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.

Economists Forecast Brighter Outlook for 2015

There is potentially good economic news as we enter 2015. The U.S. economy is forecast to strengthen this year, as solid growth in consumer spending and business investment offset higher interest rates and global weakness. That is according to a survey of professional forecasters conducted by the Bloomberg news service.

The nation's real gross domestic product will expand 2.9% in 2015 after a projected 2.3% gain in 2014, according to the median forecast of 84 economists.

Job gains will slow in 2015 to an average of 215,000 from 236,000 per month in 2014, according to the Bloomberg survey. The unemployment rate will continue the steady improvement seen throughout the economic recovery, dropping to an average of 5.5% from 6.2%, according to the median forecast of economists.

There are, of course, a number of unknowns that could significantly alter the optimistic scenario outlined above. Our hope is that no ill-conceived congressional actions are among them.

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Labor Dispute at West Coast Ports Continues; Mediation May be Needed

Contract negotiations between the longshoremen's union and shipping line and terminal operators at 29 West Coast ports have continued spasmodically since their previous contract expired last July. In spite of negotiations conducted over the intervening eight months, the two sides remain at odds on a number of major issues.

Earlier this week the union, which represents 20,000 West Coast port workers, called on member carriers of the Pacific Maritime Association to come to the bargaining table to resolve those remaining issues. The PMA responded by once again calling for both sides to submit their disagreements to federal mediation, a step the union appears reluctant to take.

The Federal Mediation and Conciliation Service says it has been monitoring the negotiations closely for a while and that it stand ready to provide mediation services "at a moment’s notice." The independent agency said it would promptly reach out to both parties, but noted that without agreement from the longshore union, federal mediation can't begin.

The logjam at the ports is slowly becoming worse, threatening the flow of both imports and exports. But it remains to be seen whether the administration will become more publicly involved in the dispute in2015 than it has do date.

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Washington Insider: Canada Emphasizes Trade Sanctions Over COOL

Well, everybody involved in the country of origin labeling fight has appealed the most recent World Trade Organization decision against the United States. This practice is common, observers say, so now the parties must await the next round of decisions. In spite of this usual dance," the expectations are that the most recent decision against the United States will be upheld and the Canadians and Mexicans will begin to levy sanctions next year.

Canada and Mexico are emphasizing this view and making sure the U.S. interests involved are fully warned of their intention to retaliate as strongly as they are allowed if the United States does not change its policies, since the policies are significantly damaging Canadian producers.

Canada not only will impose retaliatory tariffs on a range of U.S. exports unless the labeling requirements are changed, but will continue to review the retaliation list to ensure that it has maximum impact, according to Canadian Agriculture Minister Gerry Ritz.

"The WTO process has repeatedly declared that COOL discriminates against Canadian cattle and hogs," he said. "Our government will continue to stand with our farmers and ranchers, and we will take whatever steps may be necessary, including retaliation, to achieve a fair resolution."

The Canadian government has identified U.S. products for retaliation, but also has said that others may be added or removed before retaliatory tariffs are implemented. A spokesman for Ritz confirmed that the list is "not static" and that the government will make decisions on which specific products to target as the WTO process concludes.

For its part, the Canadian cattle industry is not enthusiastic about imposing tariffs on U.S. exports since these mean higher prices for some Canadian customers. However, it claims to understand that retaliation is necessary to force the United States to comply with its WTO obligations, said John Masswohl, director of government and international relations with the Canadian Cattlemen's Association. "It's disappointing, but not unexpected," Masswohl commented to the press. "If they [retaliatory measures] have to be imposed, we support that."

The Canadian industry says it is not aware of any ongoing bilateral discussions to resolve the dispute, but would be willing to listen to any U.S. offer that fully adopts the WTO panel's findings, Masswohl said. A compromise solution might have been acceptable three or four years ago, but at this point Canadian producers will only accept elimination of the non-compliant requirements, he added.

Masswohl said that the "good news" is that there has been growing recognition in Washington over the past few months that the situation cannot be resolved by further "tweaking" the regulations put in place by USDA. In fact, repeal of the legislation is the only way to fully resolve the dispute, he asserts. It would then be possible to discuss a labeling program that actually complies with WTO rules, but only after the existing requirements are completely eliminated, he said.

"I don't think they deserve any more time," he said. "They've had plenty of time," he added.

The timing for retaliation is based on the expectation of a hearing of the U.S. appeal in mid-February 2015, with a ruling expected in late spring, Masswohl said. The ruling will "inevitably" favor Canada, he thinks based on past findings. Canada will then immediately seek WTO authority to retaliate and that will be followed by an arbitration process to determine the amount of retaliation, pushing the imposition of tariffs to summer 2015, he said.

Canada's target list includes live cattle and hogs, cheese, fresh apples and cherries, rice, maple syrup, glucose and fructose, chocolate, pasta, bread, prepared potatoes, ketchup, wine, sugars, jewelry, furniture and mattresses.

In fact, there are still important decisions to be made about COOL sanctions and they are likely to go against the United States, experts say. Even if Ritz and Masswohl are not above a little trash talk about the situation in an attempt to affect potential U.S. strategies, there would seem to be little benefit for the United States to continue to attempt to protect the current policies.

This is especially true since these policies appear to be increasingly heavy baggage for U.S. efforts to build stronger trade relationships in both the Atlantic and Pacific regions, as well as for relations with important next door North American neighbors, Washington Insider believes.

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(GH/CZ)

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