Trade; Ag Economy; Biotech; Regulations; and, Policy Issues- Wednesday Posted By Keith Good On October 29, 2014 Trade Issues The U.S. Department of Agriculture’s Economic Research Service (ERS) released a report yesterday titled, “Agriculture in the Trans-Pacific Partnership,” which stated in part that, “The proposed Trans-Pacific Partnership (TPP) is a trade and investment agreement under negotiation by 12 countries in the Pacific Rim, including the United States. This report assesses the potential impacts of eliminating all agricultural and nonagricultural tariffs and tariff-rate quotas (TRQs) under a TPP agreement on the region’s agriculture in 2025—the assumed end date of the pact’s implementation—compared with baseline values for 2025 without a TPP. Cutting tariffs is only one of the many goals of the TPP negotiations, but it is an important one for agricultural trade. The value of intraregional agricultural trade in 2025under a tariff- free, TRQ-free scenario is estimated to be 6 percent, or about $8.5 billion higher (in 2007 U.S. dollars) compared with baseline values. U.S. agricultural exports to the region will be 5 percent, or about $3 billion higher, and U.S. agricultural imports from the region in 2025 will be 2 percent, or $1 billion higher in value compared with the baseline.” The ERS report also noted that, “While each member country will experience growth in both its agricultural imports and exports, Japan and the United States will account for the largest shares of the increases in intraregional imports and exports, respectively.The United States will supply about 33 percent of the expansion in intraregional agricultural exports—the value of U.S. agricultural exports to TPP partners in 2025 is estimated to be 5 percent ($2.8 billion) higher under the TPP scenario than in the baseline. Japan will account for almost 70 percent of the expansion in intraregional agricultural imports—the value of Japan’s agricultural imports from its TPP partners in 2025 is expected to be about 14 percent ($5.8 billion) higher than in the baseline.” In a separate report yesterday (“Japan’s Agri-Food Sector and the Trans-Pacific Partnership”) ERS indicated that, “Japan’s agriculture has been inward oriented, protected by trade barriers from foreign competition. Even though the share of Japan’s food consumption provided by Japanese production has gradually fallen, Japan’s farm sector remains the second-largest among the countries negotiating the Trans-Pacific Partnership (TPP). Japan’s food industry is increasingly integrated with TPP economies, although the TPP share of Japan’s agricultural imports has fallen over time. The proposed TPP agreement would lead to more agricultural exports to Japan from TPP partners, likely dominating the total agricultural trade impact of such an agreement. Despite potentially large import increases, especially in the rice, beef, and dairy sectors, the proposed agreement would only marginally reduce Japan’s output. Intrinsic strengths of Japanese agricultural production and constraints to the growth of supply in the rest of the TPP countries may limit the impact of the agreement on Japan’s agriculture. Nevertheless, U.S. exports would be well positioned to meet Japan’s new import demand.” And an overview of a third ERS report from yesterday (“Vietnam’s Agri-Food Sector and the Trans-Pacific Partnership”) stated that, “This report examines Vietnam’s agri-food sector and its trade with Trans-Pacific Partnership partners. Vietnam’s current trade agreements would overlap with the TPP. Vietnam’s already low tariff rates on animal feed and commodities for industrial inputs do not provide significant import opportunities, but consumer-oriented imports could gain from the TPP.” Meanwhile, a news release yesterday from the International Dairy Foods Association (IDFA) stated that, “In a letter to U.S. Trade Representative Michael Froman and Secretary of Agriculture Tom Vilsack, the [IDFA] called for the replacement of Japan’s current import administration program in the Trans-Pacific Partnership (TPP), calling it a potential Achilles heel in the negotiations. “Japan’s Agriculture and Livestock Industries Corporation (ALIC) is the state-trading enterprise that administers the country’s manufacturing milk quotas and imports of dairy products under tariff rate quotas. IDFA believes that ALIC operates in a trade-distorting and inconsistent manner that makes it difficult for U.S. dairy exporters to access the market.” And with respect to the Trans-Atlantic Trade and Investment Partnership (T-TIP) negotiations, Bloomberg writer Jonathan Stearns reported yesterday that, “Europe’s outgoing trade chief said the U.S. may break off talks on a commercial accord in early 2015 unless Europeans show a firmer willingness to include investment-protection provisions in any deal. “European Union Trade Commissioner Karel De Gucht said the EU would weaken U.S. interest in achieving the planned Trans-Atlantic Trade and Investment Partnership by carving out the investment-protection clause. He warned the EU against making the Americans feel as if they must ‘give in’ on the matter. “The clause would allow foreign investors to use arbitration panels instead of domestic courts to make claims against a national government when an investment is harmed, for example through expropriation.” The article noted that, “‘If we don’t want ISDS in the agreement with the United Sates, I doubt that the United States is even going to restart the discussions beginning of next year,’ De Gucht, whose five-year term ends on Oct. 31, told reporters late yesterday in Brussels. ‘This is practice in international trade.’ “The comments by De Gucht, a Belgian who belongs to the EU’s pro-business Liberal alliance, highlight the balancing act to be faced by his successor, fellow Liberal Cecilia Malmstroem of Sweden, when she tries to keep on track negotiations begun last year to expand the world’s biggest economic relationship. De Gucht has frozen talks on investment protection with the U.S. pending the outcome of a public consultation on the matter.” Also yesterday, Cristina Marcos reported at The Hill Online that, “Rep. Jim McGovern (D-Mass.) on Tuesday said the U.S. embargo against Cuba is outdated. “The United Nations General Assembly voted Tuesday — for the 23rd time — to condemn the U.S. economic embargo against Cuba. Out of 193 nations, 188 voted for the resolution slamming the U.S. restrictions. “McGovern urged the Obama administration to ease the Cuba embargo after 53 years. The Massachusetts Democrat argued undoing the restrictions would advance U.S. priorities.” Agricultural Economy University of Illinois agricultural economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“Soybeans Returns Projected Higher than Corn in 2014”) that, “Corn returns in 2014 likely will be negative on many farms, with losses near $100 per acre on cash rent farmland in northern Illinois (farmdoc daily, October 24, 2014). Projections indicate that soybeans will be more profitable than corn in 2014. Having a higher return for soybeans is unusual and may have implications for 2015 planting decisions [related table].” The farmdoc update added that, “Unlike most years, soybeans are projected to be more profitable than corn in 2014. Those farms raising more soybeans this year will tend to be more profitable than those raising more corn. “The 2014 projections may hold implications for shifts in acres in 2015. Similar to 2014 returns, return projections for 2015 suggest that soybeans will be more profitable than corn. Central Illinois has a larger comparative advantage in corn production over soybean production than many other areas of the United States. Hence, relative return differences between corn and soybeans likely are larger outside of central Illinois. Hence, economic incentives to switch acres outside of Illinois likely will be larger than those for central Illinois.” Reuters news reported yesterday that, “Agco Corp posted a lower quarterly profit on Tuesday as growers around the globe, faced with falling prices for farm commodities, purchased fewer tractors and harvesters.” Bloomberg writer Jack Kaskey reported yesterday that, “DuPont Co., the biggest U.S. chemical maker by market value, posted a surprise drop in third-quarter sales amid reduced buying by farmers and rising competition in solar-panel materials…U.S. farm income is falling as bumper crops of corn and soybeans undermine grain prices. DuPont’s agriculture unit, which sells genetically modified seeds and pesticides, is its largest by revenue. Sales there dropped 4.3 percent in the quarter amid lower prices and volumes for corn seed.” Meanwhile, Bloomberg writers Jeff Wilson and Supunnabul Suwannakij reported today that, “Prices for rice, a staple for half the world, extended losses after reaching the lowest since 2010 in Chicago as the outlook for a jump in U.S. production and increased exports from overseas producers signal ample supplies.” Also, Warangkana Chomchuen reported yesterday at The Wall Street Journal Online that, “Thailand offered about 208,000 metric tons of rice for sale Tuesday, as the Commerce Ministry attempts to unload huge stockpiles of the grain accumulated under a previous farm-subsidy program.” And Simon Clark reported at The Wall Street Journal Online that, “The Democratic Republic of Congo plans to lease farmland covering an area larger than France in an attempt to attract capital and technology capable of boosting jobs and food productivity in one of the world’s poorest countries. “Congo may lease as much as 640,000 square kilometers (247,100 square miles), or more than one-quarter of the central African nation, according to John Ulimwengu, an adviser to the Congolese prime minister who is organizing the project. The land is scattered across Congo, which is rich in mineral resources, forests, cultivable soil and water, including the Congo River, Africa’s second-longest after the Nile. The government wants investors to transform the country’s subsistence farming.” In transportation news, Reuters writer Rod Nickel reported yesterday that, “Barring a sudden pile-up of grain across Western Canada in the next five weeks, Ottawa will lift requirements that railways move minimum volumes of crops, Agriculture Minister Gerry Ritz said in an interview. “While Ritz says he is not ruling out any options before the rules expire Nov. 29, government data shows that grain has flowed more smoothly since the current harvest began compared to a year ago. “The government would need to see ‘a complete failure by the railways to move grain’ to extend the minimums, Ritz told Reuters, citing potential signs such as grain piling up in elevators and boats waiting to load at ports. Problems still exist, but not like in early 2014, Ritz said.” Also on this issue, a news release yesterday from Rep. Kevin Cramer (R., N.D.) stated that, “Chairman Daniel Elliott and Commissioner Ann Begeman of the Surface and Transportation Board responded to [Rep. Cramer’s] concerns about the Canadian government’s grain rail shipment performance mandates upon the Canadian National (CN) and Canadian Pacific (CP) Railroads. “In March of this year Canada required CP and CN to deliver 500,000 metric tonnes of Canadian grain, on a weekly basis, less face daily fines. The delivery requirement was later increased to 536,250 tonnes this past August, with the mandates currently set to expire on November 29th. Cramer began communicating his concerns with the mandates to Canadian Ambassador Gary Doer and the Canadian Parliament shortly after their initial creation. “On September 26th Cramer wrote to Ambassador