National Corn Growers Association Trade Update
On Wednesday, June 19, Mexico ratified the US-Mexico-Canada Agreement (USMCA). Its Senate voted overwhelmingly (114-4) to ratify, making it the first of three parties to the agreement to pass it. Canadian officials have said they plan to move USMCA through a process more in lockstep with the United States’ timeline.
On June 26, Ambassador Lighthizer met with House Speaker Nancy Pelosi and the nine Democrats she has appointed to a working group to negotiate key changes to the USMCA with USTR. The Ambassador has developed a warm and productive relationship with House Democrats and they plan to keep working in good faith to reach an agreement on how to address concerns over four issue areas: labor, environment, enforcement and drug pricing. Speaker Pelosi has said that her caucus wants to get to “yes” on USMCA but that they are not bound by an August recess timeline. They can move the agreement in the Fall if needed. The White House has not sent the implementing bill to Congress yet (starting the fast track clock) – the earliest it can go is July 9th.
Capitol Hill visits during Corn Congress will be valuable opportunities to promote the importance of USMCA and I suggest planning for August recess advocacy as well.
On July 30 at the G-20 meeting, Presidents Trump and Xi announced that they have agreed to pause further escalation of the trade war and will resume talks. Details on the terms of this ceasefire are still not public and a date for the next talks has not been announced. We know current tariffs will remain in place but new US tariffs will be delayed.
In other news, China’s Ministry of Commerce announced that China will keep anti-dumping and anti-subsidy tariffs on US DDGS after a recent review. China was once a DDGS market valued at over $1 billion/year prior to the anti-dumping tariffs and the retaliatory tariffs. Between the AD tariffs and the retaliatory tariffs, DDGS exports have been all but shut off, with only $20 million worth of the product shipped to China in the 2017/2018 marketing year.
In the last couple of weeks, Secretary Perdue, Ambassador Lighthizer and Senator Grassley have all expressed public optimism that we will reach an ag-only agreement with Japan shortly after Japanese elections later this month. Because it would be a tariff-only deal they think they can do it without triggering Trade Promotion Authority (TPA), meaning it would not require a Congressional vote. In exchange they would give Japan a promise of exclusion from auto tariffs. It remains to be seen whether Japan will accept those terms when they want increase access for autos in the US. Lighthizer has said he views this as a two-step process in which the more comprehensive agreement is worked out in the second phase and hopefully includes things we want like SPS and biotech provisions (likely modeled off TPP).
EU Trade Agreements
The EU recently announced two new trade agreements- one with Mercosur (Brazil, Argentina, Uruguay, Paraguay) and one with Vietnam. We are still analyzing but it doesn’t appear the big non-tariff barriers the US corn industry faces in the EU were addressed in a helpful way in the agreement with Mercosur. These new agreements are likely to infringe on US agriculture’s global competitiveness.
On June 25, the House, by vote of 227 to 194, approved the FY 20 Agriculture Appropriations bill (H.R. 3055). It was considered as part of a package of several appropriations bills (Commerce, Justice, Science, Interior, Environment, Military Construction, Veterans Affairs, Transportation, Housing and Urban Development). As approved by the House, the legislation includes the full $255 million for Agricultural Trade Promotion and Facilitation, as authorized in the 2018 Farm Bill. No amendments related to MAP and FMD were considered during floor debate. As a result, MAP and FMD will receive NO LESS than $200 million and $34.5 million respectively for FY 20. H.R. 3055 makes no changes regarding paying for administrative costs. Unfortunately, these costs, which totaled $5.5 million for MAP and $1.5 million for FMD in FY 19, will continue to come out of mandatory program money.
The Senate could consider its version of the FY 20 Agriculture Appropriations bill later this month.