Washington Insider-- Thursday

Brexit and Ag

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

Expanded Cuba Trade Could Be Boost for US Rice Farmers: USDA Official

Rice is one of the best-positioned US agricultural products to benefit from trade with Cuba once remaining restrictions end, acting USDA Deputy Secretary Michael Scuse said on Tuesday.

Before the embargo, Cuba was a large export market for U.S. rice producers. Cuba now imports rice from Brazil and Vietnam because of US restrictions on the sales of agricultural commodities.

Cuba's consumption of rice per capita is very high, Scuse said during a conference call organized by Business Forward. “I think there is great potential for rice,” he said.

Cuba imports about 600,000 metric tons of rice annually, valued at more than $300 million, according to information from USA Rice. The Senate Appropriations Committee June 16 voted to remove a prohibition on providing credit for exports to Cuba, which is the biggest barrier U.S. producers face in accessing Cuba's market.

The amendment to the Senate Fiscal Year 2017 Financial Services and General Government Appropriations spending bill faces an uphill climb in the House. U.S. government agencies are barred from providing government assistance, U.S. export assistance and any credit or guarantees for exports to Cuba.

Cuba is interested in pursuing the export of organic products to the U.S., Scuse said. Cuba, however, does not have an internationally recognized organic certification program, Scuse said, noting that this would be needed to export organic products to the U.S.

Business Leaders Urge TPP Action

Congressional approval of the Trans-Pacific Partnership (TPP) trade deal is a top priority for American business interests, according to top business officials.

"There is a strong view that getting TPP done this year is absolutely critical," said Linda Dempsey, vice president of international economic affairs at the National Association of Manufacturers (NAM).

Regardless of the outcome of the Nov. 8 elections, it is unlikely that TPP will be high on the agenda when a new president takes office and a new Congress convenes in January, she said.

Sarah Thorn, senior director of federal government relations for Walmart, said she hopes there will be a vote in the lame-duck session and is confident that “we will see accelerated activities this fall,” when there is a more pressing time line.

TPP continues to face a tough go in Congress. Key lawmakers, such as Senate Majority Leader Mitch McConnell, R-Ky., Senate Finance Committee Chairman Orrin Hatch, R-Utah, are requesting changes in several areas of the agreement, including the length of protections for biologic pharmaceuticals, financial services data localization and investor protections for tobacco products.

Both presumptive major party presidential nominees, former Secretary of State Hillary Clinton and Donald Trump, have pledged to renegotiate or scuttle the agreement entirely.

In a June 16 letter to President Barack Obama and congressional leaders, business groups asked for more support to ensure passage of TPP this year.

In the letter, Business Roundtable President John Engler, National Association of Manufacturers President and Chief Executive Officer Jay Timmons and U.S. Chamber of Commerce President and CEO Thomas Donohue called for Congress and the administration to work with the business community to get TPP passed as soon as possible. "We urge you to redouble efforts and forge a path forward to approve the TPP this year," they wrote. "If the TPP is not approved this year, the United States will jeopardize a huge opportunity for U.S. growth, jobs, and leadership,” they warned.

Several of the largest U.S. companies have voiced support for the TPP and have committed to working closely with Congress to get it passed.

"Trade agreements like the TPP are beginning to recognize the Internet's transformative impact on trade," Google said in a June 10 post on its Public Policy blog. "We will continue to advocate for process reforms, including the opportunity for all stakeholders to have a meaningful opportunity for input into trade negotiations."

Google, along with other members of the Internet Association, released a statement Mar. 30 affirming that the "TPP recognizes the Internet as an essential American export," and that it is "an important step forward for the Internet sector that accounts for 6% of the GDP and nearly 3 million American jobs."

Washington Insider: Brexit and Ag

The main press focus this week is today’s vote on whether Britain should leave the EU.

In fact, agriculture will be involved either way, Bloomberg says, since the vote could have a major impact on trade policies of the U.S. and Britain. Still, in Washington, agricultural policy makers have been quiet on the issue, likely because the trade itself is modest, but could be significant, Bloomberg says.

The article comments on the general lack of ag involvement. For example, influential agriculture policy groups such as the National Farmer's Union and the Farm Bureau haven't weighed in on the issue publicly, Bloomberg says and notes that Senate Agriculture Committee Chairman Pat Roberts, R-Kan., declined to comment on how a vote to “leave” would affect ag trade with Britain.

Also, the administration isn't wringing its hands either about a potential UK pullout, Bloomberg says.

Secretary Vilsack also has downplayed the vote’s importance, arguing that, “I think there are far more comprehensive issues relating to the EU and the UK's role in the EU and obviously the people are going to make a decision that they think is in their best interest,” he told the press last week.

He went on to note that he is more concerned with completing the Trans-Atlantic Trade and Investment Partnership (TTIP) negotiations that have been moving slowly for years and listed several trade issues he sees as are more important than today’s vote.

President Obama was less sanguine. Beyond agricultural trade, leaving the EU would likely require Britain to strike new trade deals with the U.S., but Britons might have to wait, he said.

“Maybe some point down the line, there might be a UK-U.S. trade agreement, but it's not going to happen anytime soon because our focus in negotiating is with the big bloc, the European Union, to get a trade agreement done, and UK [could be] going to the back of the queue,” Obama said during an earlier press conference with British Prime Minister David Cameron.

Indeed, agricultural trade between the U.S. and UK is small but it makes up a significant percentage of sales to the EU.

Still, “Agriculture trade with Britain shouldn't be seen as some insignificant gnat,” James P. Moore Jr., managing director of the Business, Society and Public Policy Initiative at Georgetown's McDonough School of Business, told Bloomberg. In 2012, the UK was a net importer of food and bought $2.4 billion in US agriculture, fish and forestry products. That's compared to $8.1 billion in U.S. agricultural exports to major EU members as a whole. Most U.S. agricultural exports to Britain and the EU are bulk commodities, while the U.S. imports tend to be high-value, consumer-oriented agricultural products, the USDA says.

Moore points out that agriculture is a cornerstone of the European Union, and Britain’s exit would leave a policy vacuum that may be difficult to fill. “Where agriculture is concerned, it was very much the anchor in so many ways to the creation of the European Union,” Moore said.

Britain's exit would certainly affect the bloc’s ag policy and has been a factor in the “exit” debate. Many UK farmers oppose EU rules. “What's gotten the farmers a bit angry is that, for the past few years, there have been efforts in Brussels to limit subsidies and get involved in regulations dealing with the environment,” Moore said.

Were the UK to drop out of the multistate agricultural system, it would leave U.S. regulators and trade officials looking toward the UK government for an indication of what new regulatory structure would emerge, and analysts in the US have yet to predict what that would be, Moore said.

“There is such a view of the unknown that we are literally writing a brand new chapter in economic and political history, and it's going to create just a mess in regard to how we put back some pieces of the puzzle,” Moore said.

The EU’s Common Ag Policy has long been seen as highly protectionist, but it has been broadly supported by many in US geopolitical circles because it served at least partially to unite formerly bitter enemies and warring states.

Thus, if the EU decides to go its own way now, it likely will mean much greater socioeconomic uncertainty across the region that could also face other stresses especially affecting relations with the Middle East and Russia, as well as the US. While it may be too early to estimate the specific impacts on US-EU ag trade, it would seem that most impacts would be negative and possibly significant, and certainly should be watched closely should they occur, Washington Insider believes.

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