Washington Insider -- Wednesday

Gloomy World Economic Forum

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

USDA Will Reopen All Farm Service Agency Offices Thursday

USDA is making good on what USDA Secretary Sonny Perdue said relative to the agency continuing to find "legal" ways to reopen USDA offices.

USDA announced it will give eligible farmers until Feb. 14 to apply for trade aid payments.

USDA Secretary Sonny Perdue announced Wednesday afternoon they are calling nearly 10,000 employees back to work to keep the Farm Service Agency offices open five days a week through Feb. 8. Link for details.

The Feb. 14 date is not as lengthy of a time for farmers to sign up for the Trump tariff aid payments versus what USDA said it would extend them by previously — USDA said they would extend the signup based on how many days the government was shutdown after the initial Jan. 15 deadline passed.

Meanwhile, Sen. Mark Warner, D-Va., sent a letter to Perdue raising questions about the legal basis USDA and other departments are using to reopen agencies. Warner said it wasn’t clear that Perdue had the authority to order the temporary re-opening last week of some FSA offices to handle more limited duties.


Appropriators Now Unified On USDA ERS, NIFA Relocations

A pause in USDA's plan to relocate the Economic Research Service (ERS) and National Institutes of Food and Agriculture (NIFA) outside of the Washington, D.C., region, and realign ERS within the department is being sought by House and Senate appropriators.

Last year's Senate-passed ag appropriations bill did not include language on the proposed ERS and NIFA changes, nor have earlier House bills offered this year. However, both chambers included it in their latest Fiscal Year (FY) 2019 conference report explanatory statement. The move puts Republicans who control the Senate and Democrats who control the House on the same page in questioning USDA's proposal.

The Senate statement for agriculture and Food and Drug Administration (FDA) appropriations released Monday (January 21) expresses "concern about the unknown costs associated" with the proposed relocations. It directs USDA "to include all cost estimates" for the moves in its FY 2020 budget along with "a detailed analysis of any research benefits" associated with the changes. "There is an expectation that this process will be followed in the future for any other potential proposed agency relocations" at USDA, the statement said.

Meanwhile, lawmakers called for an "indefinite delay" in USDA's proposed realignment of ERS under the Office of the Chief Economist (OCE). "At this time, the bill finds it appropriate for ERS to remain under the Research, Education and Economics (REE) mission area," the statement said, adding, "several questions remain about the merits of the proposed transfer as well as the proposed relocation of ERS." The statement cited "Insufficient information and justification relating to the reorganization and relocation" as making it "premature" to move forward with the proposals "at this time."

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The Senate language on ERS and NIFA mirrors that included in the House's explanatory statement released late last week.


Washington Insider: Gloomy World Economic Forum

The Washington Post is reporting from Davos, Switzerland, this week at the World Economic Forum. It says that fears are rising about the state of the world’s biggest economies with China posting its worst annual growth in decades and the United States injecting more uncertainty with tariffs and a lengthy government shutdown.

China reported that its economy expanded by 6.6% last year — a figure that would be good for many countries but represents the slowest growth for China in 28 years. Meanwhile, the International Monetary Fund (IMF) downgraded its expectations for the global economy, highlighting sharp declines in Europe and warning that the risks of a major slowdown have increased.

This is in sharp contrast to a year ago when President Trump and other world leaders talked about global prosperity, the Post says. This year attendees are expressing worry that the United States is undermining its own economy and the rest of the world’s, via a trade war and the longest partial government shutdown in U.S. history.

Early this month, consumer confidence slumped to the lowest level of Trump’s presidency, according to the University of Michigan’s consumer sentiment survey.

While few see a recession as imminent, the high-level officials and executives at Davos catalogue a growing number of risks, including the trade war, the potential of Britain leaving the European Union without a final agreement with the EU, rising interest rates, high global debt levels, and more polarized politics around the world.

“After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” said Christine Lagarde, managing director of the IMF. “Does that mean a global recession is around the corner? No. But the risk of a sharper decline in global growth has certainly increased.”

The scene at Davos epitomized the changes in the world economy, the Post thinks. A year ago was a time when the major countries were growing in sync with one another and the U.S. President received a warm welcome after large U.S. corporate tax cuts.

But now Trump, British Prime Minister Theresa May and other world leaders are sitting out the conference, dealing with problems back at home and the hope for expanded global business has been dashed by the trade war and other setbacks.

The IMF is the latest institution to scale back its growth forecasts, following downward revisions by the Federal Reserve and many banks. The IMF predicts 3.5% global growth in 2019 and 3.6% in 2020, down from 3.7% forecasts for both years in the fall.

But IMF economists warned that they had already downgraded growth in China and the United States in the autumn because of the trade war and that they only see greater risks of a slide from here.

The rapidly slowing euro zone, especially Germany, France and Italy, was the biggest factor in the revised predictions. Germany is struggling as exports weaken and its auto sector tries to adjust to new regulations. France is trying to rebound from street protests over a climate tax that have dampened sentiment. And Italy is battling debt problems and sluggish spending.

The IMF forecasts that the U.S. economy will grow at 2.5% this year and 1.8% next year. These predictions are unchanged from what the IMF said in October, but they represent a noticeable decline from about 3% growth last year.

In Beijing and across China, authorities have been pulling out all the stops to try to avoid a hard landing for the economy, promoting measures that are both traditional and inventive. China’s central bank has allowed banks to lend more against their reserves, a move that could free up almost $120 billion for loans.

The central government is cutting tax rates for small businesses and reducing value-added taxes in some industries, particularly in manufacturing. It is also pouring more than $125 billion into new rail projects.

A key question is how far Beijing will go to mollify the U.S. administration and end the trade war.

“The economy is a much bigger problem for Xi Jinping than the trade war. The last thing he wants is a bunch of angry people protesting because they’ve lost their jobs,” said Andrew Collier, managing director of Orient Capital Research, a Hong Kong-based consultancy.

Surveys released in recent days by global consultancies show more alarm bells in boardrooms around the world.

A survey of 1,300 chief executives released Monday by PricewaterhouseCooper (PwC) found that 30% of business leaders believe that global growth will decline in the next 12 months, a record jump in pessimism to about six times the number who said that last year.

“With the rise of trade tension and protectionism, it stands to reason that confidence is waning,” said Bob Moritz, global chairman of PwC. Executives “want a little bit more certainty and they want stability.”

Economic uncertainty is high across agriculture as key trade economic policy decisions loom amid toxic and seemingly endless political fights. Certainly, these are debates producers should watch closely as they intensify, Washington Insider believes.


Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

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(GH/SK)

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