FarmPolicy

August 20, 2019

President Bush on Doha: “I feel confident we can still get a deal.”

Reuters writer Raymond Colitt reported yesterday that, “The U.S. government is more confident of achieving success in the Doha round of global trade talks after meeting with Brazilian government officials, White House economic adviser Allan Hubbard said on Thursday…’The Brazilians indicated they are as committed as we are to make Doha work,’ Hubbard told Reuters. ‘They recognized how important this is not only to their economy but to the world economy.'”

I. Doha
II. Farm Bill
III. Biofuels – Commodities

I. Doha

Tim Colebatch, writing this morning at The Age Online (Australia), reminded readers of some recent developments in the Doha round of WTO trade talks with this brief summary: “The troubled Doha Round trade negotiations have hit a potentially fatal bump, after 110 developing countries united in rejecting a draft text requiring sharp cuts to their manufacturing tariffs.

“In a joint submission to the chairman of the talks on manufacturing tariffs, Don Stephenson of Canada, the majority of the World Trade Organisation’s members proposed 14 principles that amounted to a blunt rejection of his draft text requiring them to make significant tariff cuts.

“In an unexpectedly sharp reaction, the Bush Administration — now under pressure at home to protect its farm subsidies — issued a statement warning that ‘this proposal could signal the end of the Doha Round’”.

Mr. Colebatch then noted that, “In recent days the White House has been pressured by the farm lobby and senators from cotton-growing states after Ms Schwab [US Trade Representative Susan Schwab] said the US was willing to accept the draft agricultural text as a basis for negotiation. The text calls for steep cuts to US farm subsidies, especially on cotton.

“One source close to the negotiations yesterday played down the stand-off. ‘It’s the same rhetoric, the same issues, as we’ve seen before,’ he said. ‘It could be the breaking point, but none of this is new.’”

Optimism from the U.S. regarding the talks appears to persist.

Reuters writer Raymond Colitt reported yesterday that, “The U.S. government is more confident of achieving success in the Doha round of global trade talks after meeting with Brazilian government officials, White House economic adviser Allan Hubbard said on Thursday.

“‘The Brazilians indicated they are as committed as we are to make Doha work,’ Hubbard told Reuters. ‘They recognized how important this is not only to their economy but to the world economy.’

“Hubbard met with Brazilian officials including Foreign Minister Celso Amorim and Dilma Rousseff, chief of staff to President Luiz Inacio Lula da Silva.”

The article noted that, “Hubbard did not say whether Brazil would commit to a version of two WTO draft proposals published in July.”

Mr. Colitt also pointed out that; “European nations and the United States have been unwilling to reduce aid to cotton, sugar and other products unless they get more access to services and manufacturing in developing nations.

“U.S. Commerce Secretary Carlos Gutierrez, who accompanied Hubbard on the visit, urged Brazil on Wednesday to use its influence with developing nations to ensure that the Doha round did not end in a stalemate.”

Reuters writer Michael Connor reported yesterday that, “U.S. Trade Representative Susan Schwab said on Thursday the Doha global trade talks remain viable despite hitting a new roadblock but will succeed only with tariff compromises by big developing countries.

“‘It’s definitely salvageable,’ Schwab said. ‘It’s going to take hard work, and it’s going to take countries that have not been inclined to step up stepping up.’”

Mr. Conner stated that, “‘The United States is absolutely committed to achieving a balanced and ambitious outcome. Our trading partners know that. The president has personally talked to dozens of other leaders about the importance of the Doha round,’ Schwab said.

“In Brussels, the European Union’s trade chief, Peter Mandelson, said earlier on Thursday that the advanced developing countries were risking significant injury to the Doha talks with their proposed opt-outs.”

With respect to the opinion of President Bush, John D. McKinnon and Greg Hitt, drawing an interview the Journal conducted with the U.S. President, reported in today’s Wall Street Journal that, “The president’s remarks came amid recent polls showing declining voter support for globalization and free trade, even within his own Republican Party, where such support traditionally has been strongest. His statements reflect a new White House strategy of acknowledging economic imbalances as a way of gaining credibility to push a final handful of free-trade agreements through a skeptical Democratic-controlled Congress. Those agreements include trade deals with Colombia, Panama, Peru and South Korea. The White House also is seeking a breakthrough in the long-stalled Doha Round of global trade talks.”

