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.

Europe Indicates Some Flexibility on 'Geographical Indicators'

One of the more significant barriers to concluding a U.S.-European Union bilateral trade agreement is the thorny issue of "geographical indicators." The EU currently registers more than 1,200 of these names for foods and wines, not all of which truly are geographical in nature, but all of which Europe views in much the same way it views copyrighted names.

A vast number of Europe's GIs have been awarded to localities and products that are obscure and unfamiliar to U.S. consumers and also unlikely to be exported to the United States. Others, such as Champagne, Scotch whisky and Parma ham, are familiar to Americans and generally accepted as referring to a specific geography, like our Napa Valley wines, Kentucky Bourbon and Idaho potatoes.

Now, the EU says its previous position on protecting its GIs has been mischaracterized by news media. According Ambassador João Vale de Almeida, head of the Delegation of the EU to the United States, the EU has been wrongly accused of trying to protect names such as chorizo, ricotta, salami, lielbasa, chevre and prosciutto, which he admits are generic. "Except for a handful of GIs, the fact is that the names for which we are seeking protection in the United States do not conflict with U.S. food labels," the ambassador says.

In the trade talks, dairy, specifically cheese, is a main area where the issue of GIs is highly important to both sides. The problem is that some products taken to be generic in the United States are viewed by Europe as GIs that should receive what amounts to intellectual property protections. The ambassador's recent statement may indicate a degree of flexibility not seen before, thus potentially giving a boost to the free trade negotiations.

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House Republicans Focus Attention on Leadership Races

The unanticipated primary defeat of House Majority Leader Eric Cantor, R-Va., earlier this week has set off a scramble among some members of the Republican caucus who covet leadership positions and see Cantor's fall as their opportunity to rise.

One of the names that many originally thought might make a good candidate to replace Cantor, who will step down from his leadership post at the end of July, was Rep. Ken Hensarling of Texas. That possibility led to House Agriculture Committee Chairman Frank Lucas, R-Okla., saying that if Hensarling were to leave his post as chairman of the Financial Services Committee, Lucas would be interested in moving from Agriculture to replace Hensarling.

Yesterday, however, Hensarling said he will not seek to replace Cantor, opening the way for the possibility of Rep. Kevin McCarthy, R-Calif., moving from his position as majority whip (the third ranking House Republican) to majority leader (the second ranking position).

House Republicans' unexpected opportunity to climb the leadership ladder appears to have infused the chamber with a sense of excitement that has seemed lacking in the day-to-day routine of governing the country. Such enthusiasm could continue in the 27 legislative days that will remain this year after Cantor is replaced.

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Washington Insider: Dealing with GHG Emissions

While the outlook for climate change and its causes still face intense debate, a trio of new reports from United Nations climate scientists recently concluded that rising greenhouse gas (GHG) emissions could have dire economic consequences. They expect a 0.2 to 2.0% cut in global economic output annually following global temperature increases of 2 degrees Celsius above pre-industrial levels, the reports conclude.

This is causing concerns about rising sea levels, more intense storms and shifting rainfall patterns, press reports indicate, especially as the deadline to negotiate a new international climate treaty nears. At the same time, uncertainty about what steps to take is still high. For example, the prime ministers of Australia and Canada publicly oppose carbon taxes and emissions trading schemes while U.S. President Barack Obama and other officials argue that such approaches are economically sound ways to better manage emissions.

The debate is taking on increasingly international overtones as efforts to replace the Kyoto Protocol with a binding international climate deal by 2015 get underway in earnest.

In the United States, the Environmental Protection Agency recently released the administration's draft plan for reducing carbon emissions from all existing power plants. The "Clean Power Plan" would require carbon dioxide emission cuts of 30% from 2005 levels by 2030. Cooperative federal and state programs would allow states substantial flexibility in determining the specific steps to take to meet this national goal, EPA says.

The plan was immediately controversial, with environmental groups hailing it as a "significant positive step" although many also want a "broader strategy." Others, including some lawmakers and industry leaders charge that the plan would "cripple economic growth.

In response, the president commented that he expects pushback both from Republicans and some Democrats from states that rely heavily on "old-power" sources. However, he also stressed "the price of inaction: billions and potentially trillions of dollars lost because we do not do something about GHG emissions."

The president also commented, "If there's one thing I would like to see, it'd be for us to be able to price the cost of carbon emissions."

So, the coming debate recalls efforts to impose a cap-and-trade scheme in 2010 that stalled in the Senate, although some state and regional initiatives have gained traction in recent years. These include a California program begun in early 2012 and the Regional Greenhouse Gas Initiative which operates across nine eastern states. Others, such as Washington state and Pennsylvania, say they are considering either introducing their own cap-and-trade initiatives or joining existing ones, press reports indicate. So, the administration argues that several states have made significant progress toward cutting GHGs already.

In addition, EPA estimates that the cost of complying with the draft rules by 2030 will be quite modest, less than $10 billion annually, and that cooperation among states could reduce this figure significantly. Analysts also suggest that the long implementation timeframe, coupled with the various options available could mean lower costs than feared. At his time, however, the proposals remain highly controversial.

The EPA plan received a modest boost last week as G-7 countries pledged support for a global climate treaty in time for the U.N. Framework Convention on Climate Change's 21st Conference in Paris next year. The group affirmed what it called "our strong determination to adopt a global agreement with legal force applicable to all parties. And, promised that the deal would be ambitious, inclusive, and would reflect changing global circumstances.

The group also pledged to communicate its plans including "nationally determined contributions" well ahead of next year's conference.

Still, opposition to one of the obvious possible approaches surfaced immediately when Australian Prime Minister Tony Abbott and Canadian Prime Minister Stephen Harper lambasted carbon taxes and emissions trading schemes as measures that would, in their view, do little to tackle climate change while causing substantial harm to their respective economies.

Australia is a large per capita emitter that has had a carbon tax since 2012, although Prime Minister Abbott has made repeal of that measure a top priority and could bring it to a vote in the Australian Senate next month. The Canadian premier praised Abbott's efforts and agreed that carbon taxes would be detrimental to economic competitiveness.

Nevertheless, International Monetary Fund Managing Director Christine Lagarde told a recent international economic conference that some mechanism, either a carbon tax or a cap-and-trade scheme, must be used to reflect emissions costs, particularly for major energy producers such as Canada. "Free markets yes, but [at] the right price," she told the press, warning against "ignoring these cost factors."

Furthermore, she noted, countries must act quickly, even before the Kyoto Protocol expires.

So, once again the climate change battle is moving onto the political stage, both in the United States and globally, with the president putting significant political capital on the line in an effort to cut emissions significantly. Certainly, the electorate is more conscious of potential global climate change than it was in 2010, but controls will not be an easy sell — even if EPA's estimates of modest costs hold up. This is an important issue for producers that should be watched carefully as it emerges, Washington Insider believes.

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