Milling & Baking News - January 15, 2019 - 26

Washington Update

U.S. agriculture faces rocky start
to 2019 in three categories
BY ROBBIN JOHNSON

As 2019 dawns, U.S. agriculture faces
a complex and challenging array of
forces emanating from Washington
that could affect its health and vitality.
They fall into three broad categories:
trade, governing and foreign policy.
The longest list of issues continues to be on the trade front and related economic developments. The
Trump administration late last year
concluded negotiation of a U.S.-Mexico-Canada Agreement (U.S.M.C.A.)
to replace the North American Free
Trade Agreement (NAFTA). Now the
U.S.M.C.A. must go to Congress for
approval. With the Democrats having
taken control of the House of Representatives, that approval is by no
means assured.
China and the United States also
called a truce Dec. 1 of last year for
90 days to their intensifying trade dispute. U.S. Trade Representative Robert Lighthizer and his office now have
President Donald Trump's blessing
to lead the China negotiations, in
part because Mr. Lighthizer shares
Mr. Trump's views on the benefits of
tariffs and the dangers of failing to
rein in Chinese subsidies, intellectual
property theft and non-market behavior. Stock markets have reflected
growing concern about the effects on
the global economy of this bilateral
dispute. Talks are beginning as this
article is being written, but the March
deadline for concluding a deal is very
tight, with important implications for
U.S. soybean and meat exports.
Credit policies also affect U.S. agricultural export prospects. The Federal
Reserve has begun to tighten monetary
policy through interest rate increases.
The Fed's actions come at a time when
other regions are continuing to ease
credit conditions to stimulate their
economies. This imbalance in monetary policies has contributed to a stronger dollar. While that has helped keep
energy prices lower, it has added to the
competitive burdens facing U.S. agricultural exports. A strong dollar raises
U.S. commodity prices for importers
while making them less competitive
with exports from other regions.
The Democrats swept into power in
the House of Representatives and re-installed Nancy Pelosi as Speaker - only
the second time in history a Speaker
of the House has lost and regained the
position. Early signs indicate that the
26 / January 15, 2019

Milling & Baking News

large group of freshmen members of
the House seem likely to be more vocal
and less patient than in previous years.
Ms. Pelosi also may have had to
make promises of influence and position to many of them to regain
the gavel. While many of these new
Democrat House members are pulling the party to the left, other freshmen Democrats won in previously
Republican districts, on more moderate platforms. How the Democrats
will handle these conflicting forces
deserves careful monitoring.
Meanwhile, Republicans increased
their Senate majority modestly. This

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may strengthen Majority Leader
Mitch McConnell's capacity to support or defend Mr. Trump, if he chooses. In any case, a divided Congress
promises more partisan hearings by
Democrat-led House committees into
allegations of collusion, obstruction
of justice and other charges against
Mr. Trump, his associates and family. Special Counsel Robert Mueller's
report and actions likely will support
such efforts.
To this volatile mixture will be
added campaigns by a number of
Democrats for their party's presidential endorsement for 2020. Included
will be jockeying for the party's best
positioning between its liberal wing
seeking a more activist government
and more moderate candidates seeking to appeal to centrist voters and
the working class voters that elected
both Barack Obama and Mr. Trump.
Republican candidates for House
and Senate in 2020 also face some
tough positioning choices. Mr.
Trump's base support has proven
both intensely loyal to him and not
enough to win closely contested races. Three Republican Senators facing
re-election in 2020 already have signaled opposition to the government

shutdown over immigration, which
may undermine Mr. McConnell's
control in the Senate, perhaps sooner
rather than later.
The most recent flashpoint has been
foreign policy, where Mr. Trump's decision to bring U.S. forces out of Syria
immediately prompted Defense Secretary James N. Mattis to resign. It
also triggered criticisms from within
Mr. Trump's party and some walking
back of the decision. Because the executive branch has great freedom of
action in foreign policy, a Mr. Trump
acting largely free from experienced
foreign policy advisers could become
even more of a concern to the party's
leadership. A recent Mitt Romney
op/ed in The Washington Post is a reminder that some in the party are not
afraid to challenge Mr. Trump's leadership.
Alongside Syria are several other
potential flashpoints in foreign policy. One, of course, is China, where
Taiwan's independence and Chinese
island-building join trade as points of
friction. Another is Russia, where Mr.
Trump has long been criticized for
not challenging President Vladimir
Putin and his government even as a
Republican-led Congress tightened
sanctions on Russia and many of the
oligarchs close to Mr. Putin.
A third flashpoint is North Korea.
Both Kim Jong-un and Mr. Trump
have signaled a desire to meet again.
North Korea's demand for sanctions
relief before de-nuclearization, however, clashes with the American position that de-nuclearization must precede sanctions relief. Positions may
be hardening, again, on both sides.
The final potential flashpoint is
ISIS. The war on terror continues,
even as ISIS-controlled territory
shrinks. As an unconventional struggle, it is unclear what victory would
look like. Moreover, there remains a
number of failed or failing states that
could harbor ISIS forces, should they
be driven from current havens.
Clearly, there is much to de-stabilize either the global economy or the
political landscape, with an unpredictable Mr. Trump in the middle of
the confusion. MBN

Robbin S. Johnson, a fellow
with the Hubert H. Humphrey
Institute of Public Affairs,
is a contributing editor at
Sosland Publishing Company.
bakingbusiness.com / world-grain.com

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Milling & Baking News - January 15, 2019

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