House Panel Approves FY12 Agriculture Appropriations
The House Appropriations Committee approved discretionary and mandatory funding of $125.5 billion for agriculture and related agencies for FY12. The spending measure is $7 billion less than the President’s budget request and includes across-the-board cuts. The Committee’s budget, if enacted, would cut discretionary spending by $2.7 billion and reduce total funding to pre-’08 levels.
The Committee accepted on a voice vote an amendment by Rep. Flake (R-AZ) that would prohibit any farm program payments being made to eligible individuals or entities with adjusted gross incomes exceeding $250,000. If enacted, this new test would become effective on Oct. 1, ’11, and replace the adjusted gross income tests in the ’08 farm law.
The Committee also accepted an amendment by Rep. Flake to reduce direct payments (DPs) on cotton base by $147 million to repay the Commodity Credit Corp. for payments made to the Brazilian Cotton Institute as part of a Framework Agreement between the United States and Brazil. The Framework Agreement was put in place to allow time for the United States to determine what modifications to the program need to be made in the ’12 farm bill to resolve the World Trade Organization case under which Brazil has been granted permission to impose punitive tariffs on up to $820 million in US exports. Subsequently, the Committee accepted an amendment by Rep. DeLauro (D-CT) to deny any payments to the Brazil Cotton Institute and use the $147 million generated by reduced DPs to restore some of the cuts to the WIC program.
The Commodity Futures Trading Commission budget would be cut 44% below the President's budget request; a move Rep. Farr (D- CA) said in a statement would “hamper the implementation of the Dodd-Frank financial reform legislation.” Conservation program operations would be cut 13% from FY10 levels. Research and Development funding was cut by $361 million, according to Rep. Farr. The bill was approved by voice vote, clearing it for floor consideration during the week of June 13.
NCC Opposes Damaging Appropriations Amendments
The NCC issued a statement saying it strongly opposes amendments to the FY12 Agriculture Appropriations bill that (1) rewrite provisions of the ’08 farm bill and (2) violate a government-to-government agreement established between the United States and Brazil (see related story for details).
NCC Chairman Charles Parker said that the Appropriations Committee’s actions circumvent the thoughtful and deliberate process initiated by the agriculture committees that authorize the comprehensive multi-year farm legislation.
“As the House and Senate Agriculture Committees are beginning the process of developing the successor legislation to the ’08 farm law, the House Appropriations Committee has undertaken a misguided approach to farm policy,” Parker said.
“It is unfortunate that Representative Flake’s amendment will divert funds from the most trade compliant provision in the farm safety net and also squarely places the burden of the dispute on upland cotton programs, even though export credit programs account for 80% of Brazil’s retaliation authority,” Parker said. “Representative DeLauro’s amendment goes a step further by diverting the funds away from the Brazil Cotton Institute, and thus violating the government-to-government agreement.
“Actions by the Appropriations Committee have violated the Framework Agreement that had already established a clear path to resolving the on-going WTO trade dispute. Provisions in the Framework establish principles that will likely mean substantive changes to upland cotton programs as part of the 2012 farm bill. The U.S. and Brazilian governments negotiated a detailed process that will resolve the trade dispute and Congress should let that process come to fruition.”
Parker also expressed disappointment regarding Congressman Flake’s amendment to reduce the income means test for farm program eligibility.
“By lowering the adjusted gross income (AGI) test to $250,000, the Appropriations Committee has introduced a major change that cuts across all of production agriculture,” Parker added. “In the 2008 farm bill, Congress went through a lengthy debate before imposing tighter eligibility requirements. It is anticipated that the Agriculture Committees will debate eligibility provisions in the next farm bill. Any debate or changes to those provisions should only be done by the authorizing committees as part of the next farm bill.”
The NCC will work with the leaders of the House Agriculture and Appropriations Committees in an effort to reverse these misguided and counterproductive amendments.
Debt Limit Bill Rejected
The House, in a largely symbolic vote, rejected a bill (H.R. 1954) to raise the limit on federal borrowing by $2.406 trillion. The vote was 97-318 with 236 Republicans and 82 Democrats voting against the increase. All of the 97 votes in favor of the bill were by Democrats.
“Today we're making clear that Republicans will not accept an increase in the nation's debt limit without substantial spending cuts and real budgetary reforms,” said Rep. Camp (R-MI), chairman of the House Ways and Means Committee. “This vote, a vote based on legislation I've introduced, will and must fail.”
Since May 16, the debt that is subject to the Congressionally-approved limit has been only $25 million below the $14.294 trillion limit. The Treasury Dept. has made “accounting moves” to keep below the limit, but it has said the room gained by those moves will run out around Aug. 2. That date could change based on new data on revenue and spending, and Treasury has said it will provide updates in the first week of each month until the debt ceiling is boosted.
