Washington Insider -- Friday

Secretary Perdue Visits House Ag Committee

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Trump Administration Officially Launches NAFTA Renegotiation

The Trump administration formally began its renegotiation of the North American Free Trade Agreement (NAFTA), sending Congress a letter that starts the clock on a 90-day waiting period before U.S. negotiators can sit down with their counterparts from Canada and Mexico.

The letter, signed by recently approved U.S. Trade Representative Robert Lighthizer, outlines the administration's goal of modernizing the pact and pledges to work "closely and transparently" with Congress throughout the process.

Lighthizer noted that the administration's primary goal in renegotiating the more than 23-year-old agreement will be to update it, including by adding provisions on digital trade, intellectual property rights and labor and environmental standards, which he called "an afterthought in NAFTA."

Specific negotiating objectives are due to Congress 30 days before the start of talks. The letter noted an interest in adding stronger enforcement provisions.

"This is an important day for the Trump administration," Lighthizer said. "Today, President [Donald] Trump is fulfilling one of his key promises to the American people: to renegotiate NAFTA to get a better deal for American workers, farmers, ranchers, and businesses."

With the 90-day clock beginning today, official talks are likely to begin in late August.

House Mulls Using Reconciliation to Cut Mandatory Spending

A proposal to axe $500 billion from mandatory spending programs in the Fiscal 2018 House budget resolution via reconciliation is gaining some support, according to congressional contacts. However, the 10-year plan, not yet final or official, is drawing strong opposition from some Republicans outside the committee, such as Agriculture Chairman Mike Conaway, R-Texas, who asked for agriculture to be spared from the reconciliation instructions, adding he does not know what the Budget Committee will do.

Combined with President Donald Trump’s Fiscal 2018 budget submission next week and Senate action, putting the reconciliation instructions in a House budget resolution would open the door for Republicans to pass the cuts with a simple majority in the Senate.

If the House and Senate adopt a common budget resolution with reconciliation instructions to cut spending, authorizing committees in both chambers then separately would draw up a reconciliation bill capable of bypassing a filibuster in the Senate.

The full Trump budget submission on May 23 is expected to propose about $800 billion in spending cuts to means-tested entitlement programs and possibly additional cuts to other mandatory programs.

The budget resolution is already being written to include reconciliation instructions to the Ways and Means Committee for a comprehensive tax overhaul. The mandatory spending cuts would be added to that.

Under the plan, the budget resolution could contain reconciliation instructions to a dozen or so authorizing committees directing them to draw up legislation to cut mandatory spending programs under their jurisdiction such as food stamps, agriculture subsidies, Medicaid and Medicare and other programs. Lawmakers said the committee is considering reconciling about $500 billion in mandatory cuts over 10 years.

Conaway said agriculture should not be a candidate for reductions. “We’ve been in continuous conversation with them about what the current state of affairs is with respect to the ‘14 Farm Bill and this budget baseline and encouraged them to not do that,” Conaway said about talks with the Budget Committee. He added that the Budget Committee has “some hard decisions to make, and we’ll have to do whatever we decide once we get that number,” he said, referring to a reconciliation instruction. But Conaway argued that savings from the 2014 Farm Bill have been more than four times the $23 billion that was estimated (most of those cuts came via reduced food stamp spending, while some farm program safety net spending was above initial forecasts). Conaway added that the outlook for farmers has worsened, increasing the importance of a “vigorous, meaningful safety net.”

Conaway is also worried about deep cuts to agriculture in the Trump budget. He said he planned to meet with White House budget director Mick Mulvaney on Thursday to “pitch our case.”

Washington Insider Secretary Perdue Visits House Ag Committee

Ag Secretary Sonny Perdue appeared Wednesday before the House Agriculture Committee to discuss the rural economy and to give Committee members a chance to ask about their favorite farm and trade policy issues.

Cotton was at the top of the list although the secretary declined to make commitments about additional about beyond saying he would see what, if anything, he can do. He commented that he “didn’t want to give false hope.”

He quickly found that there are continuing hard feelings among Committee members as Committee Chair Mike Conaway, R-Texas, lashed out at Senate Agriculture ranking Democrat Debbie Stabenow of Michigan and Pat Leahy of Vermont, who worked for relief for dairy farmers in the Fiscal 2017 omnibus.

Conaway noted that Stabenow and Leahy represent states where dairy is important and that they had sought additional funding to “improve” a 2014 Farm Bill program that the industry calls inadequate. “We had an elegant solution for cotton. It should have been in the omnibus,” Conaway said. Stabenow and Leahy may not have cotton farmers in their states, but that is no reason to “take them hostage to get something that would never work,” Conaway said, noting that the northern lawmakers' proposal to help dairy producers would have cost $800 million over 10 years but did not come with an offset.

Right now, it appears that the dairy vs cotton standoff could continue into the coming farm bill debate.

Perdue also noted that he plans to travel to Canada in June and will press the Canadians on their restrictions on U.S. dairy products. He also promised to offer a milk marketing order for California by the end of the year.

A topic of major interest to the Committee was USDA’s recently released reorganization plan. Several questions focused on member concerns regarding abolition of the undersecretary position for the Department’s rural development programs. Perdue claims that these programs will be moved into his immediate office and that this will elevate rural concerns and allow him to be more involved in issues affecting small towns and rural communities but members still seemed to have concerns about whether the shift was actually a demotion for rural programs and possible future reductions.

Perdue surprised the committee by announcing that there will be an assistant secretary for rural development—a post that will require Senate confirmation, he said although he later appeared to walk back that assessment, Informa said.

Perdue argued that that access to him was more valuable than having the higher level post of Undersecretary which reported to the deputy secretary, the department’s number-two person, Perdue said. Observers suggest that USDA can expect additional questions on this issue, especially during budget debates.

The Secretary also took the opportunity to tout his creation of a new trade undersecretary, describing the new position as serving as “a top promoter of U.S. agriculture goods abroad.” Perdue sees the position as serving as part of a “triumvirate” on trade, providing expertise on agriculture to Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer as they work on new trade deals.

The Secretary also reassured Rep. Jim McGovern, D-Mass., that he thinks the Supplemental Nutrition Assistance Program is an important and effective anti-hunger program. McGovern said he has heard rumors that SNAP could be “used as an ATM machine” in the Fiscal 2018 budget process to help pay for other programs. Perdue responded that as far as he is concerned, we have no proposed changes and then went even farther, suggesting that there was “no need for fixes” to the program.

On broadband and inland waterways, Perdue said the White House understands their importance and that the administration’s infrastructure plan had waterways needs “right at the top of their list.” He said he was working to help White House advisers understand that “broadband is critical to economic development.”

In addition, Perdue suggested somewhat strangely that there was a need for additional flexibility for the “least productive acreage enrolled” in the Conservation Reserve. He also discussed setting up a bank for vaccines like those for foot and mouth disease, even though such an effort might be costly. He likely will be asked for additional detail on such a program in the near future, observers note.

So, it seems to an important extent, the Secretary’s honeymoon with Congress is continuing — but likely will be tested soon as details concerning trade policies and several other issues emerge. If USDA begins to win fights with Commerce about ag trade policies — and, about ag program budgets – his tenure may be relatively peaceful. Certainly, these skirmishes are fights producers should watch closely as they evolve, Washington Insider believes.

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