Washington Insider--Wednesday

Dense Political Fog over Capitol

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

Senate Clears Key Hurdle on TPA

The Senate yesterday handed a victory to GOP leadership and to President Obama by securing enough votes (60-37) to overcome a filibuster and take to the floor major trade legislation. That action sets the stage for the next Senate vote –– likely today –– on the bill itself that would give the president the Trade Promotion Authority (TPA) he and the administration need to conclude trade agreements. TPA, or fast-track, also establishes a process for congressional consideration of trade agreements once they are concluded, including setting timetables for consideration and preventing filibusters or amendments.

Many Democrats yesterday said their vote was conditioned on the passage of a separate Trade Adjustment Assistance (TAA) bill that would provide financial aid and job-training to workers who lose their jobs due to foreign competition. The Senate is expected to pass TAA legislation later today, but the measure faces steeper challenges in the House, where it faces strong Republican opposition.

Both Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker John Boehner, R-Ohio, say they are committed to passing both TPA and TAA, although the sequencing of votes in each chamber is unlikely to be identical. Once Congress disposes of the trade bills, members can look forward to leaving town for a week of campaigning, fund raising and parade participations during the Independence Day recess. A number also are said to have their fingers crossed that the U.S. Supreme Court holds off on announcing its ruling on Obamacare until they are safely back in their states and districts.


EPA Report Paints Grim Picture of Future Unless Climate Change is Addressed

The Environmental Protection Agency this week released a new report which compares a future scenario where no action has been taken on climate change and another where significant action has been taken. EPA administrator Gina McCarthy commented that the "report finds that we can save tens of thousands of American lives, and hundreds of billions of dollars, annually in the United States by the end of this century, and the sooner we act, the better off America and future generations of Americans will be."

Among other things, the report projects that by 2100 global action on climate change will avoid an estimated 12,000 deaths annually associated with extreme temperatures in 49 U.S. cities, compared to a future with no reductions in greenhouse gas emissions. On the other side of the coin, EPA estimates that in a future without greenhouse gas reductions, damages from sea-level rise and storm surge to coastal property in the lower 48 states are $5 trillion dollars through 2100. With adaptation along the coast, the estimated damages and adaptation costs are reduced to $810 billion.

There are economic and political forces in the United States that for years have rejected such dire predictions. Given the low esteem in which EPA currently is held by many in Congress, it is unlikely that many minds will change as a result of this latest study. For others, however, the new forecasts provide additional reasons for taking action to meet the challenges posed by climate change as early as possible.


Washington Insider: Dense Political Fog over Capitol

While the headlines now are dominated by speculation about coming Supreme Court decisions on health care and same sex marriage, several other issues of significant importance to agriculture also are involved in heated debates. For example, following a series of adverse World Trade Organization panel decisions on country of origin meat labels — the most recent just last month — the House of Representatives voted on June 10 to repeal the program. The vote was seen as a step toward averting an estimated $3.2 billion in retaliatory trade measures against the United States by Canada and Mexico.

Now, the Senate Agriculture Committee appears divided on a solution. This is in spite of the fact that Canada and Mexico say they are concerned about what they see as U.S. reluctance to change a program that damages them and that they fully intend to impose the maximum sanctions allowed by the WTO. Committee Chairman Pat Roberts, R-Kan., is telling the press that surest way to protect the U.S. economy from increased tariffs to follow the House lead and repeal the law.

How far the Senate may go in search of "another solution" remains to be seen — in spite of the heavy and widespread criticism of the law and its requirements for 100 percent domestic content for meat products to achieve the favored "product of the United States" label. Ranking committee member Debbie Stabenow, D-Mich., said she thinks lawmakers should find an alternative to repeal — although she did not suggest what that might be.

So, the issue remains contentious, and could remain so during a Senate Agriculture Committee hearing on the subject of COOL scheduled for 10 o'clock this morning.

In the meantime, another challenge to U.S. leadership of global efforts to increase access for U.S. products appears to be emerging in Brazil where there are indications of a movement toward yet another challenge for U.S. farm programs, this time for U.S. corn and soybean payouts.

A media report said last week that Brazil is "preparing" to challenge the 2014 U.S. farm bill subsidy programs, likely focusing on the forthcoming big payouts for some corn and soybean producers through the Ag Risk Coverage (ARC) program.

Those reports note that Brazilian President Dilma Rousseff will visit Washington at the end of this month and that some of her top trade officials will gather more information about U.S. producer safety net programs. It also is expected that her aides will raise the topic in meetings with U.S. officials ahead of the visit and during the sessions once in the United States. A Brazilian official was quoted as saying that his country "does not rule out a trade dispute, but we are in the early stages."

USDA and farm-state congressional aides frequently argue that U.S. farm programs are transparent and fair, do not distort commodity markets, and have minimal effects on production and trade. They note that language in the 2014 farm bill commits the safety-net programs to compliance to U.S. WTO commitments.

Nevertheless, critics long have argued that some of the large ARC/shallow loss payments expected this fall, together with changes in farm program payment caps could mean huge payments to some producers — perhaps large enough to boost plantings in 2016 above those that would have occurred had U.S. programs not been changed. The ARC program has been criticized by the EU, Canada and Australia.

Over the last decade, Brazil and a few other trading partners have shown themselves willing to challenge U.S. programs and have won significant settlements as a result. For example, a decade-long dispute between the U.S. and Brazil over cotton subsidies was resolved only last October when the United States agreed to make a single large payment of $300 million to the Brazil Cotton Institute while Brazil agreed to give up any rights to related countermeasures against U.S. trade.

Clearly, foreign markets are extremely important to U.S. producers. It is very early to suggest what Brazil may or may not do with regard to the new farm bill's programs but defense of the U.S. cotton programs was quite expensive in the past, and a decision to defend, rather than terminate, COOL likely will be expensive, too.

Perhaps the greatest expense by far could be an inward turn away from U.S. export markets, a shift that could have severely negative implications for the U.S. geopolitical position in the Pacific for years to come, Washington Insider believes.

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