You are here: / Trade Policy
thumbnail
, , , ,

Columbia Snake River System Has a Crucial Role in Moving Grain to Port

Early in 2019, I attended a presentation given by the Executive Director of the Pacific Northwest Waterways Association (PNWA), Kristin Meira. In the audience were farmers eager to hear how U.S. legislators shared their interests regarding the ongoing navigability of the Columbia Snake River System. Open waterways are a crucial and efficient source for U.S. farmers to export their products to international markets.

The Columbia Snake River System is the leading gateway for wheat exports. The Columbia Rive alone barges 53% of U.S. wheat destined for export. The rivers can move more volume at once, with greater fuel efficiency, making them more effective for moving grain to market than by rail or truck. One barge can carry the same amount as 35 rail cars or 134 18-wheelers. A barge tow can carry more than one 100-unit train or 538 trucks. One barge can move a ton of wheat 647 miles per gallon while a truck can only move a ton of wheat 145 miles per gallon

A Voice for the River System

The PNWA is an active voice in promoting the benefits of keeping the river systems open for navigation. In their own words, the PNWA is a collaboration of ports, businesses, public agencies and individuals who combine their economic and political strength in support of navigation, energy, trade and economic development throughout the Pacific Northwest (PNW). The organization’s history dates back to the projects of the New Deal in 1934. The group, known then as the Inland Empire Waterways Association, petitioned President Roosevelt to fund a navigation lock along the Columbia River just east of Portland, Ore.

Since then, the PNWA has been a leader in securing Congressional authorization for the necessary funds to build another seven locks and dams along both the Snake and Columbia River. The PNWA also works hard to maintain and improve navigability. They advocate for deepening the draft and improving the jetties that allow safe passage into the Columbia River.

Conflicting Interests

The importance of the river system is not lost on the farming community. However, balancing the interests of environmental groups is difficult. Save Our Wild Salmon, an organization with the goal of increasing PNW wild salmon and steelhead populations, advocates for the removal of dams on the Snake River and expanded spillways on the remaining dams. They also want to modernize the Columbia River Treaty with Canada. These changes would include the river’s health as an equal portion of the treaty, which currently only governs energy production and flood management.

Many groups do not place value on the beneficial role that the dams have regarding grain transportation and clean renewable energy. The four dams on the Snake River power up to 800,000 homes while producing zero carbon emissions. Instead, environmental groups focus their argument on enhancing the railroad as a replacement for barge grain transportation. This tactic would take billions of dollars in infrastructure upgrades and would not be as efficient or as environmentally friendly

A Necessary Link

The value of the Columbia Snake River System as a transport hub from farm to market is the link necessary to connect the United States to its trading partners. The river system keeps U.S. wheat competitive by moving higher volumes at more efficient prices. The wheat associations that make up the tri-state region of Idaho, Oregon and Washington all support, through their PNWA membership and resolutions,  the ongoing navigability of the rivers system. There will continue to be controversy surrounding the river system and the rich ecosystem that they sustain. The shared interest between farmers, sportsmen, environmentalists, scientists and commerce are diverse. An organization like PNWA, which has spent more than 80 years advocating for an open river system, is the key to keeping it open for decades to come.

By Michael Anderson, U.S. Wheat Associates (USW) Assistant Director, West Coast Office

/by
thumbnail
, ,

The U.S. Wheat Industry’s Partnership with Japan Adds Perspective to Current Trade Negotiations

There is renewed hope this week that the United States and Japan are making good progress toward a trade agreement that we hope will ensure U.S. wheat can continue competing with Canadian and Australian wheat based on quality, variety and value. Currently, under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), Japan’s effective tariffs on Canadian and Australian wheat imports are discounted and will continue being discounted to the tariff on U.S. wheat imports. U.S. Wheat Associates (USW) has every confidence that our agricultural trade negotiators working with Japan fully understand the need to mitigate the risk to U.S. wheat farmers in an agreement. We thank them for their efforts.

