Washington Insider -- Tuesday

By DTN's Washington Insider

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

Supreme Court of Canada Ruling in 'Beer Case' Keeps Supply/Management Programs Intact

Canadian provinces and territories have a constitutional right to restrict imports of goods from each other, provided those restrictions are not primarily put in place to restrict trade, according to a Supreme Court of Canada ruling.

The ruling in the so-called "beer case" not only prevents easier access for many Canadians who were hoping to gain easier access to cheaper or in-demand products from other provinces, but it also appears to keep the supply management programs for dairy and others intact. The case focused on the interpretation of section 121 of the Constitution Act. That states that products from any province "shall... be admitted free into each of the other provinces." But a Supreme Court of Canada ruling in 1921 found that provision only meant the products had to be free from tariffs, but that limits on quantity could still apply.

The court also mentioned the supply management programs that some feared could be removed if the court ruled in favor of the New Brunswick resident. Specifically, the court said that if it was determined that section 121 of the Constitution Act applied in this case, "Agricultural supply management schemes, public health driven prohibitions, environmental controls, and innumerable comparable regulatory measures that incidentally impede the passage of goods crossing provincial borders may be invalid."

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NAFTA 2.0 Talks In 'Perpetual' Negotiation, Says Canadian Official

The three NAFTA countries are still pushing to get a "comprehensive" agreement even as the main point of focus of late has been on the automobile rules or origin, according to Mexican Economy Minister Ildefonso Guajardo.

"There is no sense to modernize the NAFTA and to upgrade the NAFTA, if it is not based on what you have built in the original one," Guajardo told reporters, noting that the discussions also have to reflect the modern economy.

Meanwhile, Canadian Foreign Minister Chrystia Freeland the "heart" of the discussions now are the auto rules of origin. "We continued to work very hard on rules of origin, really the heart of this agreement," Freeland said. "Our negotiators will be staying in Washington over the weekend ... and then ministers will reconvene next week. So I think you can call this a sort of perpetual negotiating." The top officials are expected to meet again on Tuesday.

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Washington Insider: Congress Sets Modest To-Do List as Polarized Campaign Begins

Bloomberg is reporting this week that Republicans are now showing little appetite for big action as election challenges loom. The House took much of last week off and doesn’t get back to Washington until today. The Senate is bogged down in confirmation hearings. And many lawmakers are already focused on their first election campaigns since President Trump took office.

Democrats are working hard to take the House or Senate majority in November -- or both. As a result, as in most election years, Congress’s legislative schedule is light on high-profile initiatives, especially compared to last year’s agenda featuring massive tax cuts and the unsuccessful attempt to repeal and replace the Affordable Care Act.

Lame-duck House Speaker Paul Ryan, R-Wis., insists he’ll finish this term with a focus on bills to encourage employment and job training. But Senate Majority Leader Mitch McConnell, R-Ky., is limited by Senate rules that require help from Democrats to advance legislation. The Senate has even struggled to confirm Trump administration nominees, such as Thursday’s 50-49 vote on Jim Bridenstine to lead NASA.

So Congress will concentrate mainly on the meat and potatoes of government—and lawmakers will be required to keep returning to Washington, even as they campaign for re-election at home. One such item is the farm bill—which usually is a bipartisan measure that unites lawmakers from rural states with supporters of Supplemental Nutrition Assistance Program.

This time, however, the House Agriculture Committee last week passed a GOP-only version with Democrats withholding their votes mostly in opposition to a provision expanding work requirements for some SNAP recipients. The Senate Agriculture Committee’s Republican and Democratic leaders say they’re working on a bipartisan bill that will largely ignore the House changes. The current farm legislation expires at the end of September, and a simple extension may be necessary.

In addition, Bloomberg says, several proposals for legislation may simply be put off. For example, some Republicans want to vote to make tax cuts for individuals permanent—last year’s tax overhaul permanently reduced the corporate rate, while the lower rates for individuals are set to expire after 2025.

“We fully intend to make these things permanent,” Ryan said last week, "and that’s something we’ll be acting on this year.” However, Republicans disagree on whether this idea is a political winner, in part because the effort would remind people that their tax cut is only temporary. McConnell said he would consider it, but he’s skeptical there’s a desire in the Senate to vote this year. Republicans won’t use a fast-track budget process that would allow them to act without Democratic support.

Separately, tax professionals have urged lawmakers to make technical corrections to the tax legislation, including provisions affecting net operating losses, charitable deductions, and full and immediate expensing. But so far, Republican leaders have signaled they won’t vote on a stand-alone bill before November, Bloomberg said.

The House and Senate have taken different approaches to rolling back banking regulations. The House last year passed its plan which would rip up major parts of the Dodd-Frank law passed after the 2008 financial crisis, repeal the Volcker Rule and scrap the fiduciary rule, which requires brokers to put customers’ interests ahead of their own when handling retirement accounts.

The Senate last month passed a bipartisan plan that raises the asset threshold for banks to be designated as systemically important financial institutions, subject to stricter Federal Reserve supervision. While intended to ease regulations for smaller banks, it doesn’t go as far as some Republicans and Wall Street bankers wanted.

In the Senate, pressure is growing to complete confirmation hearings for dozens of judicial and executive branch nominees, including administration choices to replace leadership at the State Department and Central Intelligence Agency.

And, the House and Senate Appropriations Committees are taking the president at his word when he said he won’t sign any more spending bills like the $1.3 trillion omnibus that became law in March.

At this time, the House plans to consider 12 appropriations bills in May, and the Senate will try to pass at least a handful of them before the August recess. Still, the Senate is unlikely to pass them all before the 2019 fiscal year begins Oct. 1, which means Congress will need a short-term extension to avoid a government shutdown.

Administration officials say they wanted to retroactively cut as much as $60 billion from the 2018 funds, but McConnell said he’s not interested in canceling any money after months of delicate bipartisan negotiations.

Also, lots can happen even as Congress plans to coast into the election, Bloomberg says. A Senate bill to protect Special Counsel Robert Mueller could gain urgency if Trump threatens his investigation. Trump’s trade negotiators could also send a retooled North American Free Trade Agreement (NAFTA) for approval. And Paul Ryan could face calls for a pre-election succession battle for House speaker, even though he promised members he plans to “run through the tape” with a strong finish to his term.

So, we will see. It now seems like the farm bill faces highly controversial debates in both chambers, fights producers should watch closely as they emerge, Washington Insider believes.

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