Washington Insider -- Thursday

Government Shutdown Talk, Again

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

South Korea Pushes Back on Reopening KORUS

U.S. Trade Representative (USTR) Robert Lighthizer said President Donald Trump wants to see “substantial improvements” to the U.S.-South Korea trade deal (KORUS). But South Korea made clear it will not agree to any changes until it investigates the cause of any trade imbalance — a process that could take months to unfold.

South Korea officials repeated the country wants to begin a joint study to investigate potential causes of the trade gap and evaluate the overall impact of the agreement. U.S. officials made no response to the South Korean request.

Trump continues to focus on the need to reduce the U.S.' overall trade deficit, in this case the around $28 billion trade deficit in goods with South Korea. That number has more than doubled since 2011, the last full year before the deal went into effect, when it stood at $13.2 billion.”

South Korea statement. "We did not agree to the unilateral proposal from the U.S. to amend the Korea-U.S. FTA," Korean Trade Minister Kim Hyun-chong said. "We made our position clear that investigation, analysis and evaluation of the impact of the Korea-U.S. FTA must be preceded." At the close of the Tuesday meeting, the two sides had reached no agreement on possible revisions to the deal, top Korean trade negotiator Yu Myeong-hui was quoted as saying. “The U.S. suggests that the deficit has doubled since the Korea-U.S. FTA, and the need for amendment and modification of the KORUS FTA is expected to be held in the near future,” Kim said.

“Korea used statistical facts to explain the complexity of the micro and macro factors that caused the U.S. trade deficit.” Kim made clear that the U.S. avoided the word “termination” or “renegotiation” when discussing modifications to KORUS and said Seoul will proceed with talks open to “all possibilities.” Still, Kim argued that both sides would suffer if the pact is scrapped. The U.S. only raised problems at hand without offering a solution, he said. “The best results from negotiations come up when both sides give up part of something they want,” he said.

USTR Robert Lighthizer attended the meeting via teleconference, along with Kim. "Unfortunately, too many American workers have not benefited from the agreement," Lighthizer said in a statement on Tuesday after officials met in Seoul for a special session of the agreement's joint committee. "USTR has long pressed the Korean government to address burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property. This negotiation offers us an opportunity to resolve these and other barriers.”

The two countries are expected to continue discussions over the coming weeks.

Regulatory Activity Down During First Six Months of Trump Administration

The pace of regulatory activity was down in the first six months of the Trump administration, bringing welcome relief to businesses that contend they have been burdened by rules from the prior administration.

In total, 67 regulatory actions were processed in the first six months of this administration, according the Office of Information and Regulatory Affairs (OIRA) – which reviews all significant federal regulations. Those actions include notices, proposals and final rules, and compare to the 216 actions recorded by the same point in the Obama administration, according to government data.

Still doubts that the slowdown will persist linger. "I'm not sure that this [initial slowdown] portends a permanent future where we can't effectively process necessary regulations," Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, told Bloomberg BNA.

The business community is pleased with how the Trump administration used its powers, including stopping regulations that had not been finalized and extending those with a pending deadline for subsequent review, Bradley said.

Businesses also were happy that Congress was able to overturn regulations using the Congressional Review Act (CRA), which made the "first phase" of this administration's regulatory regime successful, Bradley noted. "Now we're in the second phase," where the agencies have to do their work, he added.

First up is the deregulatory agenda from the Office of Management and Budget (OMB) that lists 860 proposed regulatory actions that were withdrawn or removed from active status since the fall 2016 unified agenda.

But to deregulate, rules must go through the Administrative Procedure Act (APA) process, which takes time. The "single biggest roadblock at the moment" is the lack of political appointees at the agencies, Bradley argued. Roughly, 1,200 senior officials must be confirmed by the Senate before they can manage and set policy in various federal agencies and independent commissions.

For their part, small businesses have been impressed with Trump's two-for-one executive order, which requires agencies to eliminate two regulations for every new one they issue, said Dan Bosch, senior manager of regulatory policy at the National Federation of Independent Business (NFIB).

Small businesses also have seen willingness from executive agencies to review some problematic rules from the prior administration, such as the Labor Department's overtime rule and the Environmental Protection Agency's (EPA) Waters of the U.S. rule (WOTUS) and Clean Power Plan (CPP), Bosch noted.

