Washington Insider-- Wednesday

GOP Senator Probes San Francisco Fed Research on Climate, Race

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

US Has Suspended Trade Relations With Myanmar

The U.S. suspended trade relations with Myanmar after soldiers and police backing the military coup there killed more than 90 people.

U.S. Trade Representative Katherine Tai said Monday the U.S. was reviewing trade benefits for the country under the now-lapsed Generalized System of Preferences (GSP).

The U.S. imported slightly more than $1 billion worth of goods from the country, including around $621 million of apparel and footwear.

WH Group Cites Illegal ASF Vaccine Use As Factor Tempering Chinese Hog Herd Expansion

The use of illegal African Swine Fever (ASF) vaccines in 2020 was a factor which tempered the efforts to rebuild China's hog herd, according to the Ma Xiangjie, president of Henan Shuanghui Investment and Development, WH Group's domestic unit.

In remarks to reporters after the release of WH Group annual earnings, Ma said commented on impact of illegal vaccines. “Since the second half of last year some pig producers in China, especially south of the Yangtze river, used some immature pig vaccines and caught African Swine Fever again," said Ma.

The WH Group processed 46% of its hogs in China in 2020 compared with 2019 due to tight supplies, Ma, noted, with capacity utilization at its plants reduced to 30%.

But imports of 700,000 metric tons of pork, beef and poultry helped make up with shortfall, with 70% of the imports coming from the U.S. Ma said the firm's Chines hog price forecast has been raised due to the impact from “toxic vaccines” and said the company was expecting 2021 meat imports rise as the firm was working to expand the range and volume of products from the U.S.

Washington Insider: GOP Senator Probes San Francisco Fed Research on Climate, Race

The Hill is reporting this week that the top Republican on the Senate Banking Committee asked the Federal Reserve Bank of San Francisco to explain several recent research bulletins and seminars on racial economic disparities and climate change.

Sen. Pat Toomey, R-Pa., asked Mary Daly, president of the San Francisco Fed, to provide a briefing and a decade of records related to the reserve bank's economic research activities. “The Federal Reserve may pursue mission creep or welcome itself to political capture. But such activities are inconsistent with its statutory responsibilities,” Toomey argued.

The San Francisco bank is one of the Federal Reserve system's 12 institutions, each responsible for conducting monetary and regulatory activities within a certain U.S. region.

Each reserve bank is responsible for bank supervision and examination, lending to financial institutions, operating Fed services and reporting on the unique business environment and development within its respective district. The Fed system is funded with fees paid by banks and contributes billions of dollars annually to the Treasury.

Reserve banks also publish economic research conducted by staff economists on a wide range of topics relevant to the Fed's mandate to foster maximum employment, stable prices and a secure banking system.

Toomey argues, however, that “a sizable portion” of San Francisco Fed research focuses “on matters unrelated to monetary policy and how these impact narrow subgroups of people.” He specifically cited two San Francisco Fed blog posts on racial equity and a series of virtual seminars on the climate-related economic issues hosted by the bank.

The San Francisco Fed has also published recent research on capital flow surges, the economic impact of school closures, inflation, community bank resilience and differences between the U.S. and other advanced economies in recovering from the COVID-19 recession.

While Toomey criticized research from other reserve banks, he wrote that the “seemingly sudden and alarming inclusion of social research” at the San Francisco Fed “risks being of a bitterly partisan nature” and warranted a probe from the Banking panel.

He asked Daly to provide a briefing for Banking Committee staff, all records related to the San Francisco Fed's climate seminar series, all documents related to climate change and racial justice research dating back to July 1, 2019, and 10 years of reserve bank's annual expenses on research and community outreach.

“We have received and are reviewing Sen. Toomey's letter, and we look forward to discussing the contents with Sen. Toomey's office," a spokesman for the San Francisco Fed said.

The Hill said that Toomey's letter “opens another front in the battle between Republicans and the Fed over the central bank's growing focus on climate change and other social issues GOP lawmakers consider irrelevant to its mission and Democrats consider essential.”

Republicans have fiercely criticized the Fed for creating committees and investing in research related to the potential climate-related risks facing the banks it supervises. The Fed also has joined a global network of central banks and financial supervisors focused on climate change.

Fed leaders have insisted that the bank will play no role in setting climate policy for the U.S., but rather focus on how climate change effects bank supervision.

Even so, Republicans fear the bank could eventually steer credit away from certain energy sources — something the Fed has ruled out ever doing.

Toomey and GOP lawmakers have also blasted moves toward climate and diversity policy from the Treasury Department and Securities Exchange Commission (SEC). Treasury Secretary Janet Yellen has faced intense blowback from Republican lawmakers after declaring climate change “an existential threat” that required action from the department. She has also opened the door to fiscal and regulatory policy designed to limit carbon emissions, but has not explained what form that would take.

Gary Gensler, Biden's pick to lead the SEC, also irked Republicans when he voiced support for tougher climate, diversity and political spending disclosure rules for publicly traded firms.

In fact, there is considerable intense debate over a number of Congressional and executive research topics—as well as Democratic interest in using the Congressional Review Act to overturn controversial Department of Health and Human Services rules passed in the final days of the Trump presidency.

Reps. Raja Krishnamoorthi, D-Ill., and Anna Eshoo, D-Calif., on Monday introduced a resolution of disapproval over the HHS "sunset" rule, which requires all 18,000 agency regulations to be reviewed every 10 years, or else they expire.

However, provisions of that are available for only the first 60 legislative days of the new Congress and would end likely sometime in April. The resolution currently has no Senate co-sponsors.

The CRA was a legislative tool favored by Republicans in the early days of the Trump administration and was used to strike down 14 regulations from the Obama era. But Democrats have been more reluctant to use it, partly due to concern over statutory language in the CRA that blocks the relevant agency from crafting another rule that's substantially similar.

So, we will see. Clearly the administration and the Congress are interested in implementing changes, including prominently program changes to cut back on climate change—important proposals that should be watched closely as they are considered, Washington Insider believes.

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