As the talks move forward, USW thinks it is important to review the indelible link between the Japanese people and U.S. wheat producers. It began when the Oregon Wheat Growers League (OWGL) organized a trade delegation to investigate opportunities for expanding U.S. wheat sales to Japan in 1949. In 1956, with a vision to the future, OWGL opened an office in Tokyo to share information the wholesome goodness of wheat foods. The success of this endeavor helped encourage wheat farmer organizations in the state of Washington and Oregon to join OWGL in forming Western Wheat Associates (WWA), which merged with Great Plains Wheat in 1980 to become USW.

In the early years, USW’s legacy organization focused on acquainting the Japanese people with the nutritional value of wheat foods. Perhaps the most famous were “Kitchens on Wheels” traveling through rural Japan to promote wheat foods to Japanese consumers, conducted jointly by OWGL and the Japan Nutrition Association with financial assistance from USDA’s Foreign Agricultural Service (FAS), which has remained an essential partner with USW and our Japanese customers. Eventually, management of these programs transitioned to eight key prefectures. Another early program involved the introduction of bread to school lunch programs.

Kitchen buses helped introduce the Japanese people to the nutritional value of wheat foods. This project started in 1956 was the first of many successful wheat promotion programs sponsored by U.S. wheat farmers in close cooperation with the Japanese government, millers, bakers and the grain trade over the last 60 years.

 

Starting with bread donations, the U.S. wheat industry continued to help introduce bread to school lunch programs allowing Japanese children to enjoy the taste and nutrition of a new type of food.

As market conditions changed, the wheat industry’s Tokyo office contracted with the Japan Institute of Baking to conduct functional and quality testing offering proof that flour products milled from U.S. hard red spring and hard red winter wheat classes could compete with Canadian spring wheat. Those early efforts continued to expand and change as Japan’s milling and baking industries advanced in sophistication and automation to set global standards of cleanliness, uniformity and variety of products for consumers.

Working to Increase Confidence. For example, Japanese flour mills and their customers demand very high standards of cleanliness and uniformity in addition to the variety of wheat classes to make the wide range of flour products for hundreds of different wheat food products — and U.S. wheat producers consistently meet those standards. Recognizing that our customers in Japan needed the confidence they could contract for and receive wheat of the highest quality, USW took action. Managers worked closely with the Ministry of Agriculture, Fisheries, and Forestry (MAFF), Japan’s grain trade and flour millers to refine specifications in tenders for U.S. wheat. At the same time, USW and its state wheat commission members worked with the U.S. grain trade to respond to these specifications. Partly as a result, Pacific Northwest export elevators changed their processes to improve segregation and installed cleaners. That commitment to reliability and customer service combined with the high quality and end-use performance is why Japanese flour mills prefer and choose to source 50 percent of their annual needs – almost 3 million metric tons per year on average – of wheat from the United States.

In 2016, U.S. wheat farmers and U.S. Wheat Associates traveled to Tokyo to celebrate the founding of a U.S. wheat export office in Japan in 1956. Here is that delegation at the offices of the Japan Flour Millers Association. Bringing Japanese millers and U.S. wheat farmers together builds a closer working relationship. The result is greater trust and a big reason why Japanese millers keep producing flour from U.S. wheat.

Over the years, a strong trust had grown between U.S. wheat farmers, state wheat commissions, USW, MAFF, millers and bakers, as well as the Japanese grain trade and their quality assurance partners. USW and the farmers we represent take this opportunity to renew our commitment to producing the highest quality, highest value wheat for our customers in Japan and around the world.

/by
thumbnail
,

U.S. Wheat Farmer Testifies on Importance of Grain Inspection System for U.S. Export Markets

Original news release by the National Association of Wheat Growers published here.

