Washington Insider -- Monday

Contradictory News on Border Tax Adjustment

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

Ag Transportation Coalition Weighs In On Truck Weights

The Agriculture Transportation Coalition has asked Transportation Secretary Elaine Chao to update federal standards on weight limits for trucks traveling on Interstate highways. A 1982 law limits truck to 80,000 pounds gross vehicle weight, an

d a 1991 law froze weights for longer combination vehicles. In a letter to the Department of Transportation secretary, the coalition pledged to "work with your agency to modernize these outdated regulations and increase allowable limits to reach a common sense solution for U.S. agriculture exporters."

It pointed out that agricultural exports, such as hay, frozen meat protein, soybeans and forest products, shipped in ocean containers often "weigh out" and exceed truck weight limits before storage capacity is reached inside the containers. "

We support common-sense truck weight limit modernization, whereby the gross vehicle weight is increased on Interstate routes and at critical connector routes at land and sea ports provided that the heavy weight truck configuration meets specific criteria," the coalition wrote.


USDA Mulls GMO Labeling Rule

USDA is considering how new genetic modification technologies could fall under the GMO labeling rules that it is working on, a top administration official said.

Speaking during a panel discussion at the department's 2017 Agriculture Outlook Forum February 24, Craig Morris, deputy administrator at the USDA's Agricultural Marketing Service, said that his department put a plan to President Donald Trump's transition team examining how to keep the GMO labeling program current as new techniques are introduced to the food system.

"So right now we're in a period of transition still, and we look forward to meeting with the new team once Gov. Perdue is confirmed as [USDA] secretary, and going through the options that will be available to him given the authority provided to us by the law," Morris said.

Congress passed a law in mid-2016 mandating food makers label products made with genetically modified organisms. The legislation gave USDA two years to write rules implementing the law. The department will need to determine the scope of the new labeling law, including which techniques fall under the definition of "genetically modified."

Washington Insider: Contradictory News on Border Tax Adjustment

The agricultural industry held its national outlook conference in Washington last week and quite a bit of talk about weak immediate economic prospects was heard, along with some earnest talk about an on-time 2018 farm bill. However, Bloomberg says that those "looking for clarity from the Trump administration on border adjustments are still seeking it after a spate of contradictory news."

The group was interpreting the President's remarks and "sometimes opposing verbiage from his deputies" and found that "risky business," according to lobbyists who were protecting "client sensitivities."

So, Bloomberg concludes that the "bottom line" is that it simply is too early to know where the administration stands on House Republican leaders' preferred plan to buttress their broad tax reform proposal with a provision to tax imports and exempt exports.

Not even House Ways and Means Committee Chairman Kevin Brady, R., Texas, would say the plan has Trump's backing yet, Bloomberg said.

"I don't want to speak for the president," Brady told Bloomberg after addressing the Conservative Political Action Conference meeting last week, one day after the President said in a Reuters interview that U.S. employment would benefit from some sort of tax.

"I certainly support a form of tax on the border because everybody else does, Trump said in the interview, adding that "companies are going to come back here, they're going to build their factories and they're going to create a lot of jobs and there's no tax."

Brady was unwavering in his expectations, saying he remains confident that border adjustments would be part of the final tax reform package.

"I think we're trying to achieve the exact same goal, which is to bring American jobs back to the United States and have everyone play by the same tax rules here," Brady said. "I'm encouraged by it because we're headed in the same direction."

In his own speech earlier in the day at the CPAC meeting, Trump said nothing about border adjustments. "We're going to massively lower taxes on the middle class, reduce taxes on American business and make our tax code more simple and much more fair for everyone, including the people and the business," Trump said.

But Treasury Secretary Steven Mnuchin cast some doubts in separate TV interviews the same day, noting "concerns" with the border adjustment idea while also saying it remains part of the discussion. Then the news outlet Axios reported Feb. 24 that the head of the president's National Economic Council, Gary Cohn, another key economic adviser to Trump, opposed the border adjustment plan before the Trump administration later denied the assertion the same day.

White House officials and House Republicans will continue to work in concert to arrive at an agreement, Brady said.

"We're narrowing the differences," he said. "We continue to work on ways to improve almost every element of it, and we're having really good healthy discussions with the Trump economic team."

But those expecting a firm position from the Trump administration on border adjustability will just have to wait and see for now, Bloomberg concludes although the president's address during the Joint Session of Congress Feb. 28 remains another window of opportunity for him to address the controversial issue.

"White House support for the border adjustment tax would be a game change—a comment from a lobbyist that Bloomberg interpreted to mean, "it's on the ropes." He called Mnuchin forthcoming when he said the August recess is an ambitious deadline for enacting tax reform and it very well could slip until later this year." And if they're struggling with the stuff Republicans should be able to agree on, "wait until we get to trade and infrastructure. Republicans are learning that governing is difficult," the lobbyist said.

Another lobbyist said people were reading too much into Trump's comments about the tax on Feb. 23. "Political staff like it. Economic policy staff hate it," the lobbyist said. "I'm told by White House staff that he's going to stay out of the fight."

What Bloomberg did not say is that many companies not only hate the border adjustment idea, but think it would lower U.S. competitiveness and growth, boosting the level of anxiety across the business sector. Whether this affects the administration's decision on trade policy remains to be seen, as Bloomberg said and should be watched closely as the debate intensifies, Washington Insider believes.

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