the way to a farmer/rancher’s heart is through trade, whether “mini” deals, new bilaterals or tweaked existing trade pacts.

The administration track record so far is pretty good at least when it comes to promised opportunities.  The U.S.-Japan “mini” deal is in effect and expanded market access and new tariff rates abound.   

The U.S.-Mexico-Canada Agreement (USMCA) – NAFTA 2.0 – has been blessed by the U.S. and Mexico, but is awaiting final ratification by Canada’s Parliament.  Once that final hurdle is cleared in the next 30-45 days or so, it’ll take another 90 days for the new and improved cross border deal to kick in.

The U.S.-China tariff war détente, at least “phase one” of the deal, looks good on paper, but so far, it’s still more rhetoric than new sales.  The Chinese have announced they’ve excluded from tariffs or intend to drop tariffs on a host of U.S. ag products – it must if it’s to hit the $40 billion in new sales this year it’s pledged – but with the ongoing coronavirus crisis, some of that could be backburnered. 

The bad news is India continues to stiff arm Trump on any kind of general trade deal, save for government purchases of U.S. militaria.  The president hoped he could get a limited deal, one including processed dairy products, but India won’t budge.  Even a “mini” deal, a la the pact with Japan, isn’t expected any time soon; Trump says any deal is likely a post-2020 election goal.  On return this week from his state visit to that South Asia nation, the president told reporters he strongly warned Indian Prime Minister Modi “he must drop those tariffs.”

As for a bilateral free trade deal with the European Union (EU) – one that includes agriculture – it’s likely not going to happen until the outcome of the November election is known.   If some form of agreement emerges this year, the ag part will be very limited.  As to a United Kingdom (UK) bilateral trade deal now that Brexit is in full swing, it will happen, but when is a guess given domestic UK farmer opposition to several ag issues.  Trump’s premature declaration he’ll deliver a bilateral treaty with Brazil is complicated because Brazil is hampered by the rules of Brazil’s Mercosur partners — Argentina, Paraguay, Uruguay and Venezuela – which hold a deal with one is a deal with all.

Having said all that, it is never wise to count the Trump administration out when it comes to trade, there’s a growing school of thought the White House will dribble out trade “wins” right up until November 3.   

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