Leading Trade Policies in the Global Economies 26 th NAEGA-APPAMEX Forum August 22-24, 2019 Ryan Olson Director of Operations North American Export Grain Association
Worki king g Together her to to Mak ake e Trad ade e Work
ADM CoBank, Inc. McDonald Pelz Global Temco, LLC Commodities, LLC Agniel Commodities, LLC COFCO Agri Telwar International Inc. Mitsui & Co. Agrex, Inc. Columbia Grain, Inc. The Russell Marine Group Pacificor, LLC Agri-Port Services Degesch America, Inc. The Scoular Company Parrish & Heimbecker, Limited Arizona Grain EGT, LLC Toyota Tsusho America Inc. Pasternak, Baum & Co., Inc. Baltic Control NA Inc. Engelhart CTP Tradiverse Corporation Paterson Grain Blue Water Shipping Company Gavilon Grain LLC TRC Group Providence Grain Solutions Bunge North America Interstate Grain Corporation United Grain Corporation Richardson International Cam USA, Inc. ITOCHU International Inc. Viterra SGS Cargill, Inc. The Andersons, Inc. Zen-Noh Grain Corp. Sollio Agriculture Ceres Global Ag Corp. Louis Dreyfus Company T. Parker Host, Inc. CHS, Inc. 3
This is fine (its not fine)
Key Industry Objectives in Trade Agreements Benefitting all from Producer to Consumer More Trade, Increased Demand for Safety, Sustainability and System Reliability, Responsibility and Resilience BEST COMMERCIAL and OFFICIAL PRACTICES System integrity, predictability, and reliability . Consistent and understandable requirements that enable markets to trade products and provide for proportionate and effective risk mitigation and management. Appropriate measures that allow grain systems to maximize the value of the grain product and minimize cost inefficiencies and handling costs associated with the supply chain, while meeting plant protection needs. Respecting private contract terms and commitments 5
Improve Predictability and Transparency • Impossible to reduce regulatory or phytosanitary risk completely. • Impossible for governments to be completely transparent, reliable and predictable. • BUT regional and multilateral rules get us closer • AND create stepping stones for promoting sound regulatory practice at global level.
Types of non-tariff barriers • Sanitary and phytosanitary controls • Maximum residue limits • Customs and administrative procedures • Import permits and licensing • Biotechnology approvals • Procurement and tendering policies and procedures • Labeling requirements and sustainability certifications 7
How does USMCA stack up? Regulatory Coherence NAFTA TPP USMCA Provisions Regulatory Coherence Science Based Regulations Enforceability Risk Assessment Risk Management Border Checks/Lab Testing Rapid-Response Mechanism
How does USMCA stack up? Regulatory Coherence NAFTA TPP USMCA Provisions ✓ Regulatory Coherence ✓ Science Based Regulations ✓ Enforceability ✓ Risk Assessment ✓ Risk Management ✓ Border Checks/Lab Testing ✓ Rapid-Response Mechanism
How does USMCA stack up? Regulatory Coherence NAFTA TPP USMCA Provisions ✓ ✓ Regulatory Coherence ✓ ✓ Science Based Regulations ✓ ✓ Enforceability ✓ ✓ Risk Assessment ✓ ✓ Risk Management ✓ ✓ Border Checks/Lab Testing ✓ ✓ Rapid-Response Mechanism
How does USMCA stack up? Sector-level impacts of USMCA In absolute terms, PERCENT INCREASE (CHANGES RELATIVE TO BASELINE ESTIMATES IN 2017) 124,300 new service jobs are expected to be ■ Exports ■ Imports ■ Real wages ■ Employment created Employment in 3.4 3.3 manufacturing is expected to increase 0.37% 2.1 1.3 1.2 1.1 0.5 0.37 0.23 0.23 0.12 0.09 Agriculture Manufacturing and mining Services 11 Sources: United States International Trade Commission
Big obstacles overcome… ✓ Mexico passes labor reforms ✓ U.S., Mexico and Canada agree to Section 232 compromise ✓ Canada and Mexico remove Section 232 retaliation
…but more obstacles ahead? ❑ Discontinuation of U.S.-Mexico tomato agreement ❑ U.S tomato dumping investigation ❑ Florida seasonal produce bill ❑ WWND? – What will Nancy (Pelosi) do? ❑ Labor unions, presidential race, progressive wing
Shifting trade winds
