FarmPolicy

April 20, 2019

Trade Issues

Philip Brasher, writing in Sunday’s Des Moines Register, reported that, “A battle could be brewing between the House and Senate on an issue that seldom gets much attention in Congress – rural development…The chairman of the Senate Agriculture Committee, Sen. Tom Harkin, is preparing a series of rural development proposals, including funding for water and sewer improvements, venture capital and even child-care centers, that would increase federal spending by $2 billion over the next five years.”

I. Trade
II. Biofuels
III. Rural Development

I. Trade

Reuters writer Richard Pullin reported earlier this week that, “Asia-Pacific leaders said on Sunday they saw ‘real progress’ in world trade talks now underway in Geneva and pledged flexibility and the political will to forge a deal by the end of 2007.”

The article pointed out that, “U.S. President George W. Bush, who left the summit a day earlier to prepare for a key report on Iraq, said Washington was ready to be flexible and called the troubled Doha talks a ‘once-in-a-generation opportunity.’

“Trade talks have stumbled over reducing farm subsidies in the United States, Europe and Japan, and scaling back industrial tariffs in emerging markets like China, India, Brazil, and South Africa. Many analysts doubt WTO countries can overcome their differences, and see the round slipping into hiatus for years.

“But WTO Director-General Pascal Lamy said on Saturday trade negotiators may be edging closer to a deal. ‘There is a strong sense that it’s make-or-break moment,’ Lamy told CNBC television.

And an item posted yesterday at Forbes.com added that, “WTO director general Pascal Lamy said it is possible that a deal can be reached by early next year in the Doha round of world trade talks, but an agreement is not yet guaranteed.

“‘I am not at all certain that it is a done deal, that they (WTO member states) will get there, but I think that it can be done,’ Lamy told RFI radio.

“Lamy said developments at last week’s Asia Pacific Economic Cooperation summit in Sydney were positive.”

Meanwhile, Peter Smith reported on Sunday at The Financial Times Online that, “Leaders of 21 Pacific Rim economies failed on Sunday to make a breakthrough on climate change or world trade talks, but said they might form their own preferential trading area if global efforts collapsed.

“The Asia-Pacific Economic Co-operation (Apec) forum members, including Canada, China, Japan, Russia and the US, said there had ‘never been a more urgent need to make progress’ on the Doha round of trade talks as they concluded their annual summit in Sydney.

“But in their final declaration, Apec’s leaders said they would also pursue efforts to establish a preferential trading area among their members, who account for almost 60 per cent of global gross domestic product.”

The FT article noted that, “Apec is already stepping up efforts towards further economic integration, including lowering trade and investment barriers and improving economic efficiency across the region.

“Apec leaders said they would examine ‘options and prospects’ for a US-backed proposal to create a Pacific-wide free-trade area.”

And Mark Davis, writing yesterday at The Sydney Morning Herald Online, reported that, “The leaders of Asia-Pacific countries have used the APEC forum in Sydney to try to breath life into stalled global negotiations on freeing up trade around the world.

“But the APEC leaders also adopted a fall-back plan yesterday, deciding to start exploring a possible free trade deal covering just the Asia-Pacific in case the World Trade Organisation’s current round of multilateral negotiations collapses.”

The article noted that, “But while the APEC leaders’ statement declared that the WTO’s multilateral trading system should have ‘primacy’ on the world trade scene, it also left the way open for going ahead with an Asia-Pacific free trade deal which some APEC members have been promoting as an alternative to Doha.”

In other regional trade developments, Greg Hitt reported yesterday at The Washington Wire Blog (The Wall Street Journal) that, “The Bush administration kicked off an autumn drive to win congressional passage of the president’s trade agenda.

“Commerce Secretary Carlos Gutierrez, Agriculture Secretary Mike Johanns and U.S. Trade Representative Susan Schwab today joined Iowa Sen. Charles Grassley at a rally on Capitol Hill. The senior administration officials argued that pending deals with Peru, Panama, Colombia and South Korea will help open new markets abroad for U.S. exporters. In addition, the administration launched a Web site (www.tradeagreements.gov) touting the benefits of trade.”

Also, Reuters writer Missy Ryan noted yesterday that, “Senior U.S. trade officials warned lawmakers on Monday against turning their backs on allies in Latin America and jeopardizing U.S. primacy in world markets as they seek support in a divided Congress for free trade pacts.”

The article stated that, “Schwab told business and agriculture groups that the bilateral deals with Peru, Panama, Colombia and South Korea would give U.S. manufacturers and exporters improved access to almost 125 million consumers abroad.

“Schwab believes increased trade will also help Latin America guard against a return to dangers of years past — violence, political instability and economic hardship.”

