Washington Insider -- Thursday

Further Relaxation of Cuban Trade Rules

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

White House Highlights New Child Hunger Efforts

Child hunger-related initiatives including funding for additional summer child Supplemental Nutrition Assistance Program (SNAP) benefits, as well as allowing state to use Medicaid data to qualify students for free or reduced-price lunches under the National School Lunch Program (NSLP) are being proposed by the Obama administration as part of a discussion on child hunger issues.

A permanent Summer Electronic Benefits Transfer for Children (Summer EBT) program to provide supplemental food benefits during the summer months for all families with children eligible for free and reduced price school meals, is part of the President Barack Obama’s Fiscal 2017 budget. The budget will propose investing $12 billion over 10 years to fund the initiative.

An initiative to allow State agencies which administer the National School Lunch Program (NSLP) to access Medicaid data was announced by USDA, the change will allow easier certification of students for free and reduced price lunches, with less paperwork. The initiative will allow interested states to submit applications for the program and USDA expects to approve roughly five States to begin trials of the program for the 2016-17 school year. USDA plans to expand the program to 20 States in a broader pilot program in the years to come.

Both announcements are part of a discussion on child hunger being hosted at the White House today with leading food security and nutrition researchers on the critical role of SNAP in reducing food insecurity and poverty, as well as in improving health, education and economic outcomes.


Russia to Discuss Export Duty for Corn and Barley

Russian officials will discuss imposing an export duty on corn and barley shipments and removing the export duty currently in place on wheat, according to First Deputy Agriculture Minister Evgenii Gromyko.

“The Agriculture Ministry has proposed cutting export duties. For now we are talking about wheat only,” Gromyko told reporters in Moscow, adding that the wheat export tax issue will be discussed Jan. 29 in a session with Deputy Prime Minister Arkady Dvorkovich.

Gromyko was quoted by Interfax as saying the export duty on corn and barley would also be discussed with Dvorkovich. However, he did not offer any indications to reporters on the level of potential duties on corn and barley. “This question (over grain export taxes in general) has become very speculative,” he said.

These announcements comes on the heels of reports earlier this week that Russia was considering imposing restrictions on grain exports, with those reports supporting wheat futures. However, after the announcement by Gromyko that the ministry was proposing to end the wheat export restrictions, US wheat futures declined.


Washington Insider: Further Relaxation of Cuban Trade Rules

Once again this week, the administration has announced looser U.S. trade rules with Cuba. The changes will allow additional trade and travel and will permit U.S. banks to finance some exports—and, the administration also says it is lifting obstacles to a resumption of commercial air travel between the two countries. The announcement was carried by most urban dailies, including the Washington Post and the Wall Street Journal.

The new measures are the third round of Treasury Department changes on Cuba, and the fourth from the Commerce Department, over the past year. Previous actions loosened licensing provisions for U.S. citizen travel to Cuba for approved purposes, such as humanitarian and educational visits and facilitated exports of construction materials and other goods to private businesses.

The Post says that the new provisions bring the administration closer to the limit of what President Obama has the power to do unless Congress lifts the embargo it imposed more than a half-century ago. “They also indicate his [the President’s] resolve to eliminate as many barriers as possible before the end of his term,” the Post said.

While public opinion surveys indicate a majority of Americans of both parties favor lifting all remaining trade and travel restrictions and several bills have been introduced with bipartisan support to do so, the Republican leadership in Congress has not allowed any to move forward.

Cuban American lawmakers such as Senator Marco Rubio, R-Fla., and others have sharply opposed Obama’s opening to Cuba, dating back to Obama's announcement more than a year ago that he would reestablish diplomatic relations with the island’s government, a step that took place in July. Obama has repeatedly called for an end to the embargo.

The administration argues that the decades-long freeze on relations and bans on trade and travel failed in its stated purpose of bringing the Cuban regime to its knees and served only to harm the Cuban people. It also says it expects the new openings to benefit Cuba’s small but growing private sector and press the government toward more political and other freedoms.

So far, evidence of progress has been slight, the Post says. While there has been some growth in permitted private business, including restaurants and lodging, government licensing provisions and import controls severely hamper expansion. New public hotspots permit some internet connectivity, but private connections are still sharply restricted.

The administration has maintained that, despite the embargo, its rule changes fall within the president’s executive authority and are permissible because they are directed toward fostering economic and political freedom.

Some of the rules announced Tuesday (including access to U.S. credit) were requested by US businesses hoping to trade with Cuba. Companies frequently complain that they lose sales to higher-priced competitors from other countries because of “cash-only” and other restrictions for allowed exports. Many such complaints come from agricultural producers, whose sales to Cuba remain ineligible for U.S. financing. Congress long ago permitted agricultural and medical exports to Cuba, but for cash only. Because this was done through legislation, the President cannot change it.

Administration officials still say that despite the eased restrictions, U.S. investment and trade will continue to lag as long as Cuba funnels all imports and exports through a state body, maintains a dual-currency system and insists that all Cuban hires by foreign companies there be made through a state agency.

In addition, administration officials continue to assert that additional changes to US-Cuban relations depends on steps taken by the Cuban government--or steps by the Congress to dismantle the old US trade embargo.

Agricultural products, traditionally the biggest Cuban import from the U.S., are excluded from the new provisions on the grounds that such lending would violate U.S. embargo rules. Still, U.S. companies will be able to provide financing for approved shipments of agricultural machinery after the new rules go into effect and exports of construction materials, along with many other permitted products, observers note.

Clearly, it looks like the long, long Cuban embargo is finally on its way out. Hopefully, the failure of this crude attempt to undercut government policies the U.S. opposes will be seen as a broader policy failure in the attempt to link trade policies to social goals—linkage that has often proved more damaging to the United States than to the target governments.

Thus, while there is work to be done in rebuilding US-Cuban trade access, current trends seem positive for agriculture should be watched closely by U.S. producers as they develop, Washington Insider believes.

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