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Trade negotiations continue

By Staff | Apr 26, 2019



Iowa’s commodity groups are keeping a close eye on all of the numerous ongoing trade talks involving the United States, and each group has their own reasons for doing so.

The U.S. and Japan began talks this month. U.S. Trade Representative Bob Lighthizer and Japanese Minister of Economy Revitalization Toshimitsu Motegi met for two days and shared that they planned to meet again in the near future.

“The United States and Japan discussed trade issues involving goods, including agriculture, as well as the need to establish high standards in the area of digital trade,” Lighthizer stated in a release.

After President Donald Trump’s administration ordered the U.S. to leave the Trans-Pacific Partnership, markets have been drying up and producers have been forced to find another way around that barrier. Japan has already established competing regional and bilateral agreements, including the TPP and the European Union-Japan Economic Partnership Agreement. This has many producers concerned, as Japan is the fourth largest market for U.S. ag exports, with sales of $13 billion last year.

Kirk Leeds, chief executive officer for the Iowa Soybean Association, said that Japan’s market has been “pretty open.”

“The biggest win there would be on the meat side, particularly pork,” Leeds said. “There’s a big need for vegetable protein for livestock.”

Iowa State University economist Chad Hart said he anticipates the United States-Mexico-Canada Agreement (USMCA) will be resolved soon and that negotiations with China will wrap up. But talks with Japan have drawn his attention.

“I’m seeing the TPP going ahead without us and now you’re watching the U.S. circle back and try to negotiate one-on-one deals with the folks in the TPP,” Hart said. “The most critical market there is Japan and you can see the negative impact of us not being in the TPP right now, especially concerning trade with Japan.”

He added that market play has dropped “fairly significantly, and I would attribute almost all of that to TPP, especially with beef.”

The European Council also approved mandates for the European Union to start negotiations with the U.S., which imposes a limit on the elimination of tariffs on industrial goods. It would not include agriculture, which many vested parties have a problem with, including Iowa’s own U.S. Sen. Charles Grassley, chair of the Senate Finance Committee.

“Elimination of industrial tariffs and non-tariff barriers only get us part of the way there, especially when we face major barriers to agricultural trade in the EU,” Grassley said in a written statement. “Agriculture is a significant piece of the global economy and it simply doesn’t make sense to leave it out. Any deal that eliminates tariffs will need to get congressional approval.”

Grassley added that a bipartisan group of U.S. senators and representatives have voiced objections to a deal without agriculture, which makes it unlikely that a deal like that would pass Congress.

Leeds said if agriculture wouldn’t be included in trade agreement discussions, there’s no need to have those discussions.

“We have to have open access to the markets,” he said. “There’s been an inconsistent application of the EU rules and processes related to biotech events. Any agreement that excludes agriculture would only heighten the volatility of the Midwest and ag interests.”

“The Europeans are so protective of agriculture, and certain members of the EU are unwilling to engage in a conversation,” Leeds added. “We are fortunate to not have many barriers related to soybeans, because markets need protein.”

Talks between China and the U.S. might wrap up by late May, officials believe. Lighthizer and U.S. Treasury Secretary Steven Mnuchin plan to travel to Beijing the week of April 29.

Leeds said China is the dominating player when it comes to global soybean imports.

“China would be at the top of our list,” he said.

Hart said pork has been boosted recently by an “incredible surge” of export sales to China, which has strengthened pricing. But the beef export market is down four to five percent from this time last year and a lack of market access is to blame.

“For beef producers, I’d tell them to wait it out,” Hart said. “For pork producers, I’d be looking at locking in futures anytime they see $100 on the board. That doesn’t happen all that often and these prices are where we can be fairly aggressive with risk management.”

Ongoing talks with Canada and Mexico have producers watching warily and hoping that resolutions can be reached soon. The International Trade Commission released a report about the impact the lack of trade has had on the U.S. economy.

The report estimates that the USMCA could increase exports to Canada by $19.1 billion and to Mexico by $14.2 billion.

“NAFTA was a good agreement for soybeans,” Leeds said.

Katie Olthoff, director of communications for the Iowa Cattlemen’s Association, said that USMCA is the organization’s top priority.

“All of Iowa’s major agricultural commodities benefit from trade with our neighbors to the north and south,” she said. “Finalizing that trade agreement will free up resources within the administration to work on other bilateral agreements. Following USMCA, a bilateral agreement with Japan is essential to even the playing field for U.S. beef against competitors like Australia.”

Duane Aistrope, chair of the Iowa Corn Promotion Board and at-large director for the U.S. Grains Council, farms in Fremont County and said that while all of the trade talks are important to producers, corn growers are really eyeing USMCA, or as he called it, NAFTA 2.

“Mexico is the No. 1 buyer of U.S. corn and a lot of places ship directly to Mexico, which is very affordable,” he said. “We need a new USMCA agreement to be ratified and put in place immediately to keep everything flowing smoothly. A lot of our product goes into livestock feed, so it’s important that talks with China and other entities are wrapped up soon.”

“We have new agreements with places like Indonesia and Tasmania, which also will open the door for poultry, eggs, and other products,” Aistrope added. “Encouraging other countries to open their doors to ethanol will help, too.”

Pork producer Trent Thiele, of Howard County, said fellow producers need to see the USMCA ratified quickly.

“We export a lot of pork to Mexico, a lot of ham, so we really need that one taken care of,” Thiele said. “We lost Japan as soon as the Trump administration took over office and threw out the TPP, and we’re feeling the pressure from the loss of markets. We usually do some sort of expansion and last year, we put that on hold because of the uncertainty of the markets.”

“We’d like to keep growing, but that uncertainty still exists.”

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