On July 25, U.S. Secretary of Agriculture Sonny Perdue announced a $12 billion plan to support farmers hurt by retaliatory tariffs imposed by U.S. trading partners. In acknowledgement of the disproportionate effect on U.S. agriculture from trade retaliation, President Trump directed Secretary of Agriculture Sonny Perdue to implement a plan to protect U.S. farmers and agricultural interests. USDA estimates that its trade assistance package will help offset the roughly $11 billion in negative effects suffered by U.S. agricultural producers.
In public comments following the announcement, Secretary Perdue stressed that the assistance is not intended to be long-term, "We believe this is a temporary stop to get our producers to a point of profitability again by a normal trading relationship — that's exactly what the president is showing these other countries, with these unjustified, illegal retaliatory tariffs. They can't bully our producers politically, they can't bully Congress and they can't bully the president into taking in the things that have been unfair for a number of years."
Recent U.S. decisions to impose tariffs on steel and aluminum in addition to other imports from China have provoked retaliation in the form of countermeasures by China, the European Union, Mexico, and Canada on thousands of U.S. exports, including corn, rice, soybeans, sorghum, cotton, fruits, nuts, wine, wood, cheese, and pork.
In providing this aid to farmers negatively impacted by tariffs, USDA is exercising its authority under the Commodity Credit Corporation Charter Act. USDA will provide aid via three programs:
1. Market Facilitation Program: This program will provide payments directly to farmers of limited commodities. Producers of soybeans, sorghum, cotton, wheat, corn, dairy, and hogs will receive direct payments associated with the 2018 production year.
2. Food Purchase and Distribution Program: Specialty crops will benefit from the USDA Agriculture Marketing Service plan to purchase any unexpected surplus of affected commodities such as fruits, nuts, legumes, beef, pork, and milk. The purchasing process is expected to continue over several months. USDA's current surplus food purchase programs deliver commodities to schools, food banks and households as part of nutrition assistance programs, including the National School Lunch Program and the Emergency Food Assistance Program.
3. Trade Promotion Program: USDA plans to implement a new trade promotion program similar to the existing Market Assistance Program (MAP) and Foreign Market Development Program (FMD). The program will work to enhance current export markets and develop new ones through trade shows, promotions, and by alleviating regulations and other barriers. Unlike the other two programs, this program will be open to all agricultural commodities. Specialty crops greatly benefit from existing trade promotion and technical assistance programs to enhance exports and address technical barriers to trade. Increased trade promotion funding will allow specialty crop stakeholders to simultaneously develop new export markets and address the unique challenges of perishable products.
USDA dismissed concerns that the new trade assistance package violates WTO commitments with regard to trade-distorting subsidies. When the U.S. joined the WTO, negotiators agreed to cap trade-distorting domestic subsidies at $19.1 billion annually. USDA says that even with the new assistance, U.S. subsidies remain well below that cap.
While Congressional approval is not required to implement the trade assistance package, specific details will be subject to a formal administrative rulemaking process. USDA has not disclosed the amount of payments, although agency representatives have stated payments will be based on actual production. Other determinants for assistance, such as payment limits, remain unclear. The details of the food purchases and trade promotion program – two key programs for the specialty crop industry-- will also require more time to develop and implement. USDA officials expect to announce more details around Labor Day, which should further clarify the utility of these trade assistance programs for exporters of fruits, vegetables, and flowers.
Fundamentally, PMA believes that the best way to increase global demand is through free and fair trade, which is about cooperation and balance, not protectionism and retaliation. We will continue to share information as we receive it. In the meantime, feel free to reach out to PMA for questions, or to share personal stories of how trade actions are affecting your businesses.