Washington Insider -- Tuesday

By DTN's Washington Insider

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

Barriers Remain High for Global Trade in Services, OECD Reports

Trade agreements most often seek to reduce tariff and non-tariff barriers to the trade of goods, but with the growing importance of services in the economies of many countries, greater attention is being focused on this area as well.

Last week, the Paris-based Organization for Economic Cooperation and Development issued a report that finds significant barriers exist in services trade among many of the world's leading economies, with air transport, legal services and accounting services standing out as "highly restricted." However, the report also found the United States scored below the average in 13 of the 18 sectors examined, meaning that U.S. barriers to trade is services are relatively low.

"It is noteworthy that the United States is one of the countries where the government interferes least with private suppliers through state ownership," the OECD said. Aside from the U.S. Postal Service, "no major firm is owned by the federal government or a state government in the 18 sectors included."

The U.S. service sector is increasingly important to the country's overall economy, and the OECD finding will provide U.S. negotiators with some leverage when trade agreement talks touch on services in the future.

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House Democrats Call On USTR to Stop Hiding 'Real' Export Numbers

A group of House Democrats is accusing the Office of the U.S. Trade Representative of publishing misleading export numbers when it comes to trade with South Korea.

In a letter last week to USTR Michael Froman, the four — Rosa DeLauro of Connecticut, George Miller of California, Louise Slaughter and Paul Tonko, both of New York, — cite a report prepared by Public Citizen that they say shows that since the United States signed a free trade agreement with South Korea, U.S. exports to the Asian nation have dropped by 5%. They claim that the U.S. International Trade Commission compiles and issues export figures that are more accurate than those published by USTR.

The House members believe the United States will use the Korea-U.S. free trade agreement as a template for the proposed Trans-Pacific Partnership. And using the Public Citizen report as their base, they claim that neither that agreement nor the earlier North American Free Trade Agreement have lived up to their promise of expanding U.S. exports.

The collection of export numbers is spread through many federal departments and agencies, each of which has been charged with maintaining databases that often differ from each other because Congress requires information to be collected in different forms and for different reasons. As negotiations on free trade agreements go forward, it would be helpful if Congress would agree on a single database to use for determining the track record of U.S. imports and exports.

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Washington Insider: Trade Debate Continues on Ag Subsidies

The Helena, Mont., Independent Record newspaper ran a guest editorial last week by a former official of a major commodity group praising the 2014 farm bill. The writer noted that the new law eliminated direct payments but replaced them with Agriculture Risk Coverage and Price Loss Coverage programs that give farmers a choice, at the same time it "strengthened" and expanded Federal Crop Insurance coverage.

"ARC complements FCI" the writer commented, "by providing an additional 10% revenue coverage band at the farm or county level." He notes that PLC provides protection from consecutive years of lower prices by providing a much higher target price" than was offered in the past. He calls these components of the farm bill, in conjunction with a strong crop insurance program, a "valuable safety net."

He pushes aside criticisms of the high level of federal subsidies for crop insurance with the argument that farmers are required to put their money toward purchasing crop insurance also argues that producers "get a bill, not a check, at the end of the year for their share of the premium on crop insurance." Critics, he says, simply don't understand this and they "will stop at nothing in an attempt to discredit both this praise-worthy public-private partnership and the farmers who purchase it."

That being the case, you might have expected that U.S. producers and their representatives would be supportive of activities of producers in other countries who also want safety nets — but that does not appear to be the case. Instead, U.S. Trade Representative Michael Froman complained in Paris that "the largest emerging market countries need to hold the line on their subsidies for agricultural producers."

This kind of responsibility is necessary to get the stalled Doha Round agriculture talks back on track, Froman said. "We cannot ignore the fact that the nature of who subsidizes has transformed dramatically in the 13 years since the Doha Round was established," he noted. "The largest emerging economies now subsidize their farmers at levels as high or higher than the U.S. and Europe," he told the press. "Moreover, developed country subsidies have been decreasing, while emerging country subsidies have risen dramatically."

As always in this old debate, little notice is given to the fact that developed country subsidy declines came from even higher levels and certainly remain quite significant.

China's Assistant Commerce Minister Wang Shouwen responded that the effort to convince emerging markets to commit to greater cuts in their farm subsidy spending than their rich country counterparts is a "non-starter." This is true in spite of a paper from the Cairns Group of agricultural exporting countries that detailed "significant increases" in farm subsidy spending by some emerging economies since 2001, in particular China and India, while the United States and European Union have substantially reduced their subsidy outlays.

The problem appears to be that the United States, for one, is having a difficult time convincing competitors that its new highly subsidized risk management supports are less trade distorting than were the old direct payments — and, producer accolades like the one in the Helena Independent Record make that task far harder.

The problem with the old direct payments was not their effect on trade — they were created because they were decoupled from production and prices in order to reduce that result. Their problem was that they were widely seen as a perpetual free gift, given to select producers "rain or shine" and were clearly unnecessary and unfair — and too embarrassing to continue. Insurance programs are more appropriate, experts say, but the level of federal subsidies at issue — and considered by many to be too high. Trading partners generally say they agree, and that issue is likely to be considered by the World Trade Organization in the near future in response to charges by Brazil.

The result is that USTR Froman's case may be at least partially undercut by the 2014 law, as many argued during last year's debate. Rather than show leadership by reducing federal interventions, the United States once again is finding itself arguing for reduced support for competitors while pushing hard for supports at home — apparently, without recognizing the damage such a position does to any remaining claim to leadership in expanding access to crucial global markets.

This not only is a debate that will not go away, but also is growing in importance important since it bears on whether there is any remnant of life in the WTO's Doha Round, and, possibly, in the Trans-Pacific Partnership trade agreement, as well, Washington Insider believes.

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