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.

20 Years Late, U.S. to Grant Mexican Truckers Access to U.S. Highways

The U.S. Federal Motor Carrier Safety Administration (FMCSA) has started taking applications from Mexican motor carriers to conduct cross-border trucking services in the United States. This program was supposed to have gone into effect 20 years ago under U.S. commitments in the North American Free Trade Agreement.

NAFTA called for cross-border trucking to be phased in beginning in 1995, but the United States repeatedly delayed meeting its commitment. The delay led the Mexican government to eventually impose retaliatory tariffs of more than $2 billion on U.S. exports into that country. Mexico suspended the tariffs when the United States launched an earlier pilot program run by FMCSA that tested whether Mexican trucks could safely operate in the United States. The conclusion from the pilot program is that they did, thus opening the way for the NAFTA trucking provisions to finally become operative in the United States.

As for Mexico, that country has allowed U.S. trucking companies to apply for and to operate long-haul trucking operations in Mexico since 2007.

The teamsters union, several other organizations and a number of members of Congress have opposed the trucking deal from its inception. That opposition is expected to continue for the foreseeable future.

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Transparency Issues Swirl Around TTIP Talks

Lawmakers on both sides of the Atlantic, along with members of the so-called "civil society" have been concerned that they are being kept in the dark -- or at least not being provided with the details they want -- by governments conducting negotiations on the Transatlantic Trade and Investment Partnership (TTIP) free trade agreement.

In an effort to give the process greater transparency the European Union last week published a number of legal texts that detail its TTIP proposals. "This is the first time the [European Commission] has made public such proposals in bilateral trade talks and reflects its commitment to greater transparency in the negotiations," the EU said at the time.

Not to be outdone, the Office of the U.S. Trade Representative last Friday outlined what it called the "unprecedented steps" it has taken to increase the transparency of its negotiations on both TTIP and the Trans-Pacific Partnership (TPP) agreement with 11 other Pacific Rim countries. Among other things, USTR bragged that it has provided detailed summaries of negotiation priorities on the TPP and the TTIP and information on key negotiation topics and press conferences following negotiating rounds.

A check of the agency's web page confirms the claim. But the fact sheets on TTIP and TPP were issued on June 20, 2013, and Dec. 7, 2013, respectively. This means either nothing has changed in the past year and a half with regard to the trade negotiations or USDA needs to update its transparency documents.

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Washington Insider: Farm Bill and WTO Compliance

Over the weekend, the Congressional Research Service released a long list of reports on issues likely of concern to the new Congress, including a review of the provisions of the new farm bill and their compliance with World Trade Organization rules.

The report notes the 2014 farm act eliminates many of the supports of the 2008 act and replaces them with new programs that address even relatively small shortfalls in farm revenue. These include the Agricultural Risk Coverage, Supplemental Coverage Option and the Stacked Income Protection Plan as well as a revamped countercyclical price support program -- Price Loss Coverage -- that relies on elevated support prices.

Among major safety net programs, only the marketing loan program and the U.S. sugar programs were extended unchanged. This means the sugar program will continue to count for $1.3 billion against the current U.S. limit of $19.1 billion for non-exempt, trade-distorting amber box outlays, CRS notes.

The most notable safety net change is the elimination of the $5 billion-per-year direct payment program which had been decoupled from producer planting decisions and was notified as a minimally trade-distorting green box outlay. Direct payments are replaced by programs that are partially or fully coupled, meaning they potentially could have a significant influence on producer planting decisions.

Fully and partially coupled programs influence planting decisions both by increasing the overall profitability of farming (as low-price signals are muted), and by changing the relative returns to planting alternative crops, CRS said. Increased profitability tends to increase total planted acreage and output, while changes in relative returns influence the share of acreage planted to each crop, with consequences that could spill over into international markets, CRS noted.

Many of the new programs authorized by the 2014 farm bill have yet to be fully implemented, so producer participation is uncertain and potential distortions yet to be measured, especially since they will depend on future market conditions.

For example, under a relatively high market price environment, as was seen during the 2010-2013 period, program outlays would be small, well within the $19.1 billion U.S. amber box limit. CRS also said, most studies suggest that for program spending to exceed the $19.1 billion limit, a combination of worst-case events would need to occur -- such as low market prices generating large simultaneous outlays across several programs, in addition to the $1.3 billion of implicit costs associated with the sugar program.

CRS said it thinks such scenarios are unlikely, although not impossible, particularly since outlays under several of the programs (including the new dairy program and others) are not subject to per-farm subsidy limits.

This likely will be taken by congressional ag leaders as good news. Certainly, it is less challenging than the recent steady drumbeat of reports suggesting the new programs are tending to far exceed the estimates of the Congressional Budget Office.

The CRS review included something of a warning as well. It said because the United States plays such a prominent role in most international agricultural product markets, any distortion resulting from its policies "would be both visible and vulnerable to challenge under WTO rules."

Furthermore, it said projected outlays under the new 2014 farm bill's shallow-loss and countercyclical price support programs may make it difficult for the United States to agree to any future reductions in allowable caps on domestic support expenditures and related de minimis exclusions, as envisioned in ongoing WTO multilateral trade negotiations.

Right now, this review likely will cause ag leaders to conclude the United States is unlikely to violate its amber box spending ceiling. However, in spite of the enormous importance of overseas markets to U.S. producers, recent ag leaders have invested relatively little to shore up the U.S. leadership position to improve access to key markets, especially those in Canada and Mexico and elsewhere in Latin America.

Both the new congressional leaders and the administration are planning to invest heavily in efforts to build new agreements in the Pacific and Atlantic regions, and to salvage what they can from the struggling WTO Doha Round of talks. However, the CRS report's warning is clear that new programs now being implemented could bring unwelcome baggage to those efforts. That warning should be taken seriously and the United States soon should undertake steps to strengthen its trade leadership position, Washington Insider believes.

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GH

(GH/CZ)

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