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.

U.S. Set to Become Major Global Oil Exporter

The United States will become one of the world's largest oil exporters if domestic production continues to surge and if policy makers lift a four-decade ban that keeps most crude from leaving the country, according to a new study sponsored by the Energy Department's Energy Information Administration (EIA).

The report says that if the export ban is dropped, the United States would be capable of sending as much as 2.4 million barrels a day overseas by 2025. That would make the country the fourth-largest oil exporter, behind Saudi Arabia, Russia and the United Arab Emirates, based on 2013 EIA data. The report assumes domestic output in 2025 rises by 7.2 million barrels a day from 2013.

There have been reports this week that the U.S. oil glut is beginning to lessen, a fact that is reflected in the more-or-less steady increase in oil prices over the past month. Given the rise and fall of global oil production and oil prices over the past several years, predictions regarding supply and demand levels 10 years out should be considered very carefully.

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Report Prepared for USDA Says COOL Does Not Benefit Meat Industry

Any benefits from U.S. country-of-origin labelling (COOL) rules for meat are insufficient to offset the costs, according to a new report prepared for USDA's Office of the Chief Economist by agricultural economists at Kansas State University and the University of Missouri. The study found "little to no evidence of a measurable increase in consumer demand for beef or pork as a result of COOL requirements."

The World Trade Organization is expected by May 18 to issue a final ruling on a case brought by Canada and Mexico against COOL. A WTO dispute panel in November agreed that COOL affords imported livestock less favorable treatment than domestic livestock. Lawmakers and industry representatives fear the WTO will uphold its previous decision and pave the way for trade retaliation by Canada and Mexico against an array of U.S. products.

If the earlier WTO ruling is upheld, Congress will need to rewrite the COOL law. The finding by university economists that COOL provides no economic benefit to livestock producers or meat processors may help guide that rewrite.

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Washington Insider: Trade Threats at the Margins

Anti-trade rhetoric is famous for its claims of threats to U.S. jobs. Recent trade debates have been increasingly characterized by strange views of potential economic damage, in spite of the fact that such charges have, for the most part, been effectively refuted.

This week, the Wall Street Journal highlighted a new warning by Democratic Sen. Elizabeth Warren of Massachusetts who thinks that fast track trade legislation could help a Republican president "eviscerate" congressional financial rules.

She has in mind a fairly long chain of very specific — and thoroughly unlikely — future events.

Warren laid out her scenario earlier in the week. She told a group that the fast track authority the administration needs to conclude the Trans-Pacific Partnership trade deal could be used to pass another trade deal with the European Union. And, she surmised, that deal could result in a roll-back of the Dodd-Frank financial law and its related rules for Wall Street. "Big banks on both sides of the Atlantic are gearing up to use that agreement to water down financial regulations," she said, apparently without offering specifics.

The Journal says such events are implausible. The newspaper notes that a new Republican president would have to embrace President Obama's early-stage negotiations with the EU and put financial regulation on the table. The administration so far has declined to do this, largely because the Treasury Department traditionally prefers to negotiate international financial rules through other international forums.

Then, a Republican administration would have to make the conscious decision to negotiate with foreign officials on domestic Dodd-Frank rules, not just international rules for banks.

Such a step is also seen as unlikely because a new GOP president could be expected to prefer to simply roll back Dodd-Frank directly through changes to U.S. law, with ordinary legislation assuming the GOP maintains control of both the House and Senate after 2016. No trade deal or fast track would be needed to take that route.

The Journal notes that U.S. officials generally do not attempt to negotiate major domestic reforms through trade agreements "because of the political outcry that would ensue back home." In fact, foreign officials frequently complain that they have to swallow major changes to their laws that Washington is pushing in trade deals while the United States offers to make only minor tweaks.

Then, the Journal quotes experts who suggest that the Sen. Warren's scenario, "… sounds like another in the parade of horribles that opponents are trotting out — bizarre scenarios that 'could' happen but almost certainly won't," according to Bill Reinsch, president of the National Foreign Trade Council."

The idea behind U.S. trade proposals, lest anyone forget, is to require all parties to change their policies and laws to remove or reduce protections that constrain global market access. The charge that such deals would undercut basic economic and social rules is as unlikely as it is unfounded, but it has been a frequent theme by ant-trade interests throughout this and earlier debates.

While this fight has been opaque and often confusing, it is extremely important to producers and should be watched carefully as it proceeds, Washington Insider believes.

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(GH/CZ)

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