FOMC | Fed head | Health reform | Oil prices | Clovis nominated | New farm bill timeline | Grassley and payment caps | Rural Task Force | Uzbekistan lifts ban on U.S. pork | Transportation funding | Biofuel subsidies targeted | Brazil postpones tax decision on U.S. ethanol | NAFTA 2.0 | Ross on trade issues
— FOMC meeting concludes today. The Federal Open Market Committee (FOMC) meeting will wrap up today and without a post-meeting press conference, the attention will solely be on the statement released after the confab. The attention will be on any signals the Fed sends on the next rate action, on any timing hints on when the initial phase of the reduction in the Fed’s massive $4.5 trillion balance sheet will start and on how the Fed characterizes recent economic data which has been less than stellar. Another key will be on inflation as that has emerged as a factor mentioned or talked about by global central bankers in recent weeks. Expectations are the Fed will retain its guidance that it expects only “gradual” rate increases ahead.
— Trump to WSJ: Cohn and Yellen at top of list to lead the Fed. Current Fed Chairwoman Janet Yellen and National Economic Council head Gary Cohn are at the top of the list for those to serve atop the Federal Reserve, President Donald Trump told the Wall Street Journal (WSJ) in an interview. “I like her; I like her demeanor. I think she’s done a good job,” Trump said of Yellen. “I’d like to see rates stay low. She’s historically been a low-interest-rate person.” But he also talked up Cohn who was present during the interview, saying “He doesn’t know this, but yes he is,” when asked whether his NEC chief was in the running to take the helm at the Fed. Trump signaled he would not likely announce his choice until the end of this year.
— Senate healthcare reform debate continues. Republicans voted to begin debate on health care Tuesday, but then their first vote as the debate began saw a provision rejected that would have rolled back parts of ObamaCare. There were several provisions in the package, including ones that would have allowed insurers to offer plans that don’t meet ObamaCare standards and one that would have helped low-income people transition from Medicaid to private insurance. That plan failed on a 43-57 vote.
The return of Sen. John McCain (R-Ariz.) to Washington for the health care debate vote saw the senator recently diagnosed with brain cancer calling for bipartisanship to return to Washington as the chamber embarked on what has been a mostly partisan effort.
Expected up for a vote today will be a plan to largely repeal ObamaCare with a two-year expiration deadline, the idea being to give lawmakers more time to come up with a replacement plan.
One GOP fallback plan. A “skinny repeal” would rescind the ACA’s requirement that many employers provide health insurance to workers, and it would strike down a mandate that levies a penalty on most people who don’t have health insurance. It would also repeal the current health law’s tax on medical devices. The approach, if passed, would allow Republicans to claim at least a small victory, though it isn’t clear if it would attract the 50 votes it needs. If the Senate did approve it, senators would then have to find a compromise with the House on its version of a health overhaul, which is far more sweeping.
— Oil prices build on big Tuesday rise after API data. Crude oil supplies fell 10.2 million barrels for the week ended July 21, according to those familiar with figures released by the American Petroleum Institute (API). That allowed crude oil futures to continue the advance in Tuesday trading, the biggest rise of the year so far. Expectations for the U.S. government data due out later this morning are for a fall in supplies of 2.5 million barrels.
— Clovis officially nominated for key USDA post. President Donald Trump announced his intent to nominate Sam Clovis earlier this month for USDA undersecretary for research, education and economics. It became official on Tuesday when the Senate Agriculture Committee received a formal notification from the White House.
His nomination has been controversial although many farm and commodity groups recently noted their support. Senate Agriculture Chairman Pat Roberts (R-Kan.) said a nominee who regarded crop insurance as unconstitutional “might as well not show up” to his committee hearing. His statement came after ranking member Debbie Stabenow (D-Mich.) raised concerns about a USDA nominee who she said has questioned the constitutionality of crop insurance — in effect referring to Clovis, although she didn’t mention him by name. In a 2013 interview with an Iowa talk radio host, Clovis listed crop insurance subsidies as spending that he said was unconstitutional.
Roberts later said “it’s too early” to say whether Clovis’ expected nomination should be withdrawn. Clovis should have the opportunity to talk with the Agriculture Committee leaders and explain “why in the hell he said that,” Roberts said.
