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Wheat Industry Trade Priorities Included in USTR National Trade Estimate

Last week marked the annual release of the National Trade Estimate (NTE) to Congress by the Offices of the U.S. Trade Representative’s (USTR). The NTE report is a 474-page- list of trade barriers facing U.S. companies and producers. It documents a range of trade barriers, including Sanitary and Phytosanitary (SPS), technical and market access restrictions. USW submitted a host of concerns to USTR on October 28, 2015.

The report highlights a few major accomplishments from 2015, including completion of Trans-Pacific Partnership negotiations and the U.S. ratification of the Trade Facilitation Agreement — the first multilateral trade agreement in the WTO’s 20-year history. Beyond the successes of the past year, the report also lays out a roadmap of future work for USTR. Numerous wheat industry priorities made the listing, two of which are highlighted here.

A new addition to the 2016 report was China’s administration of their tariff-rate quota (TRQ) system, which Chinese millers and USW have repeatedly identified as a major hurdle in expanding the use of U.S. wheat in China. The report stated, “Market access promised through the tariff-rate quota system set up pursuant to China’s WTO accession agreement has yet to be fully realized.” Each year China completely uses the portion of the TRQ allocated directly to flour millers. However, the portion held by the state is not fully utilized and almost never reallocated as required by the WTO agreement.

China is not the only country where a TRQ keeps out potential wheat exports. Nearly two decades ago, Brazil committed to a 750,000 ton duty-free TRQ. The NTE report notes that Brazil never opened the TRQ, and therefore has imported no wheat under it. Without either ad hoc access, which Brazil opened in 2013 and 2014, or a functioning TRQ, Brazilian millers must pay a 10 percent tariff to purchase supplies anywhere outside of the Mercosur trade bloc. That leaves the United States, Canada and others at a significant price disadvantage.

These two barriers are just a preview of the issues listed by USTR. USW will continue to work with our partners to pursue resolutions to these barriers that hinder our customer’s ability to purchase U.S. wheat.

By Dalton Henry, USW Director of Policy

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Air Force One Lands in Cuba

Before this week, Air Force One had never been to Cuba. As the call sign for planes used to transport the President of the United States, Air Force Ones have landed in over 100 countries, but not once in Cuba until this past Sunday. That day marked the start of the first trip by a sitting U.S. president to Cuba since 1928.

President Obama spent three days in Cuba, along with a large delegation of government officials and industry representatives. Most importantly for agriculture, several representatives of the U.S. Agriculture Coalition for Cuba (USACC) made the trip at the invitation of the U.S. Secretary of Agriculture. Representing wheat farmers was Doug Keesling from Kansas.

“We need to put politics aside. It is time for the people of Cuba and the United States to finally be able to meet each other face-to-face,” said Keesling. “Whether we are looking to make deals on wheat shipments or just enjoy each other’s company over mojitos and cigars, we are tired of dealing with these restrictions. It’s time to move on to the next chapter in U.S.-Cuban relations and end the embargo.”

It was an eventful few days for the USACC members, who met with counterparts in Cuban agriculture and participated in events with agriculture leaders from both U.S. and Cuban governments. USACC acted as ambassadors for U.S. agriculture in a country where there has been far too little exposure in decades, even handing out Cuban and American flag lapel pins on the streets.

A lot has happened in the nearly 90 years since a U.S. President last visited Cuba. Most significantly, for U.S.-Cuban relations, revolutionary armed forces led by Fidel Castro deposed the U.S.-backed government in Havana in 1959. Very few U.S. citizens have ever approved of the revolutionary government in Havana or supported its efforts to spread Marxist ideology beyond its shores. Since the end of the Cold War, pronounced ideological differences have persisted, though ideological conflict has largely subsided.

According to public opinion polls, most Americans support repealing the laws collectively known as the Cuba Embargo. Generally, supporters of repeal believe it would be better for both the Cuban and American people if the two countries can trade and interact freely, or at least without obstacles imposed by the United States. Along with President Obama, many Members of Congress – both Republicans and Democrats – support engagement instead of sanctions. Several from both parties accompanied the President this week in Cuba, along with Secretary of Agriculture Tom Vilsack and other Cabinet members.

Cuba is the largest wheat market in the Caribbean, but U.S. exports have dried up completely since 2011. The single largest obstacle preventing the resumption of wheat exports to Cuba is codified in U.S. law and will take an act of Congress to repeal. The embargo must end and the wheat industry will continue advocating for that action.

