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Covering the markets these past 30 years has been a wild ride for senior market analyst Bryce Knorr.

Ups and downs for ag on the trade front

Insight into Trump's decision on steel tariffs, trade nominees confirmed, NAFTA negotiations and Guatemala trade mission.

Trade is essential for agriculture, and it looks to be increasingly important that those in the administration continue to hear about that important role farmers play on the world market as well as the strength of the overall U.S. economy. This week offered a bit of a wild ride with the rollercoaster of trade.

The biggest down came in the news Thursday that President Trump planned to impose tariffs of 25% of steel imports and 10% on aluminum. Agricultural groups as well as free trade advocates previously had warned against the move as it puts a target on U.S. agricultural products in any retaliatory wars. It appears the president didn’t hear that message.

“The tariffs announced today by the Administration will put the interests of other domestic industries over farmers,” said John Heisdorffer, American Soybean Association president and Iowa soy grower. Prior to the announcement, China has indicated that it may retaliate against U.S. soybean imports, which would be devastating to U.S. soy growers. “Our competitors in Brazil and Argentina are all too happy to pick up supplying the Chinese market.”  

In a joint statement, the U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) said, “It is dismaying that the voices of farmers and many other industries were ignored in favor of an industry that is already among the most protected in the country.”

Earlier in the week, Farmers for Free Trade released a new report highlighting how American farmers and ranchers have traditionally paid the price for trade disputes in the form of retaliatory tariffs on agricultural products. Brian Kuehl, executive director of Farmers for Free Trade, , a bipartisan campaign to rebuild support for trade at the grassroots level, said the announcement invites retaliation. “These tariffs are very likely to accelerate a tit-for-tat approach on trade, putting U.S. agricultural exports in the crosshairs. Already, we have seen China discuss tariffs on sorghum. The (European Union) and China have also indicated they will move forward with swift retaliation in the wake of these tariffs,” he said.

The announcement suggested the tariffs would apply to all countries. China surprisingly is not at the top of the list.

Bill Lapp, president of Agricultural Economic Solutions, shared that steel imports have equated to 20-30% of imports for the past 20 years. Percent of US imports by country is Canada (16%), Brazil (13%), S Korea (10%), Mexico (9%), Russia (9%), and China (2%).

Lapp said the announcement from the Commerce Department suggests the tariffs would be applied to all countries and the “toughest” option offered by the Commerce Department.

“But the impact of tariffs could be significantly curtailed by a change to a narrower list of countries,” Lapp said. A second day of sharp declines in the stock market could compel the White House to reconsider this decision to include all countries, Lapp suggested.

Doud confirmed

Thursday the full Senate confirmed Gregg Doud and C.J. Mahoney, who were nominated to serve as the United States Trade Representative’s chief agricultural negotiator and deputy United States Trade Representative, respectively. Dennis Shea also was confirmed as ambassador to the World Trade Organization (WTO). The action comes after months of waiting for the confirmations after continued delays.

Doud has served in a number of capacities related to domestic and international trade policy, working at the National Cattlemen’s Beef Assn. (NCBA), U.S. Wheat Associates, Commodity Markets Council and Senate Committee on Agriculture, Nutrition & Forestry.

U.S. Grains Council president and CEO Tom Sleight said U.S. agriculture needs Ambassador Doud in his new position. “He is uniquely skilled to represent our sector immediately in the trade negotiations happening as we speak. Having the position of chief agricultural negotiator filled by a competent, experienced leader is truly critical to our success in the ongoing North American Free Trade Agreement (NAFTA) modernization process, the reexamination of the U.S.-South Korea Free Trade Agreement (KORUS) and as we look to new trade talks that can help ensure our market access,” Sleight said.

NAFTA negotiations

The seventh round of North American Free Trade Agreement (NAFTA) modernization efforts also started Feb. 28 and are expected to continue through until March 5. The tensions between Mexico and the United States over the steel concerns also has been reported.

Mexican Economy Minister Ildefonso Guajardo met U.S. Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer during a hastily arranged visit to Washington as U.S., Mexican and Canadian officials held a seventh round of negotiations to rework NAFTA.

In a statement, Mexico’s economy ministry said Guajardo had discussed possible U.S. steel import tariffs with Ross, as well as bilateral agreements over tomatoes and sugar.

Farmers for Free Trade hosted a joint press conference Thursday with U.S. and Mexican farmers and producers, to highlight how the free flow of ag products between Mexico and the U.S. supports jobs and economic growth in both countries. The press conference included the personal stories of how farmers and businesses rely on an integrated supply chain between NAFTA partners and tool place on the sidelines of the NAFTA negotiations in Mexico City.

Kuehl said the organization continues to stress that “trade is not a zero-sum game. We win when we work together; when we build markets together and supply chains together.” He added NAFTA has created a strong trade bloc between the three countries which benefits each country.

Kuehl said he did not anticipate the controversial produce proposal – favored by one to states – to make its way into a final deal because of Mexico and Canada’s opposition.

Guatemala trip

U.S. Department of Agriculture undersecretary for trade and foreign agricultural affairs Ted McKinney said he’s bullish on the potential for future exports and imports into Central America after a week-long trade mission in the area.

McKinney led a trade mission to Guatemala Feb. 26-March 2, accompanied by a delegation of agribusiness and state government leaders, seeking to grow U.S. agricultural exports to Central America’s Northern Triangle of Guatemala, Honduras and El Salvador. The delegation included leaders from 34 agribusiness and trade associations and seven state departments of agriculture.
In speaking from Guatemala, he said the trade mission yielded nearly 450 business-to-business meeting. Early projections indicate it could be “one of the best” trade missions, following up on another strong mission trip to India last October.

“Current projections from our customers is that business would total near $30 million,” McKinney said, and this could be a conservative estimate. “Bottom line, it’s been a good one.”

McKinney said for a large part CAFTA is working. “It’s been a good one and we need to keep it going.” More than 95% of U.S. agricultural exports enjoy duty free access to the region under the CAFTA-DR trade agreement.

He also stressed the importance of two-way trade. “We seek opportunities for trade to be a successful two-way street.”

 

 

TAGS: Farm Policy
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