Concluding, Ms. Ryan indicated that, “Nick Giordano, who follows trade for the National Pork Producers Council, said a strong vote for the Peru deal could build momentum for the other deals. Venable [Nicole Venable, director of international and global competitiveness at the U.S. Chamber of Commerce] agreed: ‘Peru is going to be a barometer,’ she said.

“Chris Garza, a trade analyst at the American Farm Bureau Federation, expects the Panama agreement will be next in line.”

In a separate development regarding regional trade, in a speech delivered yesterday, WTO Director General Pascal Lamy addressed the topic of regional trade agreements and noted in part that, “As I have already suggested, I find the debate about whether regionalism is a good or bad thing sterile. This is not the point. We need to look at the manner in which RTAs operate, and what effects they have on trade opening and on the creation of new economic opportunities. This is as much true for North-South regional trade agreements as it is for South-South ones. We also need to reflect on whether regionalism is causing harm to multilaterally-based trading relationships. We know there are many different kinds of agreements and much will depend on their design and intent. These self-same questions will also be relevant when we consider the prospects for multilateralizing regionalism.

“We often think and talk about how regionalism might be hurting multilateralism, either by bolstering discriminatory interests, or perhaps by fostering an anti-trade-openness posture, if regionalism is seen as a way of building protectionist structures behind enlarged closed markets. We also might worry about how focusing on building up the stock of RTAs might distract attention from multilateral processes,” Lamy said.

Moises Naim, in an item published in Sunday’s Washington Post, provided an interesting analytical look at trade agreements and the increase level of worldwide free trade.

“It’s an odd situation: Free-trade negotiations are crashing, one after another, but at the same time, free trade itself is booming,” Naim noted; adding that, “The last time official trade negotiators had reason to feel good was in 1994, when 125 nations agreed on a significant drop in trade barriers and the creation of a body charged with supervising and liberalizing international trade — the World Trade Organization. Since then, efforts to liberalize trade through multilateral negotiations have stalled. In many countries, free-trade agreements are now politically radioactive, with imports routinely blamed for job losses, lower salaries, heightened inequality, and, more recently, even poisoned toothpaste and deadly medicines.”

Later Naim pointed out that, “Indeed, one of the surprises of the past 20 or so years is how much governments have unilaterally lowered obstacles to trade. Between 1983 and 2003, 65 percent of tariff reductions in the world occurred as a result of governments deciding that it was in their own interest to lower their import duties, 25 percent as a result of agreements reached in multilateral trade negotiations, and 10 percent through regional trade agreements with neighboring countries.

“So, who needs free-trade agreements?

“We all do. Although trade may be booming, giving up on lowering the substantial trade barriers that still exist would be a historic mistake. Even the more pessimistic projections show that the adoption of reforms such as those included in the Doha round would yield substantial economic gains, anywhere from $50 billion to several hundred billion dollars. Moreover, according to the World Bank, by 2015 as many as 32 million people could be lifted out of poverty if the Doha round were successful.”

II. Biofuels

Antonio Rebalado and Grace Fan reported in yesterday’s Wall Street Journal that, “Thanks to high oil prices and worries over global warming, multinational companies are straining to find ways into Brazil’s booming market for biofuels — renewable fuels made from crops such as corn and sugar cane. The U.S. and other countries hope to substitute as much as 15% of domestic gasoline for ethanol over the next decade. With ample land, low production costs and ethanol-production experience, Brazil is viewed by many as the country best able to sate world demand.

“A clutch of potential investors have descended here, including commodities giants, hedge-funds and energy companies. Even the founders of Google Inc. came to have a look. But the global millions are colliding with an earthy reality: families like Mr. Junqueira Franco’s [a founder of Companhia Açucareira Vale do Rosário- a steam-belching mill that crunches sugar cane into sugar and ethanol] that have controlled Brazil’s sugar-cane wealth for decades, even centuries. Many don’t want to sell; others are asking sky-high prices for operations riddled with problems.

“The standoff is preventing some big foreign players from getting into Brazil’s promising ethanol market through acquisitions, forcing them to develop their own projects from scratch. Yet resistance to outsiders could affect how quickly larger amounts of cheap Brazilian ethanol can begin flowing into the world’s auto fleet. Big companies, which have better access to credit and capital, could also help consolidate, modernize and expand Brazil’s ethanol industry,” the Journal noted.

In other news regarding Brazil and ethanol, Mark Gongloff indicated yesterday at The Energy Roundup Blog (The Wall Street Journal) that, “Bernd Radowitz and Kenneth Rapoza have the latest on Brazil’s efforts to market its ethanol industry:

“Brazilian President Luiz Inacio Lula da Silva will sign agreements on climate change and cooperation in biofuels during a visit to Nordic countries this week.

