Washington Insider -- Thursday

Life Support for COOL

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

House Leaves Town with Budget Reconciliation Unresolved

The House was scheduled to begin its summer recess tomorrow, but GOP leaders decided to let their charges go yesterday after concluding that there was little that could be accomplished in the final couple of days. Among the other items that therefore have been pushed into the tight September legislative calendar is the budget reconciliation plan which Republicans have been promising, but which has yet to be formally presented.

House Majority Leader Kevin McCarthy, R-Calif., this week told reporters that House Republicans might unveil their plans for using budget reconciliation soon after returning from their five-week summer break. The word "might" deserves special emphasis since so many fiscal deadlines have come and gone during the first seven months of the 114th Congress.

Reconciliation bills receive protection in the Senate from filibuster, thus giving majority Republicans a chance to pass legislation that otherwise could be blocked by a united minority party. Earlier this year, Republican leaders said reconciliation would be used only to pass legislation to repeal the Affordable Care Act. Senate Republicans have longed for an opportunity to vote to repeal ACA but were thwarted as long as Democrats controlled that chamber. This time, they may get their wished-for vote, but the president's veto of the measure would be impossible for the Senate –– or the House –– to override.


Senate Republicans May Finally Get a Chance to Vote on Federal Regulation Reform

The Republican controlled House of Representatives has voted three times in the past four years to approve legislation that would reform the federal rule-making process by giving Congress veto authority over major regulations. However, since until this year the Senate was in Democratic hands, the previous two measures never made it to the floor. That is about to change.

Earlier this week, the House voted once again to approve a bill called the Regulations from the Executive in Need of Scrutiny (REINS) Act, and sent it to the Senate for action later this year. The bill would require federal agencies to submit major rules with an annual economic consequence of $100 million or more to Congress for approval. If the bill were to become law, it would give Congress significantly more power over the executive branch that it currently has. However, there is virtually no chance that President Obama would sign the REINS Act into law.

There have been suggestions that if Congress were to take greater care in writing legislation –– by providing greater specificity and reducing the need for federal rule makers to interpret the "intent of Congress" –– there would be far less need for Congress to involve itself in what previously were executive decisions.


Washington Insider: Life Support for COOL

The U.S. program that requires mandatory country of origin labels for meats and a few other products has repeatedly been found in violation World Trade Organization rules that the United States has agreed to — and, the House fairly readily voted to repeal the program last month.

The Senate, however, shows signs of balking. Sen. John Thune, R-S.D., says the Senate is likely to defer any action on the issue until September, and notes that he and Agriculture Committee ranking member Debbie Stabenow, D-Mich., are supporting a voluntary approach to the labeling issue.

In the meantime, Canada and Mexico, the two U.S. trading partners who won cases and appeals about the program, are moving persistently to implement an estimated $3.2 billion in tariffs against the United States.

Since the sanctions would affect much more than just meat or agricultural products, the National Association of Manufactures says it is very worried that congressional delays will lead to their implementation. "Even threat of retaliation on our products starts drying up orders," Linda Dempsey, NAM's vice president of international economic affairs told the press. "At this point, repeal is the only option to alleviate the threat of retaliation."

Dempsey said her members could lose customers for good. "Exports have been a reason we've been able to grow coming out of the recession," she said. "This year has been slow overall. We really don't need one more strike against us.

In fact, advocates of the current program seem to be largely out of options. Stabenow and Thune, along with seven other senators, recently co-sponsored a bill that would rescind mandatory COOL for beef, pork, chicken and ground products and establish a voluntary labeling program for producers. However, it would keep the same rules for labels, thus allowing processors to label cuts as coming from animals "born, raised and slaughtered in the U.S." As a result, most trade observers conclude that it would still require segregating Canadian hogs and calves and Mexican cattle and therefore would not prevent retaliation against U.S. products.

Senate Ag Committee chairman Pat Roberts, R-Kan., last week also filed an amendment that would repeal mandatory COOL without the voluntary option. His proposal has the support of 10 Republicans. "It is clear that to protect our economy — to ensure Canada and Mexico drop their pursuit of retaliation on U.S. exports — we must first take up the House- passed bill repealing COOL, a bipartisan bill that received 300 votes," Roberts told the press.

Stabenow claims that her bill offers the same language that was passed in the House and simply gives famers a voluntary tool. But that claim is highly disputed by both Canada and Mexico. Canadian Agriculture Minister Gerry Ritz and International Trade Minister Ed Fast said Stabenow's COOL proposal would continue to undermine Canada's integrated North American supply chains. "By continuing the segregation of and discrimination against Canadian cattle and hogs, Senator Stabenow's measure will harm farmers, ranchers, packers, retailers and consumers on both sides of the border," they said. "This is contrary to successive WTO decisions that have clearly ruled in Canada's favor."

Mexico also has been firm in its intentions to retaliate against the United States with an estimated $713 million in sanctions. "The proposal in the U.S. Senate does not resolve the concerns of Mexico; it includes the requirement to indicate the place of birth, fattening and slaughtering of livestock, which would continue encouraging segregation in the supply chain," Mexico's Department of Social Communication said in a news release.

Sen. Stabenow downplays Mexican and Canadian claims, a somewhat strange position since they won the COOL case and subsequent appeals. In addition, observers are increasingly suggesting that the COOL program with its burdensome domestic content requirements for labels was an overreach from the beginning — and still has strong potential to undercut U.S. leadership in global trade deals.

So, the question now seems to be whether the broader, highly trade oriented U.S. ag sectors are able to mobilize sufficiently in time to head off the sanctions before they are implemented. Currently, the political momentum seems to be running against COOL and toward more market-oriented policies.

However, COOL still seems to have significant support in spite of its clear protectionist implications that carry more than a little potential to limit market access gains as long as it persists, Washington Insider believes.

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