Washington Insider-Wednesday

Secretary Vilsack's Policy Musing

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

US Announces WTO Challenge on China Farm Supports

The U.S. is launching a challenge at the World Trade Organization (WTO) on China's domestic price supports for the production of rice, wheat and corn, US officials announced Tuesday.

China's "market price support" for rice, wheat and corn is estimated to nearly be $100 billion above the WTO limits and provides an artificial incentive for Chinese farmers to increase production of those crops.

"These programs distort Chinese prices, undercut American farmers, and clearly break the limits China committed to when they joined the WTO," U.S. Trade Representative Michael Froman said in a statement. "We will not stand by when our trading partners fail to follow the rules like everyone else."

USTR analysis showed China's domestic price supports for wheat, Indica rice, Japonica rice and corn have exceeded the 8.5 percent "de minimis" level allowed under the WTO commitment for every year since 2012.

While U.S. agricultural exports to China are at $20 billion, USDA Secretary Tom Vilsack said at a briefing announcing the action that they would be even higher if not for the Chinese domestic farm supports.

Several lawmakers joined Vilsack and Froman in announcing the action, with Senate Ag Committee Chairman Pat Roberts, R-Kan., stating, "If we are to remain competitive in the global marketplace, it is critical that our partners adhere to and abide by the same rules that we have all agreed to."

US growers have "invested their time and resources in the difficult task of understanding and documenting Chinese market price supports for wheat, corn, and rice," Roberts said. "It is our government’s responsibility to listen to the concerns of the US agriculture industry and begin the process of holding China accountable to its commitments in the World Trade Organization."

Sen. Durbin Urges Renewed Work on Immigration Reform

There is "a reason to be hopeful" that Congress can pass legislation overhauling the immigration system, Senate Minority Whip Richard Durbin, D-Ill., said Monday.

"I'm ready for the 'gang of eight' to suit up again," Durbin said at the Immigration Law and Policy Conference sponsored by the Migration Policy Institute, Catholic Legal Immigration Network Inc. and Georgetown University Law Center.

Durbin was part of the bipartisan group of senators who drafted and pushed a comprehensive immigration bill through the Senate in 2013, but it died in the House.

Washington Insider: Secretary Vilsack’s Policy Musing

USDA is reporting that Secretary Vilsack joined the ag policy wars, sort of, with recent suggestions to a Washington D.C., policy session. At the same time, he made a recommendation that, "all ideas, including Farmer Owned Reserves, should be part of the farm bill debate." He also thinks Congress should remove restrictions on Commodity Credit Corporation (CCC) use and wants Brazilian beef to be admitted.

Critics wondered, at least to themselves, what he hoped to accomplish such a broad non-recommendation. It seems to be a class of exhortation that says everything should be on the table all the time—even widely discredited ideas. So, the Secretary is offering a wide range of opinions on policy—likely hoping to resonate with some of his key supporters.

However, he also is likely to encounter another view that holds that the nation should learn from past policy failures rather than simply reconsidering.

The Secretary came up with a description of his reconsideration effort, calling the long-dormant Farmer-Owned Reserve a "radically old idea," which raises additional questions. Still, he insists that all ideas should be “part of the mix” in the next debate.

Congress suspended the FOR program in the 1996 Farm Bill, the Economic Research Service says, in an effort to be more competitive in international markets. "Expiration of authority for Acreage Reduction Programs and “suspension of the Farmer-Owned Reserve” helped exports by not limiting production and marketings in times of large supplies.

If the United States has learned anything as a result of its policy experiments in recent years, it is that government policies that intervene in markets, especially those that attempt to control costs by controlling supplies, are not only costly, but don’t work as advertised, largely because politics makes it impossible to manage them effectively.

The idea is Biblical: build reserves when crops are good and then use them when crops are poor. The problem is trying to find agreement over the proper prices to create and then release the reserves. We surely know that when politics push reserve prices “too high” they prevent exports, protect competitors and build unwanted stocks. This often leads to planting restrictions to hold down surpluses and costs; interventions producers complained bitterly about in the past.

When it comes to beef trade, Vilsack made an interesting comment to the Farmers Union recently. "It's really irritating to me, to be honest with you, when folks come into my office and say, 'Open up that market. Get that beef into that country. Do whatever you have to do. But oh, by the way, don't let anything come into our country'... I can't make the case in any other country to open up their market unless I'm willing to show a willingness to do it, if it's safe, if it's appropriate, all those caveats."

Still, he said he wishes for more CCC funds to use, presumably, to reduce commodities available for export. Then, he says he wants more bilateral trade—but also wants to be sure reserve stockholding programs are being debated, although these are among the most interventionist programs available. It is likely that producers who lived through the tribulations and near chaos of the last FOR will insist on some meaningful restraints on that particular line of musings.

Critics often say that Vilsack is not really much engaged with trade development and making U.S. products increasingly competitive. He did give a modest nod to trade in his recent remarks, but it didn’t seem to fit well into his overall policy view. And he likely will have a tough time convincing producers that he is really interested in those important, growing markets in the future, given his interest in market interventions, Washington Insider believes.

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