The Senate Committee on Agriculture held a hearing July 31, 2019, looking at perspectives around reauthorizing the Grain Standards Act. Brian Linin, a wheat farmer from Goodland, Kan., testified on behalf of the National Association of Wheat Growers (NAWG) on the importance of reauthorizing the Grain Standards Act. Linin also serves as a board member of the U.S. Wheat Associates and works for Frontier Ag, Inc.

Highlights from his testimony can be found below:

“The Grain Standards Act serves a critical role in exporting grains and oilseeds, including U.S. wheat, of which about 50% is exported each year. With such a large volume of wheat being exported, our export markets are critical to wheat farmers’ bottom lines…”

“The grain inspection system is one that is valued by our overseas customers and adds value to our commodities. Foreign customers can be assured that an independent agency has certified shipments to meet the grade requirements specified in a contract. This certainty and reliability has helped wheat and other U.S. commodities to grow our export markets and serves as a significant advantage of purchasing U.S. wheat versus wheat from other origins…”

Brian Linin and Senator Pat Roberts (KS).

“A properly functioning grain inspection system is critical, and we urge Congress to reauthorize the Grain Standards Act this year. Despite the significant impacts of tariffs on exports, U.S. wheat has maintained some competitiveness in the international market in part thanks to the advantage and premium international buyers place on the U.S. grain inspection system.”

“Given the current uncertainty in trade agreements and many of the bearish factors working against U.S. wheat exports, it is critical we maintain one of our key advantages. Foreign and domestic customers value an independent agency certifying shipments to meet the grade requirements of contracts.”

To read Brian Linin’s testimony in its entirety, visit NAWG’s site here.

/by
thumbnail
, ,

Trade Promotion Assistance Will Support USW Activities in New and Established Markets

Under the Agricultural Trade Promotion (ATP) program administered by USDA’s Foreign Agricultural Service (FAS), U.S. wheat farmers recently welcomed additional support for the effort to build overseas demand for the high-quality wheat they produce.

FAS awarded $8.2 million to U.S. Wheat Associates (USW) in cost-share assistance in May 2019 and awarded an additional $2.6 million on July 19 earmarked for wheat export promotion through September 2022. To apply for the funding USW was required to demonstrate that wheat farmers were hurt by import barriers laid down as a result of trade disputes. In 2018, USW reported that farmers had experienced losses of more than $330 million as a result of China’s retaliatory tariffs on wheat and a slow down in imports by Mexico.

José Luis Fuente, President of Camara Nacional de LA Industria Molinera de Trigo (CANIMOLT) at the USW Mexico Wheat Trade Conference, June 2 to 4, 2019.

USW will do all it can to use these additional resources as effectively as possible and demonstrate how the addition of ATP funds will help grow new opportunities for wheat farmers and differential service for overseas customers. These include on-going efforts to develop emerging wheat export markets in Myanmar, Malaysia, Vietnam and Indonesia as well as niche soft wheat markets in the Middle East and North Africa.

USW is already putting these ATP funds to work. In June, USW held a very successful conference for Mexican wheat buyers that brought together wheat farmers, the grain trade and flour millers who represent more than 80% of Mexico’s total wheat import volume. USW sees growth potential in Chile and with ATP funding sponsored a representative of a large Chilean buyers’ group to participate in the recent Wheat Quality Council’s annual hard red spring (HRS) wheat tour in North Dakota. ATP funding is now helping build increased awareness of U.S. wheat’s superior baking quality in flour blends in the large regional market around Bogotá, Colombia.

These ATP funds come at a critical juncture for the U.S. wheat industry, said USW President Vince Peterson.

Participants take measurements to estimate yield at the recent 2019 Spring Wheat Quality Tour in North Dakota.

“We appreciated the support for the traditional Market Access Program and Foreign Market Development program in the most recent Farm Bill,” he said. “However, those program apportionments have remained essentially unchanged for 17 years with FMD and 13 years with MAP and the ravages of time and inflation have eaten away at their effective bottom lines. This renewed financial capability is an important response that will help USW adequately address both today’s trade challenges and tomorrow’s new market opportunities.”

