Events begin shaping trade with the U.S.

Free Market Reflections with Steve Dittmer

As Canadians who closely follow American politics know, the Democrats have not suffered their loss gracefully. But it’s not party hacks but citizens who suffer from obstructionist tactics. Of the 4,000 or so appointments needing Senate confirmation, only two or three dozen had been confirmed by mid-April.

One of those delays could definitely affect trade with Canada. In the waning days of the Obama administration, USDA resurrected the GIPSA rule, a proposal that free-market farm and ranch groups had vehemently opposed. For several years their supporters in Congress had written language into appropriations bills prohibiting implementation of the proposed rule. The prohibitions were dropped from the last appropriations bill after USDA promised the cattle sector it wouldn’t pursue the rule. Secretary Vilsack then broke that promise and USDA published the same content in two proposed rules and one interim final rule a month before the Trump administration took office.

The interim rule would allow livestock producers to sue packers if they felt they were treated unfairly without the need to prove harm to livestock producers as a group. Nearly all U.S. Circuit Courts in cases involving different industries have consistently ruled that a plaintiff must prove harm to a class in order to have standing to sue a buyer. The rule’s author, former GIPSA administrator J. Dudley Butler, once described this exception to usual practice as a “plaintiff attorney’s dream.”

The interim rule was meant to work in conjunction with one of the proposed rules prohibiting packers from paying premiums on better quality livestock, as this would open them up to claims that they unfairly paid more to some individuals than others. The thinking is packers would have to go back to buying livestock on the average, to avoid being sued. This direct assault on differentiation to produce livestock based on consumer preferences is what fringe livestock groups have been seeking for some time. They want to be paid the same amount for both high-quality and less valuable animals, without having to do the work, management and planning to produce high-quality products

The interim final rule was scheduled to become law April 22, 2017. That was two days before the scheduled Senate hearing to confirm incoming Agriculture Secretary Sonny Perdue who would almost certainly have pulled the rule, but after President Trump’s hold on new regulations would have expired. Farm and ranch groups had been lobbying furiously to reverse this decision while fully expecting a flood of nuisance lawsuits being filed as soon as the rule went into effect.

Thankfully, in mid-April came news that someone in the government was listening, when USDA-GIPSA’s director of litigation and economic analysis, S. Brett Offutt, announced via the Federal Register that both the interim and proposed rules would be delayed until October 19, 2017. Additionally, a new proposed rule would open a comment period regarding the fate of the interim rule. The industry is vigorously pushing to have all three squashed.

Last month I wrote about the dangers of the Border Adjustment Tax (BAT) on imports being proposed to recover revenue “lost” in tax cuts. Since then it’s become evident that not everyone favours a BAT. The list of doubters includes Democrats and Republicans in Congress, members of the cabinet and several key figures in the White House, plus a long list of manufacturers who rely on imported parts and materials, and big retailers who rely on imported goods to keep prices down for consumers. Numerous members of the ultra-conservative House Freedom Caucus have also come out against the BAT.

President Trump remains noncommittal, leaving open the possibility that the parade of business leaders, retailers and farm groups who are opposing the BAT and pleading for more open trade might still have an effect on Trump’s thinking. During his confirmation hearing, Sonny Perdue noted about 80 per cent of the comments in support of freer trade flooding into the White House were from agricultural groups, a critical bastion of Trump’s election success.

As of mid-April there was still a real chance that the BAT would be stripped out of the tax reform legislation before it becomes the law of the land.

Any fast start regarding trade has been stymied by the Democratic campaign to hold up confirmations, especially that of Perdue and proposed U.S. Trade Representative Robert Lighthizer, who needs a waiver because he did work for foreign countries in the past.

The meetings between President Trump and Prime Minister Abe of Japan and Chinese President Xi before the U.S. had adopted an official trade policy or had a full complement of trade officials in place was seen by some as a way of keeping the U.S. from falling too far behind other countries working on bilateral agreements. President Trump and Chinese President XI have agreed to begin exploring re-opening China to U.S. beef. If Trump can get that done, he will have succeeded where no one else has.

As for NAFTA, a white paper circulated by the administration in Congress regarding negotiating positions lacked any fire-breathing rhetoric. It did indicate the administration wanted to negotiate more flexibility to impose tariffs on Mexican or Canadian goods. But it would keep NAFTA’s current dispute resolution system. A Wall Street Journal story in general indicated the draft was less threatening than the Mexicans expected and more contentious than the Canadians expected.

About the author

Contributor

Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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