Washington Insider--Friday

The Jones Act Fight -- Again

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

EU Panel Finds Another Concern Regarding Trade Agreement with U.S.

The first of 13 European Parliament committees has weighed in with concern about possible unintended consequences from the proposed Transatlantic Trade and Investment Partnership (TTIP) free trade agreement between Europe and the United States.

Parliament's Development Committee says the European Commission should conduct an independent study of the possible consequences TTIP might have on developing countries "once the provisions of TTIP are clearer." Panel members are said to be worried the trade agreement will affect developing countries because TTIP will reform current trade rules and harmonize customs standards and requirements between the two sides. This, in turn, could have spillover effects on third countries.

The remaining 12 parliamentary committees also will be submitting their own opinions and recommendations of how the TTIP should be structured and carried out. The opinions will be considered by parliament's International Trade Committee, which will decide what points to include in the European Parliament's recommendations to TTIP negotiators.

The European system may appear to be overly bureaucratic, but the procedure being promoted by some members of Congress for the United States likely would be even more so. There have been calls on this side of the Atlantic for more negotiating details to be made available to more members of Congress during the course of trade pact discussions. The intent is to give Congress the ability to provide greater guidance and input. The likely outcome would be to make progress in the talks significantly more difficult. There appears in a number of cases to be a correlation between the degree of a member's interest in participating in trade discussions and that member's desire to stop those discussions in their tracks.

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Appropriations Chairman Lowers Expectations for Discretionary Federal Spending

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House Appropriations Committee Chairman Hal Rogers, R-Ky., says members of Congress should be prepared for his committee to award no significant increases for their favored programs this year in the face of a continuing tight budget environment. The reason, Rogers said, is discretionary spending under his panel's jurisdiction continues to be under pressure from growing mandatory programs.

The Appropriations Committee scheduled 19 hearings this week in preparation for writing the 12 regular discretionary spending bills this spring. Rogers said the pressure comes from the "billion dollar elephant in the room" known as mandatory spending. "Since I've chaired this committee these four years we've actually cut $165 billion from discretionary spending," Rogers said. At the same time, he said, "mandatory spending has increased dramatically and continues."

Unlike the Senate, the House has successfully moved its appropriations bills through the legislative process with great regularity over the past several years, due in large part to the leadership of Chairman Rogers. That record is expected to continue this year. However, it remains to be seen whether the change in leadership in the Senate from Democratic to Republican control will energize the appropriations process in that chamber.

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Washington Insider: The Jones Act Fight -- Again

One of the most protectionist U.S. policies in the so-called "Jones Act" requirement that goods moved by water between U.S. ports must move on U.S. made, owned and operated vessels. In addition, "cargo preference" rules are imposed to require at least 50% of the gross tonnage of all U.S. government generated cargo be transported on privately owned, U.S.-flagged commercial vessels. International food assistance provided by the U.S. Agency for International Development (USAID) and USDA is included in the definition of "government generated cargo."

This exclusion of U.S. vessels from competition with foreign carriers for significant amounts of commerce has been criticized for years for driving up shipping costs. However, Congress has frequently opted to continue to protect the U.S. maritime industry. Most recently, the oil industry has complained that the act hampers companies' ability to lower their costs in the face of plunging oil prices, hampering domestic exploration. The response to that critique by Jones Act supporters has been dramatic.

For example, the head of the Maritime Administration told a House subcommittee hearing earlier this week that "even considering" a change to the Jones Act could disrupt financial markets and potentially stall projects. And, Administrator Paul Jaenichen added, "Some of those projects that are currently on the order book today may not even occur, and that doesn't have anything to do with changing the Jones Act. It's just the threat of changing the Jones Act."

Jaenichen's comments came as lawmakers on the House Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Transportation, including subcommittee Chairman Duncan Hunter, R-Calif., blasted lawmakers for suggesting a repeal of the 95-year-old law. Jaenichen says such talk ripples across the maritime industry and its finances.

"Even the discussion of potentially changing the build requirements is potentially enough to influence some of the finance folks," Jaenichen told the press, suggesting interest rates on current projects could rise if the possibility of buying cheaper foreign-built ships was introduced. Jaenichen was referring to the requirement that shipments from one U.S. port to another must be carried on a ship built in the United States.

Chairman Hunter added, "We think that [changing the Jones Act] would be a horrible, horrible thing for America's industrial base and our ability to fight wars and protect ourselves, protect the sea lanes and build ships."

"Would the Coast Guard rather see American mariners on American flag vessels that have been inspected by the U.S. Coast Guard and been trained up to U.S. Coast Guard standards and U.S. mariner standards, driving volatile ships up and down America's inland waterways? Or would you rather see folks from Pakistan, from Yemen, from Somalia driving those ships in the interior waterways?" Hunter asked Admiral Paul Zukunft, Commandant for the Coast Guard, during a hearing on the president's fiscal 2016 budget request.

Rep. John Garamendi, D-Calif., asserted that oil trade must occur on American ships as a matter of national security. "The shipbuilding industry is absolutely critical to the Coast Guard, U.S. Navy and what remains of the American Merchant Marine," Garamendi said.

After the committee hearing, Hunter told the press he doesn't see a chance that the Jones Act would be repealed in the near future. "None, zero, as far as I see it now, because they don't have the votes in the Senate. It's that simple," Hunter said.

Opponents of the law and the protections it includes disagree sharply with these sentiments, of course. And, it is often pointed out that cargo preference provisions limit the amount of commodities that can be made available and shipped under U.S. aid programs.

As a result, U.S. commodity groups have opposed the preference rules for years -- but, have become about as skeptical about the possibility of reforms as Chairman Hunter appears to be. Nevertheless, producers have a significant stake in this policy debate and should watch carefully as it proceeds, Washington Insider believes.


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(GH/CZ)

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