Today’s Journal article stated that, “In the interview, Mr. Bush repeated his belief that free trade and globalization are good for Americans. ‘There’s a lot of high-paying jobs as a result of trade,’ he said, noting that the current strength of U.S. exports is helping to pump up overall domestic growth. He also reiterated his often-stated belief that trade helps lift poor nations out of poverty. That, in turn, could help relieve the pressures that create illegal immigration to the U.S., he said.

“But Mr. Bush also observed that skepticism toward free trade and globalization appears to be growing. ‘The United States has been through these trends in the past,’ he said, noting that tariffs levied before the Great Depression and in its early days exacerbated the nation’s economic decline. ‘This country has got to make sure that we don’t isolate ourselves or try to wall ourselves off from the world.’

“Democrats won control of Congress in 2006, in part on the strength of antitrade and antiglobalization sentiment among voters, and similar feelings are already roiling the unfolding 2008 campaign.”

Here is one exchange on regarding the Doha talks from the Journal (WSJ) interview with President Bush, “WSJ: Let me switch to Doha for a second. It’s obviously on the ropes again, as it’s been a few times.

“PRESIDENT BUSH: What was that?

“WSJ: On the ropes.

“PRESIDENT BUSH: Obviously on the ropes? Okay, go ahead. I just want to make sure–

“WSJ: What’s your strategy from here to get it — to get it across –

“PRESIDENT BUSH: The strategy is to continue to support Ambassador Sue Schwab’s efforts to work with countries, such as Brazil and India, for them to open up their markets for manufacturing goods, and at the same time work with Europe on agricultural goods, and show flexibility. I feel confident we can still get a deal. This is a very complex task to reach an accord amongst a lot of nations. Having said that, I’ve spoken to a lot of the world leaders on this subject, and they are committed to getting a deal. And if there is a commitment — in other words, if people realize the mutual benefits of completing a Doha Round, then I’m optimistic.

“We have shown flexibility. We have shown, through a variety of ways, that we’re willing to come down on agricultural subsidies. But we expect there to be reciprocity in the process. And Sue is out there working very hard and doing a fine job.

“WSJ: Can I follow up, Mr. President? Do you think that there is a role, though, in your conversations — your own, for yourself — in perhaps leading negotiations? You had six years in negotiations where the trade ministers have been doing the talking, and I just wondered if there’s a point in which –

“PRESIDENT BUSH: I think there’s an appropriate time, when enough cards are on the table, for the leaders to go try to reach a conclusion. That time is not now. But I do — let me just make sure you understand. I spend a fair amount of time in discussions with President Lula. I met with him at the U.N. I met with him at Crawford. I spent a fair amount of time in discussions with Angela Merkel. I’ve called Prime Minister Singh several times on the subject. In others words, I am engaged. And there may be an appropriate time for leaders to come together. My hope is, of course, that the trade representatives are able to conclude the deal.”

Earlier this week, WTO Director General Pascal Lamy issued a report on the Doha talks to the WTO General Council. According to the WTO webpage, “Director-General Pascal Lamy, in his report on the Doha Round to the General Council on 9 October 2007, said ‘we have regained a good level of momentum in our work, and the challenge now is to accelerate it in the days and weeks ahead, so that the necessary compromises can be found.’ He warned that ‘now more than ever, time is running against us.’”

II. Farm Bill

DTN writer Chris Clayton reported yesterday (link requires subscription) that, “Conservation and environmental groups have co-signed a letter to U.S. senators telling them the Senate farm bill has to at least match the House farm bill on conservation spending or the proposal ‘falls short.’

“The groups, 23 in all, stated that the Senate Finance Committee tax package offering $3 billion in outlays for conservation tax credits over five years doesn’t meet the goals offered in the $4.5 billion increase in conservation spending adopted last July by the House of Representatives.

“The Finance Committee package, which will be adopted in the Senate version of the farm bill, provides tax credits for the Conservation Reserve Program, Wetlands Reserve Program and the Grasslands Reserve Program. Still, the conservation and environmental groups say the money ‘falls short of the minimum amount needed for a decent conservation title.’”

Mr. Clayton added that, “A spokeswoman for Harkin [Ag Committee Chairman Tom Harkin (D-Iowa)] said Thursday that he realizes the shortcomings in conservation spending and is still looking to spend more on conservation than the House bill.

“The Agriculture Committee is tentatively scheduled to begin marking up the farm bill the week of Oct. 22.”

