Washington Insider -- Wednesday
New Trade Battle Over Taxes
Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
U.S. Agricultural Exports and Imports Were Nearly Even in May
U.S. agricultural exports edged up to $14.66 billion in May after being at $14.54 billion in April, while U.S. agricultural imports were at $14.56 billion compared with $14.35 billion in April. That left a trade surplus of $95.9 million for the month, about half of the $189 million surplus reported in April.
So far in Fiscal Year (FY) 2021, U.S. agricultural exports have reached $121.61 billion against imports of $105.79 billion for a cumulative surplus of $15.82 billion.
The forecast for U.S. agricultural exports in FY 2021 that was updated in May looks for shipments to total $164 billion and imports to be $141.8 billion which would leave a surplus of $22.2 billion.
To reach the forecast marks, U.S. agricultural exports would need to be at $10.6 billion the next four months with imports at just $9 billion. Both marks would seem to be low based on trade data thus far in FY 2021 and would mark a major slowdown on imports that does not seem likely given the improving U.S. economy.
Keystone XL Pipeline Developer Seeks $15 Billion From U.S.
Canada's TC Energy said it is seeking $15 billion in damages from the United States government over the decision by President Joe Biden early in his administration to cancel the Keystone XL pipeline project.
In a statement on Friday, the company said it had filed a notice of intent with the State Department to begin a legacy North American Free Trade Agreement (NAFTA) claim under the U.S.-Mexico-Canada agreement.
The company said it aims to "recover economic damages resulting from the revocation of the Keystone XL Project's Presidential Permit," adding that it suffered a loss of more than $15 billion "as a result of the U.S. Government's breach of its NAFTA obligations."
Washington Insider: New Trade Battle Over Taxes
With the civil aircraft disputes with the European Union and UK "resolved" via an agreement among the three parties to not take any trade actions for five years, attention with Europe and now Canada is shifting to another trade issue that could become even more difficult to find a resolution.
Digital taxes are likely to be a new trade fight front even as the U.S. has signaled they will not be taking actions on trade like their predecessors in the Trump administration. And this is now involving the U.S. Treasury Department and not just the U.S. Trade Representative Katherine Tai.
Group of 20 (G20) finance ministers are meeting in Vienna this week, and Bloomberg is reporting, "U.S. Treasury Department officials indicated in a call with reporters Tuesday that a potential digital-tax proposal might fall afoul of a deal struck last week that aims to eliminate so-called digital service taxes." The U.S. has signaled they are not in favor or several countries' digital tax plans, arguing they discriminate against U.S. companies.
European countries are under pressure from several governments within the EU that global tech companies need to be taxed. While European countries believe the new plan would comply with the international agreement on digital services taxes, the U.S. counters that determination cannot be made until the international agreement is completed and its full text is readied which is hoped for in October.
The Organization for Economic Cooperation and Development (OECD) worked out the deal with 130 countries and jurisdictions last week which would include setting a minimum rate for corporations. There are also rules under the agreement, Bloomberg noted, that would "share the spoils from multinational firms." And the deal also contained a provision to prevent new laws that attempt to apply taxes to cross-border digital sales.
But even though the international agreement would set in place a 15% minimum tax, Bloomberg said the U.S. is trying to boost that level, noting the U.S. has sought a 21% rate for the overseas earnings of U.S. companies.
One of the Treasury officials briefing reporters noted that the part of the package that would bring a redistribution of corporate taxes based on where firms do business and not just where they have their headquarters is one that would require a multilateral treaty.
Therein lies another potential challenge for the U.S. -- a multilateral treaty requires a two-thirds majority in the U.S. Senate. Given the 50-50 split between Democrats and Republicans and few, if any, Republicans willing to back a tax increase, odds are low any such treaty would be approved by the chamber.
However, Treasury argued that the U.S. proposal on this front regarding tax redistribution did not focus just on digital companies nor did it target U.S. businesses.
The G20 finance ministers are also expected to see renewed attention on the recovery from the COVID pandemic and U.S. Treasury Secretary Janet Yellen will press other countries not to remove fiscal support for measures to fight the virus and its economic impact.
Meanwhile, USTR Tai met with Canadian Trade Minister Mary Ng Tuesday and called on Canada to abandon its proposed unilateral digital-services tax, according to Bloomberg, citing an emailed statement from Tai's office.
But their discussion did not stop there and it included softwood lumber and dairy. That comes in the wake of the U.S. opting to pursue a dispute settlement request under the one-year-old U.S.-Mexico-Canada Agreement (USMCA).
And Tai has pledged that the U.S. would get its litigation briefcase back out if countries opted to put any border taxes linked to climate change in place.
So we will see. The U.S. is perhaps shifting a bit on the trade front, not willing just to try to get old disagreements resolved as it appears other countries around the world could be trying to use that stance to their advantage and it is a situation that needs to be watched closely, 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 firstname.lastname@example.org
(c) Copyright 2021 DTN, LLC. All rights reserved.