Washington Insider -- Tuesday

USTR Releases NAFTA Negotiation Objectives

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

USTR Releases NAFTA Negotiation Objectives

Addressing trade issues and provisions in a range of areas to bring down the U.S. trade deficits with Mexico and Canada have been released by the Trump administration's Office of the U.S. Trade Representative (USTR) Objectives to improve the North American Free Trade Agreement (NAFTA).

Transparency, equivalency, timely implementation information sharing and using updated technology are frequently mentioned in various portions of the 18-page report.

In agricultural products, the report outlines several areas where the administration seeks to improve the trade deal.

"Maintain existing reciprocal duty-free market access for agricultural goods, expand competitive market opportunities for U.S. agricultural goods in NAFTA countries, substantially equivalent to the competitive opportunities afforded foreign exports into the U.S. market, by reducing or eliminating remaining tariffs" are two of the areas outlined, USTR said, with a goal also to "Seek to eliminate non-tariff barriers to U.S. agricultural exports including discriminatory barriers, restrictive administration of tariff rate quotas, other unjustified measures that unfairly limit access to markets for U.S. goods, such as cross subsidization, price discrimination, and price undercutting."

While wanting to provide "reasonable adjustment periods for U.S. import sensitive agricultural products," USTR said they would also seek to engage in "close consultation with Congress on such products before initiating tariff reduction negotiations." Promoting greater regulatory compatibility in order to "reduce burdens associated with unnecessary differences in regulation, including through regulatory cooperation where appropriate" is another goal.

Under sanitary and phytosanitary (SPS) measures, USTR said they want to "provide for enforceable SPS obligations that build upon WTO rights and obligations, including with respect to science based measures, good regulatory practice, import checks, equivalence, and regionalization, making clear that each country can set for itself the level of protection it believes to be appropriate to protect food safety, and plant and animal health in a manner consistent with its international obligations."

Putting together a way to "resolve expeditiously unwarranted barriers that block the export of U.S. food and agricultural products" and establishing "new and enforceable rules to ensure that science-based SPS measures are developed and implemented in a transparent, predictable, and non-discriminatory manner," are key goals, along with improving "communication, consultation, and cooperation between governments to share information and work together on SPS issues in a transparent manner, including on new technologies." Further the USTR said they would work to "provide for a mechanism for improved dialogue and cooperation to address SPS issues and facilitate trade where appropriate and possible."

Preserving the use of U.S. trade remedies is also a key objective, the USTR report said. The U.S. wants to "preserve the ability of the United States to enforce rigorously its trade laws, including the antidumping, countervailing duty, and safeguard laws," the report noted, along with eliminating the NAFTA global safeguard exclusion "so that it does not restrict the ability of the

United States to apply measures in future investigations." The U.S. seeks to eliminate the Chapter 19 dispute settlement mechanism and will "seek a separate domestic industry provision for perishable and seasonal products in AD/CVD proceedings."

Rules of origin are another area cited in the report, as USTR wants to "update and strengthen the rules of origin, as necessary, to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America," and "ensure the rules of origin incentivize the sourcing of goods and materials from the United States and North America." Plus, the U.S. wants to make sure that goods meeting the rules of origin "receive NAFTA benefits, prevent duty evasion, and combat customs offences."

In a new provision, USTR said they want to seek an "appropriate mechanism" to "ensure that the NAFTA countries avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage."

House Budget Panel to Unveil Fiscal 2018 Budget Resolution

Release and markup of the House Budget Committee's Fiscal 2018 budget resolution is on tap this week, with the long-delayed markup set to take place Wednesday at 10 a.m. ET.

"This is a very, very important budget,” House Budget Chairwoman Diane Black, R-Tenn. said last week before the details had been worked out about the markup schedule. “It has a lot of moving parts to it, and we’re going to get it done."

However, the $1.132 trillion top-line spending level Republicans are eyeing puts them on a collision course with the 2011 Budget Control Act (BCA). Under the law, discretionary budget authority for Fiscal 2018 cannot exceed a $1.065 trillion cap. Even though the budget resolution will set forth a new top-line, it does not get signed by the president and does not have the force of law.

The conservative House Freedom Caucus has already announced it is not willing to vote for the House budget resolution in its current form, a source told The Hill. That could spell trouble for Black who can afford only three Republican no votes and still be able to move the resolution out of committee.

Freedom Caucus and House Budget Committee member Dave Brat, R-Va. confirmed to Bloomberg that he plans to vote against the budget at the Wednesday markup. Brat wants language in the budget preventing a tax code package that includes a Border Adjustment Tax (BAT) and language easing welfare cuts. Those details are not currently included and he does not have assurances from leaders on the issues either. "That’s why I’m not a happy camper right now," Brat said.