For more on this development, see this news release, which was issued yesterday by the American Farmland Trust.

III. Biofuels – Commodities

Cornelia Dean reported in yesterday’s New York Times that, “Greater cultivation of crops to produce ethanol could harm water quality and leave some regions of the country with water shortages, a panel of experts is reporting. And corn, the most widely grown fuel crop in the United States, might cause more damage per unit of energy than other plants, especially switchgrass and native grasses, the panel said.

“The panel, convened by the National Research Council, said improved agricultural practices, water recycling and other steps might reduce possible problems. But it added that ‘fundamental knowledge gaps’ made it difficult to predict what would happen as the nation’s embrace of biofuel crops expanded. Meanwhile, it said, it would be ‘prudent’ to encourage the use of ethanol sources other than corn.

“Production of ethanol from corn kernels is on the rise, the panel said, adding that President Bush has called for the annual production of 35 billion gallons of ethanol by 2017, an amount that would account for about 15 percent of liquid transportation fuels in the United States.”

Meanwhile, Reuters writer Lisa Shumaker reported yesterday that, “At least three U.S. ethanol plants have recently canceled expansion plans due to high corn prices and ethanol prices dropping as more new plants come online.

“Glacial Lakes Energy announced it was postponing construction of an ethanol plant in Meckling, South Dakota. Chippewa Valley Ethanol Co said it is postponing a 40-million gallon expansion of its 45-million gallon plant in Benson, Minnesota.”

The Reuters article noted that, “On Monday, U.S. ethanol cash margins turned positive after being in the red for two weeks following a sharp drop in corn prices, Citigroup.

“Chicago Board of Trade benchmark December corn futures have dropped about 45 cents a bushel, or 12 percent in the past two weeks to $3.42, down from a high of $4.37-1/2 in February.”

With respect to market prices, commodity usage and acreage allocation decisions, Javier Blas, writing yesterday at the Financial Times Online, reported that, “It is often said that each financial boom contains the seeds of the following correction.

“Nowhere is that truer than in the agricultural commodities market, where today’s high wheat prices are encouraging farmers to seed a large crop for 2008 in a move that is likely to depress next season’s prices.

“If wheat emerges as the winner in the battle for acres, cotton willl most likely be the loser, exposing the fibre to a price jump next season, analysts say.

“Greg Wagner, of Horizon Ag Strategies in Chicago, says: ‘High wheat prices will attract significant extra acreage at the expense of cotton.’”

The FT article stated that, “US farmers responded to a decade-high corn price last spring by planting the largest corn land area since 1944. The swing cut the acreage for every other crop, but cotton suffered the most, losing almost 30 per cent to an 11-year low of 10.9m acres.

“Gavin Maguire, of Iowa Grain, the Chicago-based agricultural and soft commodities trader, warns that cotton might lose another million acres, or 10 per cent, next season because of the competition from wheat.

“Those prospects yesterday pushed up cotton futures for December delivery to a three-month high of 64.40 cents a pound, up 20 per cent since January, and within a whisker of the four-year high of 66.7 cents a pound reached earlier in the summer.”

And, the article added that, “Corn is also likely to lose some acreage as the spread between wheat and corn prices jumps to more than $5 a bushel, from an average of about $1 a bushel in the last five years, encouraging farmers to switch crops.

“However, this season’s expected record corn crop will replenish global inventories, which would stop corn prices jumping, analysts say.

“Even if wheat gains acres at the expense of cotton and other crops, extremely low global wheat inventories and the threat of more extreme weather will prevent wheat prices from returning to pre-boom levels, analysts say.”

Dow Jones News writer Tor Ching Li reported today that, “Increased corn acreage in the U.S. and slowing demand from ethanol production are likely to weigh on corn prices in 2007-08, said a Morgan Stanley report released Thursday.

“The investment house has revised downwards its projected average price for corn in 2007-08 to $3 a bushel from the $3.15/bushel forecast in June.”

The Dow Jones article indicated that, “Morgan Stanley forecasts also that the ethanol industry will consume significantly less corn than the 3.3 billion bushels currently estimated by the U.S. Department of Agriculture, as the industry ‘appears to have temporarily reached blending capacity’ in the near term.”

“‘In our most optimistic view, we see fuel ethanol demand for corn peaking at just over 3 billion bushels,’ said the report.”

The U.S. Department of Agriculture will update their supply and demand estimates later this morning.

Keith Good

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