Trump: Withdrawal from NAFTA ‘probably’ will happen | South Korea pushes back on reopening KORUS | Trade restraints imposed on imports of Argentine, Indonesia biodiesel | U.S. adds sanctions on firms dealing with N. Korea; China responds | EU probe of Bayer-Monsanto deal | Some infrastructure council members quit | CSX problems impacting ag, coal, chemical firms | Vulnerable Senate Democrats
— Trump: Withdrawal from NAFTA will ‘probably’ happen. President Donald Trump during a campaign-like rally Tuesday night in Phoenix, Arizona, said he would “end up probably terminating NAFTA at some point.” Trump said, “I personally don’t think you can make a deal without a termination, but we’re going to see what happens,” he said at the rally, his first comments on NAFTA 2.0 since the renegotiation process began. Trump said he didn’t think a deal could be reached “because we have been so badly taken advantage of... but in particular Mexico... I don’t think we can make a deal,” he said.
Trump has the executive authority to withdraw from the deal, some observers note, but any such move would face some resistance in Congress and have major impacts on some industries, including agriculture.
During the rally, Trump also suggested a government shutdown might be needed to force Democrats’ hand on funding for a border wall — Trump reiterated his message that he was elected to help boost national security and keep illegal immigrants out of the country, many of whom he said are dangerous. Trump said the border wall was going to happen, and warned Democrats that they were harming national security by opposing it. “We are building a wall on the southern border, which is absolutely necessary,” he said. “Let me be very clear to Democrats in Congress who oppose a border wall and stand in the way of border security,” he added. “You are putting all of Americans’ safety at risk.” The House has passed legislation that would provide $1.6 billion in funding to begin work on the wall Trump has promised for more than a year now, but it’s not clear that language will survive House-Senate negotiations. The House passed a minibus bill in late July that included wall money, but the Senate is unlikely to take up the nearly $790 billion, four-bill spending package (HR 3219) because its allocation for defense spending would violate current budget law.. The bill passed the House 235-192. The border wall allocation, requested by Trump in March and originally included in the House’s fiscal 2018 Homeland Security appropriations bill (HR 3355), would fund construction of 74 miles of new construction in the Rio Grande Valley of southern Texas and the San Diego area.
Trump also signaled he was prepared to pardon former Arizona sheriff Joe Arpaio, who was found guilty last month of criminal contempt for defying a judge’s order to stop conducting immigration patrols in the state. Trump has hinted in recent weeks that he is considering pardoning Arpaio, but didn’t do so on Tuesday evening. “I’ll make a prediction: I think he’s going to be just fine,” Trump said of the former sheriff.
Market impacts: The market may be learning to discount Trump’s bombastic podium declarations, as the dollar weakened slightly and Treasury yields remained broadly unchanged following the remarks. But U.S. agriculture lobbyists continue their high anxiety regarding U.S. trade policy strategy or the lack of it.
— South Korea pushes back on reopening KORUS. U.S. Trade Representative (USTR) Robert Lighthizer said President Donald Trump wants to see “substantial improvements” to the U.S.-South Korea trade deal (KORUS). but South Korea made clear it will not agree to any changes until it investigates the cause of any trade imbalance — a process that could take months to unfold. South Korea officials repeated the country wants to begin a joint study to investigate potential causes of the trade gap and evaluate the overall impact of the agreement. U.S. officials made no response to the South Korean request.
Trump continues to focus on the need to reduce the U.S.’ overall trade deficit, in this case the around $28 billion trade deficit in goods with South Korea. That number has more than doubled since 2011, the last full year before the deal went into effect, when it stood at $13.2 billion.”
South Korea statement. “We did not agree to the unilateral proposal from the U.S. to amend the Korea-U.S. FTA,” Korean Trade Minister Kim Hyun-chong said. “We made our position clear that investigation, analysis and evaluation of the impact of the Korea-U.S. FTA must be preceded.” At the close of the Tuesday meeting, the two sides had reached no agreement on possible revisions to the deal, top Korean trade negotiator Yu Myeong-hui was quoted as saying. “The U.S. suggests that the deficit has doubled since the Korea-U.S. FTA, and the need for amendment and modification of the KORUS FTA is expected to be held in the near future,” Kim said. “Korea used statistical facts to explain the complexity of the micro and macro factors that caused the U.S. trade deficit.” Kim made clear that the U.S. avoided the word “termination” or “renegotiation” when discussing modifications to KORUS and said Seoul will proceed with talks open to “all possibilities.” Still, Kim argued that both sides would suffer if the pact is scrapped. The U.S. only raised problems at hand without offering a solution, he said. “The best results from negotiations come up when both sides give up part of something they want,” he said.
USTR Robert Lighthizer attended the meeting via teleconference, along with Kim. “Unfortunately, too many American workers have not benefited from the agreement,” Lighthizer said in a statement on Tuesday after officials met in Seoul for a special session of the agreement’s joint committee. “USTR has long pressed the Korean government to address burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property. This negotiation offers us an opportunity to resolve these and other barriers.”
