Leading Trade Policies in the Global Economies 26 th NAEGA-APPAMEX - - PowerPoint PPT Presentation

Leading Trade Policies in the Global Economies

26th 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

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ADM Agniel Commodities, LLC Agrex, Inc. Agri-Port Services Arizona Grain Baltic Control NA Inc. Blue Water Shipping Company Bunge North America Cam USA, Inc. Cargill, Inc. Ceres Global Ag Corp. CHS, Inc. CoBank, Inc. COFCO Agri Columbia Grain, Inc. Degesch America, Inc. EGT, LLC Engelhart CTP Gavilon Grain LLC Interstate Grain Corporation ITOCHU International Inc. The Andersons, Inc. Louis Dreyfus Company McDonald Pelz Global Commodities, LLC Mitsui & Co. Pacificor, LLC Parrish & Heimbecker, Limited Pasternak, Baum & Co., Inc. Paterson Grain Providence Grain Solutions Richardson International SGS Sollio Agriculture

• T. Parker Host, Inc.

Temco, LLC Telwar International Inc. The Russell Marine Group The Scoular Company Toyota Tsusho America Inc. Tradiverse Corporation TRC Group United Grain Corporation Viterra Zen-Noh Grain Corp.

This is fine (its not fine)

Key Industry Objectives in Trade Agreements

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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

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

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• 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

Regulatory Coherence Provisions NAFTA TPP USMCA Regulatory Coherence Science Based Regulations Enforceability Risk Assessment Risk Management Border Checks/Lab Testing Rapid-Response Mechanism

How does USMCA stack up?

Regulatory Coherence Provisions NAFTA TPP USMCA Regulatory Coherence ✓ Science Based Regulations ✓ Enforceability ✓ Risk Assessment ✓ Risk Management ✓ Border Checks/Lab Testing ✓ Rapid-Response Mechanism ✓

How does USMCA stack up?

Regulatory Coherence Provisions NAFTA TPP USMCA Regulatory Coherence ✓ ✓ Science Based Regulations ✓ ✓ Enforceability ✓ ✓ Risk Assessment ✓ ✓ Risk Management ✓ ✓ Border Checks/Lab Testing ✓ ✓ Rapid-Response Mechanism ✓ ✓

How does USMCA stack up?

1.1 3.3 1.2 1.3 2.1 3.4 0.23 0.5 0.23 0.12 0.37 0.09

Agriculture Manufacturing and mining Services

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Sources: United States International Trade Commission

PERCENT INCREASE (CHANGES RELATIVE TO BASELINE ESTIMATES IN 2017)

■ Exports ■ Imports ■ Real wages ■ Employment

Employment in manufacturing is expected to increase 0.37% Sector-level impacts of USMCA In absolute terms, 124,300 new service jobs are expected to be created

How does USMCA stack up?

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

Timeline of Congressional session days under the TPA process

Sources: USTR, Senate.gov, Politico

TPA outlines Congressional guidance to the President on trade policy priorities and negotiating objectives. TPA requirements the Administration to notify and consult with Congress, with the private sector and other stakeholders, and with the public during the negotiations of trade agreements. TPA defines how Congress allows the Administration to enter into trade agreements, and set the procedures for Congressional consideration of bills to implement the agreements.

STEP 1 STEP 3 STEP 2 STEP 5 STEP 4 STEP 6

ITC report submitted Implementing bill introduced House must vote on bill Senate finance must report bill Final agreement submitted to Congress Senate must vote on bill 30 days 60 days 15 days 15 days

House considers

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.

What’s next?

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Wilbur Ross Secretary of Commerce

Key U.S. negotiators

Steven Mnuchin Secretary of the Treasury Donald Trump U.S. President Robert Lighthizer U.S. Trade Representative Xi Jinping Chinese President Liu He Vice Premier of China

China versus USA

Key Chinese negotiators

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 Trade Act of 1974 Discriminatory policies that harm American intellectual property rights, innovation,

• r technology development

Investigation Completed Tariffs of 25 percent on $253 billion in goods from China Section 201 Trade Act of 1974 Injury to domestic solar panel and washing machine producers Investigation completed Global tariffs:

• $8.5 billion on solar

panels

• $1.8 billion on washing

machines Section 232 Imports threaten national security:

• Aluminum
• Steel
• Cars
• Uranium

Aluminum: completed Steel: completed Cars: report delivered to president Uranium: investigation underway Aluminum: global 10 percent tariff Steel: global 25 percent tariff

…Changing tactics

Trade Action Topic Status Outcome WTO Case Aluminum subsidies Ongoing None WTO Case Intellectual property protections Ongoing None WTO Case Tariff retaliation Ongoing None

Trade Action Topic Status Outcome Section 301 Trade Act of 1974 Determine justification for additional $300 billion in tariffs Ongoing Expected Summer 2019 Executive Order on Communications Technology Preventing U.S. businesses from buying from Huawei In effect Huawei sanctioned, but with general license

…Changing tactics

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

5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Metric Tons Year

U.S. Origin Soybean Exports to China (2005-2018)

Source: USDA GATS

Cause and Effect

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 10,000,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Metric Tons Year

U.S. Origin Sorghum Exports to China (2005-2018)

Source: USDA GATS

Sources: New York Times; Associated Press; Reuters; Washington Post; CNBC; Wall Street Journal

May 1, 2019 Mnuchin and Lighthizer meet with Chinese trade negotiators in Beijing and report progress made toward a deal; a potential final round of negotiation is scheduled for a week later in DC May 6, 2019 Trump announces, via tweet, that the US would increase tariffs by Friday if a deal is not secured but that the US would continue talks with China May 10, 2019 Following a week of bilateral negotiations in Washington, an agreement was not reached and the US increased tariffs

• n $200 billion of Chinese goods

May 8, 2019 The US formally announces tariffs will increase on May 10th at 12:01 a.m., citing China’s reneging on previous agreements

Look ahead

• President Trump has said that his administration will continue to engage China in

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

May 13, 2019 China retaliated by raising tariffs on $60 billion worth of US goods; China’s finance ministry announced that it plans to raise tariffs to 20-25% on products it currently taxes at 10% by June 1

What just happened, and what’s next?

Cause and Effect

2 4 6 8 10 12 14 16 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent Change Previous Year Year

China Gross Domestic Product Annual Growth

Source: World Bank

Cause and Effect

0.6 1 1.4

Dow Jones Jones Industry Average versus Shanghai Composite

(Indexed to 1 = January 23, 2017)

Dow Jones Industrial Average Shanghai Composite Index

Thank You!

Contact: Ryan Olson Director of Operations Email: rolson@naega.org Phone: 202-682-4030 Website: naega.org

Thank You!