Washington Insider-- Wednesday

By DTN's Washington Insider

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

Some Details Surface Regarding Trump Plan for NAFTA Renegotiation

The Trump administration has created a list of 24 foreign trade practices it would like to address in a renegotiation of NAFTA and in any bilateral trade deal it might pursue, according to sources.

The list, Key Elements of a Model Trade Agreement, was given to Senate Agriculture Chairman Pat Roberts, R-Kan., ahead of last week's Finance Committee hearing on the nomination of Robert Lighthizer to be U.S. Trade Representative.

Country of origin labeling (COOL) is reportedly on the list. Roberts reportedly was not happy to see the trade renegotiation list included COOL, which sparked a meat trade dispute between the US and its NAFTA partners. "We fixed the issue of COOL in 2015," Roberts said. "We don't need to go down that road again. We narrowly escaped about $4 billion — somewhere between $2.5 billion and $4 billion — in retaliatory tariffs against the United States."

Commerce Secretary Wilbur Ross, during his confirmation hearing in January, told the Commerce Committee that he wanted to help develop a model trade agreement containing "certain principles that would have to be in any agreement." He said it is a "huge mistake to start out each time with kind of a blank page from ground zero. Makes it take longer, makes it harder to negotiate." Ross added, "The best negotiating tool is to be able to tell someone: 'I can't change this. This is official policy. You know it is. We've got it in 10 other deals.'"

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US, Mexico Start Sugar Trade Suspension Talks This Week

The U.S. and Mexico started talks this week aimed at improving agreements that manage Mexican sugar imports.

The two countries agreed earlier this month to continue efforts to salvage the trade suspension agreements, which hold off antidumping and countervailing duties on Mexican imports in favor of an arrangement that manages trade by setting minimum prices and quantitative restrictions.

Commerce was set to issue a final determination in an administrative review of the deals by April 4 but the deadline was extended to May 1, Commerce Secretary Wilbur Ross said after a March 10 meeting with Mexican Economy Secretary Ildefonso Guajardo Villarreal.

US sugar producers have complained that the agreements have led to disruption in the U.S. sugar market. Mexican producers have been accused of circumventing the agreement by exporting semi-refined sugar that needs minimal processing yet avoids quantitative restrictions on the amount of refined sugar exports.

Some U.S. refiners argue the result of the deal has been a shortage of raw sugar as well as major price suppression for refined sugar.

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Washington Insider: Upcoming Farm Bill Debate

As Governor Sonny Perdue prepares for his confirmation hearing on Thursday, one set of key issues will concern the upcoming farm bill debate, a huge deal, Bloomberg says based on an overview published by the Congressional Research Service.

CRS notes that many of the provisions of the 2014 farm bill will soon expire unless reauthorized, so Congress is already at work on replacement legislation and likely so are the policy mavens at USDA. In recent decades, the breadth of farm bills has grown steadily to include new and expanding food and agricultural interests that likely will be covered in 12 titles that include farm commodity revenue supports, farm credit, trade, agricultural conservation, research, rural development, energy, and foreign and domestic food programs, among others, CRS says.

The upcoming review and reauthorization debate will be especially important because the expiring 2014 Act reshaped the structure of farm commodity support, expanded crop insurance programs, consolidated conservation programs, reauthorized and revised nutrition assistance, and extended authority for many USDA discretionary programs through Fiscal 2018. Still, in some cases, producers are reporting that the new safety net programs are not functioning as expected and need revisions.

When the 2014 Farm Bill was enacted, CBO estimated that the total cost of its mandatory programs would be $489 billion over the five years, Fiscal 2014-18, or nearly a trillion dollars over the decade. Four titles accounted for some $483.8 billion of anticipated program outlays: nutrition, crop insurance, conservation, and farm commodity support.

The nutrition title, which includes the Supplemental Nutrition Assistance Program, comprised 80% of the total, with the remaining 20% mostly geared toward agricultural production across other titles.

Traditionally, the primary focus of omnibus farm bills has been commodity-based revenue supports for agricultural producers. The 2014 farm bill amended these programs by expanding crop insurance provisions and modifying counter-cyclical support—and by eliminating direct payments to growers of grains, cotton, and peanuts.

In addition, upland cotton was removed from eligibility for participation in the new revenue support programs as part of compliance efforts with a WTO dispute settlement case won by Brazil. Instead, cotton producers were offered an insurance-like support program that protects against within-season revenue shortfalls.

Another major change involved dairy. Previous support programs were replaced with a new insurance-like margin protection program that insures against shortfalls in the difference between milk prices and feed costs. Now, many farm program advocates argue that the new cotton and dairy programs have been ineffective and pushing new proposals for change.

Other farm interest groups, however, continue to point to competing policy priorities that cover a range of equity concerns across the entire sector and call for enhanced support for small and medium-sized farms, specialty crops, organic agriculture, local and regional food systems, healthy and nutritious foods, research, conservation and rural development, among others.

In addition, the coming debate is expected to focus heavily on budget implications. CBO says that extending current programs would mean mandatory spending by the four largest titles- nutrition, crop insurance, farm commodity programs, and conservation of about $435 billion over the next five years, with domestic nutrition assistance accounting for some 77% of the total. This is somewhat below actual costs for the first three years of the 2014 farm bill and projections for its last two years, which suggest that these four titles may cost $456 billion over the period.

In the 2014 debate, the farm sector was somewhat healthier economically than the economy overall, and there was concern in some quarters about whether political support for such an expensive bill would be forthcoming. In fact, much of the debate did focus on national social issues rather than on the health of the sector and relatively strong, new safety nets were approved.

This time, although ag markets have been tight and farm incomes have declined recently, the national debate on spending and other social concerns appears to be even more intense and certainly will include agriculture. Pressures to reduce costs of the nutrition programs likely will continue to be intense and scrutiny by budget hawks can be expected for conservation and ag safety net programs, as well. Thus, the coming farm bill debate can be expected to be both long and contentious, Washington Insider believes.

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