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U.S. Wheat Industry Encourages Discussion on Border Issues with Canada

By Elizabeth Westendorf, USW Policy Specialist

Two weeks ago, government officials from Canada and the United States met for the biannual Consultative Committee on Agriculture — a committee designed to facilitate cross border trade flows and cooperation. In preparation for this meeting, USW sent a letter to the USDA highlighting the need for Canada to correct its discriminatory treatment of foreign grain. Both countries have a strong commitment to cross-border collaboration and open trade, but Canada’s protectionist measures go against these principles and deny U.S. wheat farmers access to a market that is right next door.

While Canada is one of the United States’ largest trading partners, USW continues to have concerns about the closed nature of its bulk grain handling system, which will not allow U.S. wheat to receive an official grade commensurate with its quality. Though Canada privatized the Canadian Wheat Board in 2012, it has not completely liberalized its wheat industry. Instead of letting U.S. wheat into its bulk grain handling system, Canada downgrades all foreign wheat to the lowest grade, feed wheat. U.S. wheat is of comparable quality to Canadian wheat, so this downgrading of all foreign wheat is a blatantly protectionist action. It denies U.S. farmers access to the market across the border, access that Canadian farmers have if they choose to bring their wheat to U.S. elevators during harvest. This lack of access means that when there is a price premium at Canadian elevators near the border, as we saw in the late summer and fall of 2015, U.S. farmers cannot take advantage of those higher prices.

USW hopes that Canada’s new government will commit to reform its Grains Act and allow foreign grain to receive the same treatment as domestic. The United States repealed Country of Origin Labeling (COOL) for meat in December 2015 as Canada requested, but Canada’s discriminatory wheat treatment does much of the same thing as COOL. Now that the United States has domestically addressed its treatment of Canadian livestock, it seems only fair that Canada fix its treatment of U.S. wheat. This will ensure a healthy continuation of the long-term partnership between the two countries. Governments should never be responsible for segregation that market forces could manage more efficiently. USW is happy to see our Canadian industry counterparts calling for reform alongside us, and we look forward to Canada continuing to break down barriers to the free trade of wheat.

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USW Lays Down Policy Priorities for Year Ahead

By Ben Conner, USW Deputy Director of Policy

A professor once told me this about achieving goals: “If you don’t write it down, it will never happen.” On behalf of the farmers we represent, USW takes a similar approach to our policy priorities: we write them down for the board to review every year. That happened again last week at the USW Board of Directors meeting in Washington, DC.

USW divides policy goals into three general categories: the World Trade Organization (WTO), free trade agreements (FTAs) and U.S. government policies. USW priorities in all three categories reflect our mission, which is ultimately to enhance the profitability of U.S. wheat producers and their customers.

The WTO category includes both trade enforcement and negotiations. A major policy priority is to ensure that wheat-producing countries follow WTO rules. Right now, a number of major developing countries are blatantly ignoring those rules, costing U.S. farmers in the form of lower exports and prices, and hurting their overseas customers in the form of more expensive domestic supplies. Studies conducted for USW estimated U.S. wheat farmers are losing more than $1 billion in revenue from domestic support policies in just four countries: China, Turkey, Brazil and India. Some of those countries have blatantly ignored WTO import rules in order to protect domestic wheat sectors. That is unacceptable and underscores the need to enforce past trade commitments. Similarly, our board supports negotiations through the WTO that create a more level playing field, but opposes rules that weaken current disciplines in the WTO Agreement on Agriculture or in continued negotiations under the failed Doha framework.

Free Trade Agreements are another priority. If the WTO negotiations remain at an impasse, aggressive market access gains will only come through bilateral regional sectoral trade agreements. The Trans-Pacific Partnership (TPP) is now signed and, hopefully, will soon be ratified by legislatures including the U.S. Congress. Beyond that, the wheat industry is hoping for rapid TPP expansion to other countries in the Asia-Pacific region as well as to new FTA opportunities.

Finally, U.S. government policies also affect U.S. wheat export potential. One of our priorities is on-going funding for the beneficial federal market promotion programs that — along with investment from state wheat commissions — help organizations like USW provide valuable services and information to customers around the world. USW also supports an end to the U.S. embargo of Cuba.

Now that we have written our 2016 Policy Priorities, it is time to make it happen. We are passionate about the profitability of farmers and their overseas customers, so we will be working hard to remove the policy obstacles in the way.

