Washington Insider-Wednesday

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

Japan Ruling Party Election Gains Seen Boosting TPP Prospects

Gains by Japan's ruling Liberal Democratic Party (LDP) in the July 10 election gave Prime Minister Shinzo Abe and allies a two-thirds majority in the Diet's upper house, boosting prospects for his agenda potentially including ratification of the Trans-Pacific Partnership (TPP) trade deal.

The LDP and its coalition partner, the Komeito party, won 10 additional seats in the upper house, bringing their combined seat count to 145 in the 242-seat chamber. The primary opposition, the Democratic Party of Japan (DPJ), lost 13 seats to take them down to a total of 49 seats.

Following the victory, Abe said the coalition would accelerate economic stimulus measures and he plans to convene an extraordinary Diet session this fall, according to his remarks at a news conference July 11.

Abe gave no additional details, but most believe he intends to call the special session in the latter part of September. That session is expected to include debate on legislation needed to enact the TPP agreement, which was formally signed Feb. 4 in New Zealand. Debate on TPP stalled in the last Diet session that ended June 3. Following that setback, Abe indicated his government would resubmit the bills to implement the trade pact in a later session.

Even given LDP election gains, parliamentary deliberations on TPP may not be as smooth as the election results would suggest, particularly among lawmakers from agricultural areas. On closer examination, results showed the coalition lost seats in the major farming provinces of Aomori, Iwate, Miyagi, Yamagata and Fukushima.

The LDP also lost seats in the major central Japan farming provinces of Nagano and Niigata, indicating Japan's farming-and-fishery-area voters are cool to TPP.

Mexican Sugar Producers Concerned About Potential Changes to Trade Agreement

Mexico's top agriculture official said sugar producers south of the border are getting anxious about the potential renegotiation of suspension agreements in which Mexican sugar producers avoided steep retaliatory duties in exchange for caps on export volume and the establishment of minimum prices.

"I can ensure you there is concern on behalf of Mexican producers, and I've been told they've been here in Washington," Mexican Agriculture Secretary Jose Calzada said after an event at the Center for Strategic and International Studies. "They've been talking to several government officials with which they have showed their concern that the rules could change and the efforts they've done in the past would be damaged."

U.S. sugar producers argue that the deal should be revised because Mexico is exporting more semi-refined sugar that's technically classified as raw but can be used in bakery and candy production. The trade trend has allowed Mexican producers to get around the suspension deal's tough import restrictions on refined sugar.

The move by Mexican producers is hurting U.S. sugar refiners, who are seeing suppressed refined sugar prices domestically while the prices of actual raw sugar increases because of scarce supply.

Washington Insider: Congress Passes Foreign Aid Bill

To the surprise of many, Congress recently passed and sent to the President a Food Security Bill in spite of the current Congress' deep political divisions on most budget issues.

The House voted to clear the earlier Senate bill which provides food aid in countries with food supply problems, Bloomberg reported this week.

The 369-53 vote last week cleared the Global Food Security Act of 2016. It would provide $1 billion per year for fiscal years 2017 and 2018 to the State Department and United States Agency for International Development (USAID) for the administration's Feed the Future initiative which partners with major companies such as Monsanto Co., DuPont Co. and PepsiCo Inc. to carry out agricultural aid programs. The Senate had passed the bill by a voice vote in April.

The bill also would authorize the Emergency Food Security Program (EFSP), a cash-based food aid program that has been viewed as a model for broader food aid policy changes. USAID has used EFSP to bypass the Food for Peace Program, whose rules requires the use of only U.S. commodities.

Food for Peace has long been controversial because it was developed in part to use up U.S. grain stocks accumulated under USDA's commodity price support programs. The United States no longer depends on supply control for its commodity programs, and U.S. food assistance goals have shifted more toward emergency response and support for long-term agricultural development. From 2010 to 2014, USAID awarded $991 million in EFSP grants, with the majority of aid going to Syria, the Congressional Research Service said.

In its fiscal year 2014 budget proposal, the administration called for sweeping changes to U.S. food aid programs, including regional procurement of crops.

House Ag Committee Chairman Mike Conaway, R-Texas, said following the July 6 vote: "While I do have reservations about the Emergency Food Security Program, I am mindful of the need to keep 'a variety of tools in the toolbox' in order to effectively combat global hunger. With EFSP funding now roughly equal to that of emergency aid under Food for Peace, private voluntary organizations should have the flexibility they so desire to complement existing in-kind assistance programs."

The House-passed measure included only one year of funding for the Feed the Future initiative and did not include the authorization for the EFSP.

While many food aid activists have long criticized the recent declines in U.S. support for aid programs, the recent legislation emphasizes the continued importance of U.S. efforts. And, the continuing efforts of aid supporters to shift away from the former reliance on surplus commodities, those programs were widely supported for a variety of reasons. Cash based programs have the downside that when food shortages strike, local prices rise and the amounts of aid provided is reduced as a result.

Nevertheless, the prevailing trends internationally are toward mainly cash programs, and advocates applauded the passage of the US funding bill. In addition, the linkage to direct support from major private firms is expected to help make the programs more effective in the future. Certainly, these are important efforts that should be followed closely by U.S. producers, Washington Insider believes.

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