The two countries are expected to continue discussions over the coming weeks.
— U.S. trade restraints proposed on imports of Argentine, Indonesia biodiesel. An initial finding that Argentina and Indonesia are subsidizing biodiesel production as expected prompted the U.S. Department of Commerce (DOC) on Tuesday to set preliminary countervailing duty rates of 41% to just over 68% on imports of the product from Argentina and Indonesia. The levels vary based on the companies involved. Commerce will take comment on the preliminary rulings and then issue final decisions, which are likely to come next year.
Cash deposits on imports required. DOC’s preliminary determination means the U.S. Customs and Border Protection Service will require cash deposits on imports of Argentine and Indonesian biodiesel ranging from 50.29% to 64.17% for biodiesel from Argentina, and 41.06% to 68.28% for biodiesel from Indonesia. Commerce imposed a retroactive penalty so that the deposit rates will apply to biodiesel exports to the U.S. from those countries dating back to May, rather than starting Tuesday, as would normally be the case.
DOC also found that “critical circumstances” exist in the Argentina investigation relative to two companies — Vicentin S.A.I.C. and LDC Argentina S.A. — and will instruct CBP to collect the required cash deposit rates retroactively on all entries of biodiesel from these companies effective 90 days prior to publication of the preliminary determination in the Federal Register. The countervailing duty (CVD) rates would be 50.29% for LDC Argentina and 64.17% for Vincentin. All other Argentinian producers and exporters will be subject to a 57.01% duty rate. Cash deposit requirements will be imposed on the other Argentine companies effective on the date the preliminary decision is published in the Federal Register.
In the Indonesia CVD investigation, Commerce calculated preliminary subsidy rates of 41.06% for Wilmar International Ltd. and 68.28% for P.T. Musim Mas. Commerce determined a rate of 44.92% for all other Indonesian producers and exports. There is no mention of “critical circumstances” relative to Indonesian biodiesel which signals those duties become effective the date the determinations are published in the Federal Register.
Commerce statement. “The U.S. values its relationships with Argentina and Indonesia, but even friendly nations must play by the rules,” Commerce Secretary Wilbur Ross said. “The subsidization of goods by foreign governments is something that the Trump administration takes very seriously, and we will continue to evaluate and verify the accuracy of this preliminary determination.”
The National Biodiesel Board (NBB) and 15 biodiesel producers had petitioned Commerce for the duties, asking for tariffs of 23.3% on Argentina and 34% on Indonesia to counter dumping. NBB did not publicly detail the level of countervailing duties sought.
Preliminary determinations in the associated antidumping investigations are due to be issued in October. Final Commerce Department determinations on CVD will be issued by November 7, 2017, “unless the statutory deadline is extended.” A final determination is due from the U.S. International Trade Commission (ITC) 45 days after the final decision by the DOC. The ITC already found there is a reasonable indication of material injury — or a threat of it — to U.S. producers.
Other countries have slapped duties on Argentine and Indonesian biodiesel; the European Union took action on both countries in 2013 and Peru imposed antidumping and countervailing duties on Argentine biodiesel last year.
NBB statement. “The Commerce Department has recognized what this industry has known all along — that foreign biodiesel producers have benefited from massive subsidies that have severely injured U.S. biodiesel producers,” Doug Whitehead, NBB’s chief operating officer, said in a statement.
The National Association of Truck Stop Operators opposed the rulings, arguing they would raise fuel prices in the U.S. and ultimately lead to higher costs for consumer goods transported by truck in the U.S. “Any outcome that results in cutting off Americans’ access to cleaner burning fuels, such as biodiesel, from foreign markets is a bad day for the United States,” David Fialkov, NATSO’s vice president of government relations, said in a statement.
The decision is “unjustified and highly discretionary,” the Argentine Biofuels Chamber CARBIO said. The group said the alleged subsidies for Argentine biodiesel don’t exist and accused the U.S. government of protectionist policies. Exports to the U.S. would immediately be paralyzed, it added.
Indonesia said they would study the U.S. decision but will object to the determination. Indonesian Trade Minister Enggartiasto Lukita said in Jakarta, “We have proven that the subsidy element does not exist.”
Impacts. The CVD levels announced by the U.S. DOC will effectively halt or dramatically curtail imports from the two countries. The action prompted a rise in renewable identification numbers (RINs) tracking 2017 biodiesel to hit $1.16 on reports of the DOC decision, the highest since early December.
U.S. imports of biodiesel climbed to a record 693 million gallons in 2016. Combined, Argentina and Indonesia, accounted for about 79 percent of that amount, according to data from the U.S. Energy Information Administration (EIA). The U.S. produced about 1.6 billion gallons of biodiesel in 2016. Biodiesel imports have been on track to be higher this year, too. Through May, biodiesel imports are up 4.3% from the same period last year, according to EIA.
Links
Commerce memo on Argentine imports | Decision on Argentina.
