By Tracey Chow
This year, trade has taken center stage and captured news headlines globally. Given the dramatic upheavals and extremely fluid nature of our international markets and trade partnerships, Western Growers is at the forefront of communicating our members’ needs in an effort to help expand American agricultural exports and remain competitive abroad.
The Trump Administration has long made known its intentions to achieve free, fair and reciprocal trade through aggressive oversight and enforcement, as well as far-reaching yet significant negotiation demands. Threats of stronger U.S. enforcement officially materialized earlier this year, with hefty tariffs increases targeting a wide range of foreign imports from around the globe—the most notable being steel and aluminum. Chinese products are being hit the hardest; in turn, China has responded with its own tariff increases, making U.S. agriculture its primary target. Into China alone, specialty crop products face retaliatory increases ranging from 25 to 40 percent. According to an economic study by the University of California-Davis, the industry could face losses of nearly $3 billion worldwide, conservatively.
After months of uncertainty and market uneasiness, a revised North American Free Trade Agreement was recently announced (now the U.S.-Mexico-Canada Agreement or USMCA), as well as a revised KORUS (U.S. Korea Free Trade Agreement). At minimum, these developments will help restore some market confidence and ease pressure on the administration’s multi-front trade agenda. However, negotiations with China have stalled, with scheduled bilateral discussions being postponed or cancelled repeatedly and both sides continuing to escalate both the amount of tariffs and the types of products targeted.
USDA Trade Mitigation Programs
On August 27, U.S. Secretary of Agriculture Sonny Perdue unveiled a mitigation package as a way to help assist U.S. farmers facing trade-related losses. Comprised of three programs, the package is authorized up to $12 billion in payments and programs. Across all sectors of agriculture, this amount has been deemed wholly insufficient, covering a few cents on the dollar for producers. For specialty crops, the amount earmarked totals roughly $800 million—clearly off the mark of what UC Davis estimated. Furthermore, it remains to be seen whether the entirety of the $12 billion will even be spent, given that USDA faces pressures from the administration’s extremely fiscally-conservative Office of Management and Budget.
• Food Purchase & Distribution Program (FPDP)
Modeled after USDA’s existing ‘bonus buy’ program, up to $1.2 billion in certain products will be federally purchased and distributed to nutrition assistance programs; specialty crops purchases will comprise roughly half of the spending. USDA aims to purchase tariff-targeted products at staggered dates that best correspond with the industry’s low/high demand cycles. It is important to note that the variety, quantity, and purchasing/distribution timeframe vary by each commodity, so there is a rolling calendar of deadlines for bid submissions. Those interested in selling product through this program must also meet existing USDA-approved vendor requirements prior to placing bids.
More information can be found at: https://www.ams.usda.gov/selling-food
• Agricultural Trade Program (ATP)
Modeled after some of USDA’s existing cost-share trade promotion programs, $200 million is open to all forms of agricultural commodities (including branded) seeking to identify and develop alternative foreign markets. In addition to a sector-wide trade promotion proposal and other information, proof of tariff-related losses is needed. The list of qualified promotion activities is quite inclusive and flexible, including point-of-sale demonstrations, consumer advertising, and helping with non-tariff SPS issues. The deadline for applications is November 2, 2018.
More information can be found at: https://www.fas.usda.gov/programs/agricultural-trade-promotion-program-atp
• Market Facilitation Program (MFP)
This $4 billion direct payment program is predominately geared towards commodity crops and certain livestock products. However, specialized payment options have been developed for almonds ($63 million) and cherries ($111 million), based on a formula that takes into account 50 percent of a grower’s total production and their adjusted gross income (AGI), post-harvest in the current year. Payments will be capped at $125,000. The sign up period runs now through January 15, 2019.
More information can be found at: https://www.farmers.gov/manage/mfp
What Western Growers Has Done
First and foremost, WG continues to drive home the message with the Administration and Congress that our industry supports trade, not aid; a resolution to all the conflicts must be secured as soon as possible to prevent further industry damage. Concurrently, we worked closely with officials to ensure our share of the mitigation funds is equitable, and that the programs are accessible and usable for our unique industry. We continue to work through technical and operational matters with USDA, and we stand ready to assist WG members interested in accessing the trade mitigation programs.
On the heels of its deals with Mexico, Canada and South Korea, the Administration has publicly expressed interest in crafting bilateral agreements with Japan and India. However, at the time of this writing, the Administration has given no indications that significant strides have been made towards resolving the trade dispute with China, nor when tariffs are expected to be lifted and markets fully re-opened. Throughout several conversations with officials from the Department of Commerce, USDA and USTR, the common message has been that a trade dispute ‘exit strategy’ (with China and others) has still not yet been developed, and we should continue to expect negative reverberations in our industry for several more months ahead.
USDA has described this mitigation package as a “short-term relief strategy to protect agriculture producers.” As such, there is no official word as of yet if a second mitigation package will be deemed warranted or authorized by USDA; if one were to occur, it would likely be rolled out early next year. Absent any drastically positive progress in the U.S.-China talks, we anticipate we will be re-engaging with USDA to discuss a second round of assistance, as well as the other agencies to further press for a timely resolution and restored (if not improved) market access.