USDA Secretary Perdue on China and Trade ... NGFA CEC 2019

U.S. Department of Agriculture Secretary Sonny Perdue (@SecretarySonny) was keynote speaker Monday, Dec. 9 at the 2019 NGFA Country Elevator Conference (#CEC19) in Indianapolis, IN.

Here is an excerpt of his comments on trade negotiations with China during a sit-down Q&A with NGFA President and CEO Randy Gordon.

Randy Gordon: Maybe we can turn to the elephant in the room. And that's trade, of course. This industry and American farmers are so dependent upon it. We've had phase one negotiations and discussions with China going on for some time now. Can you kind of give us a feel for the status of that and what hurdles we still need to overcome and what the prospects might be to completing that?

Sonny Perdue: Well, I can tell you what I think, but in 15 minutes it'll be different. So that's a problem with China in these negotiations. Are we millimeters or miles? That was my question posed to ambassador Lighthizer on Friday. He and secretary Mnuchin are the primary negotiators there. And I'm not sure he actually knew or had a good clear answer to that.

Certainly I think both countries and what this trade disruption to end. We do believe that the Chinese economy has been damaged significantly by that, but obviously we all have as well. President Trump recognized that agriculture would bear the brunt of any kind of retaliation.

And that's been the impetus behind the market facilitation program. And as director Kettler said, businesses, elevators, and those kinds of things don't get marked facilitation program for those in the input business. Maybe you get your bills paid, but it's still tough that way with volumes down and in a total disruption of the supply chain in that way. That having been said, I'm hopefully optimistic, but I'm optimistic as a person anyway. I think this will get resolved.

Is it imminent? If you can give me the definition of “imminent” in Washington, I'll tell you exactly when. Uh, I think, uh, we've got a deadline coming up on the 15th of December, as you know, for another tranche of tariffs. I do not believe those will be implemented.

I think China may have tried to send a signal this last week with the tariffs on soybeans and pork, although that's what they need. So the challenge that we're used to dealing in contracts here. We’re used to fulfilling contracts -- one party contracts with another, and we fulfill that. If not, we have arbitration. When that doesn't happen between nations, there's not a lot of arbitration. And that's the challenge.

If China signs a deal and a contract, what are the enforceability measures of that? That's really what we're dealing with right now. These folks out here make contracts over a certain number of bushels. It's not like I'll say “I’ll buy all I can.” If we presented that to a farmer and said, “I'm going to buy your crop for as much as I can pay you for it,” then they're looking at us and laughing.

And that's sort of the way China wants to act. We've got to have specifics about what they're willing to commit to. If they buy the numbers on the table right now, It's going to be a bonanza for American agriculture. Simply doubling the amount of exports we have ever had for China in many different sectors. So it'd be a tremendous bonanza for American agriculture. In fact, the president looked at me and said, “Sonny, can we produce that much?” I said, “you turn them loose, Mr. President, and they'll show you.” And I think we will show them, but it's a matter of doing that in a hassle-free environment in a very clear type with contractual terms of what real trade means.

It also has to do with whether this is going to be spent on and manipulated or whether it's going to be free trade between Chinese importers and our exporters in that way. As you know, one of the issues with China has been their state-owned enterprises and their ability to manipulate and control not only quantities and qualities, but all the rules of engagement. It gives a lot of uncertainty for our exporters that make trading difficult. So the answer is “I don't know.”

Gordon: Mr. Secretary, earlier this morning we had a conversation about the agreement that the animal plant health inspection service had with China to put an additional declaration on phytosanitary certificates of cargo exceeding 1% FM and the impact that had starting in January of 2018 to really tank our soybean exports to China simply because there wasn't a lot of clarity about how those cargoes would be treated once they got to China. And the concern I know in our industry is that using a grade quality factor as an indicator of plant health and plant past risk is really inappropriate. Can you give us any confidence or your insights on that?

Perdue: I want to just tell this group that this is the reason you belong to the National Grain and Feed Association. Now obviously they've been at the forefront of advocating on behalf of the U.S. grain industry over these issues. I think we probably have some people in the Animal and Plant Health Inspection Service who don’t understand the grain industry and how U.S. grain standards versus phytosanitary standards work. And you all have been wonderful in helping our department understand that.

You do business person to person. And I know their motive has been trying to maintain reasonable relationships with China. I do not believe that we should abdicate U.S. grain standards to artificial types of standards with a proxy of phytosanitary.

And I'm hoping that we can come to that conclusion with China in an amicable way.

The other thing you probably know is that we are working with our Western hemisphere partners. We call them the “Ag Five” of Canada, Mexico, the United States, Argentina, and Brazil, which produces maybe 90% of the grain and oilseeds in the world. I don't know about that percentage, but it’s a vast majority. We're trying to get to some common definitions of things like this that we would be willing -- in fact, we already have sent them in the biotechnology area, a letter both to Vietnam and Thailand who are proposing rules against glyphosate.

And we want to broaden that issue out to other biotech issues. We're trying to operate from a Western hemisphere perspective of growers with similar objectives there to let the world know that we do not plan to be limited by other technology-free zones such as the EU and their rules and attitudes toward technology.

Gordon: As you know, NGFA and virtually all of the farm organizations have been full-throated proponents of USMCA and getting that ratified by Congress and had been disappointed that the House hasn't brought that up for a vote. Can you give us a sense of where that all stands right now? I know there are a lot of discussions right now on the labor provisions and the enforceability of that, and it seems like some progress is being made, but do you have any prospects or observations on USMCA?

Perdue: I've heard Speaker Pelosi say this is imminent; I'll let you define that word again. I know there was a common gasp among all of us, including me, when the president talked about withdrawing from NAFTA. He heard during the campaign about all the jobs that are going to Mexico.

His commitment was to modernize that agreement and to improve it for the American economy. I think he's done that for the U.S. ag economy as well as the manufacturing economy. And I think the agreement will be good for American workers in many aspects there including agriculture. I think the opening of the Canadian market, getting away from this class seven milk issue that circumvented the rules, and the Upper Plains were dealing with wheat grading issues going into Canada, the wine industry, and other types of things.

I've looked at it chapter by chapter, line by line, verse by verse. I think this is an improved agreement. It with a modernization of data as well as technology and I think there’s a model for that. The problem has been mostly political. I've traveled to Democratic and Republican districts all over the country. I have real difficulty finding people who are against it.

I honestly believe that if the speaker allowed it on the floor today, I believe it would pass with a majority of both Democrats and Republicans in the house. Many of [Pelosi’s] moderate members are crying for that. I made the statement on the radio this morning. I don't really know how in the world she can justify sending her caucus home for Christmas holidays without passing this.

Now the issue obviously is political. Do they want to give President Trump a win? This is a win for the American economy, and I trust that she and her members will also want the American economy to do well in this. And I think it's good for the American economy. Let's face it, if the world sees that we cannot consummate a relationship between our closest neighbors, some of our largest trading partners, what incentive do they have in negotiating with us at all? And that's really the issue.

This needs to be done and should have been done a long time ago. Many of the things that are holding out from enforceability, I can’t get over us forcing these provisions in Mexico at some point. We wouldn't stand for Mexico coming in and enforcing provisions in the United States. So we need to respect one another as sovereigns and pass it.

It will be good for the American economy, be good for American workers, both in environment, health safety issues, and certainly good for having the certainty of a modern type of ag relationship, bilateral trade or trilateral trade between our two other neighbors that have been very significant in the growth of United States agriculture.