Worse still, if the resolution does advance to the floor and the Freedom Caucus maintains its opposition, it could sink the measure. Republicans can only afford 22 no votes on the floor – with Democrats likely to all vote against the measure – and the Freedom Caucus has 31 members.

Meanwhile, Senate Democrats have said any increase in the BCA's $549 billion cap on defense spending would need to be accompanied by an increase in the $516 billion limit for non-defense programs. Given that dynamic it appears more likely a stopgap spending bill – known as a continuing resolution (CR) – might be needed to avert a government shutdown when current funding lapses September 30.

Even so, it is still possible that a bipartisan agreement to raise the BCA caps could be reached, averting the need for a stopgap or the risk of a shutdown. Appropriations bills will need at least 60 votes in the Senate, requiring support from at least eight Democrats or independents, to be enacted.

Washington Insider: EU Studies Origin of BSE Cases

One of the world’s most dreaded diseases is Bovine Spongiform Encephalopathy, or BSE. This family of diseases remains without a cure and, after a long incubation period of 2 to 5 years, is completely fatal due to the spongiform degeneration of the brain and spiral cord.

Food Safety News is reporting this week that there is new interest in Europe in understanding the origin of their BSE cases, an issue that U.S. officials have followed closely over the past two decades.

There are several variations of the disease and the Centers for Disease Control says and there is the possibility that some can spread to humans—to the Centers maintain a national surveillance program. It cooperates with selected state health departments on various projects and education programs regarding the importance of autopsies to both the surveillance and diagnosis.

Only four BSE cases have been reported from the United States and none of the affected cattle entered the food chain. Several of the group were raised overseas for part of their life. U.S. officials decided years ago that the use of ruminant tissue in ruminant feed was “a necessary factor responsible for the BSE outbreak in the United Kingdom,” it instituted a ruminant feed ban in 1997 that was later tightened and then enhanced to further harmonize U.S. BSE control measures with those in Canada.

FDA enforces a tight mammalian-to-ruminant feed ban through inspection and feed testing programs.

Health officials in both the U.S. and Canada believe that the removal of “specified risk materials” from all animal feeds, pet foods, and fertilizers--not just from cattle feed--addresses risks associated with the potential contamination of feed during production, distribution, storage, and use. Canadian officials say they expect that BSE will be eliminated from the Canadian cattle herd by as early as this year.

In addition, the Harvard Center for Risk Assessment evaluated various scenarios involving BSE in the U.S. concluded that the FDA ruminant feed rule provides a major defense against this disease.

Europe’s 1986-1998 BSE epidemic was primary focused on the United Kingdom and was far more extensive than any U.S. or Canadian outbreaks. Food Safety News says the British program required eradication some 4.4 million head of cattle.

During the epidemic that outbreak, Europe also experienced 229 human deaths — 177 in the UK and 52 in other EU countries that were supplied with British beef or beef products — from a new variant Creutzfeldt-Jakob disease (vCJD), the name for BSE once transmitted to humans.

The world response to BSE after that crisis is widely seen as having significantly reduced prevalence of the disease in cattle. However, because isolated cases are still being reported in the European Union, the European Commission requested the European Food Safety Authority EFSA to investigate their origin. EFSA, based in Parma, Italy, provides independent scientific advice and communicates on existing and emerging risks associated with the EU’s food chain.

EFSA also says it believes the key measure for controlling BSE is a ban on the use of animal proteins in livestock feed as has been imposed in the U.S. and Canada—and that BSE can be transmitted to cattle through contaminated feed, mainly in the first year of life.

Still, some sixty cases of classical BSE have been reported in cattle born after the EU ban was enforced. While none of these animals entered the food chain, classical BSE is the type transmissible to humans and the Commission wants to find out if these cases were caused by contaminated feed or whether they occurred spontaneously—or, had some other source.

Experts could not rule out other causes due to the difficulty of investigating individual cases. Some constraints are the long incubation period of the disease and the lack of detailed information available from farms at the time of the trace-back investigation.

And, there are still a significant number of affected animals in the EU--1,259 cattle if those born before the ban are included. However, the number of classical BSE cases is down, from 554 cases reported in 2005 to just two in 2015 (both animals born after the ban).

So, this study may be helpful to U.S. officials, as well as those in the EU. It will be important to see what the new EU research shows, in spite of U.S. confidence in its current policies. Clearly, the current EU system allows some infected animals to enter—and it may pose other threats as well. This is an effort U.S. producers should watch carefully as it proceeds, Washington Insider believes.

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