Washington Insider -- Wednesday

Debt Ceiling Fight Blindsides Congress

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

US Trade Officials to Visit China June 5 to Establish Beef Trade Protocols

Several U.S. trade officials will travel to China June 5 to finalize trade protocols regarding coming US beef shipments to China.

Source verification will be one of the requirements, according to Oklahoma State University Extension livestock marketing specialist Derrell Peel. “However, I think that’s pretty doable in what we call a ‘bookend’ system in the U.S. if we can document the original source of the cattle as well as where they ended up at the processing plant, and not necessarily all of the travels in between,” Peel said.

Beijing has accepted a U.S. proposal in principle that would require producers to document the locations where cattle raised for beef exported to China are born and slaughtered, USDA said. The system would be less onerous than tracking cattle throughout their entire lives, during which they can be kept at up to four different locations. Peel estimated that US producers trace the movements of less than 20 percent of the nation's cattle.

China will also require that beef be free from residue of beta-agonists, the growth promoting feed additive. “The Chinese have been very consistent, in both beef and pork, at not accepting ractopamine — or, in beef, Optaflexx is the same product,” Peel noted. “That’s likely to be the case for us as well. That would be consistent with their agreements with other countries.”

Peel said there will likely be restrictions on other growth hormones used in the U.S.

Hormone residue testing will be done on beef entering China, but there will be a distinction made between synthetic and naturally occurring hormones. Meat containing synthetic hormone residue will be rejected. Meat containing residue of naturally occurring hormones will only be rejected if the levels are above those naturally occurring in cattle.

Other details of the protocol discussions include China’s acceptance of U.S. fresh, chilled beef products, as well as frozen, and beef from animals 30 months or younger.

China has agreed to recognize USDA’s certification of processing plants for export, which means plants will not have to be inspected separately by Chinese officials.

First Major Compliance Deadline for Foreign Supplier Verification Program

May 30 marked the first major compliance deadline for the Foreign Supplier Verification Program (FSVP) after it was finalized by FDA 18 months ago.

The regulation, mandated by the Food Safety Modernization Act, requires companies importing food into the U.S. to carry out risk-based evaluations of their suppliers overseas to verify that food is being produced in a way that offers the same level of public health protection as US laws.

The companies also have to ensure the imported food is not adulterated or misbranded with respect to allergens. Compliance dates are staggered based on the size of the foreign supplier and the food safety standards the FDA requires them to meet.

FDA plans to review importers’ FSVP plans to make sure there are no deficiencies, and is investing “significant” resources in training FDA employees to conduct inspections, Sharon Mayl, senior adviser for policy in the FDA Office of Foods and Veterinary Medicine, said in a blog post on Friday: “Importers can expect interactive FDA inspections with opportunities to explain how their programs meet our requirements and how they will take corrective actions if we observe deficiencies,” she said.

Washington Insider: Debt Ceiling Fight Blindsides Congress

Almost everyone knows that the debt ceiling will need to be raised in the near future. Still, the President’s top aides are pushing Capitol Hill leaders to raise the debt ceiling by the end of July but Congress is totally unprepared to do this, Politico says.

Lawmakers in both parties thought they’d have until the fall to act, the group says, so they had planned to roll the always-difficult vote into a broader spending package that could be more easily swallowed. However, that strategy now may be out of reach, politico says.

Moving to raise the limit early “raises the prospect of a bruising fight over the debt limit, not just between Republicans and Democrats but within both parties.” Politico says. It thinks that the GOP is torn over whether to combine spending cuts with the debt ceiling lift and “Senate Democrats are already signaling they may push for their own concessions because their votes are going to be needed to avoid a devastating government default.”

The request will also scramble the congressional calendar. The GOP is currently embroiled in an effort to repeal Obamacare and rewrite the tax code, two massive legislative items that are expected to requite both time and energy throughout the summer. As a result, Congress now seems to be caught “flat-footed by last week’s pleas from White House budget director Mick Mulvaney and Treasury Secretary Steven Mnuchin,” Politico says.

“I just don’t think it’s on the front burner,” said senior House Budget Committee member Tom Cole, R-Okla., a leadership ally. “So far, I haven’t heard that much discussion about it.” “We have to do it. We can’t let the government default,” said Senate Finance Chairman Orrin Hatch, R-Utah, said. But, he added, “I don’t know if it has to be done” before the August recess.

The debt ceiling exercise is one of the most painful that Washington endures, often rattling financial markets and paralyzing the Capitol. Republicans in recent years have pushed for massive spending cuts to accompany new debt authority, while Democrats typically demand “clean” debt ceiling increases without policy strings. In 2011, the GOP’s fight over the debt ceiling resulted in a credit downgrade and the sequester cuts loathed by Democrats and hawkish Republicans. In 2014, the Senate shut off the chamber’s microphones and held a debt limit vote open for more than an hour to avoid spooking Wall Street again.

This time, Republicans control the White House and Congress, and so the burden for action falls most heavily on them. Mnuchin urged Congress to quickly pass a clean debt ceiling hike. But others in the administration, like Mulvaney, who pushed budget brinkmanship as a tea party-backed lawmaker, may not be so supportive.

“Am I worried?” asked Sen. Bill Nelson, D-Fla., “I most certainly am, with a budget director who as a congressman said ‘Let the government go into default.’”

The GOP is already divided over what to do. Conservatives in both chambers are pushing for spending cuts as part of any deal to avoid default, with the House Freedom Caucus on Thursday taking a formal position opposing a clean hike. Those demands give Democrats leverage because GOP leaders will need bipartisan support to pass the Senate’s 60-vote threshold and likely in the majoritarian House as well. If House Speaker Paul Ryan, R-Wis., can’t count on conservatives to help them, he will need to rely on significant Democratic votes to avoid default.

Some Republicans assume that because Democrats consistently helped President Obama raise the debt limit, they will do so again, giving the right room to vote against a debt ceiling increase. House and Senate Democrats, however, are divided over whether to give Trump the clean debt ceiling increase that Mnuchin is demanding. Some Democrats believe it would be hypocritical for their party to push for policy concessions after years of demanding debt hikes without them.

There is still no caucus-wide Democratic strategy yet in the Senate, and Sen. Chuck Schumer, D-N.Y., the minority leader, is expected to be careful not to rattle the financial markets based in his home state.

So, it is likely that the debt limit fight this year will be both contentious and long, and could dominate the Congressional agenda for a significant part of the summer. This is a high stakes fight and could affect agriculture programs significantly, so producers should watch the debate closely as it evolves, Washington Insider believes.

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