Washington Insider - Wednesday

Administration Further Loosens Cuban Trade Rules

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

Compromise GMO Bill Would Have Pathway to Mandatory Labeling

If the food industry fails to garner “substantial participation” in a voluntary system for labeling products made with genetically modified organisms (GMOs), it could trigger a national mandatory system, according to a measure introduced late March 14 by Senate Agriculture Committee Chairman Pat Roberts, R-Kan.

The measure, introduced as a substitute amendment to S 764, needs the support from some Senate Democrats to reach the 60-vote threshold to pass the Senate. Unfortunately, Senate Agriculture Committee Ranking Member Debbie Stabenow, D-Mich., issued a statement Wednesday opposing the compromise bill.

Voluntary labeling would become mandatory if the USDA decides after two years that fewer than 70% of products are labeled.

“This will be one of the most important policy decisions for agriculture in recent decades,” said Roberts, who noted the new bill balanced the consumers’ right to know with a uniform standard nationwide. “Farmers and food producers deserve certainty. This legislation does that.”

Democratic Leader Harry Reid, D-Nev., said consumers have the right to know what is in their food. “They deserve clear standards [with] required disclosure of what’s in their food,” he said. Voluntary disclosure leaves consumers in the dark, “and that’s the wrong way to go.”

Lawmakers expect a vote on the bill as soon as Wednesday, according to a statement by Roberts.


AAR: Two-Person Train Crew Proposal ‘Unnecessary’

A proposed rule by the Federal Railroad Administration (FRA) that would require train crews to have at least two people is unnecessary and would not improve safety, according to the Association of American Railroads (AAR), a leading freight industry group.

Throughout the past year, the AAR has lobbied against the FRA’s efforts to establish a two-person crew standard. There is no need for the regulations, especially on trains that are equipped with anti-collision technology known as positive train control, said Edward Hamberger, AAR’s president and chief executive officer. He said that most railway systems around the world operate with one-person crews and that the FRA had admitted that it has no “reliable or conclusive statistical data” suggesting that two-person crews were safer.

“Coming from an administration that champions smart, data-driven regulations, it is inexplicable how this proposal was approved by the President’s Office of Management and Budget,” Hamberger stated. “I encourage the FRA to reexamine the facts and exercise sound regulatory judgment before finalizing a rule that lacks empirical support.”

The FRA proposed giving rail companies two options for continuing operations or starting new operations with a one-person crew. Under the first option, railroads would be required to provide the agency with a detailed description of the operation and any safety-related information. The FRA would then have 90 days to review and possibly approve the operation.

The second option would be for the FRA to permit one-person crew operations to continue or begin without a mandatory review and approval period, or while the review is taking place. Under that option, start-up freight operations with one crew member would be required to submit a signed statement from the company’s top rail operations officer certifying that a safety hazard analysis had been completed and that the operation provided an appropriate level of safety.


Washington Insider: Administration Further Loosens Cuban Trade Rules

The Associated Press is reporting that the administration is further loosening the rules of the U.S. trade embargo on Cuba, turning a ban on U.S. tourism to Cuba into an unenforceable honor system and paving the way for Cuban athletes to one day play Major League Baseball and other U.S. professional sports.

President Obama and Agriculture Secretary Tom Vilsack are set to arrive in Havana on Sunday and are expected to call for the elimination of the nearly six-decade-old Cuban trade embargo. Meanwhile, the administration has now eliminated a once-unimaginable number of trade and travel limits through executive action. For example, U.S. companies can now manufacture goods in Cuba, export to the Cuban government and fly regularly scheduled flights to Cuba.

Another especially important change in the embargo rules was the end of a ban on Cuban access to the international banking system. The inability to send or receive payments that passed even momentarily through the U.S. banking system had crippled the country’s ability to trade with third countries. Ben Rhodes, a deputy national security adviser, commented that, “We deeply believe that this is in America’s national interest.”

Tuesday’s announcement allows Cuban citizens to earn salaries in the United States as long as they don’t pay special taxes in Cuba, specifically mentioning athletes, artists and performers as potential beneficiaries, the AP said. Until Tuesday, only Cubans who had begun the process of emigrating to the U.S. could legally earn money in the United States beyond a tiny living stipend.

Major League Baseball is negotiating with both the U.S. and Cuban government to create a legal means for Cuban baseball players to play in the U.S. without having to abandon their country, eliminating the need for some of the world’s highest-priced baseball talent to use human traffickers to get to the major leagues.

American travelers also can now take “people-to-people” educational trips to Cuba on their own instead of joining expensive group tours. That means any American can legally go to Cuba after filling out a form asserting that their trip is for educational purposes instead of tourism. Although they’ll be required to keep records for five years about what they did in Cuba, they won’t have to submit them to the government unless asked.

Leisure travel to Cuba nearly doubled last year, to more than 160,000 visitors and Tuesday’s measure is expected to add another increase of between 10% and 20%. The elimination of the tour requirement could be costly to the Cuban government but will allow U.S. travelers to see Cuba in a far more independent way than before when American groups were required to stay in state hotels, travel on state buses, pay for the food through a state agency and use state tour guides.

The ban on international transactions that passed through the U.S. banking system had seriously hobbled Cuba’s ability to engage in international trade. Many banks have refused to do any business related to Cuba because of the fear of U.S. litigation. With Cuba’s centrally planned, export-dependent economy constantly short of cash for goods ranging from paint to heavy machinery, any interference with its ability to do business had outsize impact on the island’s decaying infrastructure.

Although the administration has legalized exports of badly needed goods ranging from constructions materials to tractor parts, no such trade has begun. Many experts continue to argue that the Communist government is delaying trade with the U.S. in order to build pressure on Congress to do away with the embargo entirely, AP said.

So, it looks increasingly like the Cuban embargo is largely a thing of the past, which is good news for substantial numbers of US exporters who are eager to help supply Cuba’s needs. The administration’s move to end the embargo is widely supported, but is still highly controversial—although the embargo has been seen as largely a failure for many years.

The embargo is broadly recognized as a trade policy extended to cover social goals well beyond its reach. Trade policy can work very well when it is used to accomplish trade objectives such as removing tariff barriers and cutting red tape—and even cutting government interventions in production and trade. However, the more the objectives are broadened, such as including limits on currency manipulation to the TPP--the less likely it becomes the range of goals will be realized. Trade deals significantly helped open markets in centrally planned countries, but rarely succeeded in “regime change” and Cuba was no exception.

As the complex rules on both sides are unraveled, major benefits are expected for ag products, shifts producers should watch closely as they proceed, Washington Insider believes.

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