Washington Insider -Wednesday

Coming Farm Bill Fights

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

Mnuchin Is 'Optimistic' On NAFTA 2.0 Talks

The U.S. is likely to succeed in its efforts to renegotiate NAFTA, and the updated deal will better serve the U.S. economy and business community, Treasury Secretary Steven Mnuchin said Monday night. “I think there are some significant issues around autos, auto parts and some other areas, and I’m optimistic that we will renegotiate this deal,” Mnuchin said at a forum hosted by the Wall Street Journal. “I’ve had lots of discussions with my counterparts in Canada and Mexico, and I think we’re hopeful. We want to renegotiate this deal. That’s what it’s about.”

Mnuchin defended the administration’s broader trade policy, saying that Trump is largely focused on making sure other countries’ markets are as open to the U.S. as the U.S. market is to them. “Let me be clear: The president believes in free and fair trade,” Mnuchin said. He used as an example two conversations Trump held with President Xi Jinping during his recent visit to China, in which he said the U.S. focused on trade and North Korea. “So the president wants to make sure that these other markets are open, and that we have fair trade for the U.S.,” he said.

Commerce's Ross Lashes Out At Japan for Beef Duties

Sharp criticism of Japan for their auto trade surplus with the U.S. and steep tariffs on imports of U.S. beef was delivered today by Commerce Secretary Wilbur Ross. "Japan and other Asian countries routinely espouse free trade rhetoric but actually are far more protectionist than the U.S.," Ross told the U.S.-Japan Council.

"In the case of Japan there are some high tariffs, such as the 50% present tariff on U.S. beef versus 22.5% on Australian beef." Plus he chided Japan and others for non-tariff barriers on autos like varying standards, inspection systems and tightly held distribution channels.

Washington Insider: Coming Farm Bill Fights

Well, there are fights aplenty all across Washington this week as efforts to pass tax reforms get underway in earnest. And while everybody is paying attention to the tax war, Politico is also looking way down the road to the coming farm bill debate.

It says this week that House Agriculture Committee Chairman Mike Conaway, R-Texas, wants to move the 2018 farm bill through committee in January or February of next year. However, Politico thinks it is important to look farther down the road, since “opponents of the farm bill status quo have been preparing since 2014 for the battle that happens after that, in the full House and Senate.”

The group says that a coalition of unlikely allies has organized earlier than ever before to cut off farm subsidies for the wealthy. The effort unites groups from across the ideological spectrum, including Heritage Action, Americans for Prosperity, the Environmental Working Group and the Union of Concerned Scientists.

Politico says these “conservative and taxpayer-watchdog groups” see targeting subsidies as part of the long-game effort to pull Washington’s tentacles from every corner of the economy. It asserts that for liberals and environmental advocates, reforming farm subsidies is a strategy for chipping away at existing farm policy, which they argue favors large operations and can harm the environment.

Still, Politico concludes that it remains to be seen how much common ground the coalition of strange bedfellows can find, and whether there will be “real” policy reforms. However, it notes that Rep. Earl Blumenauer, D-Ore., who spent two years crafting an alternative version of the farm bill, sees an opportunity to shake things up while the GOP is “not fully embraced by President Donald Trump.”

“I think we have a unique opportunity to reshape the farm bill that we’ve never had before,” Blumenauer told the audience during a strategy session last month. He later told Politico he has his eyes squarely on what happens when the bill makes the House floor. “If there is an open process on the House floor to deal with amendments, we’ll be in great shape,” he said.

Heritage Action sees its greatest opening if the farm bill becomes primarily a GOP exercise. “When the farm bill as some sort of bipartisan feel-good measure breaks down is when we have an opportunity,” said Dan Holler, vice president of Heritage Action.

Well, the farm bill debate likely will start next winter, but may not finish for a long, long time in the future. And, there likely are many more moving parts to this debate than those now being discussed. One is, as always, the health and vitality of the three cornered farm bill coalition that includes commodities, conservation and nutrition support. A second likely will be what happens to NAFTA.

The farm bill coalition has become increasingly frayed in recent years, but still has not collapsed—and, was at least lively enough to push the last bill across the finish line, in spite of growing signs of weakness throughout the debate. And, while the policy takeover by budget hawks has been rumored for years, it has so far failed to de-rail most basic policies of ag support.

Perhaps the second development is the current NAFTA “war.” While there are many NAFTA haters around these days, in the administration and elsewhere, not many of them are active in ag groups—who depend on overseas markets for major shares of their output. If the NAFTA is pulled, as the U.S. role in the Trans-Pacific Partnership was, then the farm bill coalition may decide that the loss of those market will support new claims for sharply increased safety nets and more interventionist policies.

So, we will see. Current bumper crops and building surpluses certainly will bolster claims for ag safety nets. And, the worries about support for large farms have been around for decades and have changed effective ag policies relatively little. Still, the coming fight likely will be noisy, although the industry has long been super-adept at building political support when it was needed. It certainly is far too early to conclude that it will not be able to weather still another war on big, well organized operations, Washington Insider believes.

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