USDA nominees | Harvey aid | Debt limit | FY 2018 spending | KORUS | Biodiesel | Fed officials | North Korea | Trump, congressional leaders to meet | Irma | China on trade protectionism | DACA | NAFTA 2.0
— Sept. 19 hearing likely on some USDA nominees. The Senate Ag Committee is expected to announce that on Sept. 19 it will hold a hearing on several of President Trump’s nominees at USDA. The list will likely include Steve Censky, the nominee for deputy secretary, Sam Clovis, the nominee to be undersecretary for research, economics and education; and Ted McKinney, the nominee for trade undersecretary.
— FEMA warns on funding as Harvey payouts going faster than expected. FEMA officials are warning that they could run out of funds for assistance to areas hit by Hurricane Harvey as soon as Friday, congressional aides have signaled. FEMA’s disaster relief fund had about $541 million left that could be used for Harvey relief as of Tuesday afternoon, a FEMA spokeswoman said. While the FEMA disaster fund contains about $1 billion, $473 million is deemed base funding devoted for potential future disasters and fighting fires. The pace of aid flowing thus far as been faster than expected, reflected by an increase in the request for an initial aid package by the Trump administration.
— House votes this morning on emergency aid for Hurricane Harvey victims. The House will vote on appropriations of $7.9 billion in emergency fiscal 2017 funds — an initial installment for Hurricane Harvey aid. Because it is designated as “emergency” and does not count against spending caps, even budget sticklers may get on board and vote for the measure.
One possible hurdle: The White House and some Republicans want the aid tied to an increase in the federal debt limit, but a conservative bloc opposes that. The topics may not eventually be linked but could be paired in Senate action later.
Treasury Secretary Steven Mnuchin warned over the weekend that aid could be slowed unless the debt limit is increased to accommodate the extra borrowing his agency must do to pay for disaster relief. “If Congress appropriates the money, but I don’t have the ability to borrow more money and pay for it, we’re not going to be able to get that money to the state,” Mnuchin said on Fox News Sunday, referring to Texas.
— Moody’s warns on U.S. ratings if debt limit broached. The Triple-A rating held by the U.S. will be gone if the US were to violate the debt ceiling even if the U.S. Treasury were to act to meet its obligations, according to Moody’s Investors Service. “Treasury would prioritize interest payments over other expenses to preserve the full faith and credit of the government, and to avoid disruptions in the financial markets,” Moody’s said in a document released Tuesday. The hefty obligations like Social Security benefits, Medicare and Medicaid payments and military wages are “likely to force a timely increase in the debt ceiling.” Should the “unlikely event of an interest payment not being made as a consequence of the debt ceiling, we would expect the default to be short-lived and to be cured with a recovery rate of 100%,” the rating agency said. Still, the agency noted that a “subsequent upgrade would be unlikely while the institution of the debt ceiling, and the political environment which had given rise to the missed payment, remained in place.”
— Final spending package for fiscal 2018 may take until Christmas. That is the message from House Majority Leader Kevin McCarthy (R-Calif.). Meanwhile, support for a Republican budget resolution could be tested in a closed-door House GOP conference today. The resolution promises to balance the budget in 10 years, but requires some deep cuts in entitlement programs, including agriculture, while making questionable assumptions about revenue growth. It also would bust the cap on defense spending by $72 billion — triggering across-the-board cuts to military programs unless a new budget deal is reached to raise the cap.
With none of the 12 annual bills that fund the government yet enacted, a stopgap continuing resolution (CR) will be required by Sept. 30 to extend current funding levels into the new fiscal year and avoid a government shutdown. McCarthy told the Fox Business Channel that the continuing resolution would last for about three months.
Meanwhile, funding for President Donald Trump’s border wall may wait until Christmas too, McCarthy said. While a continuing resolution extends funding for current programs, it doesn’t usually allow for new projects. “So you will deal with the wall a little later in the year,” McCarthy said. That suggests a CR could get passed this month without encountering the partisan politics over immigration policy. The fight over a border wall would be saved for the final spending package negotiated in December.
