Washington Insider -- Tuesday

Post-Shutdown Tensions in Washington

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

WTO Grants China Request for Panel on US Tariffs

U.S. Section 301 tariffs on Chinese goods, retaliation over U.S. Section 232 metals duties and continued disagreements over Appellate Body appointments highlighted a Jan. 28 meeting of the World Trade Organization's (WTO) Dispute Settlement Body (DSB).

China's second request for a dispute panel to rule on U.S. Section 301 duties imposed on Chinese imports was granted. The issue gets at the heart of the ongoing U.S.-China trade war as the U.S. Section 301 report faulting Chinese practices on intellectual property and technology transfer kicked off the now heated dispute between the two nations.

The U.S. "unilateral determination" under Section 301 of the Trade Act of 1974 to collect "25% additional duties on approximately $34 billion of Chinese imports" and "10% additional duties on approximately $200 billion of Chinese imports" is "a blatant breach" of its WTO obligations, China said. The U.S. move "is posing a systemic challenge to the multilateral trading system," it added.

China stressed the "urgency" of addressing the dispute, saying the U.S. actions continue "to damage China's legitimate economic and trade interests." China rejected U.S. allegations it routinely flaunts international trade rules. "China's action Monday by resorting this dispute to the WTO dispute settlement system reaffirms our strong support to the rules-based international trading system and is helping to strengthen the viability of the system," China remarked.

The U.S. slammed China's move and alleged "China intends to do, and is doing, great damage to the international trading system" through its use of "grossly unfair and trade-distorting forced technology transfer policies and practices and through this unfounded" dispute panel request. "China seeks to use the WTO dispute settlement system as a shield for a broad range" of its policies and practices "not covered by WTO rules," and in doing so "is threatening the overall viability of the WTO system," the U.S. said.

Meanwhile, the U.S. dismissed China's argument that the U.S. tariffs were "unilateral" and "WTO-inconsistent," noting China responded in kind with "discriminatory duties on over $100 billion in U.S. exports." China's actions and self-contradictory arguments suggest it "is not serious about addressing the legitimate concerns of its trading partners over Chinese technology transfer practices that no one could describe or defend as fair," the U.S. concluded.

EU to Request Consultation With US at WTO on the Spanish Olives' Case

The European Commission has announced that it will send a request for consultation with the U.S. Jan. 29 to try to settle the dispute about the tariffs imposed on Spanish black olives, the EU trade chief has said.

EU Trade Commissioner Cecilia Malmström announced Monday that the EU is finally ready to initiate a consultation request process within the World Trade Organization with the United States.

"The duties imposed by the United States on ripe olives from Spain are unjustified, unwarranted and go against the rules of the World Trade Organization," she said in a tweet Monday.

In June last year, the U.S. Department of Commerce announced the need for tariffs ranging from 7.52% to 27.02% to counteract Spanish olive prices, after it found that EU subsidies allow the fruits to be sold on the U.S. market for 16.88% to 25.5% below their production value.

The U.S. feels Spanish black table olives have been exported to the U.S. at dumping prices and that the product receives European and Spanish subsidies that give it an unfair advantage over similar products by American competitors.

The U.S. tariffs followed a Department of Commerce and the International Trade Commission investigation, launched after Californian olive enterprises filed a petition asking for an assessment of Spanish olive imports.

Washington Insider: Post-Shutdown Tensions in Washington

Well, the tensions in Washington are not really over, it seems. Administration officials are describing their determination to construct their wall, come what may, while the media are busy describing efforts to prevent future shutdowns. For example, The Hill said this week that as the federal government kicks back into gear after a 35-day partial shutdown, Congress is turning to its next deadline: "Preventing another funding lapse."

The continuing resolution signed by President Trump funds roughly a quarter of the government through Feb. 15, giving Congress 19 days to reach a deal on the months-long border wall fight.

A bipartisan conference committee, which includes appropriations committee members from both chambers, is slated to get to work on hashing out a plan to fund the Department of Homeland Security.

Sen. Richard Shelby, R., Ala., the Senate Appropriations chairman and a member of the conference committee, told the press, "The Democrats have stated that once the government was reopened, they would be willing to negotiate in good faith on significant investments in border security, including a physical barrier. I hope that this continuing resolution will provide us the time to work out our differences in a fair and thoughtful manner and reach a bipartisan consensus on border security."

However, the president warned Congress even as he signed the temporary funding authorization that the government could shut back down "should they fail to strike a deal that includes ample funding for his signature campaign issue." Other officials took a similar stance.

In addition, President Trump appeared skeptical that Congress would be able to reach a deal, telling The Wall Street Journal that another partial shutdown is "certainly an option." The president has requested $5.7 billion for the wall, an amount that can't clear House Democrats or get 60 votes in the Senate. Democrats have previously indicated they could support funding for fencing, but not a concrete wall.

Lawmakers are hoping the conference committee will be able to come up with a deal to fund roughly a quarter of the government through the end of the 2019 fiscal year, taking another shutdown off the table until October.

The best agreement that we can get is an agreement on border security that funds federal spending through the end of the fiscal year. "We cannot have the threat of a government shutdown hanging over our people and our economy," Sen. Susan Collins, R., Maine, told CBS.

Senators have floated taking up legislation that would prevent future shutdowns by automatically creating a continuing resolution, though there are competing proposals on the idea.

President Trump said he also "hasn't ruled out the possibility of circumventing Congress by using a mechanism such as declaring a national emergency in order to build the wall," The Hill said.

Declaring a national emergency to construct the wall would spark fierce backlash from Congress, including Republicans who have publicly warned Trump against taking the dramatic step, The Hill said.

There also is still some uncertainty about timing for the State of the Union address. It was initially scheduled for Tuesday evening. House Speaker Nancy Pelosi, D., Calif., was asked Friday if the joint session would continue as "planned," and responded that "the State of the Union is not planned now."

"What I said to the president is, when the government is open, we will discuss a mutually agreeable date and I'll look forward to doing that and welcoming the president to the House of Representatives when we mutually agree on that date," she continued.

Trump initially indicated that he wanted to go forward with the Jan. 29 speech. But after Pelosi said the House would not pass the joint resolution required to green light the speech, he said he looks forward to addressing Congress "in the near future."

Pelosi has given no hints about when she is considering rescheduling the speech, but press speculation now is focusing on Feb. 5, The Hill said.

So, we will have to see what happens next. While the idea of an extension of the border barrier fight seems quite unpopular, the administration still seems deeply dug in. It is possible that the bipartisan conference committee will come up with some new ideas that will convince the President to support a new approach. At the same time, there remains significant potential for another confrontation involving additional restrictions on the government -- a fight producers should watch closely as it proceeds, Washington Insider believes.

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