Washington Insider -- Wednesday

GAO to Investigate Farm Bailout Program

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

China to Exempt 696 US Goods From Tariffs

China will allow companies to apply for tariff exemptions on 696 US products as of March 2, with several ag products on the list, including pork, beef, soybeans, denatured ethanol, wheat, corn, sorghum some medical devices, cooper ore and concentrates, copper scrap, aluminum scrap and some pharmaceutical products and antibiotics.

Crude oil, liquefied natural gas and several seafood products are also on the list of goods where importers can apply for the tariff exemptions.

The announcement from the Ministry of Finance indicated the imports are still to be based on market conditions and companies can apply to have other products added to the list of goods that are eligible for tariff exemptions.

The ministry will approve application within three working days. Buyers must get approval before their cargoes clear customs.

EPA Discussing Court Case Impact on RFS with White House

EPA is currently consulting with the White House and Department of Justice on the potential impact of the recent court ruling that three small refinery exemptions (SREs) granted by EPA in the 2016 compliance did not meet requirements under the Renewable Fuel Standard (RFS), according to a report from Reuters.

The report said the decision would be made by March 9.

The court ruled that the three in question did not meet the RFS law which they said requires that any SREs granted after 2010 have to be an extension. The agency aims to have an announcement by March 9, according to the report.

"EPA and (the Department of Justice) are reviewing the decision and carefully considering its potential impact on the program," EPA spokeswoman Molly Block said in a statement.

The number of SREs requested and granted by EPA has risen sharply in recent years and some of those SREs are potentially impacted by the court decision, with EPA Administrator Andrew Wheeler telling reporters recently that the action has the potential to impact the SRE process.

Washington Insider: GAO to Investigate Farm Bailout Program

The New York Times and others are reporting this week that the Government Accountability Office (GAO) is opening a review of the administration’s $28 billion bailout for farmers. The Times said that the review would look into allegations that the money was “mismanaged and allocated unfairly.”

The investigation was requested by Senator Debbie Stabenow, D-Mich., who has frequently charged that the aid program was biased, providing more funds per-acre to farmers in southern states that voted for President Trump and favored “large and foreign agriculture companies over small farms.”

The administration, which signed an initial trade deal with China last month, said the farm subsidies already were planned to end this year. The program began in 2018 as a $12 billion effort to mitigate losses for farmers who lost sales or faced retaliatory tariffs from China, the European Union, Canada and Mexico as a result of the trade war – and was expanded to $28 billion last year as the conflict with China festered.

Critics have faulted the program for the formulas it used to determine payments for certain crops and for providing funds to big corporate farms, the Times said. The program used a “Depression-era fund that allowed farmers earning less than $900,000 a year to receive money if they produced one of the agricultural products that faced retaliation.” The government also purchased certain products to buoy key markets for products like apples, oranges and pork.

“It’s clear that the administration’s trade assistance payments pick winners and losers rather than help the farmers who have been hit the hardest by this president’s trade policies,” Stabenow said in a statement late last week.

She requested that the GAO study why payments disproportionately went to large farm operations, if the Agriculture Department was effectively preventing fraud, waste and abuse in the program and whether the model the USDA used to distribute payments accurately reflected trade damage that farmers experienced. Democrats have complained that the program paid subsidies to some farmers that did not need them while leaving those that were suffering from others damaged by the administration’s tariff policies without benefits.

The GAO is a nonpartisan congressional watchdog that audits government programs. It notified Sen. Stabenow’s office in a letter transmitted on Thursday that it would take up the investigation.

Democrats are not the only ones that have expressed concerns with the farm bailout program, the Times said. Senator Marco Rubio, R-Fla., joined with Senator Bob Menendez, D-N.J., and Representative Rosa DeLauro, D-Conn., in asking Sonny Perdue, the agriculture secretary, to investigate JBS, a Brazilian-owned meat-processor that received $67 million in bailout funds.

Lawmakers also raised concerns about the payments given the company’s past legal problems, noting that in 2017 two of JBS’s former top executives, brothers Wesley Batista and Joesley Batista, pleaded guilty to corruption charges in Brazil. The brothers remain majority shareholders with control over the company.

Rubio and Menendez also asked the Treasury Department to investigate possible ties that JBS has with the government of Nicolas Maduro in Venezuela, whom the United States does not recognize as the legitimate president.

In a letter to DeLauro last month, Secretary Perdue said that he did not intend to ask his inspector general to open an investigation into JBS, noting that the Department of Justice and the Securities and Exchange Commission were already looking into the company’s practices.

So, we will see. Farmers who saw export markets weaken as a result of the administration’s trade policies have long argued that they much prefer their accustomed access to growing developing country markets over government subsidies—which they charged fell substantially short of making up for the lost sales, although many producers reported that the program’s benefits were very much appreciated.

Producers have long invested in overseas market development and have punished administrations for interventions that weakened those markets – in spite of efforts to offset impacts of the interventions.

So, producers can be expected to add their criticisms to those turned up by the GAO—especially if the coronavirus weakens Chinese demand and undercuts its promises to purchase US farm products. These trade policy efforts are important and producers should watch them closely the “trade fight” proceeds, Washington Insider believes.

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