Washington Insider -- Monday

Government Shutdown Preparations

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

US Gets a Win at WTO in Dolphin Case

U.S. "dolphin-safe" tuna labeling measures do comply with WTO obligations, according to the WTO's Appellate Body in a December 14 ruling.

Previously, the trade body faulted U.S. dolphin-safe labeling rules for treating most tuna caught in ocean areas used by most Mexican fishing fleets differently. Mexico sought and received permission from WTO to suspend $163 million per year in trade concessions to the U.S., but it has not applied such countermeasures to date.

But the U.S. in 2016 issued a rule from the Department of Commerce’s National Marine Fisheries Service that expanded verification and documentation standards to apply to tuna caught anywhere in the world – not just those primarily used by Mexican fishing fleets. The changes were intended to bring the U.S. in compliance with Appellate Body decisions and avoid trade countermeasures by Mexico.

Mexico contested the changes again at the WTO, saying the 2016 regulatory changes failed to bring the U.S. into compliance with its WTO obligations and still discriminated against tuna caught in Mexico. In particular, Mexico objected to U.S. rules that denied dolphin-safe labels for tuna product produced by chasing and capturing dolphins – a practice known as “setting," and frequently used by Mexican fishing fleets. It maintained that the measures meant the US labeling program remained trade restrictive even after the other changes.

A 2017 WTO compliance panel rejected Mexico's arguments and found the revised U.S. rules "accords to Mexican tuna products treatment no less favorable than that accorded to like products from the United States and other countries."

Argentina Sends First Fresh Beef Shipment to US Market

Argentina has now sent beef to the U.S. for the first time in seventeen years.

A 500kg (one half of a metric ton) consignment of ribeye was this week sent to Miami by Swift Argentina, a division of Brazilian beef giant JBS.

News of the shipment comes just two weeks on from news that the USDA declared Argentina as eligible to resume shipments of raw beef.

After a meeting with Swift executives, Argentine Agriculture Secretary Luis Miguel Etchevehere said it was ‘enormously satisfying’ that exports were getting underway so soon after being approved. He hailed the fact that the consignment was made up of high value cuts, while praising the private sector for ‘quickly investing in response to political breakthroughs’.

“2018 will be remembered as a historic year for beef exporters. Argentina strengthened its position as the world’s sixth largest exporter and the second in Mercosur, and it was a year where beef exports grew by 70.1%,” the minister noted.

Argentina now has a quota of 20,000 metric tons a year to access the U.S. market, exempt from duties.

The Argentine agriculture ministry said the quota would be worth between $150 million and $180 million to exporters. Out-of-quota shipments will be subject to a tariff of 26.4%.

Washington Insider: Government Shutdown Preparations

In case you were worried that there would be a shortage of things to worry about over the holidays, the White House and a number of federal agencies have started advanced preparations for a partial government shutdown in the fight over border wall funds which appears unlikely to be resolved before some government funding lapses at week’s end, the Washington Post says.

GOP leaders are scrambling to find a short-term alternative to the shutdown which would start on Dec. 22 absent a deal, the Post says.

For their part, White House officials are signaling to lawmakers that they would probably not support a one- or two-week stopgap measure that some Republicans have suggested but the White House rejection of that approach has dramatically increased the odds of a spending lapse, the Post says. It adds that several budget experts believe a partial shutdown, which would impact agencies that manage law enforcement, homeland security, housing and other programs, could drag on for days, if not weeks.

That is in part because the President believes “the final days of the existing Congress are his best chance to extract $5 billion in funds to partially build a wall along the Mexico border.” In early January, Democrats take control of the House of Representatives, giving them more control over the process.

Multiple agencies and senior administration officials are preparing for the possibility that about a quarter of the government — and more than one-third of federal workers — could be left without funding. At this time, the Post reports that mass confusion remains about what would actually happen in a partial government shutdown.

The Statue of Liberty, for example, closed to thousands of visitors during a brief government funding lapse in January. National parks across the country stayed open though without visitor centers and fees and with only minimal emergency staff.

National Park Service officials confirmed Friday that parks would stay open this time — but they declined to say whether the Statue of Liberty would again close.

The lack of clarity on all fronts is seizing Washington just ahead of the Christmas holiday and as Democrats prepare to take control of the House of Representatives, illustrating how jarring the transition in power could be next year.

The President and some of his conservative allies on Capitol Hill view this as their last, best chance to deliver on the long-promised wall before they lose their grip on power, and they are reluctant to let the moment pass. But Democrats feel no pressure to give in to Trump’s demands weeks before they will assume control of the House.

At the same time, the Post reports that “a number of Republicans are cringing at the possibility that their two years of control of Congress and the White House could end in a partial shutdown.” From the sidelines, rank-and-file Republicans are urging Trump and Democratic leaders to find a compromise between Trump’s demands for $5 billion for the border wall and Democrats’ insistence that they will spend no more than $1.3 billion on fencing.

The standoff intensified following an “outlandish televised meeting” on Tuesday with Trump, Senate Minority Leader Charles Schumer, D-N.Y., and House Minority Leader Nancy Pelosi, D-Calif. During their encounter, the president and his Democratic antagonists doubled down on their demands and Trump declared he would be “proud to shut down the government over border security.”

There have not been any serious bipartisan talks since.

About 75% of the portion of the federal budget controlled by Congress has been funded through next September, including the Pentagon, Veterans Affairs and the Health and Human Services Department.

But the other 25% is operating on a short-term funding extension that runs out Friday. Unless a deal is reached, the departments of the Interior, Agriculture, State, Housing and Urban Development, Treasury, Commerce, and Homeland Security would lose funding, as would numerous smaller, independent agencies.

About 800,000 of the 2.1 million federal employees across the country would be affected and about 40% of them would be sent home without pay. The rest could stay on “essential” jobs, according to the contingency plans the agencies have filed with the Office of Management and Budget. Part of the current confusion arises because budget director Mick Mulvaney has given agencies much more leeway to remain open during a shutdown than his predecessors did. Some agencies, such as EPA have been directed to draw on reserve funding to keep employees at work.

Even a partial shutdown would cost taxpayers hundreds of millions of dollars in lost productivity, with federal employees likely to be paid for staying home. Other shutdown-related expenses would include revenue from fees and costs charged contractors for stop-work orders, for example.

Employees who are called to work during a shutdown do get paid but not until the government reopens. Employees who are furloughed are in theory not guaranteed to be paid once the government reopens. But after every previous shutdown, Congress has passed legislation mandating that they be paid.

The border wall continues to be a bitter, controversial issue and the fight over a government shutdown should be watched closely by producers as it continues, Washington Insider believes.

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