Washington Insider: Lingering Trade Concerns, New NAFTA and China’s Ag Buys

There’s a lot of unfinished business around concerning trade policy. One important piece concerns the new NAFTA, Bloomberg says. Signed by Canada, Mexico and the U.S. more than seven months ago, the agreement isn’t so new anymore. But it may be close to grabbing the spotlight again. With the U.S.-China trade fight sort of on hold, the White House is shifting attention back to NAFTA’s replacement, known as the USMCA – the U.S.-Mexico-Canada Agreement. More specifically, the concern now is how to get the pact approved by Democrats in the House. Not everyone in the administration agrees on how hard to push, Bloomberg says. On one side, Vice President Mike Pence’s staff and others are exasperated with the slow pace at which Democrats are demanding changes and offering solutions. Those officials see one way forward: force a vote on the revamped deal as soon as this month. Next Tuesday is the first day Trump can send USMCA implementing legislation to Congress, starting the clock for lawmakers to take it up. On the other side, officials including U.S. Trade Representative Robert Lighthizer don’t feel a particular urgency to ram a vote through Congress. But his continued patience will require some clear evidence that Democrats are seriously engaged, Bloomberg says. Congressional staffers caution that sending the legislation before Speaker Nancy Pelosi gives the green light would only cause delay. She wants to do minor surgery to the agreement before Democrats sign on. Too much stonewalling, though, might provoke Trump to give notice he’s withdrawing the U.S. from the existing NAFTA. The U.S. traded more than $1.2 trillion in goods with its two closest neighbors last year. Mexico has already ratified the pact, and Prime Minister Justin Trudeau has signaled Canada’s approval process is aligned with Washington’s. So, the U.S. political calendar could dictate the next steps. With no end in sight for a deal with China, the administration likely will want to hail his USMCA as a major trade victory as it campaigns for re-election next year. One additional aspect of the several trade battles these days is China’s agreement to buy U.S. agricultural products as a gesture of goodwill. Purchases could include soybeans, corn and pork, with total volumes depending on the progress of trade talks. While the potential purchases may provide some comfort to America’s farmers, the overall cautious tone suggests China is unwilling to promise too much without a deal. The plan hasn’t been discussed with their American counterparts and isn’t a part of the current truce agreement, Bloomberg said. During the last detente in December, China committed to buy over 20 million tons of U.S. soy, pork and corn. After talks fell apart in May, China said it would continue with the purchases, though it did ask for some shipments to be delayed. Some Chinese buyers are asking for offers of U.S. soybeans to be shipped out of the Pacific Northwest, said Dan Basse, president of Chicago-based consultant AgResource Co. “No sales that I have heard,” he said. Chicago hog futures gained at the open last Wednesday, buoyed by hopes of U.S. pork buying by China. “It’s that headline that’s popped us early,” said Craig VanDyke, a risk management consultant at Top Third Ag Marketing. Soybean futures, generally the most sensitive agricultural commodity to news out of China, closed 1% higher on Wednesday, while corn jumped 3.2%. However, an influential Chinese agricultural researcher this week said Beijing is unlikely to start purchasing large amounts of U.S. products anytime soon. Barriers include tit-for-tat tariffs that remain in place, as well as tensions over Huawei Technologies Co., said Li Qiang, chairman and chief analyst at Shanghai JC Intelligence Co. In addition, buying more U.S. agricultural goods also likely will not change Washington’s strict demands for concessions from China on intellectual property. “I’m not sure there’s any point for China to buy more than is needed,” Darin Friedrichs, senior Asia commodity analyst at INTL FCStone, said in an emailed report. Trump said after the G-20 meeting that he would hold off indefinitely on tariffs planned for an additional $300 billion in Chinese imports while allowing U.S. companies to continue to do some business with Huawei, one of the country’s most prominent firms. Still, the White House has yet to reveal details of Trump’s arrangement with Xi, leaving uncertainty about how the two countries will proceed. The political fights tend to intensify as the election approaches and the new fiscal year begins – and this year’s budget, trade and spending fights likely will be even more intense than usual – and thus will bear even closer watching by producers than usual, Washington Insider believes.