Washington Insider -- Wednesday

Spending Fight to Include Climate Change

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

Liu He's US trip confirmed for Thursday

Chinese Vice Premier Liu He will come to Washington on Thursday to continue trade negotiations, the Ministry of Commerce said Tuesday.

Liu had previously been scheduled to lead a large delegation for at least three days of discussions aimed at concluding a draft agreement. The two-day trip is shorter than expected after President Donald Trump's announcement that he would increase punitive tariffs on $200 billion worth of Chinese products from 10% to 25%. New tariffs on the remainder of China’s exports to the U.S. would take longer to implement beyond Friday's beginning date for lifting tariffs.

Trump’s tweets were prompted by a downbeat assessment of the state of the talks delivered at the weekend by U.S. Trade Representative Bob Lighthizer. On Monday, he suggested that businesses should have factored in the possibility of failure of the talks, saying they had been put “on notice that this was something that could very well happen”. He also said there would be a process to exempt some companies from the levies.

China is putting together its own list of goods that it will hit with additional tariffs if the U.S. follows through on its threat to hike tariffs on Chinese goods as of Friday. Bloomberg is reporting that the tariffs by China would become effective one minute after the U.S. in the event that the U.S. ups tariffs to 25% on $200 billion in Chinese goods. However, Chinese government agencies did not confirm the potential action.

The U.S. would reconsider imposing higher tariffs on China if the negotiations got “back on track,” said Treasury Secretary Steven Mnuchin. He added that negotiators had been optimistic in the past about the prospects for a deal and had been planning for a summit meeting between Trump and President Xi Jinping of China to finalize the deal. But Mnuchin said it became “particularly clear over the weekend” that the Chinese had moved negotiations “substantially backwards.”

Trump Insists on Keeping Metal Tariffs on Canada and Mexico

President Donald Trump continues to insist that the Section 232 steel and aluminum import duties remain in place on Mexico and Canada until some mechanism can be put in place to control those shipments.

But Canada and Mexico have warned that their ratification of the U.S.-Mexico-Canada Agreement (USMCA) is in jeopardy unless those metal tariffs are lifted.

That same sentiment has been echoed by U.S. lawmakers like Sen. Chuck Grassley, R-Iowa.

But so far, the Trump administration is still insisting on a solution to replace the tariffs. Talks between the three to find some kind of solution have not yet produced a solution, clouding the outlook for the trade pact.

Washington Insider: Spending Fight to Include Climate Change

Climate change likely will be a prominent issue debated this summer. Bloomberg is reporting this week that Senate Democrats have decided that they will “try to inject climate change across any and all legislation they could that needs 60 votes.”

The report notes that they are likely to score their biggest victories in two must-pass bills in the 116th Congress: a tax “extenders” package, in which they hope to negotiate broadened credits to offshore wind and battery storage and the next highway bill, where they intend to push low-emissions transportation technologies and ways to make the nation’s transportation network more resilient to climate change.

Tax extenders refer to the tax credits that lawmakers have to renew every few years, Bloomberg notes.

Both a prospective tax extender package and a highway bill are a long way from being signed into law—the highway bill, for one, will need reauthorization until September 2020 — "but the climate issue hovers over both.” Senate Democrats want to find ways that they, as a minority party, can involve climate wherever possible.

Sen. John Barrasso, R-Wyo., who will help shepherd the highway measure in the Senate, says to expect some climate provisions, even if they aren’t labeled as such, in a bill he hopes to move through the Environment and Public Works Committee this summer.

That’s because Democrats are expected to raise clean energy and climate issues in the long-promised infrastructure package which is separate from the highway bill. That package got a boost from President Trump and Democratic leaders in recent days, although it isn’t clear how they will pay for its $2 trillion price tag.

“Depending on how you handicap the likelihood of an infrastructure bill, you could add that” to the list of bills that could carry climate provisions, said Sen. Brian Schatz, D-Hawaii, who was tapped in March to chair a thus far Democrats-only Special Committee to push the climate issue. Expect climate change also to be raised in many of the 12 annual appropriations measures, he said.

“Here is a way to look at this: This is an urgent matter and it impacts every executive agency,” Schatz said. “So anytime we do a funding bill, there has to be a climate aspect, and especially as we do physical infrastructure.

Republican calls for tweaks in the 2017 tax package, some of them technical fixes, also could be an opportunity to put clean energy tax credits on the table, Schatz said.

Tax extenders include many with broad bipartisan support and some — such as for biodiesel and short-line rail maintenance by railroad companies — that have expired.

Senate Democrats say their price for moving tax extenders could include expanding clean energy tax credits to offshore wind and energy storage, including battery technologies, and tweaks in the existing credits for electric vehicles.

“I do think that on tax extenders there’s going to be bipartisan support for a lot of the new innovative technologies that the Republicans claim to support,” said Sen. Sheldon Whitehouse, D-R.I., who wants tax credits for electric vehicles extended and expanded.

The path forward for tax extenders, as well as deals on clean energy credits, will likely be the larger, must-pass packages, perhaps in negotiations for fiscal 2020 spending for federal agencies, he said.

Senate Finance Chairman Chuck Grassley, R-Iowa, said there is plenty of support for moving tax extenders, including backing by the committee’s top Democrat, Oregon Sen. Ron Wyden, but there also are plenty of obstacles, including House insistence that such extensions be paid for.

“Wyden and I have taken the position together that when you extend existing tax law—now if there are any changes, this wouldn’t apply—but just existing tax law, you don’t need offsets,” Grassley said. “The House of Representatives has a different view on that,” Grassley said. “So we’ll just have to work that out.”

Some Republicans bristle at the notion that Democrats can make a significant dent in the climate issue through such piecemeal approaches. “I think that is one avenue,” said Sen. Lisa Murkowski, R-Alaska, chairman of the Senate Energy and Natural Resources Committee. “But I think if we are really going to be addressing this in a way that is pretty robust, you’re not going to be able to do this in a highway bill.”

While Democrats also have struggled to get Republicans to back any significant climate measures in Congress, Senate Democrats are hoping the launch of their new select committee will broaden their message to Democrats who aren’t on the forefront of pushing the issue in Barrasso’s environment committee or the Senate energy committee.

They include Sen. Tammy Duckworth, D-Ill., a Senate Armed Services Committee member who has backed shoring up military installations threatened by sea-level rise, as well Defense Department investments in biofuel technologies. “I am actually approaching it from the DOD side of things — there are over 100 military installations that are in danger of being under water due to climate change,” she said.

Clearly, the coming debates will be “all politics, all the time,” until after the 2020 election, observers say. These are clearly debates producers should watch closely as they evolve, Washington Insider believes.

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