Washington Insider --Monday

White House Weighs Clawing Back State, Foreign Aid Funding

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

Hopes Rise as Trade Week Arrives

Reports Friday injected fresh optimism into the U.S.-China trade situation that had earlier last week started to rise with discussions announced for this week in Washington.

Attention on the trade situation remains high and the Wall Street Journal reported that the U.S. and China were aiming at developing a strategy to try and repair trade tensions between the two and potentially set the stage for a meeting between President Donald Trump and Chinese President Xi Jinping.

There are two international meetings set for November that would provide a backdrop for Trump and Xi to meet, presumably to put things to rest between the two on trade.

All this unfolds as the U.S. Trade Representative starts six days of hearings on their proposed list of $200 billion in Chinese goods that would be targeted with tariffs of up to 25%. And, lower-level talks between the two countries are also set to take place Wednesday and Thursday in Washington – the initial source of trade optimism that surfaced last week.

And the U.S. is poised to launch another round of tariffs on $16 billion in Chinese goods Thursday, with China promising to respond with tariffs on a like amount of U.S. goods.


US-Europe Trade Discussions on Tap

European Commission trade officials are slated to meet today in Washington with their U.S. counterparts to follow up on an agreement made July 25 between commission President Jean-Claude Juncker and President Donald Trump. Europe pledged to import more LNG in a bid to diversify imports, while the U.S. seeks new markets for its expanding production of the fuel.

The confab in the coming weeks will be focused on getting rid of tariffs on industrial goods. The targeted goods will not include automobiles and agricultural products, according to the European Commission.

The working group is charged with implementing the July 25 EU-U.S. joint statement, which called for “zero non-tariff barriers, ” in addition to zero tariffs and zero subsidies on non-auto industrial goods. The sides are exploring a limited trade deal that would not be as comprehensive as the shelved Transatlantic Trade and Investment Partnership.

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Washington Insider: White House Weighs Clawing Back State, Foreign Aid Funding

The Hill is reporting this week that the White House is considering attempting to “claw back” billions in funding from the State Department and U.S. Agency for International Development.

The Office of Management and Budget, according to multiple reports, is eyeing cuts that could total more than $3 billion from previously allocated funding. The Hill says this is part of an administration effort “intended to target funding it views as unnecessary."

“If Congress fails to take action to release the funds, they will remain on hold until the end of the fiscal year ... then be returned to the Treasury,” according to an OMB memo which was first noted by the Washington Post.

The Hill says the administration is not talking about such a potential funding pullback and responded to questions about the proposal by saying "we do not comment on alleged leaks and will not discuss deliberative and pre-decisional information." However, the Hill notes that “talk of a section rescissions package has sparked a round of speculation and chatter on Capitol Hill.”

For example, Sen. Richard Shelby, R-Ala., told reporters that he had heard the administration was contemplating a second attempt at clawing back spending but hadn't yet seen a proposal.

"I myself haven't seen any of that, but we've heard that it might come up or that it is coming up," he said.

Sen. Chris Coons, D-Del., a member of the Foreign Relations Committee, noted that the administration had repeatedly tried to undermine the State Department and US Agency for International Development's budgets, but Congress had curbed that effort.

“Fortunately, on a bipartisan basis we’ve consistently rejected those cuts. I view this rescission strategy as just another way to make harmful cuts to our work around the world," he told reporters this week.

The Senate previously rejected a $15 billion rescissions package in June. Sens. Susan Collins, R-Maine, and Richard Burr, R-N.C., joined with Democrats in opposing the legislation which then lacked the simple majority needed for passage.

But senators and staffers are raising red flags that they could be powerless to block a second package because the 45-day period normally given to Congress to approve a rescissions package would go past Sept. 30, the end of the fiscal year, The Hill said.

If Congress doesn't take action, OMB is arguing that the administration could automatically take back the funding after the end of the fiscal year.

If the administration goes forward with its plan, Congress could try to push back by including language forcing the administration to spend the money in a continuing resolution that is expected to be needed to fund the government past the end of next month.

Sen. Bob Menendez, D-N.J., said he had heard the administration was weighing another rescissions package, but warned there would be "consequences" if they sent it up so close to the end of the fiscal year.

Sen. Bob Corker, R-Tenn., the chairman of the Foreign Relations Committee, questioned if it was legal for the administration to submit a rescissions package so close to the end of the fiscal year.

"I don’t know how they can do that legally," he said at a committee hearing. "We certainly look forward to seeing how to counter that if that’s the case."

So, we will see. We are now entering the end-of-year season when absolutely everything is driven by retail level politics, and that especially includes anything to do with budgets—among other things. USAID still has a few friends on the hill and the State Department has even more and both agencies have already been hammered throughout much of the year.

So, the administration’s end-of-year pullback effort could turn out to be fairly bitter. It should be watched closely by producers as it proceeds, Washington Insider believes.


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