Washington Insider -- Friday

Tracking Emerging US Trade Policy

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

USDA Suspends All Fresh Beef Imports From Brazil

USDA has now suspended the import of all fresh beef from Brazil, taking the step out of concern for U.S. food safety. And the action comes after Brazil had self-suspended shipments of beef from five Brazilian plants after irregularities in the beef from the plants in question.

Brazil notified USDA on June 16 of the suspensions, USDA's Food Safety and Inspection Service (FSIS) initially said, adding the translation of the notification took place on June 20, making that the effective date the shipments from the five plants were suspended.

However, late Thursday, USDA suspended all imports of fresh beef from Brazil.

FSIS has been inspecting 100% of all meat products arriving in the United States from Brazil. "FSIS has refused entry to 11% of Brazilian fresh beef products," USDA detailed "That figure is substantially higher than the rejection rate of one percent of shipments from the rest of the world."

FSIS has refused entry to 106 lots (approximately 1.9 million pounds) of Brazilian beef products "due to public health concerns, sanitary conditions, and animal health issues," USDA said. "It is important to note that none of the rejected lots made it into the US market."

The Brazilian government had pledged to address those concerns, including by self-suspending five facilities from shipping beef to the United States. However, USDA said, "Today’s action to suspend all fresh beef shipments from Brazil supersedes the self-suspension."

The situation comes as JBS in particular has been rocked by the meat scandal in Brazil that unfolded earlier this year. A judge June 21 put the sale of JBS facilities in Argentina, Paraguay and Uruguay on hold, saying the sale could harm the corruption investigation.

House Democrats Latest to Seek EPA Info on Icahn & Biofuels Policy

The regulatory influence potentially wielded by billionaire investor and White House special advisor Carl Icahn – on biofuels policy in particular – is now coming under fire from House Democrats via a letter on the matter to Environmental Protection Agency (EPA) Administrator Scott Pruitt.

Lawmakers are asking EPA to disclose all communications with Icahn – who owns a refining company, CVR Energy. Rep. Frank Pallone, D., N.J., and other Energy and Commerce Committee Democrats are also suggesting Icahn's business dealings present an inherent conflict of interest.

CVR's refineries are among those that purchase biofuel credits to meet their obligations under the Renewable Fuel Standard (RFS), which means fluctuations in the prices of those credits have a direct financial impact on the company's position, the lawmakers contend.

That pressure comes at a particularly sensitive time: EPA will soon unveil proposed RFS levels for 2018 biofuel and 2019 biomass based biodiesel for 2019. Icahn has drawn attention since President Donald Trump tapped him as an adviser in December 2016. Senate Democrats have pressured more disclosure on his activities since Trump's inauguration, but the letter marks the first salvo from House Democrats.

“As an unpaid adviser, Mr. Icahn presumably has not undergone a review by the Office of Government Ethics and is not subject to conflicts of interest regulations applicable to government employees,” the lawmakers wrote.

The White House has not released additional details of Icahn's role in government. The ethics office vets many administration officials for financial conflicts. The letter requests a response by June 30. Icahn told Bloomberg News in March that his special adviser title does not make him a government employee, meaning he is not required to comply with ethics rules or sell his financial holdings to reduce conflicts of interest. Icahn said he is acting as a private citizen in his conversations with Trump and administration officials.

Washington Insider: Tracking Emerging US Trade Policy

While there seems to be less pressure on the future of NAFTA these days, there is still uncertainty regarding the outcome of the talks with Canada and Mexico, Informa Economics is reporting today. Now that more officials of the administration’s trade policy team are on board U.S. Trade Representative Robert Lighthizer is helping key congressional committees dig deeper into administration positions.

For example, Informa noted that the stance outlined by Lighthizer in his appearance before the Senate Finance Committee on Wednesday differed from the earlier views of Commerce Secretary Wilbur Ross and others in the administration “who have signaled they want to wrap up the talks as quickly as possible.” However, even Ross has admitted that getting them completed yet in 2017 is not likely.

Should the discussions get bogged down and reach a "total stalemate," Lighthizer said he would come back to the Senate panel for discussions. However, he said he would not accept a situation where the agreement stays in place without changes that address U.S. concerns.

Lighthizer was urged by Senate Finance Committee Chairman Orrin Hatch, R-Utah, to use the talks to “improve” North American integration in order to make the region a “more attractive investment and manufacturing hub and serve as a counterweight to China."

The coming weeks will be active on the U.S. trade policy front relative to NAFTA, Informa noted. USTR plans to publish detailed negotiating objectives July 17, following more consultations with Congress. Plus, there are three days of hearings set by USTR next week and already some 130 witnesses are scheduled to appear.

The administration plans to push for stronger labor and environmental provisions in the agreement, as well as a digital trade chapter and strong intellectual property provisions, Lighthizer said.

He also called on Japan should make unilateral changes to cut the U.S. trade deficit, including reducing high tariffs on U.S. beef, and outlined hopes to reach bilateral trade deals with many of the countries that were part of the 12-nation Trans-Pacific Partnership agreement. However, he admitted, "some of the TPP countries don't want to do bilaterals," apparently including Japan, at least for the time being, Lighthizer said.

He told the committee that the controversial mechanism for resolving investment disputes may not be removed from NAFTA, as he would have preferred. At issue is the so-called investor-state dispute settlement provision, which creates a forum for companies to challenge government laws or regulation they believe have negatively impacted their business investments. "I really look forward to working with committee on that issue," Lighthizer said.

Improving the functionality of the WTO is also a Lighthizer commitment, along with seeking “reforms to the WTO dispute settlement system.” "We expect to see meaningful changes in order to maintain the relevance of the system," he said.

In addition, he noted that the pending WTO fight on China's market-economy status is "without question" the most serious litigation the global trading body is handling right now—and, concluded that a ruling in Beijing's favor would be "cataclysmic." While he cautioned, "Who knows how the WTO rules?" He reiterated the U.S. believes its position to be correct – that China is not a market economy.

China insists it should have been treated as a market economy starting in December 2016, the 15th anniversary of its accession to the WTO. The change in treatment would likely affect how the U.S. calculates antidumping duties, resulting in lower margins for U.S. industry petitioners.

Following Lighthizer’s testimony, Informa noted that it “should help ease concerns in U.S. agriculture circles about the administration's trade policy direction” following worries generated during the campaign.

At the same time, Lighthizer’s testimony revealed remaining schisms among administration trade policy officials that could potentially raise new issues as groups try to determine which views will prevail in the various trade negotiations. As has been seen, these frequently involve very important issues that producers should watch closely as they emerge, Washington Insider believes.

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@dtn.com