Washington Insider-- Thursday

By DTN's Washington Insider

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

House Appropriations Chairman Continues to Struggle with Sequestration

House Appropriations Committee Chairman Harold Rogers, R-Ky., this week told committee members that he is resigned to having to take bills conforming to the Budget Control Act's austere spending levels (known as sequestration) to the House floor, where they face uncertain prospects.

Rogers said he wished that he could advance bills this year that avoid the heavy cuts required by the 2011 law. But, minus any deal between the White House and congressional leaders, he said the committee has no choice but to continue taking bills reflecting the BCA to the floor this summer.

In a letter to Rogers, Shaun Donovan, director of the White House Office of Management and Budget, said the administration wants to work with Congress "to reverse sequestration for defense and non-defense priorities and offset the cost with commonsense spending and tax expenditure cuts, as members of Congress from both parties have urged."

Attempts over the past seven years to bring the White House and Congress together on this and other issues haven't produced many positive results, but hope springs eternal. Both ends of Pennsylvania Avenue need to keep in mind however that the House is scheduled to be in session for only 38 days between now and the beginning of the 2016 fiscal year on Oct. 1. Predictions of a government shut-down after that already are being heard around town.

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ITC Working to Complete Report on U.S. Embargo Against Cuba

A host of witnesses this week told members of the U.S. International Trade Commission that the United States should move forward with proposals to end the economic and trade embargo against Cuba, an action that they said could provide significant benefits to U.S. agricultural exporters.

At the request of the Senate Finance Committee, ITC is conducting an investigation that will measure the likely effects on the United States of normalized relations with Cuba. That report is scheduled to be delivered to the committee by Sept. 15.

Witnesses in favor of lifting the embargo included Minnesota Democratic Sen. Amy Klobuchar, Bill Christ of the U.S. Grains Council and Terry Harris of Riceland Foods, who noted that before the embargo, Cuba was the number one export destination for U.S. rice.

There remains significant opposition in Congress to altering the U.S. relationship with Cuba, but it has softened over the past several years. Sen. Klobuchar is the lead sponsor of the Freedom to Export to Cuba Act, which would repeal the current legal restrictions against doing business with Cuba, and is a co-sponsor, with Sen. Jeff Flake, R-Ariz.), of the bipartisan Freedom to Travel to Cuba Act. When finalized, the ITC report is likely to influence senators' views on these bills and, perhaps, to give some senators the cover they need to approve the proposals.

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Washington Inside: Trade Talks Coverage

Much of the press coverage of trade issues seems to take place in an "alternative" universe. For example, while the U.S. Trade Representative has taken pains to describe early and often the U.S. producer's stakes in the Trans-Pacific Partnership (TPP) talks, a reporter for the publication Politico suggests he has a scoop of some sort from an interview with USTR Michael Froman because he has some hard facts of real barriers to U.S. exports.

Nevertheless, the actual numbers are interesting. Politico notes that Vietnam charges duties of 70% on U.S. cars and machinery, 35% on U.S. chemicals, 30% on U.S. biscuits and baked goods, and 25% on U.S. recording equipment. And, Japan "marks up our oranges 16% from June through November and 32% from December through May"; and it marks up our beef exports 38.5% all year long.

Cars made in America face a 30% tariff in Malaysia and this might not seem stiff compared to 50% on motorcycles or 35% on plywood, except that cars made in Japan and other Asian nations don't face any tariff in Malaysia.

USTR Froman says these tariffs are the kind of problems President Obama hopes to address with the TPP free trade deal. He is critical that while the public fight is focusing on the adequacy of TPP's environmental and labor safeguards, its support of profits for pharmaceutical and financial interests and the secrecy of its negotiations, the "heart of the deal" is an effort by the 12 participating countries to phase out tariffs and other export barriers for more than 11,000 categories of commodities.

Froman argues that export-supported U.S. jobs pay 13% to 18% more than the average job and that freer trade along the Pacific Rim would create a lot more of them. He thinks that while there are real concerns beyond tariffs, most Americans would at least back the administration's efforts to tear down these tariffs.

While the U.S. imposes an average tariff of 1.4% on foreign goods from other nations, the TTP countries with which Froman is negotiating have tariffs ranging up to 100% on textiles, 87% on corn and 75% on consumer goods. Japanese tariffs on rice above a certain annual quota amount to 778%. Even free-trade focused Canada has tariffs on dairy, poultry and eggs that run as high as 249%. So, one important objective of the TPP is to level the playing field for U.S. exports.

Overall, American exporters shipped more than $700 billion worth of goods and services to TPP nations last year, so better access to TPP markets could bring significantly more revenue into the United States, Froman says.

Well, Politico's introduction to some of the mundane economics and politics of trade policy is interesting and stands in stark contrast to the usual urban daily coverage of these issues. Many reporters focus only on a red hot horse race without much detail on what various outcomes might mean. In part, that's because trade policy is complicated. The policies do have winners and losers, and how the losses are compensated is almost beyond complicated. But they are really, really important.

As if that weren't enough, there is another important threat to U.S. trade policy that is not often covered well, and that is the unreasonable expectation that trade must solve all social problems before it is worth supporting. In addition, critics often want that done in the direct spotlight of their scrutiny, which almost certainly would lead to efforts to weaken key sections and to constantly find provisions "not good enough," an aspect not usually covered by the mainstream news outlets.

So, it seems that Politico has done more than most in pushing behind the scenes to report on the trade debate. This includes, especially Froman's belief that most Americans would "back the administration's efforts to tear down these tariffs" even though it has been a "lot easier … to focus on this controversial element or that controversial element, rather than what we're trying to achieve."

This is an enormously important debate for U.S. producers, and should be watched carefully as it proceeds over the next few weeks, Washington Insider believes.

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(GH/CZ)

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