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© Pacific Coast Council 2018

Peter Friedmann’s View from Washington DC - September 2019

September 20, 2019

Congress is back from August recess. If they are going to get any legislation passed this year, it better start moving in September! Thus far, other than prison reform, Congress has produced precious little (but they passed a budget, so Federal spending continues at record pace).

 

Politicians make public statements ‘back home’ about gun violence; but once in their Capitol Hill offices,  gun control legislation remains a topic that many Members of Congress try to avoid, while the others won’t compromise.

 

The world watches with trepidation: first Iran attacked tankers carrying Saudi oil. Now it has attacked Saudi Arabia and its oil production directly – will Saudi’s treat it as an ‘Act of War’? Will the US intervene?

 

The US-China trade dispute has done nothing but accelerate, with both sides rapidly approaching the bottom of their bags of trade weapons. Tariffs have been imposed now on most of what we import from China, (with a few exclusions). And China has reciprocated on our exports. We’re not done; the President continues to ratchet up tariffs – from 10% to 15% to 25%, changing the effective dates on short notice, keeping both the Chinese trade negotiators and all the US businesses, guessing. The biggest “List 4” on all consumer goods, has been announced, many are now at 15% tariffs, with the very ‘sensitive’ imports such as cell phones, electronics, televisions, footwear, apparel, going up to 15% in December…unless the President feels a delay (or acceleration) is warranted to get China to a deal.

 

How long will the US-China trade war last? Good question, particularly since the President seems to be supported, or at least not opposed, by most Members of Congress, both Republican and Democrat. In fact, shortly before the President declared China to be a currency manipulator, the Senate Democratic Leader urged the President to do so. Overall, Democrats and Republicans continue to support a tough position versus China to address intellectual property theft, cyber security and hacking, counterfeiting, technology transfer. Meanwhile Wall Street gyrates violently

 

A glimmer of hope: lower level US and Chinese trade negotiators are wrapping up meetings here in DC, which were sufficiently promising to set the stage for senior trade officials’ negotiations in coming weeks. At least they’re talking again.

 

Meanwhile hundreds of imports from China have been excluded from the tariffs following petitions to, and review by the US Trade Representative. That process remains available to those US importers who can make the case for exemption from the tariffs.

 

What about Japan? Trade negotiations promise some new opportunities for US ag to enter the Japanese market duty free or with reduced barriers – except of course, rice, maybe beef; Japan wishes to protect its domestic producers from competition from US imports. It does not appear that Japan will budge on the President’s desire to limit the imports of autos from Japan. So it will be a limited agreement.

 

More challenging is the US-European Union trade relationship. The World Trade Organization ruled that the EU unfairly subsidizes Airbus, and authorizes billions of dollars of US retaliation in the form of higher duties against EU products entering the US, such as wine, cheese, etc. EU isn’t having any of it.

 

The southern border, recently the center of attention, has quieted down. The number of immigrants approaching the border have dropped dramatically as Mexico has acquiescence to President Trump’s demands that it enforce its own southern border. This has curtailed the flow of people from Central America.

It’s not only tariffs that challenge international trade:  international transportation is increasingly imposing costs on importers and exporters.

 

An international mandate to ocean carriers to shift to expensive “low sulfur fuel” by January 1, 2020 is resulting in surcharges on importers and exporters.

 

Congestion at US ports is caused by marine terminal inefficiency, ocean carrier consolidation and massive new vessels with capacity that overwhelms many US marine terminals. Meanwhile, political and labor interests limit automation that would address congestion, creating at times a debilitating bottleneck on US international commerce. The Federal Maritime Commission may act to stop ocean carriers from imposing costly penalties on US exporters, importers, and truckers when their containers are delayed due to this congestion.

 

If surviving legal challenges, California's newly enacted legislation to limit Independent contracting in transportation will be felt nationwide.  Getting cargo in and out of California ports will be more expensive; Uber and Lyft also subject to this new law, are fighting back.

 

We have the lowest legal truck weights in the world. The cost on US commerce is significant: it takes 4 trucks to carry the same amount of cargo carried by 3 trucks in Canada, Mexico, Europe, etc. Decades of effort to bring US truck weights up to global standards continue to be thwarted by the railroads.

 

Lots of challenges, lots of Presidential campaign talk, but not so many solutions…

 

 

Peter Friedmann

Our Man in D.C.

 

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