WTO Says Doha Momentum Needed
Director-General Pascal Lamy, head of the World Trade Organization (WTO) said the immediate challenge for the organization is to generate momentum on “realistic, credible and achievable targets” for a positive result that could be agreed upon at the ministerial conference in Geneva on Dec. 15-17.
Lamy said priority in the December package should be given to issues of direct interest to least developed countries (LDCs), notably duty-free/quota-free (DFQF) market access for LDC exports and related rules of origin for LDC products; an LDC waiver from a future Doha services agreement; and a “step forward” on cotton. Lamy said he would continue consulting with WTO members and report back to the Trade Negotiating Committee on June 9 with the aim of having greater clarity on what the membership hopes to achieve in December so that delegations could get into the “real work” of negotiating on outcomes. The December package is intended to rebuild confidence in the Doha process following the recent admission that differences between the United States and major emerging economies on market access issues could not be bridged.
Members also are expected to decide at the December ministerial conference how to proceed in ’12 on the remaining issues on the Doha agenda, including the central issues of market access in agriculture, services and industrial goods. According to reports, battle lines are forming over cotton, one of the potential December “deliverables.” WTO members agreed in ’04 to address the issue ambitiously, expeditiously and specifically, within the agriculture negotiations, and to set up a subcommittee on cotton to address “all trade-distorting policies affecting the sector in all three pillars of market access, domestic support, and export competition.”
Amid these reports, NCC President/CEO Mark Lange and Senior Vice President John Maguire met with Administration officials and Congressional staff and conveyed the industry’s opposition to any proposals that include cotton in a scaled-back December package. In meetings with USDA Deputy Under Secretary Darci Vetter, USTR Assistant Trade Representative Sharon Bomer, and US Trade Ambassador to the WTO Michael Punke, NCC staff stressed that cotton only can be addressed as part of a comprehensive agreement encompassing all of agriculture.
The original target of the cotton initiative was subsidies available to US cotton farmers at the time, but Ambassador Punke noted that the situation has changed sharply since then.
“If people wish to discuss cotton, everyone's cotton programs must be on the table,” Punke declared. Referring to China, Punke said that “one member that is the world's largest market for cotton has failed to meet its WTO obligation to notify agricultural subsidies it has provided since ’04. Since that time, we understand that the member in question has initiated or significantly expanded subsidies benefiting its cotton sector. Let me be clear, we will not negotiate in the dark. If we are going to have a discussion about cotton, it must be a comprehensive discussion about all forms of market distorting practices. We would need to discuss both direct subsidization and other practices such as import licenses, sliding tariff scales and reserves management—that produce very substantial levels of effective support for domestic cotton producers.”
Punke added that even on the issue of DFQF (duty-free, quota-free market access), where broad support exists for its inclusion in the package, getting an agreement won't necessarily be easy.
“Frankly, we hear very different viewpoints from different LDCs, with some expressing grave concern about [tariff] preference erosion,” the US ambassador said. He also said that DFQF could not be “divorced” from its original context, where the issue had been discussed as part of an ambitious Doha Round agreement.
“The situation today is different,” Punke argued. “The United States is not pulling issues off the table, but neither can we ignore the dramatic shift in context.”
US officials already have indicated that a deal on DFQF would stand little chance of approval in the US Congress without something extra—such as trade facilitation—benefitting US exporters.
Responding to Punke's remarks, a Chinese official speaking on condition of anonymity accused the United States of bringing to the table a “series of issues, which go far beyond the concerns of LDCs, which are difficult, complicated, sensitive and obviously not achievable within the next few months.”
“The only solution to fundamentally address the difficulties of African cotton producers lies in the elimination of the subsidies of developed countries in an expedited manner,” the Chinese official declared.
Strong Rules-Of-Origin Urged for TPP
Rep. Gowdy (R-SC) organized a letter co-signed by 51 members to the US Trade Representative (USTR) urging the inclusion of strong rules of origin for textiles in the Trans-Pacific Partnership (TPP) negotiations to reduce the risk to the US textile and apparel industry from Vietnam's inclusion.
The letter said that while they recognized the opportunities represented by the TPP, “the inclusion of Vietnam could dramatically shift global trading patterns, displace critical U.S. textile and apparel jobs, and undermine important trade relationships in the Western Hemisphere that support nearly 2 million jobs.”
The co-signers included three specific recommendations: 1) establish special market access rules, given Vietnam's non-market economy status and inherent advantages provided to its textile and apparel sectors; 2) adopt the basic yarn-forward rule of origin for textiles and apparel with no loopholes (a yarn forward rule would mean that only apparel using US yarn and fabric would qualify for duty-free benefits, with all textile components in garments, including linings, narrow elastic fabrics, sewing thread and pocketing, required to originate in parties to the agreement); and 3) strengthen customs rules. The House members also encouraged USTR to handle textiles and apparel in a separate negotiating group.
The letter said it was important for USTR to recognize that Vietnam's textile and apparel production and export model is heavily influenced by its proximity to and its relationship with China.
