Washington Insider-- Friday

Risks of TPP Failure

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

Japanese Diet to Begin TPP Deliberations in Special Session

Japanese lawmakers will consider legislation to approve the 12-nation Trans-Pacific Partnership (TPP) pact now that a supplementary Fiscal 2016 budget has been approved.

Prime Minister Shinzo Abe's administration and coalition parties want to begin discussing legislation to implement and ratify TPP, so they can approve related bills before the U.S. presidential election Nov. 8.

Approval of Japan's Fiscal 2016 budget leaves TPP-related legislation as the next and effectively only remaining legislation to be debated by the Diet.

Abe administration officials and lawmakers who are members of the ruling Liberal Democratic Party (LDP) and its coalition partner Komeito (Clean Party) October 12 said leaders from the two parties agreed to propose beginning deliberations in the House of Representatives Special TPP Committee on Oct. 14.

Still unclear is when the committee will be convened. A spokesman for the Nippon Ishi-no-kai, a small pro-coalition party, confirmed that the party's secretary-general Nobuyuki Baba told reporters Oct. 12 that his party supports the coalition's plan to convene the TPP committee.

A spokesman for the primary opposition, the Democratic Party of Japan, said they are opposed to convening the committee because the coalition is ignoring the traditional Diet protocol of hearing Cabinet ministers' policies on the Diet standing committees before holding a special committee meeting.

Even if the special committee does not convene as planned, the committee is likely to be convened soon due to Abe's continuing high voter support and the coalition's powerful majority, an LDP source told Bloomberg BNA.


New Law Extends Livestock Producer Protections for Electronic Transactions

Livestock transactions made using electronic exchanges now have the same protections as their traditional counterparts via legislation overhauling the Packers and Stockyards Act (PSA) signed Oct. 7 by President Barack Obama.

The Clarification of Treatment of Electronic Sales of Livestock Act (CTESLA) amends the protections provided by the PSA to include livestock transactions made through video or online forums, a growing segment of the market. Rep. David Rouzer, R-N.C., was the primary sponsor of the measure.

Other provisions require meat packers with annual purchases of more than $500,000 to be bonded to conduct electronic transactions. Producers selling their livestock electronically will also have trust protections in case of nonpayment, similar to if the transaction were made using traditional means.

The law is likely to have little impact on livestock purchases, a September 16 estimate by the Congressional Budget Office (CBO) found, as most operators of online and video livestock auctions already follow the same PSA regulations as for traditional transactions.

Other provisions of the law clarify that funds can be transferred electronically, such as through a credit or debit card. Previously, the PSA allowed only checks or wire transfers to settle sales.

CTESLA was passed by the House Sept. 26 with the Senate clearing the bill Sept. 29.


Washington Insider: Risks of TPP Failure

The Washington Post is not usually a big fan of Republican presidential candidates and it generally opposes economic protectionism and supports trade. So, it is no surprise that it was willing to report a recent statement by John Kasich, Republican Governor of Ohio, on the Trans-Pacific Partnership (TPP) proposal.

Kasich opposes the Party's standard bearer on trade, among other things, and argues that the TPP will provide a crucial test of whether the United States still has the ability or will to continue to be the undisputed global leader, as it has been since World War II.

Kasich argues that Congressional decisions on the TPP will affect the course of US "security, prosperity and global influence for the rest of the 21st century." In fact, he sees "trade as the foundation for peace." He also argues that this test as coming at "a time of increased Chinese and Russian assertiveness."

Kasich urges Congress "not to be fooled by divisive talk in the presidential campaign that the TPP is only a debate about trade." At its very core, this agreement is about making sure the United States continues to strengthen its essential alliances and is willing to sustain its standing as the global leader, something we have done for more than half a century.

The argument is important, he thinks, because China, Russia and their dangerous client states such as North Korea and Iran are working to "outmaneuver everyone else." At the same time, fast-growing, independent nations are looking to partner with the United States and thereby bring their strategic, economic and political values into alignment with ours. That list, he says, begins with the initial TPP partners, but "as many as 10 additional economies have expressed interest in joining," and the last thing we need is for these thriving markets to come to believe they can't count on US support. "Vladimir Putin, Russia's latter-day Stalin; and Xi Jinping, the most repressive Communist Chinese leader since Mao Zedong are strong advocates in this contest."

Kasich sees this agreement as crucial. Global concern is growing rapidly regarding the U.S. resolve about its willingness and ability to continue its historic role. It's time for members of Congress to put aside partisan politics, resolve their differences and ratify the deal—and, send a message to the world that we are the global leader, today and forever, he says.

The Kasich "message" has little prospect of changing either this year's toxic debate on the economy or the widespread belief that trade has badly damaged some economic sectors. At the same time, there appears to be increasing pushback to the widespread political promise to "bring back" lost jobs in coal, manufacturing or other sectors.

For example, the New York Times recently carried an article that asserted that from an economic perspective there can be no revival of American manufacturing--because there has been no collapse even though fewer jobs are now required. It was automation that reduced jobs in factories, the Times says. In fact, the value of stuff made in America reached a record high in the first quarter of 2016, even after adjusting for inflation. The present moment, in other words, is the most productive in the nation's history.

Politicians of all persuasions have tried to turn back time through a wide range of programs best summarized as "throwing money at factory owners," the Times says. They offer tax credits and other incentives; some towns even build whole industrial parks, at taxpayer expense, so they can offer free space for manufacturers. By and large, those strategies haven't helped and some, such as proposals to tax imports, are more likely to hurt.

The article basically argues that the current anti-trade proposals have little chance to help the economy because they do not recognize the most basic problem, which is technological change and how to deal with that. It emphasizes the fact that the job growth that has taken place is much different from factory work and that is it much more difficult to boost the productivity of those jobs and thereby raise their wages and incomes.

This focus doesn't eliminate the problem of unequal income growth, but it does reduce the risk of turning to isolationism as an answer. This is a difficult problem for agriculture, which depends heavily on exports for market growth and which has a large stake in avoiding the anti-trade proposals now being discussed.

Still, the tone of the most recent trade policy discussions seems at least a little different than they were only a few months ago. These potential deals include major benefits for agriculture and continue to face heavy, ungrounded criticism and therefore are still at risk -- a high stakes fight for producers that should be watched carefully as it proceeds, Washington Insider believes.


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(GH/CZ)