Trade boss Doud takes tough stand with China

The Trump administration chief agricultural negotiator took a tough stand against China’s trade policies during a Washington forum May 22.

Gregg Doud, a Kansas native, was with former chief agricultural negotiators Darci Vetter, who served from 2014 to 2016; Richard Crowder (2006 to 2008); and Al Johnson (2001 to 2005) at a Farm Foundation forum.

“It’s not my role to make any news, but it is fun to be with these folks,” Doud said.

Yet only a few minutes later, Doud went after China’s trade practices at a time United States farmers are worried that President Donald Trump’s proposed tariffs on steel and aluminum will lead China to reduce purchases of U.S. farm products.

“It’s the goose that laid the golden egg and now China wants the goose,” Doud said, referring to China’s insistence that U.S. companies doing business there provide access to the technology behind their products.

Doud also pointed out that these practices have taken place “outside the realm of the World Trade Organization,” and that “this is the issue we have in front of us.”

Doud noted that USTR has filed WTO complaints against China, charging that it has exceeded its allowed agricultural subsidies and now has large stocks of commodities that are affecting prices worldwide.

USTR believes that since China joined the WTO in 2001, it has exceeded what it believed would be its permitted agricultural subsidization by “somewhere in the neighborhood of $100 billion,” he said.

The result, he noted, is that China now has 38 percent of world’s residual corn supply, 52 percent of the wheat, 67 percent of the rice, 22 percent of the soybeans, and 40 percent of the cotton.

China “is not a country that necessarily believes in the dynamics of supply and demand and futures markets and price discovery,” Doud said.

“We have to remind ourselves today that China is a communist, command-controlled, economy. When you have that level of the world’s residual supply of these agricultural commodities in one country, and that country it is costing not only U.S. farmers money in terms of lower world commodity prices for these commodities—it is costing every farmer in the world money. This is something that has to be addressed.”

When he started in as chief ag negotiator March 1, Doud said, the Chinese held 45 percent of the world’s residual corn supply.

“I believe China has begun to realize something that we realized in the 1980s here in our farm policy,” Doud said. “In 1986 the U.S. government owned 60 percent of the corn stocks, which was an unmitigated disaster. That was a train wreck that led eventually to our decoupling farm subsidies from production.

“The purpose of this discussion is to help China realize we know how this movie ends. It’s bad and they need to take their farm policy in a different direction. Hopefully they will.”

Doud said, “the world is watching” China and “what they’re doing is affecting every farmer in the world.”

Doud also noted the U.S. has another WTO case against China over its administration of its tariff rate quotas and has filed a counter notification to India’s notification to the WTO on domestic support charging that China subsidizes much more than it reported.

Some countries want to get back into negotiations about reducing subsidies, but China and India represent 40 percent of the world’s population and the United States needs “a good understanding of what they are doing before heading back to the negotiating table,” he said.

From a U.S. perspective, Doud said, the trade discussion has always been about reducing domestic supports coupled with market access.

Other countries have urged the U.S. to reduce domestic supports and said they want to talk about access to their markets later, but the answer to those proposals is “no, no, no, no,” Doud said.

Market access and domestic support, he said, have to go “hand in hand.”

On the subject of the North American Free Trade Agreement, Doud said, “the pens are not down. There’s obviously still a lot to get done. Our position on NAFTA is that you’d rather get the policy right rather than to be in big hurry. If it means we don’t get it ratified in this Congress, then it means we do it in the next Congress. It doesn’t mean that anything is going in the wrong direction. It’s just that these things take time and we’re going to continue to work on it.“

Doud recalled that the original NAFTA was at first an agreement with Canada, then became a bilateral agreement with Mexico.

“The complexity of doing this is exponential,” Doud said. “It’s really difficult when you add in what Darcy was doing with the (Trans-Pacific Partnership, now shelved by the Trump administration.). That should not be lost on anyone.”

Doud said U.S. ag exports currently total about $138 to $140 billion, with NAFTA responsible for about $38 billion of that, placing Canada and Mexico into the top four in U.S. trading partners.

The Office of U.S. Trade Representative is seeking more bi-lateral agreements rather than regional agreements, with a deal with Japan seen by Doud as the most “clear and obvious top priority.

“I know there’s a lot of frustration with regard to what happened about TPP, but the good news is we already have the basis for a good agreement.”

He also said negotiations next year with the United Kingdom to write a free-trade agreement will occur once the UK leaves the European Union, but “the complexity will be extraordinary.”

Doud said if there’s one thing other countries always demand of the U.S. its an exchange of market access for reduction in domestic supports.

Larry Dreiling can be reached at 785-628-1117 or [email protected].