According to the letter, the Vietnamese market does not offer significant export opportunities for US yarn and fabric producers given that China was the dominant source of Vietnam's textile and apparel inputs. It stated that Vietnam already is the second largest supplier of textiles and apparel to the United States behind China and that a partially Vietnamese state-owned company named Vinatex was the world’s 10th largest garment producer.
Other letter signers included the entire North Carolina delegation, the entire South Carolina delegation, and Reps. Roby (R-AL), Rogers (R-AL), Sewell (D-AL), Grijalva (D-AZ), Sanchez (D-CA), Courtney (D-CT), DeLauro (D-CT), Barrow (D-GA), Bishop (D-GA), Broun (R-GA), Gingrey (R-GA), Johnson (D-GA), Scott (D-GA), Westmoreland (R-GA), Braley (D-IA), Latham (R-IA), Michaud (D-ME), McGovern (D-MA), McCotter (R-MI), Nunnelee (R-MS), Pascrell Jr. (D-NJ), Kaptur (D-OH), Sutton (D-OH), DeFazio (D-OR), Marino (R-PA), Cicilline (D-RI), Langevin (D-RI), Duncan Jr. (R-TN), Roe (R-TN), Conaway (R-TX), Neugebauer (R-TX), Griffith (R-VA) and Petri (R-WI).
Trade ministers from the TPP countries met during the Asia-Pacific Economic Cooperation (APEC) forum in Big Sky, MT, on May 20. The next round of negotiations is scheduled to be held in Hanoi, Vietnam, in June.
President Announces Commerce Secretary Nomination
President Obama announced his intention to nominate John Bryson, a director of The Boeing Company, The Walt Disney Co., and Coda Automotive Inc., as the next secretary of Commerce.
Sen. McConnell (R-KY), on behalf of 44 Senate Republicans, sent a letter in March threatening to block all nominees, including the Commerce secretary, until the President submitted the three pending free trade agreements to Congress for approval. Separately, Sen. Inhofe (R-OK), the ranking member of the Senate Committee on Environment and Public Works, said he would actively work to defeat Bryson's nomination, calling him the founder of a radical environmental organization and a member of a United Nations advisory group on climate change.
Bryson would replace current Commerce Secretary Gary Locke, who has been nominated to be the next US ambassador to China. According to a White House-issued biography, Bryson was chairman and chief executive officer of Edison International, the parent company of Southern California Edison and Edison Mission Group, from ’90-08.
Bryson is a trustee of the California Institute of Technology and a director of The California Endowment and the W. M. Keck Foundation. Previously, he was a member of the UN Secretary-General's Advisory Group on Energy and Climate Change. At the start of his career, he was a co-founder and attorney for the Natural Resources Defense Council. Response from the business community was mixed.
NCC Flow Proposals Posted
The NCC Performance and Standards Task Force (PSTF) recently met to examine two specific resolutions adopted at the NCC's annual meeting that are related to cotton warehousing and incentives for exceptional performance.
From that PSTF meeting, 12 flow proposals emerged. The proposals, along with supplementary cotton flow information, are posted on the NCC website’s Technical Service Flow-Shipment page (members only) at www.cotton.org/tech/flow/index.cfm. Industry leaders are urged to review the proposals so that the most time sensitive ones can be refined prior to being considered at the NCC’s ’11 Mid-Year Board meeting in August.
The supplementary cotton flow information, which includes data from the first quarter of ’11, was presented at the NCC Cotton Flow Committee meeting in February and some of it was reviewed by the PSTF at its recent meeting.
Sales Weak, Shipments Steady
Net export sales for the week ending May 26, 2011 were -18,300 bales (480-lb). This brings total ’10-11 sales to approximately 15.6 million bales. Total sales at the same point in the ’09-10 marketing year were approximately 12.4 million bales. Total new crop (’11-12) sales are roughly 5.7 million bales.
Shipments for the week were 210,600 bales, bringing total exports to date to 12.7 million bales, compared with the 9.4 million bales at the comparable point in the ’09-10 marketing year.
Effective June 3-9, ’11
Adjusted World Price, SLM 11/16
146.45 cents
*
Fine Count Adjustment ('10 Crop)
1.65 cents
Fine Count Adjustment ('11 Crop)
1.70 cents
Coarse Count Adjustment
0.00 cents
Marketing Loan Gain Value
0.00 cents
Import Quotas Open
1
Limited Global Import Quota (480-lb bales)
217,208
ELS Payment Rate
0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East
166.96 cents
Forward 5 Lowest 3135 CFR Far East
143.08 cents
Coarse Count CFR Far East
NA
Current US CFR Far East
178.81 cents
Forward US CFR Far East
150.69 cents
'10-11 Weighted Marketing-Year Average Farm Price
Year-to-Date (Aug.-April)
81.47 cents
**
**August-July average price used in determination of counter-cyclical payment
