Looking Ahead on Trade        02/25 13:52

   China, USMCA and United Kingdom Come Up Repeatedly in USTR Nominee Hearing 

   The hearing for Katherine Tai, the president's nominee for U.S. Trade 
ambassador, hearing comes as trade deals and negotiations reached under the 
Trump administration have set the table for record agricultural exports in 
fiscal year 2021, which USDA forecasts at $157 billion.

Chris Clayton
DTN Ag Policy Editor

   OMAHA (DTN) -- Agricultural trade barriers were frequent areas of discussion 
with senators asking Katherine Tia on Thursday how the Biden administration 
would expand trade markets if Tai is confirmed as U.S. trade ambassador.

   Agriculture Secretary Tom Vilsack, in his first day on the job, also told 
reporters the current high sales to China have benefited farmers, but it's 
still important for agriculture to diversify markets.

   Members of the Senate Finance Committee holding Tai's confirmation hearing 
to lead the U.S. Trade Representative's Office raised concerns that President 
Joe Biden might dial back on signing any new trade agreements until his 
domestic priorities are achieved.

   "Ms. Tai, you must make the president understand that trade is a domestic 
priority for hundreds of millions of Americans," said Sen. Mike Crapo, R-Idaho, 
ranking member of the Senate Finance Committee.

   Tai's hearing comes as trade deals and negotiations reached under the Trump 
administration have set the table for record agricultural exports in fiscal 
year 2021, which USDA forecasts at $157 billion. The higher trade sales are 
driven heavily by a boost in sales to China, projected at $31.5 billion in 
sales for fiscal year 2021.

   In her opening statement, Tai noted she is the daughter of immigrants who 
were born in mainland China and grew up in Taiwan. Her parents both then 
immigrated to the U.S. Tai said that becoming the country's trade 
representative would provide special resonance for her.

   "I am proud to live in a country where -- in just one generation -- their 
daughter could grow up to represent the United States and our interests around 
the world," she said.

   When it comes to China, Tai said the U.S. has to commit to work with other 
trade partners, while working with China as well.

   RIVAL, PARTNER, PLAYER

   Tai called China "simultaneously a rival, a trade partner, and an outsized 
player whose cooperation we'll also need to address certain global challenges." 
She added, "We must remember how to walk, chew gum and play chess at the same 
time."

   Tai then indicated the Biden administration would prioritize resilience in 
the U.S. and make investments in domestic infrastructure "to harness our 
potential, boost our competitiveness, and build more inclusive prosperity."

   Tai was also asked about the billions in tariffs placed on other countries, 
especially China, by the Trump administration. Tai did not dismiss the value of 
using tariffs to address trade challenges. "Tariffs are a legitimate tool in 
the trade toolbox," Tai said.

   USMCA CONCERNS

   Crapo pointed early on to some agricultural challenges coming up with Mexico 
despite the new United States-Mexico-Canada Agreement (USMCA). The Idaho 
senator pointed out Mexico is putting new restrictions "that lack any 
scientific justification" on potato sales, as well as biotechnology.

   Tai said she is aware of some of the ongoing concerns with Mexico and 
agriculture. She said new enforcement tools in USMCA could help.

   "We have a full set of tools, a lot of them new in USMCA, to engage with 
Mexico and Canada for that matter, to address ongoing irritants and ongoing 
frictions again," Tai said.

   Sen. Charles Grassley, R-Iowa, pointed to concerns that Canada is 
undermining USMCA's dairy provisions by setting aside a percentage of quota for 
domestic processors that limits U.S. dairy access. Grassley wanted Tai to 
assure she would pursue enforcement against Canada that was begun by former 
USTR Robert Lighthizer. Tai said she also was aware of the dairy situation and 
noted this is a long-term challenge.

   "U.S.-Canada dairy tensions also feel like some of those issues dated back 
to the beginning of time," Tai said. She added, "If confirmed, I look forward 
to digging into this file."

   UK TRADE NEGOTIATIONS

   Crapo and Grassley also each pointed to Lighthizer's early talks with the 
United Kingdom to negotiate a trade agreement that remains under discussion. 
Crapo said the U.K. represents the fifth-largest economy in the world. "The 
U.K. must now be complemented with a special economic relationship that will 
increase employment and output on both sides of the Atlantic," Crapo said.

   Tai cited the "pandemic reality for the last year, and we're still in the 
midst of it, working to get out of it." After confirmation, Tai said she would 
review the discussions and negotiations that had taken place so far.  

   Sen. Bill Cassidy, R-La., also pointed to the desire of Louisiana rice 
producers to export more rice to the UK, but they face a 25% tariff. "We'd love 
to sell a lot of Louisiana rice in the UK," Cassidy said.

   BRAZIL AND ETHANOL

   Grassley also asked about Brazil and ethanol. Brazil has a 20% tariff on 
U.S. ethanol, but U.S. allows Brazilian ethanol into the U.S. without any 
tariff.

   Tai acknowledged Grassley is a "leading voice" on ethanol trade, but Tai 
said she lacked the preparation and background to engage on the issue during 
the hearing.

   CHINA TRADE PROMISES

   While pointing to China trade promises, Grassley noted the $31 billion in 
farm exports to China, while falling short of what was expected, is still 
positive news. Still, there are structural changes needed in China's economy 
Grassley said. Tai acknowledged the long-term challenges of making structural 
changes are "well-worn" roads among former USTR, expecting China to change," 
Tai said.

   "On the issue of the U.S.-China trade, relationship, we need to be exploring 
all of our options," Tai said.

   On a separate press call Thursday, Vilsack also was asked about the Phase 
One Economic and Trade Agreement and China's pledge to buy nearly $37 billion 
in agricultural goods in the first year. The pandemic affected sales and the 
agreement has a provision allowing market conditions to dictate whether 
purchase goals would be reached, he said. Still, China's buys have buoyed the 
farm economy.

   "That's one of the reasons why -- if you look at commodity prices today 
versus where they were a year ago -- you're going to see across-the-board 
increases, which obviously is good news. For many farmers, ranchers and 
producers, it's the best news they've had in some time," Vilsack said.

   So, China seems to be living up to its obligations, Vilsack said, but there 
is a lot of risk that a geopolitical event could wreck those export sales.

   "At any point in time, because of the complex nature of the Chinese-U.S. 
relationship, things can happen that might impact and affect those purchases, 
as we saw with the assessment of tariffs in the previous administration," 
Vilsack said.

   While highlighting the importance of the trade relationship with China, 
Vilsack also added that the U.S. will "do everything we can to continue to look 
for other market opportunities for American agriculture."

   Vilsack pointed to economic growth across Asia -- reiterating a theme 
brought up when the Obama administration pushed for the Trans-Pacific 
Partnership, which was rebranded after the U.S. chose not to enter the 
agreement under former President Donald Trump. Vilsack said opportunities 
remain to increase sales to the United Kingdom in a trade deal, and possibly 
the European Union as well. "It's important for agriculture to have multiple 
market opportunities."

   Chris Clayton can be reached at Chris.Clayton@dtn.com

   Follow him on Twitter @ChrisClaytonDTN




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