Washington Insider -- Wednesday

Infrastructure Push

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

US-Mexico Sugar Trade Deal Reached, Duties Averted

The U.S. and Mexico have reached agreement in principle on sugar trade issues between the two countries that will allow Mexican sugar access to the U.S. market as before and will suspend U.S. antidumping and anti-subsidy duties against imports of Mexican sugar, Commerce Secretary Wilbur Ross announced in Washington.

Mexico agreed to "nearly every" request from the U.S. to fix issues under the prior sugar deal, Ross said, and it bodes well for longer-term relations between the two countries. "We have gotten the Mexican side to agree to nearly every request made by U.S. industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners,” He said. Mexican Economy Minister Ildefonso Guajardo and his colleagues "have been honest and collaborative partners in seeking a fair and sustainable solution – this bodes well for our long-term relationship," Ross added.

Plus, Ross noted the package will address U.S. concerns and will avert negative impacts to other industries such as confectioners and corn producers. However, Ross noted the U.S. sugar industry is "not on board" with the agreement. However, he added there would be a final drafting stage, during which the two sides would try to make it easier for U.S. sugar producers to "come on board" with the deal.

"Unfortunately, despite all of these gains, the U.S. sugar industry has said it is unable to support the new agreement, but we remain hopeful that further progress can be made during the drafting process,” Ross observed. "We look forward to continuing discussions with them as we finalize the agreement. We remain confident that this deal defends American workers across many industries and is the best way to ensure stability and growth."

The draft amendments, if finalized, would update certain provisions, such as, in the countervailing duty (CVD) agreement, the ratio between the quantities of Refined and Other Sugar that Mexico may export to the United States during a given export limit period, and the polarity division between the two types of sugar, according to information from the US Commerce Department.

The concern by the U.S. sugar industry is that there could be a loophole in the agreement that could be exploited by Mexico. "Mexico could exploit this loophole to continue to dump subsidized sugar into the U.S. market and short U.S. refineries of raw sugar inputs," Phillip Hayes, a spokesman for the American Sugar Alliance, said in a statement.

Cattlemen Await Results of US-China Beef Talks

U.S. negotiators are in China this week to ideally finalize an agreement to reopen U.S. beef trade to China, with sources indicating the effort was aimed at getting details in place of food safety protocols that would allow U.S. beef to officially re-enter the Chinese market.

Acting USDA Undersecretary for Farm and Foreign Agricultural Services Jason Hafemeister is heading up the U.S. negotiation effort which is said to be focusing on areas such as the ability to track animals and the use of growth promoters/hormones and/or beta-agonists.

On the animal tracking side, indications ahead of the detailed discussions underway in China this week that the U.S. had gotten China to agree to a system where U.S. would have to track the birth and slaughter locations. Some indicate this is less onerous that a system which would require tracking of the animal throughout its life as it moved through the production system.

On the issue of beta-agonists, China bars the presence of those compounds such as ractopamine. This could become a limiting factor for US beef exports to China, some observers note, since there is only a small number of U.S. cattle that are a part of USDA's Non-Hormone Treated Cattle effort.

Still others note that short-term gains for the US beef industry could be tempered as they expect regulations and red tape to be a factor. Similarly, others point out some of the initial shipments could come via supplies that have previously been transshipped from Hong Kong and now could be directly sent to China.

Washington Insider: Infrastructure Push

Since the President was inaugurated, there has been talk of a bipartisan initiative on infrastructure. Democrats have fairly reliably supported efforts to strengthen roads, bridges, etc. in the past and the President hoped to build on that interest with a huge infrastructure investment program. However, The Hill is reporting this week that there is “staunch” opposition now to major elements of President Trump’s initiative, increasing the likelihood that Republicans will have to go it alone.

Making a deal with Democrats on the administration’s rebuilding plan was always going to be a challenge for the administration, The Hill says, but now sinking approval ratings, his polarizing tweets and administration move to block oversight requests from the minority party have further eroded Democrats’ appetite to support one of the President’s chief campaign promises.

“The president doesn’t make it any easier on himself,” said Democratic strategist Brad Bannon. “He’s going to have a hard time getting Democratic votes.” For example, the President kicked off his infrastructure campaign Monday by announcing a proposal to separate air traffic control from the federal government — one of the most controversial infrastructure ideas floated by the administration so far, and one that was quickly rejected by Democrats.

“Trump’s ‘infrastructure week’ appears to be little more than a Trojan Horse for undermining workers’ wages and handing massive tax breaks to billionaires and corporations,” House Minority Leader Nancy Pelosi, D-Calif., said. “Trump’s ideas for privatizing Air Traffic Control — which recycle a tired Republican plan that both sides of the aisle have rejected — would hand control of one of our nation’s most important public assets to special interests and the big airlines.”

The proposal would transfer the Federal Aviation Administration’s air traffic control operations to an independent outside agency over three years “at no charge,” removing 30,000 FAA employees from the federal payroll. The FAA would still maintain safety oversight.

A similar spinoff plan for air traffic control stalled on the House floor last year from lack of votes. Supporters of the proposal hope Trump’s leadership will help erode opposition this time around—although, at least among Democrats, the proposal seems to be having the opposite effect. For example, minority Leader Charles Schumer, D-N.Y., took to the Senate floor to bash the plan, while his office blasted out a fact sheet seeking to rebut claims that the administration has made about the policy.

“Privatization, whether it’s for the construction of roads and bridges or in aviation, often leaves the average American with the short end of the stick and gives big corporations way too much power,” Schumer said. “If this week is all about privatization, it will be another broken promise that President Trump made to the working people of America.”

The remarks from Schumer and Pelosi are a far cry from their statements following Trump’s election. At the time, both leaders mentioned infrastructure as an area where they would be willing to work with Trump, though they always maintained they would only support the package under certain conditions.

Pelosi emphasized that her party is still willing to work with the GOP on the issue, but said that the “Republican Congress must stop pushing plans that fail to create good-paying jobs for hard-working Americans.”

Trump’s infrastructure proposal, which was outlined in his budget request last month, would spend $200 billion to inject $1 trillion worth of overall investment into the nation’s transportation system by largely incentivizing private firms to back projects.

The private-sector model has raised concern among Democrats and rural Republicans who fear investors would only be attracted to projects that can recoup their revenue quickly through tolls or fees. “A private-sector-driven infrastructure plan means tolls, tolls, tolls — paid by average working Americans,” Schumer said.

Democrats and others also have severely panned the administration’s budget request for proposing major cuts to several transportation programs, while at the same time advocating for increased infrastructure investment, which Schumer called a “sleight of hand.”

Several groups of Democrats have signaled that they would prefer to move ahead with their own infrastructure plans, including the Congressional Progressive Caucus, which recently outlined a $2 trillion proposal in an effort to create a contrast with Trump, The Hill said.

“In reality, President Trump and Congressional Republicans are pushing a trillion-dollar corporate giveaway that would create tax incentives for Wall Street to privatize our roads, bridges, sanitation systems, and utilities, while raising tolls, fees, and bills,” the CPC outline says.

Observers suggest that the toxic political environment means an uphill push for Republicans struggling to enact their legislative agenda, especially with Trump besieged by the FBI’s investigation into Russian election meddling. This also gives Democrats little reason to deliver the administration a win. “The reality is, it’s hard to convince anybody to do anything when you have a 36 percent job approval rating, because no one fears you,” Bannon said.

So, we will see. The infrastructure promise is important to producers, at least some of whom are concerned about efforts to tie it so closely to the administration’s preference for privatization. Thus, this important debate should be watched closely by producers as it proceeds, Washington Insider believes.

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