— Congressional leaders tell Trump to improve, not withdraw, KORUS. The chairmen and ranking Democrats of the House Ways and Means and Senate Finance committees issued a joint statement yesterday calling South Korea a “significant economic partner, our seventh largest export market, and a vital customer for U.S. manufacturers, services providers, farmers and ranchers.” The lawmakers called on Trump to push South Korea to improve its compliance with the agreement. “To be effective and constructive, however, we must not withdraw from the agreement while we do so,” the lawmakers added.
— Argentina wants to negotiate biodiesel tariff with U.S. Argentina’s Production Minister Francisco Cabrera indicated that the South American country would keep on talking to the U.S. to defend its biodiesel exports after the Commerce Dept. announced a tariff of up to 61% on imports of the Argentinean product. “We filed a formal complaint, and the U.S. Commerce Secretary told me he would take the lead in the matter,” Cabrera said in an interview with the La Nación newspaper. The official noted that “the magnitude of the tariff came as a surprise,” since the government knew “that there would be a preliminary duty and then a negotiation, but this tax being so high does not encourage the American private sector to sit down and discuss,” Cabrera said.
Officials from Argentina and the U.S. held a meeting Tuesday on the matter. U.S. Commerce Secretary Wilbur Ross and other U.S. officials met with a delegation from Argentina on the preliminary biodiesel import duties . Ross indicated a willingness to seek a negotiated solution on biodiesel. “Here you can look for a negotiated agreement now or appeal to the World Trade Organization [WTO] in a process that may take about five years or more,” a source told La Nacion on the condition of anonymity. “What the United States said, in other words, is that you’re exporting to me at a price too low and you’re damaging the local production,” he said. “Let’s look for a reasonable price without affecting local production.” Argentine officials in the meeting included Undersecretary of Foreign Trade, Shunko Rojas; by Pablo Quirno, the head of the Cabinet of the secretary of International Economic Relations Horacio Reyser; and José Molina, agricultural attaché of the Argentine Embassy in Washington. Argentina filed a complaint and the talks were a result of that complaint.
Argentine officials also met with U.S. Trade Representative Robert Lighthizer on the matter of Argentina’s return to the Generalized System of Preferences (GSP). La Nacion reported that the Argentine delegation cited several changes they have made on intellectual property and also movement on agricultural market access issues. While not necessarily liked to GSP, the report indicated that Argentina’s decision to reopen its market to U.S. pork and the U.S. decision to allow in imports of lemons from Argentina were also brought up in the discussions as evidence of advances.
— Fed officials comment on rate outlook. Fed Governor Lael Brainard urged monetary policy makers to wait for more realized progress on the Fed’s inflation goal before lifting rates again. Minneapolis Fed President Neel Kashkar warned that the central bank’s tightening cycle may have harmed the economy. Five-year inflation protected Treasury yields slipped into negative territory for the first time in nearly three months during Tuesday’s session. The Fedspeak continues today, with regional Fed Presidents Robert Kaplan and Loretta Mester slated to deliver remarks.
— Russian President Vladimir Putin called sanctions on North Korea “useless and ineffective”. Putin said other governments would be better served by offering security guarantees to North Korea. He added that U.S. President Donald Trump is “not my bride.” China has said that Trump’s threat to shut off trade with any country doing business with North Korea is “unacceptable,” and it’s seen as unlikely the China would agree to cut off oil exports to North Korea. Kim Jong Un’s escalation of tensions has transformed South Korean President Moon Jae-in — who campaigned on a pledge to open up dialogue with his northern neighbor — into a military hawk.
— Trump to meet with congressional leaders. House Speaker Paul Ryan (R-Wis.), Senate Majority Leader Mitch McConnell (R-Ky.), House Minority Leader Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.) are scheduled to meet today with President Donald Trump at the White House. All members of Congress will be briefed this afternoon on the situations in North Korea and Afghanistan. Secretary of State Rex Tillerson, Defense Secretary James Mattis, Chairman of the Joint Chiefs of Staff Gen. Joseph F. Dunford Jr. and Director of National Intelligence Dan Coats will brief lawmakers.
— Irma makes landfall. The Category 5 hurricane, one of the most powerful Atlantic storms ever recorded, hit the Caribbean island of Barbuda overnight and is expected to strike Puerto Rico and other islands today. Irma could reach Florida this weekend. Here’s a map of the storm’s projected path.