 

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Taking a Vote on TPP is Critical to Its Ultimate Success

Representatives from the 12 Trans-Pacific Partnership (TPP) negotiating countries are set to sign the agreement in New Zealand next week. Though signing the pact is primarily ceremonial, it marks another step forward in the long process of putting the world’s largest free trade agreement into action.

In the months since the final agreement announcement, the TPP collected many new endorsements, particularly among business groups. The U.S. Chamber of Commerce announced its endorsement Jan. 6, while encouraging the Obama Administration to work with Congress and industry members on unresolved concerns.

After the Feb. 4 signing attention will largely shift to the U.S. Congress, where leaders have so far hesitated to commit to any timing for a potential vote in part because much work is needed before a vote can even be considered. The International Trade Commission (ITC), which held a hearing on the agricultural portions of the agreement earlier this month, is accepting formal testimony on the merits of the agreement until Feb. 15. Their final report due May 18 will incorporate those comments, required by this past summer’s Trade Promotion Authority (TPA) bill.

With that ITC report as an official “scorecard” of the TPP, the administration will work with Congressional leaders to find time for a vote. That is a critical point because according to the regulations set down by the TPA, after introducing the implementing legislation the appropriate committees must complete their reviews and hold a final up-or-down vote within 90 days.

Many congressional watchers speculate that this final vote will not take place until after the U.S. elections in November. Some legislators fear trade agreements are too political to address prior to the election, while others may hope a new administration will place different priorities on the agreement’s portions that are more contentious. Unfortunately, any delays will mean U.S. wheat producers and their customers overseas must continue managing through inconsistencies in sanitary and phytosanitary standards and paying higher tariffs until the agreement is implemented.

Conceived as much more than just another free trade agreement, TPP was to be the platform for expanded trade in an entire region. In fact, within a few weeks after negotiators struck an agreement, as many as 12 additional countries contacted U.S. Trade Representative officials to test the membership water. However, no other country may apply for membership until after the U.S. Congress and the governments of the 11 other countries ratify the agreement. For this positive momentum to continue and ultimately help reach that goal of lifting economic opportunity in the region, moving as quickly as possible toward the Congressional vote on TPP is critical.

By Dalton Henry, USW Director of Policy

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WTO Takes a Few Steps Forward in Agricultural Trade Negotiations

While achieving progress in multilateral trade negotiations among World Trade Organization (WTO) members is often frustrating, USW sees some steps in the right direction in the recent agreement at the WTO Nairobi Ministerial meeting held in mid-December — despite some setbacks.

USW is particularly pleased to see the elimination of export subsidies, which rank high among the most trade-distorting forms of support. The agreement immediately eliminates such subsidies for developed countries and calls for a phase-out for developing countries. Though the world’s largest traditional user of agricultural export subsidies – the European Union – has moved away from the subsidies, agreeing to eliminate them is no small matter.

USW welcomes the recognition in Nairobi that the United States can keep offering food aid and development programs without change, which underpins this country’s leadership in the world. Wheat produced by U.S. farmers is a cornerstone grain for food aid that is affordable, nutritious and fits monetization projects that encourage in-country development.

The Nairobi agreement also addressed export credit and financing rules that reflect reforms the United States has already made. USW believes there should be no further restrictions on the GSM-102 program, which is a reliable, practical financial tool used by several U.S. wheat importing countries.

Despite these gains, USW is disappointed that the Ministerial reauthorized the use of transportation, marketing and processing subsidies for agricultural products for developing countries. This exception could provide cover to bad actors who have violated past agreements to the detriment of producers around the world. USW will continue working with the Office of the U.S. Trade Representative (USTR) to ensure developing country members do not abuse this exception.

The Ministerial reflected differing views on future WTO negotiation priorities. At least the agreement recognizes that work would continue on Doha’s remaining issues in agricultural trade. This includes public stockholding programs, which India uses to subsidize its farmers, and a “special safeguard mechanism,” which would allow countries to “snap-back” tariffs on products in the face of rising imports. The continuation of these negotiations is especially concerning given some countries’ insistence on using these negotiations to roll back progress at the WTO.

USW congratulates and thanks our negotiators at USTR for their hard work. We look forward to sharing the U.S. wheat farmer’s voice in future negotiations. We must also ensure that WTO members hold firm on past agreements, allow no more backpedaling on domestic subsidies and return their focus to the original goal: liberalizing trade policies to promote economic growth for all participants.

By Dalton Henry, USW Director of Policy

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