Washington Insider--Wednesday

By DTN's Washington Insider

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

Senate May Approve Obama Nominees During Lame Duck

Senate leaders reportedly are holding talks aimed at bringing a number of Obama nominees to the floor for confirmation votes before Congress goes out of session next month.

Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., are working behind the scenes to strike some deals that will permit the Senate to clear packages of nominees by the time the 113th Congress concludes in December. Reid said on Monday there are now more than 150 of Obama's nominees sitting on the Senate's executive calendar after being cleared in committee for action. Under Senate rules, any nominees not confirmed by the end of the session must be returned to the White House and re-nominated next year.

Currently, Senate rules permit most nominees to be confirmed by simple majorities. McConnell, who will become majority leader in January, is said to be considering reinstating a Senate rule that would require 60 votes to approve most nominees. Reid is understandably eager to hold as many confirmation votes as possible under the current rules. It is not known what concessions McConnell will require from Reid in return for allowing these votes to go forward.

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G-20 Nations Moving Ahead on Climate Change

Leaders from the Group of 20 major economies agreed over the weekend that preventing climate change should be a fundamental aspect of their work. This marks a shift from their primary focus on steps aimed at getting their economies -- hit by the 2008 crisis -- back on track.

The G-20 leaders issued a joint communique that commits them in 2015 "to adopt successfully a protocol, another legal instrument or an agreed outcome with legal force" under the United Nations Framework Convention on Climate Change.

If the Obama administration signs on to a U.N. document that carries with it a U.S. commitment to fight climate change and to face international legal consequences for violations, there is virtually no chance Congress would approve the deal.

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Washington Insider: China-Australia Free Trade Agreement

There has been a lot of talk in the United States about trade and trade policy, including debates over whether Congress should grant the president "fast track" authority to facilitate ongoing negotiations. In the meantime, China and Australia announced earlier this week they had sealed a deal that significantly expands ties between Asia's largest economy and one of Washington's closest allies in the region.

In addition, China also announced it was giving Australia more access to its capital markets and it will be allowed to clear renminbi stock trades, measures that would bolster Beijing's efforts to promote global use of its currency. The trade deal is expected to open up Chinese markets to Australian farm and service-sector exports while easing limits on Chinese investment in resource-rich Australia.

Prime Minister Tony Abbott and President Xi Jinping signed a memorandum of understanding for the agreement at a ceremony in Parliament in Canberra. Abbott, who has also signed trade agreements in the past year with Japan and South Korea, said of the agreement, "This has been a 10-year journey, but we have finally made it." Xi praised the deal in an address to Parliament, adding, "As long as we have our long-term and the larger interests in mind, increase positive factors and remove obstacles, we will certainly forge a closer and more comprehensive strategic partnership between us."

China already is Australia's top trading partner, with bilateral trade of around $130 billion in 2013.

Observers suggest Australia needs China's help in making the transition from exports based on minerals like coal and iron ore to others like food and agricultural products directed at Asia's growing middle class.

Once the agreement is fully implemented, 95% of all Australian exports will enjoy duty-free entry into China, Australia said.

The new agreement highlights the fact that Washington and Beijing have competing visions for free trade in the Asia-Pacific region. The United States is pushing its 12-country Trans-Pacific Partnership pact, which includes key North American economies, but excludes China, which is promoting its own Free Trade Area of the Asia-Pacific.

The agreement gives Australian dairy farmers tariff-free access to China's lucrative market for infant formula within four years, without the so-called safeguard caps that now restrict competitors from New Zealand. "Australia has been marginalized from being a major exporter to China in the last few years, one of the reasons being that milk production has been going down over the last decade," a dairy analyst at Rabobank in China told the press.

On the other side of the deal, private Chinese companies will be able to make single investments of up to AUS$1.078 billion (US$950 million) in Australia without needing a review by the government's regulator. The limit had been AUS$248 million.

The Chinese central bank will reciprocate by allowing more access to its markets. Australians will be able to invest up to 50 billion renminbi, or $8.2 billion, under the Qualified Foreign Institutional Investor program, which allows foreign investors to use renminbi to buy Chinese stocks and bonds. "It's making it much easier for Australian fund managers to be able to access the domestic Chinese market," said Andrew Whitford, general manager and country head for greater China at Westpac Banking.

Xinhua, China's state-run news agency, also said China was improving the Australian central bank's access to its interbank bond market by increasing the central bank's investment quota to 10 billion renminbi.

Greater use of the renminbi globally is essential to the Chinese government's long-term plans to reform its economy, reduce its exposure to the dollar, and enhance its stature in the region.

None of this is lost on the United States, Canada and other participants in the Trans-Pacific Partnership negotiation. China can be expected to continue to be more than willing to arrange trade deals it thinks will bring U.S. trading partners into its sphere of influence and weaken the U.S. role regionally and globally, even in the field of ag trade.

It will be interesting and important to see where the U.S. goes with trade policies while China and other competitors strengthen their economic links significantly, Washington Insider believes.

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(GH/CZ)

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