Policy Updates: USTR Issues NAFTA 2.0 Warning to Canada, Mexico

Posted on 11/22/2017 4:00 AM

Peterson gives update on new farm bill



USTR issues NAFTA 2.0 warning. U.S. Trade Representative (USTR) Robert Lighthizer said Canada and Mexico are not responding seriously to U.S. proposals to renegotiate NAFTA and warned that if the two countries don't change their tactics, "We will not reach a satisfactory result." The three countries ended a fifth negotiating round without major breakthroughs. “I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year,” he added.

Canadian and Mexican officials placed blame on the U.S. for putting forth a list of proposals that they said would weaken the pact, and would move its longtime focus away from the accord's initial intention to integrate trade between the three nations. “Significant differences remain on some key areas,” Canadian Foreign Minister Chrystia Freeland, who is leading her country’s negotiating team, said in Ottawa. While Canada is open to “mutually beneficial” compromises, she said, “at the end of the day we are always going to clearly defend our national interests.”

Timeline. The three countries have agreed to keep negotiating until the end of March. The statement said the countries had agreed to hold the sixth round of negotiations from Jan. 23-28, 2018, in Montreal, Canada. Negotiators will also continue their work in meetings in Washington, D.C., in December, the statement said.

There was some optimism expressed at the conclusion of the fifth round of talks in Mexico City. Lower-level negotiators from all three countries noted several advances they made this week in less controversial areas. “Progress was made in a number of chapters,” negotiators said in a trilateral statement issued at the end of the round. Officials said progress was made in digital trade, telecommunications, harmonizing regulatory practices, fighting corruption, food safety standards, and streamlining customs procedures. While there are still critical issues that are not yet resolved, one senior official said the goal of wrapping up the talks by March "is not out of the question."

House farm bill likely to be ready in early ’18, says Rep. Collin Peterson (D-Minn.), ranking member of the House Ag Committee. He told AgriTalk that he believes all that awaits is a “call by GOP leadership” on when to put the bill on the floor. Peterson offered this summary of some farm bill topics:

  • Overall, the next farm bill will look at lot like the 2014 Farm Bill. Reason: “Not enough money” to make many changes. But there may be a few farm bill alterations, detailed below.
  • Dairy: Besides some tweaks to the Margin Protection Program (MPP), focusing on milk production of 4 mil. lbs or so, Peterson said there would be “two new insurance products.” One of them is expected to be along the lines of an American Farm Bureau Federation proposal, with the other being the Livestock Gross Margin (LGM) program.
  • CRP: “Significant reforms” for the Conservation Reserve Program (CRP) will offset the funding needed to boost maximum CRP acres to 30 million, from 24 million now.
  • Ag Risk Coverage (ARC) program improvements dealing with county-to-county discrepancies and other requested changes need funding, and Peterson said he does “not want the funding to come from the Price Loss Coverage (PLC) program,” a safety net plan he favors over ARC. The need for big ARC changes could be a big issue in the Senate.
  • Cotton program changes will be paid via major changes to generic base acres.

FTC again finds no concentration in ethanol market. The 2017 Report on Ethanol Market Concentration from the Federal Trade Commission has reached the same conclusion it has in prior years relative to the question of "whether there is sufficient competition among industry participants to avoid price-setting and other anticompetitive behavior." The 2017 report concluded, "The low level of concentration and large number of market participants in the US ethanol production industry continue to suggest that the exercise of market power to set prices, or to coordinate on price and output levels, is unlikely." The FTC approved the report on a vote of 2-0.

Border wall funding included in Senate spending bill. The Senate Appropriations Committee’s fiscal 2018 spending bill for the Homeland Security Department (DHS) includes $1.6 billion to begin building President Donald Trump’s wall on the U.S.-Mexico border. The draft bill, released by the committee Tuesday, would provide DHS with $1.6 billion that Trump requested in March to construct a wall along 74 miles of the border near San Diego and in southern Texas.

This is bumper sticker budgeting at its worst,” said Sen. Patrick Leahy (D-Vt.), the committee's top Democrat. “Building a wall along our southern border is a waste of taxpayer dollars and an insult to our neighbor to the South.”

The bill’s Republican sponsors called it an investment needed to keep the country safe. “Recent terrorist attacks within the United States demonstrate our need to be constantly vigilant against security threats,” Chairman Thad Cochran (R-Miss.) said in a statement. “I hope this mark sets us on a course to provide the resources required by the Department of Homeland Security to protect the American people.”

The draft bill would provide about $44 billion in discretionary funding — around $770 million more than the administration requested — not including $7.4 billion in disaster relief funding and $163 million in Overseas Contingency Operations funding for the Coast Guard that is exempt from statutory spending caps. A companion bill (HR 3355) passed by the House would provide $45.2 billion in discretionary funds.

