Washington Insider -- Tuesday

House Freedom Caucus Goals

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

Argentina Says They Have Green Light to Ship Lemons to US

Argentina's foreign ministry said they have received notice from USDA that it has given a "definitive authorization" for Argentina to ship lemons to the U.S.

The decision ends a 16-year period where Argentine lemons were kept out of the U.S. market. The shipments could reach 20,000 metric tons and be worth $50 million, the ministry said. The agreement to reopen the U.S. market to Argentine lemons came in part due to the visit last week by Vice President Mike Pence. It was initially raised by Argentine President Mauricio Macri in a session with President Donald Trump in April.

USDA, however, has so far not made any official announcement of the action.

The Argentine agency announced the U.S. action August 17. The announcement on lemons came as the U.S. announced that Argentina had agreed to reopen its market to U.S. pork, a market that had been closed for 25 years. Talks are also underway on resuming Argentine beef, sheep meat, sweet citrus and other fruits, the ministry noted.

US Requests WTO Panel in China Grain Import TRQs

The U.S. has requested a WTO dispute settlement panel be established to investigate Chinese tariff- rate quotas (TRQs) used for wheat, rice and corn.

The action stems from the initial case filed by the Obama administration and they had requested consultations in December. The Trump administration moved ahead with a formal request for the dispute settlement panel, which is on the formal agenda for the WTO Dispute Settlement Body (DSB) meeting for August 31. While China can block the first request, the panel must be established via a second request unless all WTO members agree to block it.

The Trump administration signaled in a report to Congress that they were still pursuing the agricultural cases filed by the Obama administration on China agriculture matters.

Since the U.S. raised the issue last year, the Australia, the European Union, Canada and Thailand have joined the dispute as third parties.

The U.S. contends China has failed to administer the TRQs on a "transparent, predictable,", or "fair" basis.

Washington Insider: House Freedom Caucus Goals

Looking forward to expected policy fights this fall, Bloomberg is reporting what almost everybody knows: the House Freedom Caucus is almost big enough to dictate what bills get approved. It also is one of the most conservative and vocal groups in Congress, with a record of successfully ousting former Speaker John Boehner.

Still, it is unclear that the group will succeed in getting the tax cuts it wants as “the prospects for large-scale tax reform have dwindled and the days have ticked by with few agreements about how to approach a bill,” Bloomberg says. But Freedom Caucus Chairman Mark Meadows, R-N.C., remains confident.

Republicans all agree about the need to do something with taxes, but discussions about how steep the tax rate cuts should be and how they should be paid for are exposing fissures between the Freedom Caucus and the tax-writing House Ways and Means Committee.

Meadows said earlier this summer that he prefers a corporate tax rate of 16% and that it would be difficult for him to support a rate beyond 19% or 20%. House Ways and Means Committee Chairman Kevin Brady, R-Texas, released a plan last year with a 20% rate, but House Republican aides say discussions of taxing corporate income are now in the 25% to 28% range. This is exacerbating tensions between the Freedom Caucus and House leadership.

Freedom Caucus members opposed several versions of the health bill and House Speaker Paul Ryan R-Wis., in a surprising move, canceled a vote on a bill in March—largely because of opposition from Caucus members. There are concerns that this group could derail tax reform, too.

Brady and Ryan had hoped to bring Caucus members on board by abandoning the border adjustment tax—but that didn’t work. As a result, they’re reluctant to give in to other policy demands, the lobbyist said.

Now, group members, including Meadows and Reps. Dave Brat, R-Va., and Jim Jordan, R-Ohio, want to see the details before they sign on to a budget resolution that includes the instructions to fast-track the bill through the Senate.

Congressional leaders, along with White House and Treasury Department officials, are working on a tax plan, but few details, other than that it will lower taxes and “grow the economy” have been released.

The budget resolution calls for more than $200 billion in spending cuts, a provision that was included in part to woo the more libertarian wing of the Republican Party. Moderates oppose the cuts, making it difficult for Republicans to garner enough support to pass this budget. Without the budget, there isn’t tax reform, Brady said.

The group is at odds with the people who want comprehensive tax reform, such as Ryan and Brady, and those who also want a quick political win before primary season in 2018, Alexander L. Reid, partner at Morgan Lewis and Bockius LLP, said.

So far, the caucus as a whole hasn’t released any official position on tax reform. Now, with the border adjustment option gone, there is flexibility among caucus members about the specifics in a tax bill, Jason Pye, vice president of legislative affairs for FreedomWorks, said. A high priority is a tax cut for individuals, he said.

Meadows has expressed doubt about proposed changes to expensing rules, including some included in the Ways and Means plan. Meadows, a realtor, supports maintaining the mortgage interest deduction.

Meadows suggested earlier in August that the tax bill should be retroactive to the beginning of the year, a position many economists disagree with because businesses and individuals can’t travel back in time to adjust their economic behavior to account for lower taxes, Scott Greenberg, a senior analyst at the Tax Foundation, said.

It’s telling that the caucus hasn’t been able to gather enough support to come out in favor of—or in opposition to—any particular provision, a GOP aide said.

But, there’s one thing every Republican agrees on: the need for a full-bore effort to push legislation in the fall. Brady, Meadows and many others in the Republican conference are still publicly bullish that a bill can get to President Donald Trump by the end of the year.

“So far, the process is better than with health care, though that doesn’t take a whole lot to improve upon,” Pye said. “The sooner the better, for tax reform. We can’t stall this.”

Clearly, tax reform is enormously complicated and will be increasingly difficult to work out in the time remaining this year. Nevertheless, the groups involved say they are determined and, at some level, united. In fact, policies hammered out under such conditions have an almost uniformly poor level of success and producers should watch the tax debate especially closely as it proceeds, Washington Insider believes.

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@dtn.com