Washington Insider -- Friday

Chinese State Visit, High Level Consultations

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

Kerry Plans to Present Claims Bill During Today's Trip to Cuba

John Kerry today opens the U.S. embassy in Havana, becoming the first U.S. secretary of State to visit Cuba since 1945. During the course of the trip, he plans to raise the subject of the nearly 6,000 certified claims that U.S. corporations and citizens have filed against the Cuban government with the Foreign Claims Settlement Commission.

In 1960, the Cuban government confiscated $1.8 billion in private property and assets from U.S. corporations and residents when it nationalized the economy. However, the government did not compensate the companies or individuals for the seizure, and the claims filed in connection with it remain unsettled. With interest, the Cuban government may owe certified claimants between $7 billion and $8 billion.

Lack of compensation for property seized by the Cuban government 55 years ago has been a major point of contention regarding the Castro government through the intervening years. Should Cuba agree to pay the claims, it would take that issue off the table and perhaps smooth the way for more normalized diplomatic relations. However, it is unlikely that Cuba has an extra $7 billion to $8 billion available to pay the claims, even if it chose to do so. Analysts will be watching closely to see what the Cuban government's official response will be.

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Corn Growers Seek Delay in EPA's Clean Water Rule

The Environmental Protection Agency and the U.S. Army Corps of Engineers should postpone the effective date of their final clean water rule until they are able to train and educate field staff and develop "sound" guidance to implement the regulation, according to the National Corn Growers Association.

In a letter to EPA Administrator Gina McCarthy, NCGA President Chip Bowling said it is imperative that the rule's effective date be delayed, particularly in light of recent corps memos that revealed "clear disagreement" over fundamental policy matters involving what are adjacent waters and whether isolated waters can be considered jurisdictional.

McCarthy has indicated that EPA will not be pulling the clean water rule back, even in the face of lawsuits brought by the attorneys general of more than half the 50 states seeking to overturn it. It therefore seems unlikely that the corn growers' letter will tip the balance. However, the letter does mention the possibility that corn growers could "face serious financial and legal risks if the rule takes effect Aug. 28," thus perhaps laying the foundation for a possible legal challenge down the road.

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Washington Insider: Chinese State Visit, High Level Consultations

One of the main policy topics in Washington these days, since Congress is out of town, is China. The focus is on next month's visit to Washington by President Xi Jinping and, the growing number of U.S.-Chinese issues that may be on the agenda. Although President Obama met with Xi for an informal summit in California in 2013, the September visit will be much more formal, and, perhaps, more important.

The most recent issue, of course, is China's currency devaluation which demonstrates the strength of U.S.-Chinese economic links, and which is uniting politicians in their outrage. However, there are many other important items on the table, too. These include hacking of U.S. government personnel records by Chinese operatives; maritime skirmishes between China and its neighbors in the South China Sea; and now renewed currency manipulation.

Administration officials acknowledge the tensions but play down the consequences of the currency manipulation on the pending summit, insisting that the current China policy is built to withstand areas of conflict.

Last November, amid similar tensions, Obama visited Xi in Beijing and the two leaders announced a major agreement to reduce carbon emissions, as well as plans to extend business and tourist visas. At this time, there appear to be no major announcements on the agenda. As a result, policy observers see the escalating rhetoric on Capitol Hill and among campaigning politicians as likely to increase pressure on the president to get tougher on Xi, even amid impressive formalities.

Senior administration officials are telling the press that the "China relationship" should be studied realistically. "You'll see on display during the state visit an accurate representation of U.S.–China relations writ large," said one senior administration official on condition of anonymity. "There are a number of cooperative areas where we are working together, and other areas where we have fundamental concerns about China's behavior. We won't pull any punches on those issues. We will have very candid discussions."

Experts also hasten to point out that the Chinese have their own set of grievances, including Obama's push for the Trans-Pacific Partnership (TPP) trade deal that does not include China and has been cast as a hedge against China's economic influence in the region. Also, the administration's bid to persuade allies not to support the China-backed Asia Infrastructure Investment Bank certainly was unpopular in China.

Still, many foreign policy experts continue to push the White House to take a tougher position with Beijing. In response, the administration has been wary and moved to block bipartisan efforts from the Senate to insert tough currency provisions into Trade Promotion Authority (TPA) legislation passed in June. However, the president still will need congressional approval for a final deal and the recent Chinese devaluation "highlights the need to include a strong and effective obligation on currency manipulation in TPP," said Rep. Sander Levin, D-Mich., ranking member on the House Ways and Means Committee.

Experts say that while China is often been cast as a villain in U.S. political debates, Beijing's leaders return the favor at home, and understand such posturing. Still, White House aides point out that the administration — any administration — needs Beijing's help on global challenges ranging from Iran, where China is among the nations involved in Obama's nuclear deal with Tehran, to fighting the Islamic State to Ebola relief to international terrorism. And, of course, in combating climate change.

Still, lawmakers are airing their concerns more forcefully these days as Xi's visit grows closer. On Tuesday, a bipartisan group of 10 senators wrote the president calling on him to raise the issue of human rights abuses with Xi next month. Members of the group said that they expect many economic and trade issues will figure prominently in the upcoming discussions. They also assert that "Under President Xi, there has been an extraordinary assault on rule of law and civil society in China."

Clearly, the economic troubles in China and the policy changes being implemented to deal with them are on many people's minds this season. And, the world will be watching closely as the visit proceeds. China is an enormously important trading partner for U.S. ag producers and China's internal policies affect those markets directly, as recent U.S. commodity price volatility has demonstrated.

Thus, producers need to watch these talks especially closely as they proceed, Washington Insider believes.


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(GH/CZ)