November orange juice futures soared 6.2% to $1.45 per pound, the highest for a most actively traded contract since May 2016.
Shares of insurers already coping with damage from Hurricane Harvey and reinsurers providing insurance companies with backup protection against major disasters ended yesterday’s trading with sharp losses. Reinsurer Everest Re fell nearly 7%, making it the biggest loser on the S&P 500, and XL Group slumped 5.8%.
— China President Xi: Trade protectionism undermines emerging markets. Protectionist trade policies undermine the interests of emerging market and developing country economies, Chinese President Xi Jinping said at an annual conference. Xi said a “zero-sum game” approach to trade will undermine “the interests of emerging market and developing countries.”
— Trump as expected announced he would end the Deferred Action for Childhood Arrivals (DACA) program, which former President Barack Obama implemented in a 2012 executive order. Trump said DACA permits won’t expire for another six months, and will remain active for up to 24 months, calling on Congress to pass immigration reform legislation.
Both House Speaker Paul Ryan (R-Wis.) and Senate Majority Leader Mitch McConnell (R-Ky.) issued statements indicating they would work with the administration to enact such legislation. “At the heart of this issue are young people who came to this country through no fault of their own, and for many of them it’s the only country they know,” Ryan’s statement said. “It is my hope that the House and Senate, with the president’s leadership, will be able to find consensus on a permanent legislative solution that includes ensuring that those who have done nothing wrong can still contribute as a valued part of this great country.” But House Minority Leader Nancy Pelosi (D-Calif.) called Trump’s statement a “cruel and heartless decision.”
As early as March 2018, some of the 800,000 young adults brought to the U.S. illegally as children who qualify for the DACA program would become eligible for deportation without a congressional fix.
In reaction, a wide range of business urged Congress to act, and said Trump’s decision to end the program moves the labor force in the wrong direction for achieving growth.
— NAFTA update. Trade negotiators from the U.S., Canada and Mexico praised the work of their teams in the first weeks of talks on the North American Free Trade Agreement (NAFTA), sidestepping President Donald Trump’s threats to pull out of the deal. U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland held a joint statement in Mexico City on Tuesday as the second round of talks concluded, highlighting their progress and shared commitment to finish talks this year.
The officials said they have made headway and now have a deeper understanding of each other’s demands. Lighthizer still stressed a new deal must benefit “all Americans,” including those in manufacturing who lost their jobs as a result of NAFTA. “We feel like we’ve done as much as you could hope to do in two rounds,” he said. “I expect when I finish this agreement that the president will be supportive of it, because I’m not going to agree to things that he’s not supportive of.”
The third round is scheduled to take place Sept. 23-27 in Ottawa. Guajardo said he expects seven rounds of talks in all this year. “The Washington round was about setting the table,” Freeland said. “This round was about really digging in deeply in detail and understanding the positions of our counter-parties.”
U.S. officials said they reached broad consensus, but not full agreement, in provisions governing small and medium businesses, services, digital trade and the environment. Guajardo said he expects to “start seeing results in the third round of talks.”
“There’s no secret that the labor provisions will be contentious,” Lighthizer said. Guajardo noted that labor issues could be among the harder ones to deal with. The Trump administration has made the biggest waves, seeking to insert “America first” provisions in the three-country deal, including “buy American” procurement provisions and U.S. content rules for the auto industry.
Meanwhile, Lighthizer downplayed the impact of Trump’s threats on negotiations. Both Barack Obama and Hillary Clinton promised during the 2008 presidential campaign to improve Nafta or withdraw, he said, adding such a stance “is not a crazy position to take… We have an important job to do, and it’s really important to working people,” Lighthizer said. “I never have a conversation with the president where he doesn’t make that point.”
Both Freeland and Lighthizer dismissed concerns that the negotiations aren’t proceeding fast enough. “We are 20 days into this negotiation. That is very important to bear in mind,” Freeland said, while Lighthizer said negotiations are advancing at “warp speed.”
Lighthizer said NAFTA negotiators tabled text for more than two dozen chapters that “represent a new modern agreement which once concluded will support robust economic growth in North America for decades to come.”
The trio of top officials had dinner Monday night before a trilateral meeting Tuesday, with Freeland saying the talks set a “strong foundation” for the next round, she said. “We are running fast for the end of the year.”