Memo on Indonesian imports | Decision on Indonesia
— U.S. imposed additional sanctions on Chinese and Russian entities that it alleges have aided Kim Jong Un’s push for intercontinental nuclear capabilities. American prosecutors are also looking to recover $11 million from certain companies for money they allege was laundered via U.S. accounts in an attempt to avoid sanctions.
China responded by saying these moves put the bilateral relationship with the U.S. at risk. Following the stepped-up sanctions, as well as the U.S. trade probe into its intellectual property practices, China is reviewing its antidumping levies against a type of optical fiber produced in the U.S. and E.U. at the urging of domestic producers.
On Tuesday, North Korea warned that the U.S. would face “merciless revenge” for its annual military drills with South Korea. Un has ordered the production of more solid-fuel rocket engines, state media said today. The report came as he pursues nuclear and missile programs amid a standoff with Washington, but there have been signs of tension easing.
— EU regulators say they need more time on Bayer-Monsanto tie up. European Union (EU) antitrust regulators are raising “serious doubts” about the Bayer takeover of Monsanto. The European Commission signaled the deal could add pressure on farmers that are already struggling with lower crop prices. While the EU has completed its preliminary probe of the deal, officials said Tuesday they may need until January 2018 to wrap up their work via an extensive probe of the matter. “We need to ensure effective competition,” said EU competition commission Margrethe Vestager. The commission said it wants to make a decision by Jan. 8.
“Seeds and pesticide products are essential for farmers and ultimately consumers, Vestager said. “We need to ensure effective competition so that farmers can have access to innovative products, better quality and also purchase products at competitive prices.”
Bayer said it had expected an extended review “due to the size and scope of the transaction.” The company said the deal “will be highly beneficial for farmers and consumers” and it will work constructively with the EU.
Monsanto said it was committed to working with regulators globally “with a view to receiving approval of the proposed transaction by the end of 2017.” It said it looked forward to supporting growers’ efforts to be more productive, profitable and sustainable.
Environmental campaigners have sent Vestager hundreds of tweets in recent weeks, asking her to block the deal, on top of more than 50,000 emails and more than 5,000 postcards and letters the EU said it has received. Avaaz, a campaign group, called on Vestager “to show she has the guts to choose the public interest over corporate greed.”
Vestager posted a response to petitioners on the EU’s website, saying she was “carefully investigating the merger” and that her review would be limited to competition issues. Other concerns raised by petitioners fall under EU and national rules to protect food safety, consumers, the environment and the climate.
Commitments submitted by Bayer and Monsanto in July to address the EU regulator’s concerns were considered insufficient to send to rivals for feedback, the commission said.
The EU is cooperating closely with the U.S. Department of Justice and antitrust authorities in Australia, Brazil, Canada and South Africa, it said.
— Members of Trump’s infrastructure panel resign in protest. More than a quarter of a blue-ribbon panel of experts that advises President Donald Trump on infrastructure security submitted a joint resignation letter to him Monday because, they wrote, his actions jeopardize U.S. security and “undermine” America’s “moral infrastructure.” Seven members of the 27-person National Infrastructure Advisory Council, mostly Democrats, are stepping down, said Cristin Dorgelo, one of the resigning members, CQ Roll Call reported. Dorgelo, a senior counselor at Mission Partners LLC, was formerly chief of staff for President Barack Obama’s Office of Science and Technology Policy. The council, created in 2001, advises the president through the Homeland Security secretary on critical U.S. infrastructure and information systems. Its members are drawn from the private sector, government and academia. Earlier this month, President Trump disbanded the Manufacturing Jobs Initiative and the Strategic and Policy Forum after CEOs resigned in droves from them.
The White House last week said that the infrastructure council was not going to move forward.
President Trump had this to say regarding the CEOs who left his business councils: “When it got a little heat with the lies from the media, they sort of said, ‘Oh, we’ll take a pass.’ ... I remember the ones that did.”
— Coal production sites, agriculture, chemical firms being impacted from service problems along CSX Corp.’s troubled freight rail network. Congestion, delays and erratic operations are hitting the railroad from Chicago down to Florida, the Wall Street Journal reported (link).
Companies are telling regulators and lawmakers that CSX’s problems are undermining their business. Some firms have turned to costlier truck transport. The WSJ article notes that the problems are from the rapid-fire, rough rollout of new CSX chief Hunter Harrison’s effort to streamline operations and set the “precision railroading” that Harrison touts. The CEO insists CSX is fixing bottlenecks as the company pushes forward on long-term plan, and he’s promising bigger improvements next month. But if the problems persist into the fall the calls for regulators to intervene will grow louder, the article concluded.
Harrison said he aims to improve efficiency on the 21,000-mile network by keeping trains on tighter schedules, among other steps. “Shortly after Labor Day, you’ll see things return to what we call normal,” Harrison said.
— The Hill ranks vulnerable Democratic senators. The Hill article noted that ag-state Democrats Sens. Claire McCaskill (Mo.), Joe Donnelly (Ind.), Heidi Heitkamp (N.D.) and Jon Tester (Mont.) are among the most at-risk seats in the upper chamber. Link to article.
