Washington Insider -- Thursday

Thinking About Trade

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

Farm Bureau Says Army Corps of Engineers is Expanding CWA Jurisdiction

Jurisdiction under Clean Water Act is being asserted over water features by the US Army Corps of Engineers using the agency's waters of the US (WOTUS) rule even though a federal appeals court stayed the rule nationwide, an American Farm Bureau Federation official told a Senate Environment and Public Works Committee panel May 24.

The hearing was called to explore the drop in exemptions and expansion of federal control seen under the now-stayed federal jurisdiction rule.

"This hearing validates those concerns with concrete examples of how the corps and EPA are already implementing the expanded federal control that they are trying to codify in the WOTUS rule," Committee Chairman James Inhofe, R-Okla., said at the beginning of the hearing.

The corps is using aerial photography to reveal, and then regulate, water features that existed before land was converted for agricultural use, testified Farm Bureau Senior Regulatory Relations Director Don Parrish.

Sen. Dan Sullivan, R-Alaska, asked whether the corps is allowed to conduct aerial photograph under the existing rules. "Without the [stayed] rule, they would have no authority to conduct aerial photography," Parrish replied, noting that the aerial photographs are of features that "aren't visible to the naked eye" and, he said, the corps won't share them with landowners even though it uses them to require permits.

The Corps also is starting to regulate farming and ranching practices that were previously exempt from requirements to obtain dredge-and-fill permits under Section 404 of the Clean Water Act. The exempted activities now being regulated include plowing and changing from one crop type to another, Parrish said.

The US Court of Appeals for the Sixth Circuit has stayed WOTUS as it reviews about 22 challenges.

President Obama: Wary Americans Should Give TPP a Fresh Look

People fearful job and market share loss to foreign nations should still support the pending Trans-Pacific Partnership (TPP) trade deal, President Barack Obama said when addressing a group of Vietnamese entrepreneurs in Ho Chi Minh City.

The address was part of the President's visit to Vietnam and TPP has been high on the agenda. Obama said instead of staying with the status quo and opposing the deal, Obama said people should look at the reforms included with TPP.

"If you're dissatisfied with the current trade arrangements, where tariffs are placed on U.S. goods, and other people's goods are already coming into the U.S., why would you want to just maintain the status quo?" Obama asked.

Obama admitted "people became suspicious of trade and worried that if we do TPP, then the same pattern will repeat itself," in reference to issues with previous trade deals, indicating that lessons learned from those trade deals informed TPP negotiations and should address much of the wariness of TPP.

Washington Insider: Thinking About Trade

There is a lot of talk about trade policy these days, but not a great deal of new thought, critics say.

All parties in the presidential race have attacked U.S. bilateral and multilateral free trade agreements, the Washington Post points out; Hillary Clinton thinks NAFTA needs "fixing;" Bernie Sanders calls for ending our "disastrous" trade agreements; and Donald Trump wants to take every "unfair" trade agreement and either "renegotiate it" or "break it" so that the United States will "win with our trade deals."

Tough talk, you think. Sounds easy, but, in fact, all three candidates have called for violating international law. The Washington Post thinks much of this talk is simply wrong.

For example, the Post reports that Trump wants a 20% tariff on all imported goods and both he and Clinton threaten to impose even higher tariffs on goods from China in retaliation for perceived injustices. And, the public seems to like these proposals. Many recent polls have shown that a majority of Americans favor more trade restrictions and think that current US trade agreements have done more harm than good, according to the Post.

The Post even says it's not surprising that many people don't like free trade even though most economists believe that it increases efficiency and makes citizens better off overall, even though it affects producers unevenly.

For example, many corporations have moved their operations overseas to places where goods can be manufactured cheaply. Although consumers can buy less expensive goods as a result, some Americans have lost jobs or wages as a result of these agreements.

Trade theory generally calls for some redistribution from those who win to those who lose, but the Post says helping the losers is hard. We have a number of programs that provide cash transfers, job retraining programs, or other forms of redistribution, but these have proven to be logistically and politically challenging to implement.

This leads some politicians and others simply to advocate less trade, period.

However, the Post notes that a little deeper look shows that higher US tariffs also would increase the cost of goods for consumers, a policy that is especially hard on low-income consumers. And higher protections would make American companies less able to compete overseas. Anyway, the Post says, the rest of the world would be unlikely to agree.

Perhaps even more crucially, the United States could then find it hard to persuade trading partners to accept a deal that is worse for them. What could the United States give them in exchange? If it allowed trading partners to raise tariffs on U.S. goods, that would surely hurt American businesses and workers. If the trade agreements fell apart completely, the nation could face expensive trade wars, as it has in the past.

Might the United States just raise tariffs unilaterally? This likely would lead to severe negative economic and security implications that risk damaging trust and straining geopolitical partnerships. Furthermore, unilaterally raising tariffs at the rates proposed by the candidates would clearly violate long-standing international laws and commitments long advocated by the United States.

While many of these actions have been described fairly casually in the debates, they would have serious long-term implications, the Post says. Once the United States gains a reputation as one that backs out of its trade commitments, we could expect others backing out of agreements with us, a situation that could seriously undermine international cooperation, a system that the United States has worked hard to build and enforce over a long time.

Finally, backing out of trade agreements could deal a major blow to U.S. credibility in all non-trade domains; even calling into question U.S. integrity in finance, security and other areas that rest on the United States' reputation for compliance with its commitments. This is why the United States takes its trade obligations seriously and why it may be dangerous to stop doing so now.

So, trade issues are deeply complicated and have far reaching social, political and economic implications. In fact, the low level of the current debate is already seen as shaking confidence of nations engaged in the current Trans-Pacific Partnership negotiations, and others as well.

The benefits of trade, especially for a sector like agriculture where domestic markets are nearly saturated and slow growing are especially difficult to explain to many, but are certainly real to producers, but are often ready targets for opponents. Certainly, this is an important fight, especially for producers, who need to be increasingly involved and highly skeptical of many of the current political claims, Washington Insider believes.

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