Washington Insider -- Tuesday

Turning to Tax Reform

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

U.S. Unveils Dairy Proposal in NAFTA 2.0 Talks

In an expected move, U.S. trade officials on Friday released a proposal to reverse a Canadian pricing program that has negatively affected some U.S. dairy exports to Canada. The proposal demands that Canada eliminate an industry pricing classification that lowered domestic prices for certain milk protein concentrate products to the minimum global price.

The move is seen as a direct threat to Canada's supply management system. It does not include any language on market access, as those provisions will be negotiated separately. Also as expected, the proposal was aggressively opposed by Canadian dairy producer lobbyists.

The Class 7 milk category was created to encourage Canadian cheesemakers to use up excess Canadian product, resulting from increased butter production as domestic demand increased. In August, Canadian Foreign Minister Chrystia Freeland said that any effort to undermine Canada's supply-managed sectors would be a red line in the NAFTA 2.0 talks.

EPA, Monsanto, BASF Announce Steps to Curb Dicamba Drift

Monsanto Co., BASF Corp. and Dupont agreed to limits on a pesticide linked to crop damage. EPA announced Friday that the agency reached a resolution with companies that sell new formulations of the herbicide dicamba. The manufacturers have agreed to list their weedkillers -- Monsanto's XtendiMax, BASF's Engenia, and Dupont's FeXapan -- as "restricted use" pesticides -- only certified applicators with dicamba-specific training can handle the products.

The agreement comes after complaints were filed to state agriculture agencies this summer, alleging that the pesticide drifted away from its intended target and damaged crops in neighboring fields. The manufacturers insist that the new herbicides, sold for the first time this year, are not to blame for the damage.

Washington Insider: Turning to Tax Reform

The Hill, as well as a number of other media outlets, is reporting that "Senate Republicans hope to get the ball rolling this week on tax reform," which remains a key priority.

The GOP lawmakers will need to vote on the FY 2018 budget, which paves the way for Republicans to pass tax reform by a simple majority and avoid a Democratic filibuster. The resolution, which passed the Budget Committee along party lines earlier this month, would allow the tax plan to add up to $1.5 trillion to the deficit over a decade.

The Hill said the Republicans "are expected to be able to pass the budget" but have little room for error. With a 52-seat majority, they'll need the support of 50 senators. In addition, Sen. Rand Paul, R., Ky. is viewed as a likely "no" vote.

Before they can take a final vote on the budget, senators will need to go through an hours-long vote-a-rama -- a process that in the past has stretched well into the night.

Under this free-wheeling floor procedure, senators can force a vote on any amendment to the budget that they want. Lawmakers normally file hundreds of amendments and spend hours on the Senate floor voting.

The House, which is out of town this week, passed its budget earlier this month. Once the Senate follows suit, the two chambers will have to come together to sort out the differences between their bills.

The Senate budget proposal would cut non-defense spending starting in 2019 and result in up to $106 billion by 2027. It would also only cut mandatory spending by $1 billion, compared to the House version's $203 billion.

Republicans want to pass tax reform by the end of the year, The Hill said. The move would give them something to tout heading into the 2018 election as they have struggled to score political victories despite having unified control of government. Recently, GOP lawmakers have been increasingly warning about the political consequences of not passing tax reform.

"If tax reform crashes and burns, if [on] ObamaCare, nothing happens, we could face a bloodbath," Sen. Ted Cruz, R., Texas, who is up for reelection in 2018, told a group of roughly 100 wealthy donors during an event in New York on Friday.

Sen. Lindsey Graham, R., S.C., added separately on Sunday that the GOP is "in trouble" if their tax plan falls apart. "We promised to cut taxes and we've yet to do it. If we're successful, Mitch McConnell's fine," Graham told CBS's Face the Nation. "If we're not, we're all in trouble. We lose our majority, and I think President Trump will not get reelected."

In the meantime, Sens. Lamar Alexander, R., Tenn., and Patty Murray, D., Wash., are continuing to try to negotiate a deal aimed at stabilizing the insurance market after President Trump announced he would nix funding for key ObamaCare payments to insurers.

Alexander signaled late last month that they were close to a deal, but acknowledged he would need to win over not only a significant number of Senate Republicans but the House and White House.

Alexander and Murray, the top senators on the Senate Health Committee, are trying to reach an agreement on legislation to provide the payments to insurers in return for more flexibility on state waivers and the ability to buy "copper plans" that include less coverage but are cheaper.

Democrats are warning that they could also demand the Cost Share Reduction payments as part of a December deal to avoid a government shutdown.

"I think we're going to have a very good opportunity in the omnibus to get this done in a bipartisan way, if we can't get it done sooner," Senate Minority Leader Charles Schumer, D., N.Y., told the press last Friday.

He added that Republicans "own" the health-care system after the CSR decision and a separate executive order and will be under pressure to pass legislation to stabilize the insurance market.

"Democrats are going to work very hard to get these cost-sharing payments restored, but remember, there are a whole lot of Republicans who want to get them restored, too," he said.

The Senate also needs to tackle a supplemental aid package to fund relief efforts to victims of disasters throughout the United States. The House passed the legislation last week before leaving Washington. The bill would provide $36.5 billion to fund hurricane relief, a flood insurance program and wildfire recovery efforts in the West amid a string of natural disasters.

It also includes $18.7 billion for FEMA's disaster relief fund, $16 billion to address national flood insurance program debt and $576.5 million for wildfire recovery efforts, as well as $1.27 billion for disaster food assistance for Puerto Rico.

The House approved the bill hours after Trump sparked a bipartisan backlash late last week after he tweeted that FEMA and federal resources could not stay in the U.S. territory "forever," The Hill said.

Well, these life or death struggles have become more common recently, and likely will continue to arise on taxes, trade and other issues. The scale of the fights and their intensity continues to raise the likelihood of unforeseen and unwanted consequences so they should be watched closely as they emerge, Washington Insider reported.

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