“Monday, Lula will sign a memorandum of understanding in Finland on climate change and the use of the Clean Development Mechanism, Brazil’s foreign ministry said on its Web site. While in Sweden on Tuesday and Wednesday, Lula will sign a memorandum on renewable energies aimed at creating a standardized global biofuel market. Lula is scheduled to sign a similar memorandum during his visit in Denmark on Wednesday and Thursday. While in Oslo, Norway, on Thursday and Friday, Lula will also discuss climate change and energy issues.

“On his Monday morning radio broadcast, Breakfast with the President, Lula said his government’s main objective was to get the northern European nations to invest in Brazilian infrastructure as part of a new economic growth program known locally by the acronym PAC.

“‘We want to have partnerships with their oil companies, especially between Norway’s Statoil and Petrobras,’ Lula said in the radio broadcast, conducted from Helsinki on Monday. ‘Petrobras can partner with these companies to try to find deep sea oil, and not just in Brazilian waters. This is the idea we want to sell to them.’”

As interest in biofuels abounds, Financial Times writer Andrew Bounds reported yesterday that, “Governments need to scrap subsidies for biofuels, as the current rush to support alternative energy sources will lead to surging food prices and the potential destruction of natural habitats, the Organisation for Economic Co-operation and Development will warn on Tuesday.

“The OECD will say in a report to be discussed by ministers on Tuesday that politicians are rigging the market in favour of an untried technology that will have only limited impact on climate change.

“‘The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits,’ say the authors of the study, a copy of which has been obtained by the Financial Times.”

Anecdotal news reports suggest that additional biofuels impacts are being felt in both the EU and the U.S.

Clive Cookson noted yesterday at The Financial Times Online that, “The British countryside will be transformed through the planting of tall energy crops, the BA Festival of Science in York heard on Monday. Fields planted with miscanthus grass, 3-4 metres high, will look like Caribbean sugarcane plantations.

“The government’s Rural Economy and Land Use (RELU) programme estimates that 15-20 per cent of Britain’s agricultural land may have to be devoted to growing biofuels to meet international obligations to reduce carbon emissions and improve energy security.

“The two main candidate crops are willow coppice, harvested every three years, and miscanthus, a fast-growing Asian grass harvested annually in late winter or spring. Farmers would grow these on poor-quality arable land, said Angela Karp of Rothamsted Research, RELU energy crops co-ordinator.

“‘The impact on agriculture and food production is a big concern. Because the energy crops recycle their own nutrients and do not need fertilisers, they will not need to be planted on the best agricultural land. A lot of our research is about where best to grow these crops.’”

And in the U.S., Robert Pore reported in Sunday’s Grand Island Independent Online (Nebraska) that, “Funding for conservation programs and wildlife habitat may be at risk as lawmakers put together a new farm bill that encourages fence-row-to-fence-row planting in pursuit of biofuels, said Dan Stahr, executive director of the Nebraska Wildlife Federation.

“‘Three out of four farmers and ranchers who apply for conservation funding are turned away due to a lack of funding,’ Stahr said. ‘We need to do a better job in the next farm bill of meeting that demand.’”

The article added that, “This year, Nebraska farmers planted more than 9 million acres of corn in response to higher corn prices because of demand from the ethanol industry. By the end of next year, ethanol plants in Nebraska could be using as much as 800 million bushels of corn in producing 2 billion gallons of ethanol.

“‘It’s a real risk,’ Hovorka [Duane Hovorka, farm bill outreach coordinator for National Wildlife Action] said. ‘With the USDA saying that there will be no CRP sign-up this year and next and they are going to let 3-4 million acres come out of that program and go into production, that is going to take a toll on wildlife.’”

III. Rural Development

Philip Brasher, writing in Sunday’s Des Moines Register, reported that, “A battle could be brewing between the House and Senate on an issue that seldom gets much attention in Congress – rural development.

“The chairman of the Senate Agriculture Committee, Sen. Tom Harkin, is preparing a series of rural development proposals, including funding for water and sewer improvements, venture capital and even child-care centers, that would increase federal spending by $2 billion over the next five years.

“The farm bill that passed the House this summer had relatively little new money for rural development programs.”

Mr. Brasher went on to explain that, “A mandatory program must be included in the federal budget each year. Spending for other rural development programs in the House bill would be left to the discretion of congressional appropriations committees.

“By contrast, all of the $2 billion in new rural development money that would be in Harkin’s legislation would be designated as mandatory spending, according to his staff, which provided a description of his plans.”

Keith Good

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