Washington Insider-- Tuesday

Infrastructure Negotiations Continue

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

State Lawmakers Urge USDA to Conduct Another Beef Checkoff Vote

A new producer referendum on the Beef Checkoff is being called for by 131 state lawmakers from 11 states. In a letter to USDA Secretary Tom Vilsack, the lawmakers said the $1-per-head assessment needs to be voted on again by producers.

“This tax was voted on in 1985 under the auspices that the money raised would go to promote exclusively USA beef,” said in their letter. “Unfortunately, that money is being funneled away from its original intent and is being used by private associations and entities that do not exclusively represent USA beef.”

It is not clear whether USDA will act on the request and whether there would be enough producer support for altering the checkoff if it were put to another vote by producers.

Steel and Aluminum Import Tariffs Remain in Focus

The Section 232 tariffs imposed on imports of steel and aluminum by the Trump administration are still in place and the Biden administration has not yet signaled they are ready to lift or alter those duties.

A union and various steel industry groups are calling for President Joe Biden to keep steel tariffs in place. Leaders of seven groups wrote a letter last week addressed directly to the president on behalf of U.S. steel producers, fabricators, and workers emphasizing the impact that Trump's 2018 steel tariffs had on their industry. They said that the move was necessary because surges in steel imports threatened nearly 2 million domestic jobs.

“Since the tariffs took effect, American steel producers have announced plans to invest more than $15.7 billion in new or upgraded facilities -- investments that are now beginning to bear fruit in the form of permanent, family-sustaining steel jobs and economic activity that supports communities across the United States,” the letter said.

Meanwhile, the UK government has indicated it will put new tariffs on imports of U.S. wine, chocolate and lobsters as it rebalances the list of goods it will target for import duties the U.S. imposed on imports of steel and aluminum. The British trade ministry said the new tariffs would be aimed at "the needs of the UK economy and shaped to defend industries across the UK."

No specific tariff rates were mentioned and the list published reflected a six-week consultation with businesses and other stakeholders.

Washington Insider: Infrastructure Negotiations Continue

The White House has lowered its price tag on an infrastructure package to $1.7 trillion, down from an initial package of $2.25 trillion, as efforts to find bipartisan agreement on infrastructure spending continues.

Republicans had offered up a $568 billion package which some Democrats dismissed immediately as woefully short of what is needed. Indications are Republicans may be willing to bump their offer up by some $250 billion, but even that may not be enough to win much support among Democrats.

The offer to Republicans, White House Press Secretary Jen Psaki said, was made “in the spirit of finding common ground.” The offer, she noted, “exhibits a willingness to come down in size.”

While the size of the package is one objection from Republicans, the other is how the administration wants to pay for the plan. One of the key ways to pay for the administration's package is an increase in the corporate tax rate to 28% from the 21% that Republicans put in place via their 2017 tax package. But touching the GOP tax package is a non-starter for many Republicans, including Senate Minority Leader Mitch McConnell, R-Ky., who said as much last week. “If they're willing to settle for a targeted infrastructure bill without revisiting the 2017 tax bill, we'll work with them,” McConnell said, but he noted a package of $2 trillion or more “is not going to have any Republican support.”

Republicans, on the other hand, have suggested paying for their package in part by tapping unspent funds from the massive COVID-19 aid package. Other money could come from uncollected tax revenue or public-private partnerships.

But Biden has continued to meet with Republicans even as those in his own party are warning him not to let Republicans just negotiate for an extended period of time. But that does not appear to be the case – that Biden will let the negotiations drag on for weeks or months.

Biden will “change course” on the infrastructure plan if he can't get bipartisan support, White House senior adviser Cedric Richmond told CNN's State of the Union. "He wants a deal. He wants it soon, but if there's meaningful negotiations taking place in a bipartisan manner,” Richmond said. “He will not let inaction be the answer. And when he gets to the point where it looks like that is inevitable, you'll see him change course.”

That change in course is going the reconciliation route which would allow Democrats to move the infrastructure deal forward without needing to have 60 votes in the U.S. Senate.

Another factor which is chafing some on the Hill are items included in what is labeled infrastructure. Sen. Roy Blunt, R-Mo., has been involved in the negotiations with the White House, and said the price tag is one thing but that reflects the amount of various issues that are included.

But this situation is unfolding as other countries around the globe are investing in their infrastructure. Brazil, for example, has focused their attention on improving the infrastructure for their soybean industry. Brazil's infrastructure minister has predicted a boom in development of the nation's highways, railways and airports on the back of $50 billion in investment in concession projects by the end of next year.

“Brazil will become an immense construction site,” Tarcisio Gomes de Freitas told the Financial Times. “With the planned concessions, by the end of 2022, $50 billion will have been contracted in investments for the modernization of airports, ports, highways and railways. In other words, the equivalent of more than 30 years of the public budget for infrastructure,” he said.

Indeed, Brazil has put $10 billion into an array of projects that include airports, seaports, rail lines to reach into the interior of Brazil and more.

But Brazil is also looking at the infrastructure effort with an eye on climate change. The country current sees some 65% of their distribution system in trucking and only 15% by rail.

Freitas said that connecting the interior of the country with Amazon River arteries would reduce up to 1 million tons of carbon dioxide.

Brazil has production costs for their soybean that are very favorable compared with the U.S. But it's getting their crops to export channels that is their biggest cost factor. And they look at infrastructure as not only addressing that situation but also making their country more eco-friendly.

Here in the U.S., infrastructure was hoped to be one of the topics that could find Republicans and Democrats working together. But so far, that hope is not being materialized, at least not to the point where the two sides are ready to put a package together that can get votes from both sides of the aisle.

And that is part of the irony. Both Democrats and Republicans agree that infrastructure is something that benefits all Americans and it is not a partisan matter. Few can disagree that the nation's roads, bridges and rail system along with the lock and dams on the Mississippi River that move ag products to export locations are sorely in need of updates. Yet getting to that point where all can agree is moving at a slow pace. And that slow pace is coming while our foreign competitors continue to invest in what it takes to move their ag products in particular to export to the rest of the world.

We shall see. If budget reconciliation ends up being the route for infrastructure spending, it will keep the fractured Washington in place. And that is something agriculture needs to monitor closely as they produce the crops, livestock and other ag products that would benefit considerably from improving the farm-to-market system, Washington Insider believes.

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