What’s next? TPA defines how Congress allows the TPA requirements the Administration to TPA outlines Congressional guidance to Administration to enter into trade notify and consult with Congress, with the President on trade policy priorities agreements, and set the procedures for the private sector and other and negotiating objectives. Congressional consideration of bills to stakeholders, and with the public during implement the agreements. the negotiations of trade agreements. Timeline of Congressional session days under the TPA process Thirty days before the USMCA bill can be formally introduced in Congress, the administration must submit the final text of the legislation and a draft Statement of Administrative Action. STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 30 days 60 days 15 days 15 days House considers ITC report Final Implementing House must Senate finance Senate must submitted agreement bill introduced vote on bill must report vote on bill submitted to bill Congress Sources: USTR, Senate.gov, Politico
China versus USA Key U.S. negotiators Steven Mnuchin Donald Trump Robert Lighthizer Wilbur Ross U.S. President Secretary of the Treasury Secretary of Commerce U.S. Trade Representative Key Chinese negotiators Xi Jinping Liu He Chinese President Vice Premier of China 16
Changing Strategy… Source: Speech by Deputy Secretary of State Robert Zoellick, 2005
Changing Strategy… Source: U.S. Department of Defense, National Defense Strategy, 2018
…Changing tactics Trade Action Topic Status Outcome Section 301 Discriminatory policies that Investigation Completed Tariffs of 25 percent on $253 Trade Act of 1974 harm American intellectual billion in goods from China property rights, innovation, or technology development Section 201 Injury to domestic solar Investigation completed Global tariffs: Trade Act of 1974 panel and washing machine - $8.5 billion on solar producers panels - $1.8 billion on washing machines Section 232 Imports threaten national Aluminum: completed Aluminum: global 10 percent security: Steel: completed tariff - Aluminum Cars: report delivered to Steel: global 25 percent tariff - Steel president - Cars Uranium: investigation - Uranium underway
…Changing tactics Trade Action Topic Status Outcome WTO Case Aluminum subsidies Ongoing None WTO Case Intellectual property Ongoing None protections WTO Case Tariff retaliation Ongoing None
…Changing tactics Trade Action Topic Status Outcome Section 301 Determine justification for Ongoing Expected Summer 2019 Trade Act of 1974 additional $300 billion in tariffs Executive Order on Preventing U.S. businesses In effect Huawei sanctioned, but with Communications Technology from buying from Huawei general license
Cause and effect
Cause and effect
Cause and effect Source: Peterson Institute for International Economics
Cause and Effect Commodity Chinese Tariff 2017 exports Soybeans 25 percent $12.3 billion Sorghum 25 percent $800 million
Cause and Effect U.S. Origin Soybean Exports to China (2005-2018) Source: USDA GATS 40,000,000 35,000,000 30,000,000 25,000,000 Metric Tons 20,000,000 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year
Cause and Effect U.S. Origin Sorghum Exports to China (2005-2018) Source: USDA GATS 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 Metric Tons 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year
What just happened, and what’s next? May 10, 2019 May 1, 2019 Following a week of bilateral negotiations in Washington, Mnuchin and Lighthizer meet with Chinese trade an agreement was not reached and the US increased tariffs negotiators in Beijing and report progress made toward a on $200 billion of Chinese goods deal; a potential final round of negotiation is scheduled for a week later in DC May 13, 2019 China retaliated by raising tariffs on $60 billion worth of US May 6, 2019 goods; China’s finance ministry announced that it plans to Trump announces, via tweet, that the US would increase raise tariffs to 20-25% on products it currently taxes at 10% tariffs by Friday if a deal is not secured but that the US by June 1 would continue talks with China May 8, 2019 Look ahead The US formally announces tariffs will increase on May 10 th at 12:01 a.m., citing China’s reneging on previous • President Trump has said that his administration will continue to engage China in agreements trade deal negotiations • China and the US are facing contentious discussions on intellectual property theft and forced technology transfers • The US has yet to confirm whether or not tariffs on Chinese goods would be maintained at the same levels after a deal is finalized, in order to ensure Chinese compliance Sources: New York Times; Associated Press; Reuters; Washington Post; CNBC; Wall Street Journal
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