Washington Insider-- Wednesday

By DTN's Washington Insider

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

Congress Unlikely to Sign On to President's Plan for Crop Insurance

The administration's fiscal 2016 budget request to Congress contains a plan to trim federal subsidies for some crop insurance premiums. The requested budget for crop insurance would be $8.2 billion, slightly less than the $8.8 billion total cost in 2014. The budget cuts requires legislative changes that would reduce premium subsidies to farmers for policies providing revenue protection with harvest price coverage and reforming prevented planting coverage.

Agriculture Secretary Tom Vilsack said the savings would help USDA stay within the 2014 farm bill's limits for spending on agricultural programs. As it is, lower market prices for corn and other major crops seem likely to increase payouts for new farm bill price loss and revenue protection programs by $1 billion to $1.5 billion over the next 12 to 18 months. "If you want to stay generally within the budget savings identified for that safety net, you have to make some adjustments," he said.

Congress almost certainly will balk at the administration's proposal. Farm-state lawmakers rejected proposals for reducing premium subsidies in the past, and Senate Agriculture Committee Chairman Pat Roberts, R-Kan., said he has no intention of taking up the proposed cuts this time around. "We have seen these types of proposals from this administration before and Congress has been right to ignore them," said Roberts.

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Ways and Means to Markup Permanent Tax Extenders

The House Ways and Means Committee this morning plans to take up and vote on seven expired tax provisions that the previous Congress failed to make permanent. The seven bills would make permanent certain benefits related to conservation easements, S corporations and business expensing, among other items. The conservation easement provision would extend the enhanced tax deduction for contributions by individuals and corporations of real property interests for conservation purposes.

The measures would make permanent provisions that Congress extended to cover 2014. They are modeled after bills that the Ways and Means Committee passed last year and that in some cases — such as the food inventory bill — that the full House passed as well.

These will be the first tax measures the committee has considered since Rep. Paul Ryan, R-Wis., became chairman at the beginning of the year. He hasn't announced plans for taking up other of the more than 50 provisions that expired at the end of 2014. There is speculation that Ryan may seek to include some of those provisions in a larger tax reform package.

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Washington Insider: New Controversy Over COOL

There was a modest surprise recently as the U.S. National Farmers Union, which generally opposes livestock or meat imports, reported a new study by an Auburn University professor offering the conclusion that the U.S. country of origin labeling law had no effect on cattle imports into to the United States, or on Canadian prices over the six years of its existence. The study concluded that any such declines "largely coincided with the global economic downturn and decreased consumer demand for more expensive meat products."

The study was conducted by Auburn's Robert Taylor, who used comparisons of the fed cattle basis, or the difference between futures and cash prices reported to USDA. Taylor's findings stand in stark contrast to those presented by Canadian and Mexican opponents in the World Trade Organization case against the U.S. COOL law,

Taylor insists that comparisons before and after the law became mandatory reveal no pattern that could be attributed to the law itself, in spite of the fact that the law reserves the designation of "U.S. born, raised and slaughtered" for meat with 100% U.S. content. He asserts that reductions in cattle imports from Canada and Mexico occurred because of beef demand uncertainty and "other factors" such as changes in currency exchange and the economic decline in 2008-09.

The study has caused something of a stir on both sides of the U.S.-Canadian border already, and is raising questions among U.S. agricultural economists. Morris Dorosh, publisher of the Canadian weekly Agriweek, noted that Canada and Mexico had successfully challenged COOL before the WTO on the grounds that it served as a trade barrier that compromised their export opportunities and market access to the United States for live cattle and hogs. Agriweek asserted that all credible previous studies in the United States and Canada as well as actual experience of U.S. packers and evidence accepted by the WTO dispute panel had reached exactly the opposite conclusions for hogs as well as cattle.

Informa Economics, which had conducted an earlier study for the meat industry, commented that it appeared that "the NFU-released study cherry-picked the years for analysis." Those years included 2005, it said, when there were trade restrictions on Canadian live cattle. Had the analysis used the trade years prior to the Canadian mad cow disease crisis in 2003, it would have had nearly opposite conclusions, analysts said.

Skeptics suggest that Taylor has a fairly high hill to climb to make a compelling case that "failure to find" evidence of the consequences of COOL means there were none, especially in the midst of arguments relying on industry experience and suggestions that Taylor "cherry picked" the time period he analyzed.

Because the study has been inserted in a high-stakes debate concerning public policy and is being analyzed by experts who are members of WTO panels, Taylor should be more forthcoming about his study, and experts from USDA and universities also need to weigh in on the matter.

The meat industry, the WTO and others say that the policy and USDA rules needlessly raise costs for consumers. Taylor says he has USDA numbers that show much the opposite, and the NFU wants to base U.S. policy on that finding.

It now seems the time for Agriculture Secretary Tom Vilsack to clamber off the fence, admit he knows what the COOL rules say, who they affect and how much. And he needs to produce a sensible alternative, at least for the parts of the policy that will allow the United States to avoid the trade sanctions it will face if rule changes are not made.

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(GH/CZ)

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