Washington Insider-- Monday

WTO Nairobi Ministerial

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

Tax Extenders Package Will Spur Tax Reform: Brady

Broader tax reform efforts should benefit from the passage of the tax extenders package, as unresolved issues and clarification of the current tax code will provide the impetus and foundation for future efforts, House Ways and Means Committee Chairman Kevin Brady, R-Texas, said.

The $622 billion tax extenders package passed the House on a 318-109 vote on Dec. 17 and signed by the president on Friday. Business tax breaks such as the research and development credit and Section 179 expensing, along with expansions to household tax credits such as the Earned Income Tax Credit (EITC) were made permanent by the bill.

In total, the bill affects 52 tax breaks and renews a handful of extenders for two to five years. It also has provisions which affect Internal Revenue Service practices and create new rules for real estate investment trusts (REITs) and other issues.

The $622 billion cost of the extenders package will prove to be a boon for tax reform efforts as it increases the budget baseline by $600 billion, making major changes to the tax code easier to institute without impacting the bottom line. Several tax credits which were extended or made permanent are thought to be in a better position to hold up to the scrutiny they would face under any broad tax reform effort.

With respect to potential follow-up to the extenders package, Brady noted “We have other areas of the code that members either wanted included or they felt the language could have been improved, so we’ll keep those discussions going as well. We’ve still got some work to do on the issue.”

Other aspects of the package included an extension of some renewable energy tax credits, which were included in exchange for a lifting of the crude oil export ban. Only the wind and solar industry tax credits made it to the final bill and some Democrats were caught off guard, expecting a fuller slate of such tax credits to be included. Brady has indicated that he is open to discussing the other credits, noting that many will not expire till after 2016 and don’t need to immediately be renewed.


South Africa Reopens Market to U.S. Poultry

South Africa has officially reopened their market to U.S. poultry, establishing a 65,000-metric-ton quota level that starts April 1, 2016, with what appears to be a pro-rated amount for the period from Dec. 18 to March 31, according to documents from the International Trade Administration Commission of South Africa.

South Africa will issue a temporary rebate of the full anti-dumping duty on U.S. poultry meat with the terms set on a first-come, first-served basis. The annual quota of 65,000 metric tons is established for the period from April 1, 2016-March 31, 2017, with a level of 16,250 metric tons for any imports prior to April 1, 2016.

Further, from April 1, 2017, forward, there will be an annual growth factor applied to the quota as determined by the South African Department of Agriculture, Forestry and Fisheries (DAFF).

The issue of poultry trade now has been resolved so the attention will shift to the beef and pork trade issues that were referenced by South Africa’s Davies. There is no indication yet on any timing though the statements from Davies indicate those matters will also be resolved soon enough to avert any loss of trade benefits for South Africa under the African Growth and Opportunity Act (AGOA).


Washington Insider: WTO Nairobi Ministerial

The tenth WTO ministerial on the long stagnant Doha Round talks has been considered on life support recently, especially over tensions between least developed and developed countries on several policies, including agriculture.

In the midst of considerable confusion and uncertainty, Bloomberg reported on Saturday that the organization may be on the verge of significant progress toward multilateral trade disciplines for agriculture and a future path for the WTO’s negotiating agenda.

The report said that global trade ministers produced a draft ministerial declaration on the final day of their biennial meeting with a five-page draft ministerial declaration text with three sections that focus a statement of WTO principles and objectives, a package of deliverables for Ministerial Conference 10 as well as “regular work deliverables” and a path forward for the multilateral trading agenda.

WTO Director-General Roberto Azevedo formally unveiled the document to the organization’s 162 members at a heads of delegation meeting in Nairobi in the early afternoon and urged them to approve the accord. Later that day, members were expected to convene for a heads of delegation meeting to participate in a “make or break” decision to adopt the text.

The draft declaration concerns a trio of agriculture issues and would that eliminate export subsidies for agricultural goods, provide a special safeguard mechanism and resolve the perennial debate over public stockholding programs.

For example, the draft on export competition specifically seeks to reduce the trade-distorting impact of direct export subsidies, address export credits, international food aid and state trading enterprises, Bloomberg says. The deal also contains draft declarations on cotton and offers preferential trade terms to its 34 least developed countries.

Though the details of the various agriculture agreements remain murky, Bloomberg says trade ministers were reporting that they were both surprised and pleased that an agreement was forged in the early morning hours of Dec. 19.

However, Bloomberg says the draft declaration appears to muddle the question of whether members were willing to reaffirm the mandate of the 2001 Doha Development Agenda. “We recognize that many members reaffirm the Doha Development Agenda(DDA), and the declarations and decisions adopted at Doha and at the ministerial conferences held since then, and reaffirm their full commitment to conclude the DDA on that basis,” the draft said.

Then, it also notes that other members do not reaffirm the Doha mandates, as they believe new approaches are necessary to achieve meaningful outcomes in multilateral negotiations,” it said. It recognizes that members have different views on how to address the negotiations, but “acknowledges the strong legal structure of this organization.”

Bloomberg says that the text notes the strong commitment of all members to advance negotiations on the remaining Doha issues. This includes advancing work in all three parts of agriculture, namely domestic support, market access and export competition, as well as non-agriculture market access, services, development, Trade-Related Aspects of Intellectual Property Rights and rules,” the text said. “Work on all the ministerial decisions adopted in part II of this declaration will remain an important element of our future agenda.”

The document omits a specific reference to the growing trend towards piecemeal, sectoral trade deals among smaller groups of willing parties—often called plurilaterals. The declaration is silent on such deals and deleted text from a prior draft that would permit members “to take on, at least on an exploratory basis, any trade-related issues deemed necessary in order to stay relevant and in keeping with the evolution of the global economy.”

In addition, the text notes the proliferation of negotiations on regional trade agreements (RTAs) like the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, without specifically citing them. Such agreements “remain complementary to, not a substitute for, the multilateral trading system,” the draft declaration said. “In this regard, we instruct the committee on regional trade agreements to discuss the systemic implications of RTAs for the multilateral trading system and their relationship to WTO rules.”

So, it will be important to evaluate carefully the results of Ministerial 10 in terms of whether the final document actually captured the content of the Saturday draft. If so, it will have progressed well beyond the very low expectations that emerged in the early days of the Ministerial, Washington Insider believes.

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