Peterson cited several trade challenges. Mexico for example is a leading buyer of U.S. wheat, but almost everything about that relationship depends now on the passage of the pending U.S.-Mexico-Canada Agreement on Trade. In Japan, a strong preference for several U.S. wheat classes there is threatened by the growing tariff advantage for Canadian and Australian wheat supplies under the new Trans-Pacific Partnership agreement. Since March 2018, China has turned to Canada to supply what had been U.S. wheat before tariffs were implemented and just this week its government announced changes that will make it possible to import Russian grain supplies. USW is encouraged by apparent progress in those negotiations reported on July 31.

The Trump Administration’s support through the ATP program, combined with the Market Facilitation Program (MFP), is welcomed by wheat farmers affected by low prices and other risks related to on-going trade challenges. It is no exaggeration to say that the long-term health of an industry that contributes about $6 billion per year to wheat farm families and U.S. wheat supply businesses hinges on a swift and favorable end to the on-going trade disputes.

*Header Photo Caption: Panel on “Optimizing Rail Operations of U.S. Wheat Shipments and Minimizing Additional Expenses for Mexican Importers.” at the USW Mexico Wheat Trade Conference, June 2 to 4, 2019.

/by
thumbnail
,

U.S Wheat Industry Supports International Food Assistance Programs

By Elizabeth Westendorf, USW Assistant Director of Policy

“We know that a peaceful world cannot long exist, one-third rich and two-thirds hungry.” – President Jimmy Carter

Conflict and population displacement are both on the rise around the world. From war in Yemen to natural disasters in Southern and Eastern Africa, when these events happen, the people most at risk are also the most vulnerable to malnutrition—women and children. While there are no easy answers to these problems, the U.S. government and U.S. wheat farmers are doing their parts to help.

In marketing year 2018/19, the United States donated 800,100 metric tons (TMT) of wheat through international food assistance programs. Of this, 46% (364.4 TMT) was hard red winter wheat donated primarily to Ethiopia, and 52% (418.1 TMT) was soft white (SW) wheat primarily donated to Yemen. Other countries that received wheat included Ghana, Kenya and Bangladesh. Some of these donations were part of USDA Food for Progress monetization programs, under which wheat is sold commercially in-country and then the proceeds of that sale are used to fund an agricultural development project in the area.

September 2018 – USAID hosted an event in Portland, Ore., to bring attention to the need for food in Yemen and ongoing U.S. efforts to provide aid. Read more about this event here.

U.S. Wheat Associates (USW) has long supported these programs and the economic value they bring to countries. Other donations, like the SW wheat going to Yemen, were part of USAID’s Food for Peace emergency feeding initiatives. Yemen has been embroiled in civil war for several years now, and that instability has very real negative effects on its population. This program works to ensure that the most vulnerable people, such as women and young children, have access to food despite such turmoil.

Food aid donations are not a “market.” These programs feed hungry people and generate diplomatic goodwill, making the world a safer place. If these programs are working effectively, there would be no need to donate commodities at all because there would not be food insecurity abroad. However, until that day comes and while political crises continue to outpace natural disasters, the United States’ leadership and commitment to supplying these resources, as it has for over 60 years, is as crucial as ever.

In 2017, USW led a team of U.S. wheat farmers, state wheat commission staff members and others to Tanzania to visit current USDA Food for Progress projects funded by wheat monetization. Read more about this experience here.

/by
thumbnail
, , , ,

Some Positive News on Wheat Trade with Japan, Mexico and China

Headlines on the trade front this week have direct bearing on the U.S. wheat industry’s desire to reaffirm our trade relationship with long-standing customers in Japan and Mexico, and to renew our relationship with customers in China. For now, at least, the news is positive.

