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.

China Concerned U.S. Will Not Honor Climate Agreement

Last November, President Barack Obama and Chinese President Xi Jinping surprised the world by announcing a bilateral agreement setting targets for carbon dioxide emissions out to the year 2030. Some members of Congress voiced skepticism whether China will honor those commitments. Now China is beginning to question whether the United States will carry through on its side of the deal.

China's skepticism appears to be on solid ground. The Wall Street Journal earlier this week reported a number of GOP senators have made it clear they see White House efforts to forge a global pact on climate change as another case of "executive overreach." These Republicans "are quietly considering ways to warn other countries that the president doesn't speak for them and may not be able to deliver on his promises to slash emissions," according to the Journal.

This strategy is the same one 47 Republican senators pursued last month when they signed a letter telling Iran's leaders that the next president could revoke any nuclear agreement and that Congress could modify it at any time. It may be a good thing (although highly unusual) for members of Congress to warn other nations that it is risky to trust the United States to honor its commitments. But it certainly could make future negotiations far more difficult.

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White House Report Warns of Future Costs of Climate Change

In related news, a new White House review of U.S. energy infrastructure finds that increasingly severe weather events, thought to be the result of a changing global climate, are costing the U.S. economy between $18 billion and $33 billion a year. Future climate change will only make it worse, it said. Among the report's recommendations are for the U.S. to invest in the nation's electric grid to protect it from the severe storms that may occur more frequently because of global warming, as well as from physical and cyber-attacks.

The review recommends spending about $15.2 billion over a decade to improve the grid, upgrade the Strategic Petroleum Reserve, and make energy infrastructure more resilient to the effects of climate change. Some of that money is in the proposed 2016 federal budget.

Severe weather -- including hurricanes and tornadoes -- resulted in about 679 widespread power outages from 2003 to 2013 resulting in a cost to the U.S. economy of as much as $33 billion annually, according to the report. The report said risks are growing as rising sea levels caused by climate change worsen storm surge and the severity of downpours, intensifying coastal flooding.

Among other things, the report is aimed at convincing members of Congress of the need to increase federal spending for building and improving the nation's energy infrastructure. Given the current disagreement in Congress about global climate change, it is not clear whether tying the infrastructure development goal to warmer temperatures will help or harm the effort.

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Washington Insider: Any Hope for Anything Much From Doha?

Amid the rhetorical thunder over fast track trade authority and the Trans-Pacific Partnership, you might be forgiven if you thought the Doha Round was so far in the past as to be completely forgotten. And, you would be largely -- but not completely--— correct.

Last week, the World Trade Organization's top agriculture negotiator publicly assessed members' recent efforts to resolve some of the most difficult aspects of the 2001 Doha round. Turns out, there are many difficult aspects and not much success worth mentioning.

During an April 24 meeting of the WTO Agriculture Committee, Chairman John Adank of New Zealand told members, "There is no escaping the fact that any possible progress towards convergence is being seriously impeded by the standoff among some major players over the threshold issues." Observers interpreted this as Adank's focus on the deep, ongoing disagreement between the United States and China about proposals to reduce domestic farm subsidies that distort international markets.

Since January, members have engaged in a consultation process aimed at new disciplines in the areas of agriculture ahead of the Dec. 15-18, 2015 Ministerial Conference in Kenya. Their efforts have largely stalled, Adank said. The United States sought to encourage major emerging economies such as China to agree to discipline their overall trade-distorting support, mostly without success.

Without getting too far into the weeds on details, it is important to note that members also failed to agree on the treatment of de minimis support, the level of trade-distorting subsidies permitted under WTO rules. Many developing country members consider de minimis support essential to their farm industries. Other members -- mostly exporters -- want to reduce de minimis entitlements.

Disagreements in these areas have essentially blocked progress in negotiations toward product-specific limits, aggregate measurement of support and blue box measures, which relate to direct payment agricultural subsidies, Adank said.

Summing up, Adank said: "The intensive process in which we have been engaged has still not seen delegations move from entrenched positions or find acceptable ways around them. Doing so is the urgent challenge that is still ahead of us."

In the view of several participants, the United States and China bear the blame for lack of progress around domestic support negotiations, but this is an oversimplification. Obviously, China is holding fast to its position that it won't accept any new disciplines on farm subsidies, largely on the basis that it is a developing country, supported by other developing countries. In response, Deputy U.S. Trade Representative Michael Punke said it is not realistic to ask only the United States to reduce its farm subsidies while emerging countries fail to "carry their weight."

The United States argues that since many developing countries have become extremely large exporters, it would be politically impossible to allow them to ignore disciplines required of more developed members.

WTO Director-General Roberto Azevedo is expected to play a larger role in coercing members like China and the United States to find middle ground in their negotiating positions, Geneva trade officials said. There is little optimism for near-term success on that front.

Negotiations in the WTO's Doha Round continue in large part because multilateral agreements are widely seen as more powerful with much larger potential trade benefits, and that maybe some technical trade facilitation measures are within reach. However, the WTO process has long been stagnant, with little likelihood of bridging the large gap between developed and developing members to achieve the unanimity required for a new agreement. As a result, global attention has increasingly shifted to free trade areas, with more modest objectives and smaller membership. But even those deals have been more difficult since the resurge of protectionism that began during the recent economic recession.

These developments, together with the long, drawn out demise of Doha, have upped the stakes for regional agreements such as the Trans-Pacific Partnership, especially for agriculture. It makes the current "sturm und drang" over the consequences of trade more risky and increases the need for producers to watch this process carefully as it evolves, Washington Insider believes.

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GH

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(GH/CZ)

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