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Cross-border trade: Baby steps, clues and competition

The Trump administration has been hampered by the Democrat opposition party trying everything to delay confirmation of Trump appointees. So it was mid-May before the U.S. Trade Representative Robert Lighthizer was finally confirmed, nearly four months after the inauguration. That factor, plus Agriculture Secretary Sonny Perdue’s confirmation only a couple of weeks earlier, hampered the new administration’s momentum on trade.

However, while the USTR normally leads trade efforts, there are indications Commerce Secretary Wilbur Ross might be the cabinet officer leading Trump trade negotiations.

Perdue’s announcement that he would fill a new USDA position of undersecretary for trade was good news to agricultural groups. Perdue is a free trader and this appointment should stengthen his position.

Observers will have noted that while Trump has been pushing hard with executive orders and memos, Congress has not moved fast on anything. Congressional leadership’s decision to start with repealing and replacing Obamacare made for a rocky start. A very contentious issue was complicated by indecision among Republicans on the shape of the legislation. While the House thrashed out a decent beginning, the Senate decided to start writing a new bill. Meantime, the House is supposedly beginning tax reform legislation.

It is hard to decide which of those two priorities are most important as they both carry huge political and economic impact. As neither house has demonstrated the ability to walk and chew gum at the same time, it will take a minor miracle to get both those issues resolved by fall. Such a pace is frustrating to both Trump and his supporters — many of whom are accustomed to a businesslike pace, rather than Congressional slow motion.

All of that time has not been wasted, however. The slog has given business and agricultural groups that favour free trade more time to lobby Trump and his White House contingent. The tone of Trump’s rhetoric moderated for a while — then he would say something or do something to raise concerns all over again.

His chiding of Canada’s dairy policy while in Wisconsin had to concern Canada’s livestock producers. Especially after he said Canada’s portion of NAFTA shouldn’t need much change. His NAFTA memo to Congress was less radical than many expected. Then he goes after Canadian softwood, an issue that’s been on the burner for years.

After several comments by insiders that protectionist economist Peter Navarro was losing clout in the White House, the next thing we know, he’s writing a U.S. withdrawal from NAFTA. When that news leaks, Trump credited phone calls from President Pena and Prime Minister Trudeau for changing his mind, and he decides to negotiate, not withdraw.

How much of that was political theater, softening up negotiation partners, and how much was a near miss for free traders is anyone’s guess. I’m suggesting to American cattlemen that they should expect to be just as much in the dark regarding Trump’s negotiating positions as his trading partners during negotiations. His style is about as far removed from Obama’s “telegraphing” and recent Republican leadership’s “cave-in first” styles as is possible.

While the slow Washington pace has affected Trump’s agenda, North Korea’s belligerence and accelerating rocket testing has helped bring us a tutorial on Trump’s negotiating style.

Trump’s constant China bashing during the campaign regarding trade and currency policies, as well as his abuse of trade regulations, was obviously a major factor in President Xi’s meeting directly with Trump so soon after the inauguration. Xi took Trump at his word that a huge chunk of China’s economy — exports to the U.S. — was at risk. The North Korean factor accelerated the need for a meeting.

According to the joint statement, China will import U.S. beef, based on existing international standards, no later than July 16, 2017. Previously, negotiations had been hung up on two issues. The one Canadians already had a leg up on American producers was traceability. The other was the use of ractopamine during the last few weeks in the feedlot. Apparently, the need to establish some good will with the U.S. is overcoming those issues.

That will mean more competition for Canadian beef in the Chinese market. However, given the size of the market and the relative newness of grain-fed beef to many emerging middle-class Chinese, it might not be such a bad idea to have two experienced marketing teams working the country, expanding the overall market for grain-fed beef and variety meats. Traditional Chinese tastes are more attuned to variety meats, and how long it will take them to become interested in volumes of muscle cuts is an open question.

But we’ve learned some things about Trump’s negotiating style. If this is the normal Trump template, he likes to start things off himself, top leader to top leader. Beforehand, rattle your negotiating partners and make sure they know you are willing to walk if you are not getting enough of what you want. During negotiations, set deadlines and goals, then send in the top lieutenants to wrap things up in short order.

It was encouraging but not definitive that Trump sent Ross and Treasury Secretary Steve Mnuchin to execute the China agreement. Ross is a free trader and Mnuchin appears open to it. However, Ross is an avowed China trader and fan, so that likely influenced his leadership role in this case.

— Steve Dittmer is CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain.

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Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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