Washington Insider -- Friday

By DTN's Washington Insider

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

House GOP Planning Possible Tax Overhaul for 2016

Tax reform proposals are being discussed among House Republicans and may include international tax changes as well, according to House Ways and Means Committee Chairman Kevin Brady, R-Texas.

“It’s clear that 2016 is going to be a critical year to lay the foundation for tax reform, and there may be an opportunity for significant international tax reform as well,” Brady told reporters on Jan. 6 after the weekly lunch for Republican Ways and Means Committee members.

The tax reform issues will be raised at two upcoming House Republican retreats. The first retreat, for all House Republicans, will be held Jan. 13-15, and a second retreat, for Ways and Means Republicans, will take place Jan. 25. The second meeting is expected to involve creating a strategy for moving tax reform legislation forward.

Support for tax reform legislation is strong among members of the conservative House Freedom Caucus, whose chairman Rep. Jim Jordan, R-Ohio, has indicated the group will pressure leadership for a vote on such legislation.

A meeting with international tax reform advocate, Sen. Chuck Schumer, D-N.Y., of the Senate Finance Committee is planned, Brady said. Schumer has previously supported the so-called innovation box, which would encourage multinational companies to remunerate their profits to the U.S. by providing a lower tax rate on income related to certain assets, including intellectual property.

Major tax reform legislation is not expected to be enacted until after the presidential election, possibly in 2017, and Brady suggested that his recent moves are just the start, saying “We’re advancing tax reform, one or more ways, in 2016.”

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ERS: US the Largest Poultry Exporter to Sub-Saharan Africa

U.S. poultry exports to Sub-Saharan Africa have grown over the past decade as rising incomes, a growing population and urbanization have boosted demand for poultry in the region, according to the Economic Research Service (ERS).

Limitations for domestic poultry production in Sub-Saharan Africa have made the region very reliant on poultry imports from the U.S., European Union (EU) and Brazil to meet domestic demand. A total of 93% of U.S. poultry exports to Africa are to Sub-Saharan nations and since 2012, the U.S. has been the region’s leading poultry supplier.

Africa’s share of all U.S. poultry exports reached 12.6% in 2014, second only to Mexico which commanded a 23.8%. Following Africa is Hong Kong, with an 8.6% share of U.S. poultry exports, China with 5.8% and Canada with 3.7%. U.S. poultry exports to Sub-Saharan Africa totaled 455 million kilograms in 2014, with a value of $523.6 million.

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Washington Insider: Taps for Doha, NYT Says

Well, it seems that the New York Times, in spite of its frequent approving reports of the most strident anti-trade arguments, now has regrets that Doha is failing. The collapse was not unexpected, the Times says, given how fruitless these discussions have been recently. But, world leaders “need to think anew” about the global trading system, the Time preaches.

Countries had hoped that the talks would substantially lower trade barriers, contribute to development in poor nations and tackle difficult issues like agricultural subsidies that were not resolved in earlier pacts. Failure to achieve this agenda has “undermined the credibility of the multilateral trading system and hurt the least-developed countries, which need to export more to richer countries. Well, yes.

The Times is pretty realistic in its assessment of causes of failure. At the start of the Doha Round, American and European officials committed to producing a trade agreement that would promote development in poorer countries without asking them to reduce import barriers to the same extent. However, as developing countries, particularly China, began exporting far more than they were importing, wealthier countries started demanding that they also lower import barriers and cut subsidies to their farmers. Not surprisingly, China and India refused, insisting on sticking with the original principles.

The Times notes that many countries are turning to far less ambitious regional agreements, which “can be useful if done right,” but that strategy threatens to segregate the world into overlapping trading blocs with different rules in areas like labor rights, environmental protection and access to medicines, among others.

And most such pacts which include tariff elimination of tariffs for products made within the trading bloc do not include the world’s least-developed countries, like Bangladesh and Ethiopia.

Another approach, NYT says, is to pursue more limited pacts that include many or all members of the WTO focus on limited objectives like trade facilitation, which covers improved customs procedures, border crossings and ports with aid and technical expertise offered poorer countries. Another worthwhile effort, it concludes, began in 2014 with 14 WTO members, including the United States, China and the European Union, is designed to eliminate tariffs on environmental goods like solar panels and wind turbines. Still none of these approaches fill the bill, NYT says.

Pacts focusing on specific issues may be easier to negotiate but can’t cover the broader issues that countries, rich and poor, have to wrestle with. Trade increasingly determines how governments set social policies and labor conditions within domestic markets, and, of course, affects the future of the environment locally as well as globally. The Doha talks may be at a dead end, the Times argues, but “there has to be a place for global trade pacts that encourage development and sustainable economic growth.”

Well, the NYT’s sentiment about bad news regarding the end of Doha likely will be welcome in the office of the US Trade Representative, but it leaves out quite a few things the paper might have helped with, it seems. The first is the brutal fact that effective, long-lasting trade deals increase competition, both for things countries produce inefficiently and those in which they have strong advantages. On many, many occasions, the Times has reported favorably, and with a straight face, on domestic protections that were imposed to limit competition for locals, a key threat to effective trade deals.

It may be difficult to explain in a daily paper the idea that trade means some winners and some losers and understanding the need for helping out those who bear the brunt of competition may be a really tough sell — and, that politicians who pander to sectors that really don’t compete well should be called to account. We have seen little of that.

The second fact is that trade is not magic, although it is powerful, it cannot heal all wounds. Thus, it often is productive to emphasize that trade deals should support effective labor and environmental laws, and uplift the downtrodden.

But, trade that flows only when world rules are perfect likely will not flow at all. Pushing trade deals to do more than trading partners are willing to concede or able to support likely means much reduced trade, at the expense of all. Yet, many involved in national trade debates seem willing to disregard this often demonstrated fact, and the press seems reluctant to point that out.

So, was it a mistake to link trade deals to development as closely as was done at Doha? Turns out, it was and the effort failed. Now, the US political environment is increasingly hostile to trade, especially to trade agreements and especially to concessions necessary to strike deals. How hostile? We will see as the TPP faces ratification. Can we continue to build a prosperous world without well regulated, extensive trade relationships? We likely will see about that, too, over the coming months, Washington Insider believes.

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(GH/CZ)

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