Washington Insider -- Friday

By DTN's Washington Insider

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

EPA's Pruitt Signals He Can Do E15

Embattled Environmental Protection Agency (EPA) Administrator Scott Pruitt has told farmers this week the agency has the authority to allow the sale of gasoline containing higher blends of ethanol. "The Administrator shared that he believes statutory authority to grant the ... waiver for E15 exists under the Clean Air Act, and to be effective, would require a subsequent notice and comment rule making process," said EPA spokesman Lincoln Ferguson.

But Pruitt in South Dakota Wednesday said the E15 move has been put "on pause."

Pruitt also told farmers in South Dakota that he does not plan to reallocate Renewable Fuel Standard (RFS) obligations that were waived for small refiners, indicating that the White House counsel reportedly questioned EPA’s authority on the matter. However, Pruitt did indicate they are moving up the timeline on the waiver process to complete those ahead of the finalization of Renewable Volume Obligations (RVOs) in November to adjust for those waivers.

As for the RVOs, Pruitt signaled those would come "next week," making the comment that biodiesel/advanced biofuel backers would be "happy" with an announcement due next week.

But, Pruitt also said that he did not agree that allowing Renewable Identification Numbers (RINs) on exported biofuel to qualify for RFS obligations would hurt ethanol demand, asking for data to back up that contention.

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House Farm Bill Consideration Odds Rising for Next Week

GOP leaders announced that votes will be held on two different immigration bills sometime next week. Under the rules, the House can revote on the farm bill until June 22.

House Agriculture Chairman Mike Conaway, R-Texas, said he expects another vote on his committee’s farm bill by next Thursday or Friday, right after the House finishes debating the pair of immigration bills. "Everything is negotiable," Conaway said. "I am ready to get a bill compromised and done and sent to the president."

Senior White House adviser Stephen Miller signaled that the White House supports Republican efforts to pass two separate immigration bills next week.

Perhaps key for the farm bill prospects, House Freedom Caucus Chairman Mark Meadows, R-N.C., said he will support the farm bill now that GOP leadership has worked out how to handle votes on immigration legislation.

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Washington Insider: Anti-Trump Trade Fight Fizzles

The press is reporting today that Republicans are backing away from confrontation with President Trump over trade. For example, the New York Times says that when it came time to stand up to President Trump on tariffs this week, Senate Republicans took a pass “casting aside the party’s long-held commitment to free trade.”

At issue was the decision by Republican leaders this week to block a vote on an amendment to an annual defense policy bill that would have required the president to get congressional approval to impose tariffs on national security grounds. Republican leaders maintained that the measure would have created procedural issues that could jeopardize the underlying defense policy bill. They privately called the reaction of the amendment’s supporters as “hyperbolic” although several Republicans said they would continue to make their differences with the president clear.

But the amendment’s defeat, without a vote, was widely seen as a setback for a core Republican principle, and it played out in public on the Senate floor, underscoring just how far most congressional Republicans would go to avoid confronting Trump ahead of the November midterm elections. The increasingly lonely forces of opposition within the party are coming from those who are leaving politics or those in the chattering classes safely removed from a Republican electorate overwhelmingly aligned with the president.

A number of Republicans appeared “deflated” on Wednesday, the Times said, but argued that the path forward was not clear. Sen. Mitch McConnell, R-Ky., the majority leader, is reluctant to put forward legislation that Mr. Trump does not support because he does not want to waste time making Republican senators take difficult votes ahead of a possible veto.

“It’s terribly disappointing,” said Senator Patrick Toomey, R-Pa., who helped write the trade amendment with Sen. Bob Corker, R-Tenn. He added: “We are the Senate. We’re not potted plants. We should be doing what we think is right.”

Douglas Holtz-Eakin, the former director of the Congressional Budget Office and president of the conservative American Action Forum, said the Republican trade rebellion collapsed because the party is genuinely divided on the issue these days.

“They’re going to have to pick a place to make a stand, and they haven’t,” Holtz-Eakin said.

One area where many Republicans are continuing to oppose the President is national security, and the next test will be whether Republicans will dare the President to veto the defense policy bill over ZTE, the Chinese telecommunications company.

Senate Republicans have joined Democrats to include in the defense measure an amendment that would restore harsh penalties on ZTE for violating American sanctions that the administration has moved to lift. If it makes it to the president’s desk, the provision would undercut the settlement that the Commerce Department reached with the company this month that essentially threw it a lifeline at the request of China’s president, Xi Jinping.

The White House on Wednesday signaled that it would try to strip that amendment out when House and Senate negotiators hash out a final National Defense Authorization Act (NDAA). “The administration will work with Congress to ensure the final NDAA conference report respects the separation of powers,” Hogan Gidley, a White House spokesman, said, insisting that the new agreement makes ZTE pay for its violations and gives the government sufficient oversight of the company to protect the United States.

Consternation over ZTE has created bipartisan backlash and lawmakers have been more willing to defy the President on national security issues than trade disputes.

Trump administration officials have argued that the president is using the threat of tariffs and showing flexibility over ZTE as part of a broader strategy to overhaul America’s trade deals, reorient commerce with China and strike a peace agreement with North Korea. His Republican allies in Congress contend that he should have the space to maneuver.

While Republicans appear ready to swallow their worries about trade for the moment, an all-out trade war could restore their nerve. Breaking with the president has its risks, but rattled financial markets and slower economic growth are also problematic in an election year.

Trump could roll out more tariffs on China in the near future and countries are preparing to hit back with tariffs of their own on American products, from Kentucky bourbon to Harley-Davidsons, the Times said.

After a meeting at the Capitol with the Senate Foreign Relations Committee on Wednesday, Chrystia Freeland, Canada’s foreign minister, warned that her country had retaliatory tariffs ready to be unleashed on July 1. She said that Canada was rolling them out more in sorrow than in anger and that she hoped retaliation could be avoided.

“The answer is very simple: The United States has to remove these unfair illegal tariffs from Canada,” Freeland said.

So, the administration’s polarizing trade fight continues, and is increasingly seen as a threat to many established markets, as well as U.S. growth. Certainly, this is a fight producers should watch closely and discuss widely as it emerges, especially since agriculture products somehow end up embroiled in the disputes, Washington Insider believes.

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(GH/BAS)

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