Washington Insider -- Friday

Rural Investment Push

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

EU Advises U.S to Make Trade Negotiation Details More Transparent

The European Union has advised the United States to take steps to inform Congress and U.S. non-governmental organizations of details involved in Transatlantic Trade and Investment (TTIP) negotiations. Doing so, says EU Trade Commissioner Karel De Gucht, would help counter rising criticism about the talks.

De Gucht was responding to complaints about access to TTIP negotiating texts. He said that during a recent meeting with U.S. Trade Representative Michael Froman, De Gucht insisted changes were necessary to make the negotiations more transparent. "I told him: 'Look, you have to make these negotiating texts more widely available,' " De Gucht said. "This will only become more and more of an issue."

Many members of Congress have complained that they and their staffs are being kept largely in the dark regarding the progress and content of the TTIP negotiations, as well as those aimed at securing a Trans-Pacific Partnership trade agreement. Many trade observers believe that once the details about the negotiations are made public, complaints about being kept in the dark would shrink while complaints about the details would grow.

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TPP Talks Gaining Momentum, Says USTR's Cutler

Progress on the Trans-Pacific Partnership agreement being conducted among 12 Pacific Rim countries is gaining momentum, acting Deputy U.S. Trade Representative Wendy Cutler told an Atlantic Council gathering this week. That assessment appears to be borne out by sources familiar with the talks who told Bloomberg that many of the 29 chapters on the rules side of the agreement are essentially or nearly completed.

In her remarks, Cutler said that U.S.-Japan TPP-related agriculture market access discussions, which have shown recent progress according to negotiators from both sides, will resume in early August. A major sticking point between the two countries remains Japan's desire to provide its "sensitive" agricultural products (beef and pork, dairy, wheat, sugar and rice) with as much protection as possible for as long as possible.

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Even if the United States and Japan are able to agree on how they plan to deal with trade in agricultural and automotive products, the Obama administration still faces daunting opposition from within the ranks of congressional Democrats and from U.S. organized labor and environmental groups.

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Washington Insider: Rural Investment Push

There is something a little unusual going on in Washington this week. The White House Rural Council announced plans for a $10 billion investment fund that will give "pension funds and large investors the opportunity to invest in agricultural projects." Those include wastewater systems, energy projects and infrastructure development in rural America, it said.

Agriculture Secretary Tom Vilsack compared the new effort to an online dating service and suggested that this would be a new role for USDA.

The fund is to be called the Rural Infrastructure Opportunity Fund, backed by CoBank, a member of the Farm Credit System. CoBank has committed the first $10 billion to the fund, a fact likely to impress some potential investors.

Capitol Peak Asset Management will manage the investments, with USDA committed to help find projects. Press reports indicate that the projects will be expected to earn returns on the principal investments along with interest.

One of the curious aspects of the whole activity is its timing — coming as it does amid numerous reports of floods of pension funds and institutional investor money being shifted into untraditional investments like hedge funds and private equity firms, according to the New York Times.

Still, Secretary Vilsack cited "extraordinary" demand from local communities in rural America for capital in describing the background of the project. As a result, he recruited Matthew McKenna, a former PepsiCo executive, to help find a way to attract Wall Street and large institutional investors.

McKenna says he found that investors with big war chests were interested in making investments in more than just one or two individual projects at a time, so the new fund will offer bundled projects. One specific area where investment is needed is in California, the secretary said, where the state is facing one of its most severe droughts on record. He thinks this means, "a business opportunity there because people will pay for water."

The press, however, still seems focused not on infrastructure but on farmland where investment returns have been high. The New York Times has noted several times in recent days that "agricultural conferences once attended mostly by farmers and others in related fields are now crowded with institutional investors, venture capitalists and hedge fund managers." However, it is not clear that land purchases will be supported activity under the new project.

Instead, the White House fact sheet for the conference focused heavily on small, rural businesses and rural entrepreneurs, some with catchy names like "Made in Rural America," "Expanding Partnerships," and the "Regional Conservation Partnership Program" among several others. Included areas also are the Rural Health Philanthropy Partnership and broadband investment in rural schools.

And at least a few of the focus areas seem a little off the wall. For example, the fact sheet points to USDA's Local Food, Local Places program that provides direct technical assistance to 20 communities integrating local food production into their civic planning process.

So, it will be interesting to see what the economic profile of the proposed project portfolio turns out to be — and, what public sweeteners will be offered to attract big bucks for at least some of the purposes envisioned. While Secretary Vilsack may think he is selling a gold mine — water to drought stricken farmers, for example — pushing local communities to include local foods in their "civic planning" looks like at least a modestly costly enterprise, unlikely to appeal much to flinty-eyed Wall Street types.

At this early date, cynical observers may be having a little trouble with this government-sponsored effort to separate economic winners in rural areas from potential losers. Thus, it will be interesting and important for producers to watch carefully as the details of this program emerge and are vetted by the market, and by Congress, Washington Insider believes.


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