The Trump administration’s new authority to provide emergency assistance to farmers strengthens U.S. negotiating authority in ongoing trade disputes with China, says Agriculture Secretary Sonny Perdue.
Knowing that the White House was considering imposing tariffs on imports from China and elsewhere, Perdue said he asked congressional appropriators last fall to lift restrictions on USDA’s authority to provide emergency assistance from programs known as Sections 32 and 5. USDA currently has about $15 billion in unused borrowing authority under Section 5 to provide assistance to farmers, officials say.
Perdue, who spoke to reporters Wednesday after testifying before the Senate Agriculture Appropriations Subcommittee, said Chinese negotiators are “absolutely” aware of the broad authority that he has to compensate farmers for tariffs that China may impose, and that gives the U.S. greater negotiating leverage “to some degree."
He said that the administration will make sure that farmers “are not held hostage to retaliatory measures taken by China or another nation.”
The restrictions on USDA spending were added to the department's annual appropriations bills after then-Agriculture Secretary Tom Vilsack used the authority to provide payments to farmers in 2010 at a time when the then-chairwoman of the Senate Agriculture Committee, Blanche Lincoln, D-Ark., was in an ultimately unsuccessful struggle to win re-election.
Some lawmakers, including Senate Agriculture Chairman Pat Roberts, R-Kan., have raised concerns this week that Perdue’s use of the spending authority could set a new precedent for future secretaries to provide payments to farmers during election years.
Another Republican senator, Ben Sasse of Nebraska, called the administration's proposal "Saturday-morning-cartoon central planning."
"We want more trade, not less," Sasse said in a statement. "Farmers want to feed the world and win with trade. Now, some in Washington instead want to pay them to lose. That's a bad idea and not a real strategy to fight Chinese cheating."
House Agriculture Chairman Mike Conaway, R-Texas, argues that Perdue's use of the authority would be justified. "Vilsack used it for a political issue and not for trade issues," Conaway said.
Roberts and other lawmakers are set to meet with President Trump on Thursday about the trade issue. China has threatened retaliatory tariffs against a range of U.S. commodities, from soybeans to cotton, pork and ginseng in response to U.S. threats to impose tariffs on steel and aluminum and to punish China for intellectual property theft.
Perdue said it was too early to discuss the details of how farmers could be compensated for the market impact of Chinese tariffs. “We’re at a negotiating stage right now. We’re not at a mitigation stage,” he said.
During the hearing, senators on both sides of the aisle pressed Perdue on the potential damage Chinese tariffs could do to the farm economy.
Sen. Jon Tester, D-Mont., said the result could be a repeat of the 1980s farm crisis. Sen. Jerry Moran, R-Kan., brought to the hearing a blown-up photograph of a large pile of grain on the ground outside a Kansas elevator.
Sen. Tammy Baldwin, D-Wis., noted that specialty crops such as cranberries and ginseng were among China’s targets and asked Perdue to commit to using his new authority to compensate producers.
“We will, if needed. ... Obviously our first goal is to negotiate ourselves out of the saber rattling that has occurred and to make sure that these market disruptions don’t have a permanent impact," he said. "There’s enough anxiety (among farmers) already, as you well know.”
USDA’s chief economist, Rob Johansson, told Baldwin the department had adequate data to assess the potential impact of tariffs even on relatively minor commodities such as cranberries and ginseng.
Also in the hearing, Perdue expressed concern about EPA’s granting of waivers to refiners from requirements of the Renewable Fuel Standard. He said the waivers resulted in “demand destruction” for ethanol, and he said that RFS concerns were contributing to farmer anxiety.
Tester pushed Perdue on whether he supported the White House budget proposals to slash crop insurance. Tester said Montana farmers tell him “unequivocally, 'Don’t screw up crop insurance. It’s our lifeblood, it is our safety net.'”
Perdue didn’t disavow Trump’s budget but told Tester “you rightly articulated my view of crop insurance.”
Trump's fiscal 2019 budget would save $22 billion over 10 years by reducing crop insurance premium subsidies from the current average of 62 percent to what the White House calls a “more reasonable” 48 percent. Underwriting gains to insurance companies would be capped at 12 percent, saving another $3 billion over 10 years.
(Updates at 2:45 p.m. with comment from Conaway.)
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