Government Shutdown Impacts Include Progress On Trade Negotiations

As the administration and Congress continue to struggle to find a way out of the government shutdown impasse, numerous trade policy initiatives are at a standstill.

“No one knows when the shutdown will end,” said U.S. Grains Council (USGC) President and CEO, Tom Sleight. “The longer it goes, the more anxious we get.”

A summary of impacts on key negotiations and agreements includes:

U.S.-Mexico-Canada (USMCA) Agreement

The U.S.-Mexico-Canada Agreement (USMCA) was signed by the three governments last December. Under the Trade Promotion Authority (TPA) provisions, the International Trade Commission (ITC) must conduct an economic assessment of the agreement by mid-March before the Trump Administration can send final agreement text to Congress. With ITC closed for more than month, the assessment will likely be delayed, pushing the remaining TPA timetable into late summer or early fall.

That challenge, plus a new Congress with more than 90 House members unfamiliar with USMCA, could mean the agreement may not be ratified this year. Under that scenario, existing Section 232 steel and aluminum retaliatory tariffs by Canada and Mexico on many U.S. ag and food commodities could remain in place.

U.S.-Japan Trade Agreement Negotiations

The U.S. and Japan were to begin formal negotiations on a bilateral trade agreement around Jan. 20. However, much the of U.S. Trade Representative’s (USTR’s) staff have been furloughed since mid-January and are unable to announce chief negotiators and initiate formal discussions. Many commodity groups including livestock and dairy are already being impacted, as Australia, New Zealand and the European Union (EU) have trade agreements in place with Japan with tariff concessions on these products that will impact U.S. market shares.

Trade Discussions With The European Union And The United Kingdom

Discussions on potential agreements with the Europe Union (EU) and the United Kingdom (UK) are also on hold. USTR issued its negotiating objectives for the potential U.S.-EU bilateral agreement on Jan. 11 and proposed potential discussions to begin on or after Feb. 11.

At the same time, there is continued and unresolved misalignment on negotiating objectives, with the United States demanding that agriculture must be included in the negotiations while the EU remains equally adamant that it will not include agriculture.

The U.S. Grains Council’s Director of Trade Policy and Biotechnology Floyd Gaibler testified in support of agriculture being included in negotiations in December 2018, emphasizing that the U.S. and EU need to “reconsider a systematic approach to normalize trade,” a reference to regulatory barriers and legal challenges marring the grains trading relationships between the two markets. Agriculture must be included in these negotiations to meet that objective.

USTR and the ITC were scheduled to receive comments and hold hearings on the potential for a UK agreement the last week of January. The Council submitted comments to both agencies (only USTR was able to accept comments) and requested participation in the hearings. Further progress on both initiatives will be delayed until the government shutdown is resolved.