Washington Insider -- Thursday

By DTN's Washington Insider

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

President Calls for Budget Sequestration Negotiations

President Barack Obama is calling on Republican congressional leaders to begin negotiations with the White House on a way to replace budget sequestration, a system installed several years ago under the Budget Control Act (BCA) that requires automatic cuts in both defense and non-defense spending.

Calling the cuts required by sequestration "mindless," the president repeated warnings that he will veto fiscal 2016 appropriations bills Republicans wrote to reflect the BCA's austere spending caps. But, for the first time, the president urged Republican leaders to begin talks to replace sequestration in hopes of heading off a looming funding crisis when the government's fiscal year ends Sept. 30.

Republicans earlier turned down requests by Democrats to undertake budget negotiations, and if congressional Democrats hoped that having the president weigh in on reconciliation would make a difference, they may be disappointed. House Majority Leader Kevin McCarthy, R-Calif., told reporters Republicans are not interested in negotiating a replacement for sequestration while there is a chance to pass more appropriations bills. Thus are the annual spending bills stuck once again with little hope of getting any of them approved before Sept. 30.

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Republicans to Miss Non-Binding Budget Deadline

Congress is operating under a joint budget resolution that calls for three committees in the House and two in the Senate to report reconciliation mandated budget-cutting ideas to the two chambers' budget committees by July 24. But there is no penalty for missing that date, which is good for Republicans because they are certain to miss it.

Congressional Republicans have told reporters that they do plan to eventually use the reconciliation process, which short circuits Senate filibusters. They just don't expect anything to be ready by tomorrow.

A key issue for Senate Republicans is that reconciliation bills must result in a reduction of the federal deficit before they become subject to a simple majority vote. This is causing a problem for those who want to undertake a full repeal of Obamacare, which the Congressional Budget Office estimates would cost $137 billion, a figure that would be added to, rather than subtracted from, the deficit.

The hope is that there can be some agreements forged between and among both Democrats and Republicans before Congress leaves town July 31 for its five-week summer recess.

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Washington Insider: Aussie-COOL Emerges Down Under

Earlier this week, the National Pork Producers Council and 34 state pork producer organizations wrote to urge the Senate to take up legislation to repeal country-of-origin labeling requirements for beef, pork and poultry. They want the repeal done before Congress leaves town for its month-long recess beginning in early August.

The U.S. COOL law requires meat to be labeled with its source country, including details regarding where the animal was born, raised and processed. COOL rules also apply to fish, shellfish, fresh and frozen fruits and vegetables and certain nuts.

Last May, the World Trade Organization rejected an appeal by the United States of the international trade body's October 2014 ruling that COOL provisions discriminate against Canadian and Mexican animals. That decision allows Canada and Mexico to place retaliatory tariffs on U.S. imports.

While the House already has voted to repeal COOL, the Senate has not. The NPPC and the state pork associations say they are concerned that without swift repeal, Congress will imperil U.S. exports and jobs since Canada and Mexico are requesting large sanctions. Canada wants some $3 billion Canadian dollars, while Mexico is requesting $713 million.

In the meantime, an additional wrinkle in the debate has emerged in the form of new Australian country-of-origin labels for food products that will become mandatory in 2016. The Australians say that their program will not breach their WTO obligations and will provide information that the U.S. COOL program does not.

The new mandatory labels will include a bar chart and text to show the approximate proportion of the ingredients that are from Australia. There will be six versions of the bar chart, ranging from "Made in Australia from 0 percent Australian ingredients" to "Made in Australia from 100 percent Australian ingredients." By contrast, meat can gain a "Product of the U.S." label only if it comes from animals born, fed and processed in the United States.

The Aussie mandatory labels require only that the Australian content of food be listed. However, the labels also include a version for "grown-in" country-of-origin claims if, for example, an apple producer in Chile wanted to label its fruit as "grown in Chile."

In addition to the mandatory labels, companies will be encouraged to provide additional information on the origin of significant ingredients, using a bar chart and text. An information sheet gives the example of a non-mandatory label that says "Made in Australia from Canadian pork," in which the bar chart is empty, and a label that says "Made in Australia from Australian milk," in which the bar chart is almost fully colored gold.

At this point, the Australian labels seem quite different from the U.S. version of COOL by showing what the foreign content is and reporting that information to consumers interested enough to scrutinize the labels.

However, while the Australian program may prove less costly and intrusive and require less or perhaps no segregation by place of origin, it nevertheless could harm imports. For example, there is an implied need to keep track of animals imported as feeders and their share of "domestic content" which would be something of a burden, too, and could possibly be opposed by livestock exporters as discriminatory.

As a result, it will be important to see whether exporters choose to make a case against the Australian program as they did against the U.S. COOL system. And it remains to be seen whether U.S. COOL opponents can succeed in getting the Senate to vote to end the program as the House did, and to do so quickly enough to douse any interest in attempting an Aussie-COOL approach here, a steps that likely would simply prolong the labeling fight, Washington Insider believes.

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(GH/CZ)

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