Washington Insider-- Friday

By DTN's Washington Insider

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

Senate Bill Would Drop U.S. Ban on Financing Farm Exports to Cuba

Sens. John Boozman, R-Arkansas, and Heidi Heitkamp, D-North Dakota, have introduced legislation that would lift the ban on U.S. banks and companies providing financing for agricultural exports to Cuba. The measure would amend a law Congress passed in 2000 that exempted agricultural commodities like rice (from Arkansas) and wheat (from North Dakota) from the embargo against Cuba. The bill would apply only to U.S. farm exports.

Under current law, Cuba is required to pay in full for U.S. exports before they leave the port, and the exchange is handled by a third-party bank. The proposed bill would remove that requirement for U.S. banks and companies dealing with the Cuban government or private operations, permitting lengthier payment terms, for example.

Financing restrictions are the biggest obstacle to U.S. farm sales competition to Cuba, where the majority of food imports now comes from countries like Brazil, Vietnam, the European Union and Canada. And the competition for this market is heating up. U.S. agricultural exports to Cuba have fallen from $658 million in fiscal 2008 to $300 million in fiscal 2014, according to USDA data.

The proposal is certain to receive a great deal of attention in Congress, especially once the U.S. farm lobby gets into full swing promoting the idea. As always, there will be opposition from those who want nothing to do with the Castros. However, there may be something to be said in favor of a small opening in sales to Cuba as a test of just how risky expanded trade might be in the future.

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Republicans, Democrats Both Want to Phase Out Energy Subsidies

There appears to be bipartisan support in Congress for ending some of the federal tax credits currently available to energy producers. However, there is little agreement on which may be the best candidates for termination.

House Republicans this week introduced a bill that would phase out the 2.3-cent-per-kilowatt-hour production tax credit for wind and other renewable energy sources. The credit, first enacted in 1992, benefits wind power producers and turbine makers. "If we want to build a healthier American economy, Congress must get rid of the deadweight in the tax code that is limiting our nation's potential," said one of the bill's GOP sponsors.

Meanwhile, Sen. Bernie Sanders, I-Vermont, and Rep. Keith Ellison, D-Minnesota, have proposed legislation that would end subsidies for the oil, natural gas and coal industries, a move they said would save taxpayers more than $135 billion over the next decade. "At a time when scientists tell us we need to reduce carbon pollution to prevent catastrophic climate change, it is absurd to provide massive taxpayer subsidies that pad fossil-fuel companies' already enormous profits," Sanders said in a statement.

Democrats can be counted on to oppose the GOP's proposal to end renewable energy subsidies and Republicans almost certainly will not allow even a hearing on the Sanders-Ellison bill on oil and gas tax credits. This is known as a Double Checkmate, a move that is virtually unknown anywhere but Capitol Hill.

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Washington Insider: New Problems for U.S. Biotech Crops in Europe

Since the beginning of the U.S.-European Union talks about a Transatlantic Trade and Investment Partnership, the role of the EU's atrocious Precautionary Principle has been very close to the surface. For more than a decade, the EU has used that concept to insist that it will ignore scientific information concerning its regulation of food technology whenever it chooses.

Earlier this week the European Commission proposed legislation that would give US member states the explicit right to ban food and animal feed containing ingredients from genetically modified crops (even if those products have been approved at the EU level) if members see reasons deemed to be in the "public interest."

Observers say the proposal is unpopular all around, especially with food processors, farmers and environmental groups, as well as with exporters from the United States and other countries.

The proposal is a long ways from final, but is intended to satisfy concerns of EU citizens opposed to genetically modified crops, an objective it seem unlikely to accomplish..

The proposal also was promoted to the commission as a way to maintain a single risk management system throughout the EU. It will not amend the current authorization system, which relies on science, "with labeling rules that ensure consumer choice," EC Spokesman Enrico Brivio told the press. "What will change is that once a GMO is authorized for use as food and feed in the EU, member states will have the possibility to decide on whether to opt-out from allowing that particular GM to be used in the food chain."

Observers note that the proposal would allow EU member states to ban food and animal feeds that contain biotech crops that already are on the market.

Critics have been scathing in their reactions. They note that the proposal defies EU single market rules as well as international trade law and that its argument is inherently weak: a finding by the European Court of Justice that member state opt-outs are legal if they are in the "public interest."

The new proposal also triggered immediate criticism from U.S. Trade Representative Michael Froman, who expressed disappointment with "a regulatory proposal that "appears hard to reconcile with the EU's international obligations." Moreover, he said, "dividing the EU into 28 separate markets for the circulation of certain products seems at odds with the EU's goal of deepening the internal market.

At a time when the United States and EU are working to create further opportunities for growth and jobs through the Transatlantic Trade and Investment Partnership, "such a proposal is not constructive," Froman said.

Many in the EU ag industry agreed, noting that they rely on imports for 60 percent of their animal feed protein needs. They joined food manufacturers and the EU biotech industry in a statement that the plan defied EU single market rules, ran counter to its international trade obligations and will have severe economic consequences if it becomes law.

In a weird development, environmental groups led by Greenpeace, which campaigned for two decades for a ban on biotech crops, said that the measure does not go far enough since it does not uniformly ban all biotech products. "The European Commission is offering EU countries a fake right to opt-out that will not stand up in any court," said Franziska Achterberg, food policy advisor for Greenpeace.

The United States had an agricultural trade deficit with the EU of more than $5 billion in 2013, according to Froman's office, with a significant portion of that has to do with the failure of the EU to approve various biotech crops grown in the United States that have received approval from scientists, but are blocked because of the political divisions in the EU on biotech issues.

The United States already has successfully challenged the EU on its biotech crop regulatory regime, in particular, a five-year moratorium that was in place in the early 2000s. In that case, the United States won the right to impose retaliatory trade sanctions, but has not done so. Some U.S. agriculture organizations insist that the case should be re-opened now in response to the EU genetically modified cultivation law and the pending food and animal feed regulation.

Clearly, this new European proposal raises serious question regarding the EU's willingness to negotiate free trade issues, especially. From the beginning, these talks have involved enormous EU grandstanding and heartfelt promises that this or that policy provision could never be changed — no matter how restrictive or illegal.

This new, highly complex provision adds to that list and seems to strengthen the already substantial view among U.S. trade observers that the current U.S.-EU negotiations are a long, long way from complete and may, in fact, be beyond reach altogether, Washington Insider believes.

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(GH/CZ)

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