Washington Insider -- Thursday

Trade Concerns from the Senate

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

House Republicans Vow To Pass Farm Bill

House GOP leaders are pushing to get the House version of the farm bill through the chamber despite the stinging defeat over immigration issues. "We're going to pass this bill," House Majority Whip Steve Scalise, R-La., said during a news conference. Given that Democrats had taken a "radical" no vote, he said, "When you break down the votes, every single Democrat voted against that bill not because they don't support the farm components, but every Democrat in Congress voted against the bill because it actually put work requirements in place for welfare."

House Speaker Paul Ryan, R-Wis., also lamented the farm bill vote, labeling it "regrettable."

House Majority Leader Kevin McCarthy, R-Calif., sought to downplay any possibility that the farm bill situation is calling into doubt Ryan's effectiveness, harkening back to the process that eventually resulted in the 2014 Farm Bill.

"You're building something into a farm bill that we have to pass ourselves because [of] its work requirement," McCarthy said. "I remind people that the last farm bill, when we went to move it, failed at the beginning as well. I think you're building something in that's not out there."

Reuters: Marathon Sought RFS Waiver for One Its Facilities

Marathon Petroleum Corp. has asked EPA for a hardship waiver from Renewable Fuel Standard (RFS) obligations for one of its facilities, according to Reuters.

The firm made the waiver request for the 2017 calendar year, according to the report, but there is no indication on when the request was made and whether it has been granted.

The news comes as the agency has faced increased pressure from biofuel backers on the small refiner waivers and EPA Administrator Scott Pruitt is said to have expressed a willingness to look at reassigning obligations waived via the small refiner waivers.

Not surprisingly, Sen. Chuck Grassley, R-Iowa, issued a statement blasting the report. "That an oil company making billions of dollars in profits even thinks it has a shot at receiving a 'hardship' waiver proves how broken this process is," Grassley said. "Any changes to the Renewable Fuel Standard have to fix this embarrassing loophole and guarantee 15 billion gallons of ethanol actually get blended."

Washington Insider: Trade Concerns from the Senate

Well, if you think the state of play on trade policy is confusing, you are not alone — to the point where The Hill is reporting this week that several GOP senators are saying that the president has wound up on the losing side of the trade discussions and “his talk of lifting rules barring U.S. companies from selling to the Chinese telecommunications firm ZTE has prompted a revolt.”

The Senate Banking Committee in midweek voted overwhelmingly in favor of an amendment to block Trump from easing penalties on ZTE, which violated U.S. sanctions by selling equipment to North Korea and Iran. The panel’s action followed a similar vote by a House panel last week.

Treasury Secretary Steven Mnuchin announced on “Fox News Sunday” that “we’re putting the trade war on hold” by pulling back on the threat of new tariffs. But that announcement did not appease unhappy Republicans upset over the administration’s mixed messages, The Hill said.

Lawmakers from farm states have been the most vocal in pressing Trump to reconsider his tactics. Sen. Ben Sasse, R-Neb., said farmers and ranchers he met with recently are not reassured by Trump’s claim over the weekend that “China has agreed to buy massive amounts of additional farm/agricultural products.”

“I’ve been meeting with farmers and ranchers all morning. I have not yet heard one who thinks the U.S. has won anything from the Chinese leadership,” he said. “They’re scared to death.” Sasse, who ripped Trump’s trade policies earlier this year as the “dumbest possible way” to take on China, said Trump doesn’t appear to have made significant progress addressing two major economic threats facing the United States: China’s ambitions to dominate high-tech industries and its rampant theft of U.S. intellectual property.

“All that I have seen would suggest that China’s winning,” he said. “The big two are the Made in China 2025 initiative and the way they steal our [intellectual property].”

Even some of Trump’s most loyal allies are expressing frustration The Hill said. For example, Senate Finance Committee Chairman Orrin Hatch, R-Utah, said he agreed with criticism of administration trade policy.

The criticism has put Trump on the defensive, The Hill said, and noted that “on Tuesday, he denied that his administration is on the cusp of a deal with China and vowed that ZTE will have to pay a massive fine “of more than a billion dollars. Could be [$1.3 billion]. I envision a new management, a new board, and very, very strict security rules.”

“And I also envision that they will have to buy a big percentage of their parts and equipment from American companies,” Trump added.

Other GOP senators are also faulting the administration for a disorganized approach.

They say Trump was wrong to threaten sanctions, causing turmoil in markets, only to pull back and declare the trade war over, before reversing course again with new threats.

“Is there a plan somewhere?” asked Sen. Pat Roberts, R-Kan., the chairman of the Senate Agriculture Committee.

Some argue it would be more effective to fight what they see as China’s unfair trade practices through the World Trade Organization instead of threatening seismic trade penalties only to shrink away from them when faced with retaliation.

“What I’m concerned about is there seems to be a lot of ad hoc-ery going on,” said Sen. Jeff Flake, R-Ariz. “Steel tariffs — you impose them and then go to [foreign trading partners] and say ‘If you want an exemption, this is what you need to do.’ Then you end up with that ZTE debacle where you promise them some kind of relief from sanctions. We have a structure to this already. It’s called the WTO,” he added.

The ZTE fight has emerged as a flashpoint, and lawmakers grilled Mnuchin about the matter last week when he testified before an appropriations subcommittee.

Sen. Christopher Coons, D-Del., asked why the administration is “backpedaling to make it easier” for ZTE to “operate and compete with U.S. companies.” Sen. Jerry Moran, R-Kan., asked Mnuchin to “justify” administration actions related to ZTE.

Some Republicans think that Mnuchin may be playing the role of “good cop” to Lighthizer’s “bad cop” to maximize leverage in the negotiation. But a senior GOP aide admitted this interpretation was “reading the tea leaves.”

GOP senators were unwilling to bring up their concerns on trade during a meeting last week with the President, but frustrations are boiling over as they fear U.S. exporters are being hurt by the unpredictability of the administration’s approach, The Hill said.

“I don’t think anything’s been settled yet. It’s still in the development stage. I think we have maybe too many cooks in the kitchen,” Roberts said.

So, we will see. Certainly, the administration’s opaque negotiating policy is confusing and has been for some time. Trade Issues, the defeat in the House of the draft farm bill as well as concerns about the North Korean talks all are increasing pressure on the administration, especially as the fall elections near. Producers should watch these issues especially closely as they continue to emerge throughout the fall, Washington Insider believes.

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