Other items of note:

  • Sen. Lisa Murkowski (R-Alaska) supports repealing the penalty for not purchasing health insurance under the 2010 health care law, (ObamaCare) she wrote in a Fairbanks Daily News-Miner op-ed published Tuesday.
  • U.S. Commerce makes affirmative preliminary determination on CVD investigation on ripe olives from Spain. Exporters of ripe olives from Spain have received countervailable subsidies of 2.31% to 7.24%, the US Commerce Department announced late Tuesday in an affirmative preliminary determination. Unless the final determination is postponed, Commerce is currently scheduled to announce its final countervailing duty (CVD) determination on April 4, 2018. If the final determination is affirmative and the International Trade Commission makes an affirmative final injury determination, a CVD order will be issued. The final determination from the ITC is to be made on or about May 18, 2018.
  • GAO: USDA must boost oversight of checkoffs. The Government Accountability Office (GAO) urged USDA to increase oversight of the 22 federal agricultural research and promotion programs, known as checkoffs, while noting that some progress has been made following a critical report from the department's Inspector General. In a report, GAO found that the Agricultural Marketing Service's oversight of checkoffs remains inconsistent, despite the recent improvements, which include AMS establishing standard operating procedures for checkoff oversight and conducting internal reviews of oversight efforts. Both were recommendations the Office of the Inspector General made in a 2012 report. Link to report.
  • Grassley: McConnell will help lift hold on Northey for USDA post. Iowa's two GOP senators have a commitment from Senate Majority Leader Mitch McConnell (R-Ky.) to help work with Sen. Ted Cruz's hold on USDA undersecretary nominee Bill Northey. Sens. Chuck Grassley and Joni Ernst "had a conversation with the leader about the importance of getting him approved … because his position is so important," Grassley said. Northey, the Iowa agriculture secretary, is the nominee for undersecretary for farm services and conservation. Cruz put a hold on Northey's nomination in October after Grassley, Ernst and other farm-state lawmakers worked with the White House to secure commitments from EPA Administrator Scott Pruitt on the Renewable Fuel Standard that favored corn producers over refiners. The Texas Republican has demanded the White House organize a meeting to discuss a solution to the RFS. Grassley and Ernst have attempted to negotiate with Cruz, but it "hasn’t done much good," Grassley said, adding it was not clear what McConnell will do to get Cruz to yield, but said he and Ernst stressed that it should be done no later than early December.
  • Trump pardons 'Drumstick' for Thanksgiving. President Donald Trump carried on the 70-year-old tradition of pardoning the Thanksgiving turkey at the White House. The turkey, "Drumstick," received a pardon and his wingman "Wishbone" will also get to live out his days in Virginia at Gobbler's Rest at Virginia Tech University. Of course, Trump did have some fun with the situation, joking he had checked with White House counsel on whether he could overturn the pardons of last year's birds by President Barack Obama – "Tater" and "Tot." However, White House lawyers told Trump that could "not be, under any circumstances, revoked,” Trump said. “So we're not going to revoke them. So, Tater and Tot, you can rest easy.”

Markets. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all hit fresh records Tuesday. The Dow Jones Industrial Average added 160.50 points, 0.7%, to 23,590.83, while the S&P 500 gained 16.89 points, 0.7%, to 2,599.03. The Nasdaq Composite rose 71.76 points, 1.1%, to 6,862.48. The S&P 500, with its 54th record close, has now posted the most records in a calendar year since1995.

Oil prices remain rangebound ahead of a meeting of the Organization of the Petroleum Exporting Countries next week. The cartel’s members and non-OPEC producers, including Russia, are expected to extend a deal to reduce production and bring down the global supply.

The Federal Reserve is monitoring inflation closely given officials’ uncertainty over whether the factors keeping it below their 2% target will prove endemic, Chairwoman Janet Yellen said Tuesday. “We expect [inflation] to move back up over the next year or two, but I will say I’m very uncertain about this,” Yellen said. Yellen and other Fed officials previously said the shortfall in inflation could be caused by transitory factors, but more recently, they have questioned how transitory the price weakness may be. “My colleagues and I are not certain that it is transitory, and we are monitoring inflation very closely,” Yellen said at New York University’s Stern School of Business. “It may be that there is something more endemic or long-lasting here that we need to pay attention to,” she said in a discussion with Mervyn King, the former governor of the Bank of England.

The central bank at 1 p.m. CST today will release minutes from the Oct. 31-Nov. 1 meeting that should reveal officials’ views ahead of their final policy gathering of the year in mid-December, when the central bank is expected to raise rates.

Deere and Co. reports fourth-quarter earnings today. Deere’s stock is up 34% since the start of the year, compared with a 15% gain in the boarder-market Standard & Poor’s 500 Index.


 

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