By Randy Gordon, President and CEO
U.S. Department of Agriculture (USDA) officials this week continued fast-paced development of another round of trade mitigation assistance in response to the continued trade disruption with the People’s Republic of China.
Secretary of Agriculture Sonny Perdue, in remarks on March 15 as he wrapped up a mission to Japan and South Korea, said the trade mitigation package may total up to $15 billion to $20 billion, and generally contain the same three elements of the program developed in 2018. Perdue indicated that the figures were preliminary USDA estimates based upon the dollar value of lost export sales to China in the aftermath of retaliatory tariffs imposed on U.S. agricultural products. The 2018 version of the trade mitigation package consisted of market facilitation program payments to agricultural producers; purchases of commodities for food aid and domestic food assistance; and funds for agricultural trade promotion activities. Perdue said USDA was expediting development of the package at President Trump’s direction “so farmers, as well as China, can know they cannot use the political impact of damaging our farmers to our great exporters in this trade disruption.”
Perdue said USDA continues to work on finalizing exactly how the aid package will be constructed, and had solicited input from stakeholders on what went well and what could be improved upon from the 2018 version. The NGFA was told it was among approximately 15-20 organizations whose input was solicited by USDA this week. It is NGFA’s understanding that the Trump administration hopes to announce details of the plan late during the week of May 20 in an effort to avoid influencing producers’ planting decisions, and is striving to structure the producer market facilitation payments to be crop-neutral.
During his call with reporters, Perdue was quoted as saying USDA was “assuming” the 2019 trade-mitigation package will contain direct payments for commodities. “Certainly, the president’s concept of buying commodities for humanitarian purposes may also be part of that,” Perdue added. He said the up to $15 billion to $20 billion size of the package is what USDA economists believe represents a legally defensible level on the amount of trade damage imposed on U.S. producers so as to be compliant with World Trade Organization restrictions on subsidy limits.
In August and December 2018, USDA provided a total of up to $12 billion under what then was dubbed its Trade Mitigation Program, including market facilitation direct payments to producers of commodities affected by the trade disruption. As of May 13, USDA said $8.52 billion of the up to $10.2 billion in authorized market facilitation payments had been made to producers. Producers in Illinois, Iowa, Kansas, Nebraska and Indiana represented the top five states to receive such payments, while the top five commodities were soybeans, corn, wheat, cotton and sorghum. Not all of the allocated funds have been disbursed yet; producers have until today (May 17) to report their 2018 production data to be eligible for the payments.
Tariff Escalation: Meanwhile, the office of the U.S. Trade Representative (USTR) this week set in motion the potential imposition of “up to” 25 percent tariffs on the remaining $300 billion of U.S. imports from China. In a 76-page notice published in the May 17 Federal Register, USTR announced it will conduct a June 17 public hearing on additional Chinese products that would be subjected to the additional tariff as part of the agency’s so-called “Section 301” investigation of the Chinese government’s “acts, policies and practices…related to technology transfer, intellectual property and innovation.”
Meanwhile, in response to USTR’s May 10 increase in tariffs to 25 percent from the previous 10 percent on $200 billion of Chinese imports, China on May 13 announced plans effective June 1 to impose 25 percent import tariffs on 2,493 U.S. products, as well as tariffs ranging from 5 to 20 percent on others.
President Trump and Chinese President Xi Jinping are expected to meet on the sidelines of the G-20 economic summit in Osaka, Japan, which is scheduled for June 28-29.