U.S. Trade Representative (USTR) Ambassador Robert Lighthizer this week told members of Congress that the Trump Administration hopes to “wrap up” an agricultural trade agreement with Japan “later this year.” That is good news for flour millers in Japan, who do not want to continue paying incremental effective tariffs for U.S. soft white (SW), hard red spring (HRS) and hard red winter (HRW) relative to Canadian and Australian wheat under the new TPP-11 agreement. Repairing this potential breach with Japan is essential for wheat farmers who, with their partnership with the USDA Foreign Agricultural Service have invested countless resources for more than 60 years to serve the demanding Japanese flour and wheat foods industries.

Amb. Lighthizer also reached out to members of Congress who have expressed concerns about the new U.S. Mexico Canada Agreement on Trade (USMCA). In a description of his remarks, Agri-Pulse reported that the USTR “bent over backwards to assure Democrats on the Senate Finance Committee that he was hearing and addressing their concerns, both about enforcing labor rules in Mexico and about whether the trade pact would hamstring efforts to lower pharmaceutical prices.” At the U.S. Wheat Associates (USW) 2019 Mexico Wheat Trade Conference early this month, our colleagues and our customers in Mexico identified that supporting the USMCA will be our shared focus. They took another big step today with news that Mexico’s Senate on Wednesday passed the USMCA, making it the first country to ratify the new trade pact. Mexico’s imports are the foundation of farm family incomes throughout the southern and central U.S. Plains. Losing it because of trade policies beyond their control is unthinkable.

On June 18, President Trump raised expectations for some positive trade outcome from his planned meeting with Chinese President Xi Jinping at the upcoming G-20 summit. He said he had a “long talk” with Pres. Xi and, according to news reports, said “China very much wants to discuss the future and so do we.” In this case, “we” definitely includes U.S. wheat farmers who have been all but shut out of exporting wheat to China following the imposition of retaliatory tariffs in March 2018. Before then, Chinese flour millers and their baking customers were demanding more high-quality U.S. wheat to blend with domestic wheat. Now, China has replaced our wheat with competing supplies of Canadian spring wheat.

As Amb. Lighthizer said during his congressional testimony on negotiations with Japan, “I think we are making headway and we’re in a situation where we if we don’t make headway quickly, people will lose market share and never get those customers back.”

USW continues to support the need to enforce commitments made in multi- and bilateral trade agreements and, given this week’s upbeat news, look forward to a speedy resolution of these challenging situations.

/by
thumbnail
, ,

A Trade Policy Win for the U.S.-China Wheat Chain

By Ben Conner, USW Vice President of Policy

It has been my pleasure these past four years to contribute content to this newsletter but, unfortunately, all good things must come to an end, as this will be my last Wheat Letter article as a U.S. Wheat Associates (USW) colleague. I am grateful especially to the half dozen (or so) regular readers of my articles. You may not like agricultural trade policy as much as I do, but it is a critically important part of this industry so thank you for working to understand it.

There are several issues I could have chosen to write about for this final article, but during my tenure at USW there has been no market as affected by trade policy issues as China. One of the first trips I took for USW was to Geneva, Switzerland, and the World Trade Organization (WTO) in 2015. I was there to discuss the market distortions caused by China’s domestic support policies, an issue first identified and pursued by my predecessors at USW. Coupled with those policies was an approach to tariff rate quota (TRQ) administration that had — to that point — dashed our hopes of China becoming the world’s largest importer of high-quality wheat (the TRQ quantity is for 9.636 million metric tons).

More recently, the trade friction between the United States and China has stopped virtually all imports of U.S. wheat in China. The additional 25 percent tariff on U.S. wheat imposed in response to U.S. tariffs has proven to be prohibitive. A market that could now be among our top import markets with steady demand of more than a million metric tons per year was reduced to practically nothing. As I noted before, trade policy matters to farmers and importers alike.

