Washington Insider -- Tuesday

Republican Governors' Fine Line on Trade

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

House Fails to Clear Disaster Aid Package

The Senate Thursday cleared a $19.1 billion disaster aid package on an 85-8 vote, but the House was unable to follow through.

Democrats plan to bring the disaster aid bill back up today when the House meets for another pro forma session. "We'll bring it up again and again until everybody gets back, but hopefully it'll get done," said Rep Donna Shalala, D-Fla., If that fails, the House is scheduled to return on June 3 and will be able to hold a roll-call vote.

Because the House was in a pro forma session on Friday, the only option for quick passage was to obtain the unanimous consent of all House members. That didn't happen.

A lone lawmaker, Freshman Rep. Chip Roy, R-Texas, objected to a unanimous consent request, telling reporters he had concerns about the process as well as the substance of the legislation.

"The people, particularly in Texas, but people generally, are tired of the swamp and this is a very swampy thing to do — have a vote on a Friday heading into Memorial Day weekend and after we recess, when we could have done our job yesterday when we had 435 members of Congress who should be here and should vote," Roy said.

The conservative lawmaker said he hasn't decided if he'll return Tuesday to object to the House clearing the disaster aid bill and said he didn't know if another Republican might object if he decides to remain in Texas. "We'll see. There are others who have concerns, but all of us have obligations," he said.

Legislation Seeks to Put Timeline on Small Refiner Waivers

House Ag Chairman Collin Peterson, D-Minn., Rep. Dusty Johnson, R-S.D., and the co-chairs of the Congressional Biofuels Caucus introduced the Renewable Fuel Standard Integrity Act of 2019, which establishes an annual June 1 deadline for refineries to submit small refinery exemption (SRE) petitions from their RFS blending obligations each year and increases transparency in the process.

"It is clear to me that EPA is abusing its authority by recklessly handing out small refinery waivers and refusing to account for them," said Peterson. "This is hurting farmers and agriculture communities at the worst time. This bill ends the gamesmanship in the waiver process and increases transparency along the way."

Since 2018, EPA granted 54 waivers to refineries for the 2016 and 2017 RFS compliance years totaling 2.61 billion ethanol-equivalent gallons being taken out of the market place. By law, the RFS requires that the EPA make adjustments when determining future biofuels targets to account for waivers to ensure that the overall biofuels targets are not reduced by waivers.

However, the agency is not accounting for these waivers and the demand for biofuels is being undercut, the lawmakers noted.

By setting a June 1 petition submission deadline each year, the EPA will have time to account for renewable fuel gallons stripped from the market due to these waivers, the lawmakers said. The bill also requires more transparency in the process by making petition information subject to public disclosure.

Washington Insider: Republican Governors' Fine Line on Trade

The urban media seems focused on the question of whether President Donald Trump's "get tough” trade policies are weakening its strong ties to rural voters. For example, the Washington Post reported this week that Republican governors are working to build links to Chinese markets and cited Kentucky Gov. Matt Bevin’s gathering of 400 Chinese political and business leaders to deliver a simple message: U.S. states, and especially Kentucky, want a lucrative relationship with them that rises above the President’s ongoing dispute with China.

However, when the Republican governor tried to deliver a personal message from the President, whom he had spoken to Wednesday night, the audience only laughed.

The Post interpreted the “skeptical chuckling” as reflecting the growing tensions between the White House and foreign leaders—a standoff that is also a growing concern for U.S. governors. And, it says, that’s especially true in Kentucky, where there are signs the trade dispute is rattling the state’s soybean and bourbon industries.

Gov. Bevin, who narrowly won his Republican gubernatorial primary recently, is a staunch defender of free-market conservatism, but likely needs Trump administration help salvage his political career--which includes the distinction of being one of the nation’s most unpopular governors, the Post said. He will face off against Democrat Andy Beshear, the son of popular former governor Steve Beshear.

Bevin is staunchly pro-trade but his alignment with the administration seems essential to his political career and “he’s trying to find a way to accommodate both,” the Post said.

The National Governors Association conference was in part an effort to showcase how governors hope to become a firewall for limiting economic fallout should the trade disputes drag on, the Post said. Representatives from 20 states and territories and four Chinese provinces attended.

During a meeting with reporters, Bevin attempted to play down the effects that administration trade policies will have on the state. Although he called tariffs “a tax” on consumers that could hinder sales, he argues that the President views them as a short-term tactic. “But this will end — it won’t last,” he said.

Bevin isn’t the only Republican governor navigating how to speak out against tariffs while not criticizing Trump for using them, the Post said.

After Tennessee Gov. Bill Lee spoke at Wednesday’s conference, extolling the state’s low tax rates and the Nashville music scene, he said he trusts that the ongoing trade negotiations “will be beneficial” for the United States.

However, Middle Tennessee State University published a report last week that estimated the state lost $500 million in exports during the last quarter of 2018 because of the tariffs, including a $62 million decline in whiskey exports.

Earlier this month, at a conference sponsored by Yahoo Finance, Nebraska Gov. Pete Ricketts said it was time for Trump to “wrap up” his trade dispute with China and argued that Nebraska farmers lost more than $1 billion in revenue last year because of the tariffs.

Former Missouri governor Bob Holden, a Democrat who chairs the U.S. Heartland China Association, said Republican governors are “trying to identify and work with China to protect their state’s self-interest” while “still not wanting to cross waves” with the White House.

Republican-aligned business groups are also pressing GOP governors to become more outspoken critics of Trump’s trade policies. Officials with Americans for Prosperity, the main political arm of billionaire brothers Charles and David Koch, have been asking governors to be “more public and vocal” about the impacts that tariffs are having on their states, according to Brent Gardner, the chief of government affairs for the group.

Last year, after the trade war erupted, Chinese investment in the United States plunged 83%, while increasing 80% in Canada. However, China remains the third-largest export market for U.S. goods and services and it will be responsible for one-third of all global trade over the next decade, said Craig Allen, president of the US-China Business Council.

Under Bevin’s leadership, Kentucky has been at the forefront of spurring economic development from China, which is one of the largest buyers of the state’s exports.

As he seeks reelection, Bevin can point to other economic successes, including a state unemployment rate that has been hovering at about 4 percent, the lowest in nearly two decades. However, the governor’s approval ratings have fallen amid a well-publicized battle with teachers and government workers over the state’s chronically underfunded pension program.

At the same time, D. Stephen Voss, a political science professor at the University of Kentucky, said most Kentucky voters still haven’t “really felt the effect of the trade battles in their day-to-day lives,” so the trade issue may not have a major impact in November.

“Even to the extent we are feeling effects, it’s hard to trace them back to the source,” Voss said. “Some prices go up here, but down over there, so you are never going to get that smoking gun that says, ‘The tariff caused this.’”

It is clear that producers are watching the trade disputes closely and know that the stakes are high. At the same time, the administration is working to reduce any negative political fallout, also an effort producers should watch closely as it is implemented 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.

If you have questions for DTN Washington Insider, please email edit@dtn.com