Doer calling for the mandates to expire, requesting assistance from the Surface and Transportation Board, as well as U.S. Trade Representative Michael Froman and U.S. Secretary of Agriculture Tom Vilsack. In separate letters, Chairman Elliott and Commissioner Begeman ‘appreciated’ Cramer’s views regarding the performance mandates, with Commissioner Begeman indicating she will continue to follow the matter ‘closely.’” Biotech Dana Tims reported yesterday at the Oregonian (Portland, Ore.) Online that, “Oregon’s Measure 92 to require labeling of GMO foods is behind by six points, according to a new poll released Tuesday, just a week before Election Day. “The measure has already made history, becoming the costliest ballot measure fight in Oregon history. Opponents have raised just over $16 million — also a record for one side — and backers have raised nearly $7 million. “The Oct. 26-27 survey of 403 likely voters showed the measure trailing 48 to 42, according to the poll, which was conducted by independent Elway Research of Seattle, and commissioned by The Oregonian and KGW. Seven percent of respondents said they were undecided.” Regulations Todd Neeley reported yesterday at the DTN Ag Policy Blog that, “The National Cattlemen’s Beef Association and the Public Lands Council asked the EPA to withdraw the proposed Clean Water Act rule in a 37-page comment letter submitted Tuesday, calling out the agency on a number of fronts including making claims that EPA and the U.S. Army Corps of Engineers have not followed the Administrative Procedures Act during the public comment period that ends Nov. 14. In addition, the two groups said the agencies have misinterpreted two U.S. Supreme Court rulings in 2001 and 2006 in drafting a rule they say lacks clarity and exposes landowners to legal jeopardy.” An update yesterday at the blog of House Majority Leader Kevin McCarthy (R., Calif.) indicated that, “Last week, [McCarthy] released a memo on how the House plans to take real steps to reform government. This post expands on that memo by discussing a part of the House’s plan. “Imagine: A government official in Washington proposes a new regulation that will cost your employer lots of money and probably even cost you your job. You and your employer push back, saying the regulation won’t work and will destroy too many jobs. The government official says, ‘Well, our decision is based on science.’ But when you ask to see that science—science that they used to write the regulation and that will cost you your job—they say, ‘We can’t share that with you.’” Yesterday’s update added that, “Isn’t that wrong? Even so, it’s exactly what is happening today with the EPA. The EPA proposes new rules that will cost billions of dollars and destroy thousands of jobs. Then, when questioned, they say it is all based on the best science but often refuse to share that science with the American people or even Congress. “Soon the House will consider H.R. 4012, the Secret Science Reform Act, which fixes this problem. The House Science committee recognizes that if the EPA is committed to making rules on the best-available science, it should only make regulations based on science that is transparent and reproducible.” Policy Issues A news release yesterday from USDA’s Risk Management Agency (RMA) stated that, “[RMA] encourages ranchers and livestock producers to take advantage of additional protection for their operation by signing up for Pasture, Rangeland, Forage Crop Insurance by Nov. 15, 2014. Ranchers and producers signing up for this insurance option will have an additional safety net in place for their livestock operations. “‘There are more than 1 million livestock operations across the country, according to the most recent U.S. Agriculture Census,’ said RMA Administrator, Brandon Willis. ‘This insurance policy offers America’s ranchers and livestock producers a little extra confidence that they’ll be able to feed their herd and protect their livelihood.’” J.P. Singh, a Professor of Global Affairs and Cultural Studies at George Mason University, indicated in a recent update at Foreign Affairs Online (“The Land of Milk and Cotton”) that, “Earlier this month, Brazil and the United States struck a landmark trade agreement over a longtime point of contention: cotton. The deal—the United States pays a hefty sum to Brazilian cotton farmers in return for an opportunity to continue subsidizing its own producers—had all outward appearances of a fair compromise. Under the surface, however, the agreement concealed an uglier truth about the misbalance of power in international trade.” Professor Singh added that, “Although Brazil’s cotton farmers hailed the settlement as a major breakthrough, the victory is not as straightforward as it may seem. First, the history of many similar agreements—involving a dominant player and a growing economy—demonstrates that developing countries often find their concessions to be more expensive in the long run than they initially believe them to be. Second, the U.S.-Brazilian pact echoes an all-too-common conclusion to such disputes: a buy-off by the more powerful player rather than real steps to liberalize trade and reduce protectionism. On each point, Brazil is the loser.” -- Keith Good President FarmPolicy, Inc. Champaign, IL FarmPolicy is a FREE newsletter and is underwritten and made possible by the generous support of McLeod, Watkinson & Miller- Attorneys at Law. Office accommodations for FarmPolicy are provided by Bartell Powell LLP- Attorneys at Law, located in downtown Champaign, Il. To subscribe to the FarmPolicy Email, send a note to, [email protected]. To unsubscribe, send a note to, [email protected]. FarmPolicy is also on: Twitter, Instagram, YouTube and Google+
Posted on: Wed, 29 Oct 2014 11:28:51 +0000
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