However, USW has always taken a long-term view and our trade policy goals with China are no exception. We encouraged the U.S. government to launch the domestic support and TRQ trade cases not due to any animus towards China, but because we want to be closer trading partners. What was holding us back were policies that are not consistent with WTO rules, a fact confirmed again in the TRQ case by the WTO dispute panel.

The WTO panel determined that China administered its wheat TRQ in a way that was not “transparent, predictable, and fair” using “clearly specified administrative procedures.” The panel sided with the United States on most of its arguments, and came to the following conclusions:

  • Basic eligibility criteria – It is not clear from China’s regulations what would qualify an entity to receive quota allocation for wheat. China admitted to the panel that it relies on the entity not being placed on the Credit China blacklist, rather than the published eligibility criteria, but this is not made clear to applicants.
  • Allocation principles – In determining how China allocates the TRQ, the panel found a disparity between its written principles and practice. TRQ quantities are allocated based on actual import performance, which supersedes all other factors, though China does not make this practice clear to applicants.
  • Reallocation procedures – China has two conflicting measure on reallocation, with one document setting out a first-come, first-serve method for reallocation, but a separate document referencing other allocation principles.
  • Public comment process – China accepts public comments on the TRQ allocation process, but it is not clear at all how these comments are used, and so China fails to meet its obligations to administer TRQs transparently and through clearly specified procedures.
  • Administration of STE and non-STE portions – 90 percent of China’s wheat TRQ allocation goes to state trading enterprises (STEs), i.e. COFCO. If a private entity does not use its TRQ allocation, it must return it to NDRC, but if COFCO doesn’t import 90 percent of the TRQ (it never has) there is no requirement to return unused quota. The panel found that COFCO’s unused quota should be returned and reallocated – so in 2018 COFCO should have returned 6.8 million metric tons (MMT) that could have been reallocated to non-STE end users.
  • Usage requirements – China also inhibits the filling of TRQs by requiring recipients to process in the mill specified in the application or be subject to penalty if the wheat was moved to another mill or sold to another company irrespective of commercial conditions. The panel’s view is that this would cause users to be overly cautious in their applications and import less than they would otherwise.

Bringing these and other policies discussed by the panel policies into compliance and removing retaliatory tariffs should allow China to grow into one of the largest and most consistent markets for U.S. wheat, increasing the availability of high-quality products provided by China’s food processing sector. This is the objective that USW will continue working towards long after I have handed the organization’s policy responsibilities to someone else and, more importantly, long after the trade tensions between our countries subside.

[Editor’s Note: Ben Conner is leaving USW to join DTB Associates, a Washington, D.C., firm providing consulting, legal and business services in trade, agricultural policy and legislation.]

/by
thumbnail
, , ,

U.S. Wheat Farmers Have Not Abandoned Customer Service in China

It is certainly true that the trade relations between the United States and China are in a difficult place. With the latest round of tariff increases announced and imposed, it is certainly possible to imagine that this conflict will not end soon. But we must all remember that negotiations are happening, and reworking the trading relationship between the two largest economies in history was never going to be easy.

In the meantime, U.S. Wheat Associates (USW) stands firmly by the following article by USW President Vince Peterson, “In Spite of Trade Conflicts, U.S. Wheat Farmers Will Not Abandon Customers in China,” published in “Wheat Letter” nine months ago.

USW remains engaged in keeping our once and future customers in China informed about the quality, variety and value of U.S. wheat in anticipation of future opportunities. Upcoming work includes a short course on contracting for wheat value, baking demonstrations in cooperation with the USDA’s Foreign Agricultural Service trade office in Beijing, and additional technical milling support activities in China. The commitment to service there will continue long after this trade conflict has ended. 

In Spite of Trade Conflicts, U.S. Wheat Farmers Will Not Abandon Customers in China

By Vince Peterson, USW President. Originally published August 21, 2018.