"They're going back and looking at those rules to see how they can improve them and make them better for small business to comply with, or getting rid of them entirely," Bosch said. "So our members are feeling like there's some relief on the horizon," he added.

Washington Insider: Government Shutdown Talk, Again

It seems the impossible is happening; that tensions are rising even more between the Congress and the administration. The surprise is that this time, it is not just the debt ceiling that is festering, but that “President Trump’s demand to build border wall could upend sensitive negotiations on Capitol Hill.” The Washington Post says.

President Trump told a campaign rally in Phoenix on Tuesday that he “might shut down the federal government over his demand for funds for the wall.” The Post says this “upends delicate negotiations on Capitol Hill to keep the government open and funded past Sept. 30.”

During his recent rally in Phoenix, the President Trump leveled his latest threat about blocking new government funding “if it doesn’t include the $1.6 billion he wants to partially construct a new wall along the Mexico border.”

“Build that wall,” he said. “Now the obstructionist Democrats would like us not to do it. But believe me, if we have to close down our government, we're building that wall.”

Government operations are only funded through Sept. 30, which is the end of the federal fiscal year. If Congress and the White House don’t agree on new funding levels by then, there will be a partial government shutdown, the Post says. It will close national parks, suspend many government operations and send hundreds of thousands of federal workers home without pay on furlough.

Federal workers are traditionally repaid for the lost wages, but if a shutdown is prolonged it can cause major strains because of a disruption in income.

The House of Representatives in July passed a bill that would direct $1.6 billion toward new wall funding, but Senate Majority Leader Mitch McConnell, R-Ky., has not said whether he will include a similar measure in the Senate funding bill. Democrats – and some Republicans - oppose the use of taxpayer money to build a new wall along the Mexico border, and McConnell needs at least eight Democrats to agree to any funding bill in order for it to pass.

Democrats have said they support spending money for border security, but they have opposed the use of taxpayer money for the construction of a new physical wall along the Mexico border.

Trump has threatened to shut down the government before, the Post says. In May, he bemoaned Senate rules that require 60 procedural votes before bills can move to the floor for a final vote. He has repeatedly urged McConnell to change this longstanding rule, to no avail.

“Our country needs a good ‘shutdown’ in September to fix this mess!” Trump wrote on Twitter in May.

The president's digging in on the border wall money and vowing to shut down the government comes during a period of tense negotiations between Republicans and Democrats on Capitol Hill, and it could sour discussions on a number of fronts.

Congress needs to reauthorize a law that provides health care to low-income children by the end of September or there will be cuts to funding for that program, and they also must raise the debt ceiling by Sept. 29 or Treasury Secretary Steven Mnuchin has said the U.S. government could run out of the money needed to pay all its bills.

The last government shutdown was from Oct. 1-17 in 2013. The number of federal employees placed on furlough during that shutdown peaked at 850,000 workers, with federal employees losing a total of 6.6 million work days, the Obama administration said at the time. Economists also believe that the shutdown negatively impacted economic growth, though they disagree on precisely how much.

The government shutdown in 2013 was led in part by Sen. Ted Cruz, R-Texas, and his demands for new votes related to the Affordable Care Act. He had support at the time from then-Rep. Mick Mulvaney, R-S.C., a leader of a conservative wing of the Republican Party. Mulvaney is now the budget director and has also demanded Congress authorize the $1.6 billion in wall funding.

During the presidential campaign, the President said U.S. would not have to pay for a wall and that Mexico would finance it. But Mexico has refused to pay, and Trump earlier this year demanded the money come from congressional appropriations.

The 2013 shutdown was the first since the 1990s. It is very unusual for there to be a government shutdown when one political party controls the White House and both chambers of Congress as Republicans do now. Typically, shutdowns occur when control of government is split between Democrats and Republicans and lawmakers are at an impasse.

Thus, we will have to wait to see what happens. Right now, tensions are growing sharply from many directions—and prospects of significant damages to financial and other markets are real. These are large scale, many dimensional fights that producers should watch closely as they evolve, Washington Insider believes.

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