Washington Insider - Monday

By DTN's Washington Insider

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

'Cut-as-You-Go' Proves Difficult for GOP to Put Into Practice

House Republicans are finding it increasingly difficult to put into practice their pledge to offset new or emergency federal spending by cutting spending elsewhere. The procedure, known as "cut-as-you-go," or "cut-go" for short, is the GOP's answer to Democrats' "pay-go" plan, a procedural rule put in place as a way to ensure new permanent spending or tax cuts were offset elsewhere in the budget by equivalent spending cuts and/or revenue increases.

Cut-go basically is pay-go without the possibility of increasing revenues. It simply requires any new permanent spending to be offset with spending cuts elsewhere, ensuring there is no net increase in mandatory spending.

The rule was waived 12 times in the 112th Congress. It was waived earlier this year to approve the omnibus appropriations bill. House Republicans also waived the rule twice in recent weeks, once regarding the bill to ensure the Highway Trust Fund would keep making payments after August. The House also waived cut-go to allow for consideration of a bill to give tax credits for college students, including making the credit refundable, which constitutes new spending.

The expectation is that as the current year winds down, House Republicans increasingly will waive cut-go when they vote for legislation that is not paid for and that therefore will contribute to the federal deficit.

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WTO Misses Trade Facilitation Agreement Deadline

The World Trade Organization missed its July 31 deadline for gaining member consensus on a multilateral Trade Facilitation Agreement after India blocked the measure due to concerns over a separate agreement on food security for developing countries.

The TFA essentially would be a blueprint for minimizing bureaucratic border delays, with some economists estimating it could save WTO countries more than $1 trillion. It would likely be more significant for agriculture than any of the elements agreed to in the Bali package, according to some analysts.

Many trade analysts suggest that a lack of agreement on trade facilitation could have significant ramifications for the Doha Round of talks. Setbacks have been far more common than progress during the nearly 13 years that WTO members have been discussing provisions of the Doha Round. The expectation is that the talks will continue to limp along for the foreseeable future. (Also see longer item below.)

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Washington Insider: Trade Talks Founder

Last week, the World Trade Organization's first major trade negotiations in 19 years collapsed over objections raised by India, which has steadfastly insisted on expanding special protections for its domestically produced food.

The failure is a major setback for the global trade talks and throws into question the ability of the WTO to serve as a forum for international accords as well as its status as an arbiter of trade disputes. The U.S. envoy to the WTO last week characterized a failure in Bali as tantamount to killing the accord struck there last December.

WTO estimates said an agreement would have stimulated the world economy by more than $1 trillion by cutting regulatory hurdles and red tape at international borders. "Now we're back to square one, to where we were before Bali," said Biswajit Dhar, an economics professor and trade specialist at Jawaharlal Nehru University in New Delhi. Still, Dhar told the press he hoped that the members would return to negotiations instead of letting them die as they did during a round of trade talks in 2008. Observers suggest that his optimism is not widely shared.

The Bali agreement, reached under Indian Prime Minister Narendra Modi's predecessor, allowed India and other developing countries to subsidize food staples as long as they did not distort trade. Members also agreed to negotiate a permanent solution on the issue for adoption at a meeting scheduled for 2017, according to the Bali text.

Negotiators were debating technical provisions of that deal, which would allow nations to begin steps to ratify the accord in their own countries, when the deadline for the talks expired. Now, WTO members are considering how to move forward when they reconvene in September.

Efforts to minimize red tape at borders, negotiated by all 160 WTO members, was widely seen as promoting trade. Now that language is increasingly unlikely to be implemented, experts say. Senior trade officials are telling the press that that the failure of the Trade Facilitation Agreement might well drive countries to conclude that multilateral agreements are no longer practical and increase emphasis on more limited plurilateral or bilateral agreements instead.

Following the collapse of the Bali talks officials are suggesting to the press that the WTO's post-Bali work program is in serious jeopardy. Some are advocating that efforts should proceed without India. Advocates of this course suggest that the already negotiated text could provide as the basis for future discussions.

"Today's developments suggest that there is little hope for truly global trade talks to take place," Jake Colvin, vice president for global trade issues at the National Foreign Trade Council in Washington, told the press. "What is most impactful is the slowdown or the lost growth opportunities that will happen in the developing world," Linda Dempsey, vice president of international economic affairs at the National Association of Manufacturers, said before the talks collapsed.

India always has been a reluctant participant in trade talks — arguing that it deserves special protections for its millions of small farmers at the same time it receives special access to other markets. In the current talks, U.S. officials saw the proposed agreement as a test of new president Narendra Modi's willingness to follow up on his efforts to boost growth, which has slowed in recent years. That position was interpreted as supportive of better relations between the world's largest democracies. Based on developments at Bali, that hope may prove forlorn.

U.S. Secretary of State John Kerry and Commerce Secretary Penny Pritzker had pressed Indian officials to advance the accord during a recent visit to New Delhi for recent U.S.-India strategic talks. Clearly, India's recent hard-line performance does not suggest a new, higher priority for trade or international cooperation — or, for improved U.S.-Indian strategic cooperation in the near future, Washington Insider believes.

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