Chinese Vice Minister of Agriculture Han Jun recently acknowledged the decades of work that U.S. farmers have put into growing the Chinese market for U.S agriculture. He then warned that this market may never come back to where it was if the trade dispute with the United States continues much longer.

We can guarantee the Vice Minister, and the wheat food industry in China, that U.S. Wheat Associates (USW) and the farmers we represent will not turn our backs on our outstanding customers in China. We remain dedicated to our core mission in China, as we are everywhere in the world, to bring profitability and value to our customers even if that is temporarily more difficult today.

Presumably, Chinese leaders believe that U.S. farmers can persuade the Trump Administration to end this trade war with China. However, U.S. farmers have been clear with their own government that China’s predictable response to the conflict has harmed them and we have supported negotiations to resolve this conflict. While we agree that escalating rounds of tariffs are a bad idea, we also believe that many of the U.S. government complaints about China’s policies are valid.

In our experience, state disruption of the wheat trade has been an enormous problem, severely limiting opportunities and profitability for both U.S. farmers and our wheat food industry customers in China. Through opaque administration of its wheat tariff rate quota (TRQ), China has deprived its flour mills of an average of 6.5 MMT of imported wheat annually over the past decade. In fact, recent import volumes are still well below what China imported in the 1980s and early 1990s; that is, before it joined the World Trade Organization (WTO). One could be forgiven for thinking China was a more promising market before joining the WTO than after; almost entirely because of excessive subsidies to the domestic wheat crop in recent years, as well as tight limits on TRQ access. This is why the U.S. government, under the Obama Administration, initiated two WTO cases on these issues in the fall of 2016. The prosecution of those cases has been continued and pressed forward by the Trump Administration. We are highly supportive of this action.

The Chinese government should recognize that its many years of flouting international commitments and highly interventionist “state capitalism” have led directly to the present conflict. If China had lived up to the commitments made when it joined the WTO, it is highly doubtful that we would still find ourselves in this situation. If Chinese leaders want to avoid further conflict and bolster the international trading system that they claim to defend, China can first start behaving like a responsible economy and adhere to its trade commitments in both letter and spirit. Of course, we are urging the same from the United States, which must also approach China with clear demands and a path towards achieving them.

Nevertheless, we are confident that this trade confrontation will one day be resolved. In the meantime, we will continue to reach out to our customers and friends in China, to reassure them of our unfailing dedication to our work with them. Further, we will make the guarantee that, once this trade dispute is resolved and behind us, we will work harder than ever to continue earning their business as we chart a path, together, to build the commercial channels that hold so much promise for Chinese and American industries and people.

/by
thumbnail
,

The Long-Term Risks of “National Security” Tariffs Have Appeared

By Ben Conner, USW Vice President of Policy

In June 2017, U.S. Wheat Associates (USW) suggested that pursuing a strategy of import protection under the guise of national security would set a dangerous precedent. Then USW President Alan Tracy said “… if the United States undermines WTO national security exemptions, it would be handing a gift-wrapped roadmap of protectionism to food self-sufficiency advocates all over the world.”

The United States did impose these tariffs and threatens more. The risk of imitation by other countries is a long-term threat to U.S. agriculture, but most affected countries to date have responded by retaliating against U.S. agriculture exports, rather than imitating the U.S. policy. In addition, these countries have brought several cases against the United States at the World Trade Organization (WTO). The United States claims these tariffs are allowed under the WTO’s national security exception, which is self-determined. Other countries claim such measures are allowed only if they fit under one of the criteria established in the WTO rules.

The WTO earlier this month gave a preview of how it might rule on the cases against the United States with its panel decision in a case that Ukraine brought against Russia. The report was adopted last week by the WTO Dispute Settlement Body (DSB). Ukraine argued that Russia’s restrictions on its transshipment rights violated WTO rules, which would be clearly true in normal circumstances. Russia claimed these restrictions were imposed for national security reasons due to the armed conflict with Ukraine. Russia further argued that the panel had no jurisdiction, because Russia had invoked the WTO’s GATT Article XXI, the rule that allows exceptions to normal WTO rules for national security reasons. Russia argued that determining national security is up to each country and therefore not subject to the panel judgment. The United States made the same argument in a third-party brief.