— Roberts to Senate leader: bring new farm bill to Senate floor this year. Senate Majority Leader Mitch McConnell (R-Ky.) made a rare appearance before the Senate Ag Committee on Tuesday introduce a witness from his home state, Mark Haney, president of the Kentucky Farm Bureau Federation. Senate Ag panel chairman Pat Roberts (R-Kan.) urged McConnell to bring the next farm bill to the Senate floor this year, if his Agriculture Committee can deliver. “The sooner the better,” McConnell told Roberts.
Meanwhile, USDA Secretary Sonny Perdue plans to travel to San Angelo, Texas, next week to attend the House Agriculture Committee’s second field hearing on the farm bill, House Ag Chairman Mike Conaway (R-Texas) announced Tuesday. The hearing is scheduled for July 31 at Angelo State University.
— Grassley explains why he supports farm program payment caps. Sen. Chuck Grassley (R-Iowa) in comments Tuesday during a hearing noted his frustration over he dubbed the watering down of a provision he secured in a draft of the 2014 farm bill to cut off commodity subsidies to managers who aren’t “actively engaged” in farming. Grassley had sought to limit to one the number of farm managers that a single operation could have, and cap their subsidies at $125,000. In the final version of the law, family farms were exempted from the new “actively engaged” requirements, which USDA finalized in 2015. Grassley said this maintains a loophole allowing non-farming family members to receive subsidies.
“Perhaps the most important thing I can do is explain why this issue is so important,” Grassley said in comments during the Ag Committee hearing. “Giving non-farmers subsidies is completely indefensible, especially when we have a $20 trillion debt. If bigger farmers are as efficient as they claim, they should not need unlimited subsidies to make their business model work.”
Grassley said he did not understand how the current $125,000-a-year cap on subsidies for a single farm operator (double for married couples) wasn’t enough to get a business through the year. “What is the harm of supporting a policy that helps young and beginning farmers, gives us credibility against critics, and saves taxpayers money? Mr. Chairman, I’m trying to help you, given the tight budget situation, as we try to help farmers that really are on the land doing the work,” Grassley said to Sen. Pat Roberts (R-Kan.), who responded: “Message received.”
— USDA hosts cabinet-level meeting of rural task force. USDA Secretary Sonny Perdue hosted the second meeting with the leaders of the Agriculture and Rural Prosperity Task Force Tuesday morning. The task force, created by an April executive order by President Donald Trump, is charged with “promoting agriculture and rural prosperity in America” and is expected to issue policy recommendations within 180 days. The group is planning to send a final report to the White House by late October, USDA said.
Other cabinet members meeting with Perdue included Commerce Secretary Wilbur Ross, Health and Human Services Secretary Tom Price, Transportation Secretary Elaine Chao, Housing and Urban Development Secretary Ben Carson and FCC Chairman Ajit Pai, the department said. “We’re synchronizing departments and agencies across the federal government so that citizens can truly believe that their government can work faster, friendlier, and easier,” Perdue said in a statement.
— Uzbekistan lifts ban on U.S. pork. Uzbekistan has lifted a ban on U.S. pork put in place in 2014 after an outbreak of porcine epidemic diarrhea virus (PEDV), according to the U.S. Meat Export Federation (USMEF). “The suspension was very unfortunate because initial shipments of U.S. pork had just reached Uzbekistan a short time before the ban, and the product was quite well-received,” said Yuri Barutkin, a USMEF representative in the region. The lifting of the ban “did not happen as soon as we would have liked, but we never gave up,” he said.
— Senate appropriators approve $2.4 billion boost in transportation, housing spending. A $60 billion Transportation-Housing spending bill approved by Senate appropriators would increase annual funding by $2.4 billion, including nearly $1 billion more for transportation. The bill would restore funding for TIGER grants targeted for elimination by President Trump.
— Biofuel subsidies targeted for defunding in new House bill. Biofuel subsidy programs at USDA would be defunded in a bill set for introduction in the House, but would likely face Senate opposition. Rep. Andy Biggs (R-Ariz.), who chairs an environment subcommittee of the House Science, Space and Technology Committee, plans to introduce the legislation today, saying the programs disregard market demand at the expense of taxpayers. The legislation is part of a broader effort by opponents of biofuels to rein in support for advanced biofuels. The legislation from Biggs would defund the Bioenergy Program for Advanced Biofuels and Biomass Crop Assistance Program, which both aim to boost innovation.
