Washington Insider- Thursday

EU Trade Barriers Remain

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

OMB Says President Will not Sign House Version of EPA Appropriations Bill

Shaun Donovan, director of the White House Office of Management and Budget, says the president will not sign pending legislation to fund the Department of the Interior, the Environmental Protection and other agencies for the upcoming fiscal year, due largely to the deep cuts contained in this and other spending bills working their way through Congress.

To remain below the caps imposed on congressional appropriators by the sequestration process, the Senate and House bills would impose budget cuts on EPA of between 7% and 9% below its current funding levels. Donovan said President Obama will not sign any federal spending bill that "locks in sequestration," not even a long-term continuing resolution that would fund the government temporarily at its current levels.

Many Hill watchers are betting that Congress once again will need to approve at least one continuing resolution before the Oct. 1 beginning of the new fiscal year.

Separately, in a letter to House Appropriations Committee Chairman Hall Rogers, R-Ky., Donovan says that the sequestration funding levels in FY16 Agriculture appropriations bill prevent safeguarding of derivatives markets, shortchange food safety needs, underfund efforts to address child poverty. The legislation also cuts competitive research grants, an action that would hurt the ability of the United States to respond to emerging animal health issues.

Writing appropriations bills that can avoid or withstand threatened presidential vetoes is becoming increasingly challenging for Congress this year.


Senate Republicans Strive to Find a 'Work-Around' for Budget Sequestration

Senate Republican leaders are continuing to search for ways to provide more relief from budget sequestration, even as appropriators keep moving spending bills at the levels stipulated by the Budget Control Act (BCA). Sen. Lindsey Graham, R-S.C., a member of the Senate Appropriations Committee (and a GOP presidential candidate), said the amounts allocated to various federal accounts under sequestration are inadequate to fund needed initiatives that he oversees as chairman of the State and Foreign Operations Appropriations Subcommittee.

Sen. Susan Collins, R-Maine, another member of the Appropriations Committee, said earlier that she also hopes there will be a deal later this year providing relief for sequestration in order to avoid the deep cuts in programs covered by the Transportation and Housing and Urban Development Appropriations Subcommittee that she leads. But Collins also recently said that absent a deal, the Appropriations Committee has no choice but to report bills following the mandates of the BCA. She and other Republicans also have rejected calls by Democrats to put the bills on hold and instead start talks with the White House on how to provide relief from sequestration.

As is the case for the House (see item above), the Republican Senate is finding appropriating in the current fiscal environment to be at least as difficult as it was for Democrats when they were in the majority.


Washington Insider: EU Trade Barriers Remain

While U.S. trade negotiators are busy negotiating an agreement with 11 trading partners working on the Trans Pacific Partnership (TPP), they also took part in the World Trade Organization's biennial trade policy review this week. The WTO report found good and bad things to say about the EU's trade policies, while the U.S. team was especially critical of the EU's continuing high agricultural tariffs and other trade barriers.

The U.S.-EU trade relationship is important, with annual two-way trade that totaled $1.06 trillion in 2013, the most recent year for which data are available. The largest U.S. farm export categories to the EU are: tree nuts; soybeans; soybean meal; wine and beer; and prepared foods — and services, a category in which the United States registered a trade surplus of $60.5 billion in 2013.

The EU, of course, frequently points to what it calls its "significant" modernization of its Common Agricultural Policy since the last review was conducted in 2013. These include new directives and implementing rules covering direct payments to agricultural producers, market measures and rural development.

In particular, the bloc has set its export refunds at zero since mid-2013, a truly significant reform of a policy that once allowed EU domination of several key global ag markets. And, EU agricultural and food imports surpassed $114 billion in 2014.

The WTO also pointed out that, "Although the reform in the CAP may reduce distortions to production in the EU, the total funding for agriculture and rural development will remain over $55.3 billion a year."

In addition, the WTO policy report noted critically, "… as with earlier reforms, market access measures, including tariffs, tariff quotas, and the use of the special agricultural safeguard are not directly affected and, therefore, agricultural producers will continue to be insulated from changes in international prices."

Deputy U.S. Trade Representative Michael Punke called the EU's high tariffs on farm goods a "significant obstacle to the capacity of our producers to succeed in the important EU market." While the average EU tariff is 6.5% and nearly a fourth of all tariff lines are duty free, "the average applied rate for agricultural products is more than twice that [average], 14.4%" and amounted to some $11.9 billion in 2013.

Punke was especially critical of the recent EU proposal to permit member states to restrict the use of genetically modified food in their territories, a policy that "does not square with either the EU's existing international obligations or its aspiration for a seamless internal market," Punke said. He noted that a number of EU sanitary and photo-sanitary measures are not supported by the scientific opinions of EU institutions and are defended on grounds other than demonstrated risks to human or animal health or the environment," he said.

U.S. and EU trade officials are expected to focus on these and other trade issues in Brussels for this summer's upcoming 10th round of Transatlantic Trade and Investment Partnership (TTIP) negotiations.

So, while the EU has moved away from reliance on its export subsidies to push its surpluses on global markets, it continues to hide behind very significant border measures as well as social barriers that many of its spokesmen insist are not on the international bargaining table. That posture makes it very difficult to imagine any type of ambitious U.S.-EU agreement from the TTIP negotiations in the near future, Washington Insider believes.

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