Russia won the case, because armed conflict is a valid national security issue, but lost the argument that the panel had no jurisdiction. At the risk of oversimplifying, the panel found that if the national security rule was meant to be self-judging, the authors of the agreement would not have included specific criteria. It quoted a U.S. delegate who said in 1947 that they supported the specific criteria due to the recognition “that there was a great danger of having too wide an exception…because that would permit anything under the sun.”

Permitting tariffs on “anything under the sun” could lead to devastating consequences for the competitive U.S. agriculture sector as more protectionist nations around the world follow the U.S. example. However, the United States, consistent with the position it has taken to date in this case, opposed this decision and claimed there should be no parameters on any trade restriction if the country imposing the restriction cites the national security exception.

USW takes no position on the respective arguments in the case but remains extremely concerned with the indiscriminate use of 232 tariffs that will likely put this question in front of the WTO DSB soon. This is a major challenge facing the WTO that did not need to happen and threatens to undermine the global trade rules that are so important to U.S. agriculture and its overseas customers.

The Trump Administration’s trade agenda includes fixing an extensive list of long-standing concerns with how some of our trading partners and international institutions have applied trade rules. USW shares many of these concerns. Unfortunately, we believe that the use of Section 232 undermines the long-term interests of the U.S. economy and U.S. agriculture in particular; and any gains made because of these tariffs are likely to be short term while the damage to the rules-based trading system could be permanent.

For additional information, visit https://bit.ly/2EA9HOn and https://bit.ly/2KmTSRx online.

/by
thumbnail
, ,

Old Trading Friends Japan and USA are Talking Again

By Ben Conner, USW Vice President of Policy

The United States and Japan kicked off negotiations this week on a potential trade agreement between these two Pacific Rim economic giants. While the path forward for these negotiations is not yet clear, the pace is likely to speed up with a schedule of additional meetings between these traditional trading partners.

With the knowledge that U.S. farmers and their Japanese customers face significant challenges in the coming years, we were glad to see agriculture mentioned prominently in the U.S. Trade Representative (USTR) statement about the meetings.

USTR also reported that it raised the “very large trade deficit” with Japan as a primary area of concern. For U.S. agriculture, the concern is that the U.S. trade deficit with Japan seems poised to increase due to the disadvantage of being outside the Trans-Pacific Partnership (all other economic factors such as Japan’s significantly higher savings rate being equal). This month, in fact, Japan lowered its trade barriers further to imported agricultural products from many of the world’s major suppliers, but not the United States. Consequently, U.S. products, including wheat, are more expensive for Japanese importers.

U.S. Secretary of Agriculture Sonny Perdue has noted that there are two ways for other countries to shrink their deficit with the United States: buying more or selling less. His priority for overseas customers to buy more U.S. agriculture products. Here at U.S. Wheat Associates (USW), we strongly support that, but right now, in Japan, it is U.S. agriculture that is selling less.

The Trump Administration has described several trade policy problems facing U.S. industry. USW agrees with many and questions some, but we have strong hopes for an improved global trading system following the disruption that many see as necessary to rebalance trade relationships.

The Administration clearly has not forgotten U.S. agriculture, as the USTR statement proves. Concluding an agreement with Japan to offset the effects of withdrawing from TPP would be a crucial and welcome step toward demonstrating to U.S. farmers that their interests still matter.

/by

Think Farm Export Programs Don’t Matter? Think Again.

GET THE REST OF THE STORY

DTN Wheat Detail
DTN Corn Detail

2008-2013 U.S. Wheat Associates. All Rights Reserved
Privacy Policy | Non-Discrimination Statement