— Brazil trade chamber postpones decision on taxing U.S. ethanol: Reuters. Brazil’s foreign trade chamber, Camex, has put off for 30 days a decision on whether to impose a tariff on ethanol to curb a surge in imports from the U.S., a senior government official who attended the meeting told Reuters on Tuesday. The official said the chamber, which represents eight ministries, could not agree on applying a tariff and may consider quotas for imported ethanol at its next meeting. The quota proposal to be discussed would allow in 500,000 tonnes a year of ethanol and apply a 20 percent tariff on any imports beyond that quota. Brazilian ethanol imports jumped 330% in the first half of 2017 compared to the same period a year earlier to around 1.3 million cubic meters, mostly from the United States.
— Political calendar favors quicker NAFTA 2.0 deal: Ross. Factors signaling that North American Free Trade Agreement (NAFTA) renegotiation should be concluded sooner rather than later include the expiration of trade promotion authority (TPA) in mid-2018, Commerce Secretary Wilbur Ross said. TPA allows the president to submit implementing legislation for a trade deal to Congress for a straight-up or down vote. The mechanism prevents potentially deal-busting amendments. The current congressional grant of TPA applies to agreements reached before July 1, 2018, with a possible extension to July 1, 2021. Implementing bills may get no amendment consideration if negotiated during the time period for which TPA is in effect.
“You never know. And it’s probably a big mistake to set a particular date,” Ross said when asked how long the NAFTA talks with Mexico and Canada would last. “But the political calendar both here and there suggest it should get done pretty quickly,” he said.
Ross also cited the U.S. midterm elections, July 2018 presidential elections in Mexico, and provincial elections in Canada as “political calendar” reasons bolstering the proposition that “quicker is more likely to be conclusive than waiting.” NAFTA talks are scheduled to start Aug. 16.
TPP and NAFTA 2.0. The Trans-Pacific Partnership (TPP) would not have garnered enough political votes for passage by the time of the 2016 election, Ross said. Trump pulled the U.S. out of the 12-nation pact shortly after his inauguration. But Ross said there were “some very good features” to the TPP, which also included NAFTA partners Canada and Mexico. “Some of those are features we’ll be trying to build upon in subsequent trade negotiations,” he said, without providing further specifics. TPP member Japan has not said it is yet ready to negotiate a bilateral trade pact with the U.S., Ross said.
— Ross comments on other trade policy issues. Ross spoke Monday before the Economic Club of Washington.
* Softwood lumber dispute with Canada. Ross said the Trump administration wants a more “permanent, negotiated solution” instead of the imposition of tariffs. The U.S. has imposed preliminary dumping and subsidy duties on softwood lumber from Canada and is currently expected to move to final Commerce dumping and subsidy rulings in September. Ross will meet with British Columbia Premier John Horgan in Washington today for discussions expected to focus on softwood lumber. Senators from both sides of the aisle released a letter to Ross and U.S. Trade Representative Robert Lighthizer calling for a quota agreement with Canada and close consultations with the Senate Finance Committee.
* U.S.-China 100-day plan. Ross said the U.S. and China were entering a “more difficult phase” in their trading relationship to address “deep seated issues” after some accomplishments on what Ross characterized as “low hanging fruit,” including on beef trade. The 100-day action plan, which ended July 16, reopened China’s market to U.S. beef after 14 years. “It’s a work in progress,” Ross said of the U.S.-China trade discourse.
* Steel issues. Ross said steel overcapacity is “quite massive,” adding that China accounts for at least half of that overcapacity. The U.S. has launched an investigation on whether steel imports threaten U.S. national security. Ross provided no timeline on when the administration would release the findings of its investigation, which could result in tariffs and/or quotas on steel imports.
Steel sanction decision timeline. The Trump administration is unlikely to make any decisions regarding whether to limit imports of steel and aluminum for national security reasons any time soon, after President Donald Trump told the Wall Street Journal on Tuesday that “we don’t want to do it at this moment.” The administration had already missed its initial deadline of wrapping up the pair of Section 232 reports by the end of June, and Trump indicated Tuesday that was in part because of various regulations regarding any decisions. “You can’t just walk in and say I’m going to do this,” he told the WSJ. “You have to do statutory studies … It doesn’t go that quickly.”
* KORUS agreement. Asked about the U.S.-Korea Free Trade Agreement (KORUS), Ross said the U.S. triggered the notice for consultations with South Korea. “Hopefully we’ll begin very shortly to address the issues we have with that agreement,” he said. The U.S. has called for the two countries to hold a special joint committee meeting to consider modifications to the pact.
