House clears spending bills, Senate to follow | CBO issues USMCA impact assessment
In today's updates:
* Analysts trying to forecast if China can get to $40 bil. in U.S. farm product buys
Markets: Ratings agencies S&P and Fitch both improved their assessment of the U.K.’s credit outlook Wednesday following Boris Johnson’s majority win last week, but the pound continued its slump overnight following its biggest drop in a year.
Since ASF arrived in China in mid-2018, about a quarter of the world’s pigs have died from the disease or culls undertaken to prevent its spread. China farms about half of the world’s pigs and consumes about half the world’s pork. Source of following chart: Financial Times.
President Trump issued an executive order that closes all federal government agencies and gives federal employees the day off on Christmas Eve.
— U.S./China trade policy update:
- Latest parlor game: commodity analysts try to get to $40 billion in sales to China. Just like look-ahead outlooks for 2020, analysts with sometimes detailed forecasts of how much China could purchase towards the $40 billion U.S.-announced commitment of American farm products. Most of the analyses get to the $32 billion to $34 billion area. The predictions if not guesses come with a lot of uncertainty regarding what actually applies to China's shopping list. For example, U.S. Trade Representative Bob Lighthizer in an interview with Fox Business Network yesterday revealed that hardwood lumber purchases would at some stage count toward China's farm product purchases. Also, many commodity analysts are not so familiar with estimating buys of fruits and tree nut purchases and also fish products.
- China watchers say most if not all industry analysts will not likely include some items that cold run up the China purchase tally. They include but are not limited to:
— Purchases for reserves, both domestic and strategic
— Reports that China could require all imports to go into China ports not Hong Kong... perhaps $10 billion in value… thereby meeting China's commitment.
— A possible China move to echo the U.S. Food for Peace program whereby China would donate some of their domestic food products to needy nations, building up goodwill among those nations.
— House approves spending bills totaling nearly $1.4 trillion; Senate action ahead. The House on Tuesday approved $1.4 trillion in spending for fiscal year 2020 that began Oct. 1. There were two large “minibus” packages, largely to avoid the even larger omnibus bill that both sides say represents the worst of the "swamp." The page tally totaled 2,313 pages; more than 3,800 pages if explanatory statements are included.
The process includes a nearly $54 billion tax package, including a retroactive extension of the $1 per gallon biodiesel tax incentive program, from 2018 through 2022. Senate Finance Chairman Chuck Grassley (R-Iowa), helped establish the credit 15 years ago. National Biodiesel Board CEO Donnell Rehagen gave Grassley and Rep. Abby Finkenauer, a freshman Democrat, equal praise for securing the deal. The nation's largest biodiesel producer, Renewable Energy Group, is headquartered in Iowa. Sen. Maria Cantwell (D-Wash.), who helped broker the late-night tax agreement, represents a huge REG facility in her home state.
The Senate is expected to vote on the spending packages this week and key White House aides have indicated Trump plans to sign the bills before a temporary spending bill expires at midnight Friday.
— USMCA update:
- House panel advances trade pact bill. Via a nearly unanimous House Ways and Means Committee vote on Tuesday, the panel advanced to the floor implementing legislation for the USMCA. By voice vote, the committee agreed to favorably report the bill (HR 5430) without changes after a mock markup where members reviewed the 239-page legislation. By law, implementing legislation for a trade agreement cannot be amended.
- Rep. Bill Pascrell Jr. (D-N.J.) said the bill was getting “a bum’s rush in an effort to schedule a White House East Room victory celebration. I want to register that I am at best deeply uneasy about how this process has concluded.” Pascrell's was the only audible vote against the measure. “We’re now at the so-called one-yard line and I regret that I’m not satisfied with what we have. No one can question there has been progress,” Pascrell said. However, he said the agreement provides no guarantees that labor rights and environmental standards will be protected.
- House is scheduled to vote Thursday on the bill.
- Senate action will take place in 2020, said Majority Leader Mitch McConnell (R-Ky.), after his chamber finishes the impeachment trial of President Donald Trump.
- The implementing bill calls for about $2 billion in funding for several agencies and institutions to help the U.S. meet USMCA obligations and create a network for monitoring and enforcing the agreement’s provisions. Some of the funding would be provided as emergency spending that is not subject to budget caps.
- Impacts: The Congressional Budget Office (CBO) estimates that the USMCA will increase U.S. government revenue by $2.97 billion from fiscal 2020 to 2029, with the boost coming from higher expected duty revenue on car and truck parts that do not meet stricter rules. Some vehicles and parts would no longer qualify for duty-free treatment because they don't meet new requirements that 75% of content in cars and auto parts come from North America and that 40% of car content and 45% of truck content be made by workers earning $16 an hour.
- Additional impacts: CBO also estimates the agreement would reduce the federal deficit by $3 billion over a 10-year period. The agency estimates that appropriations not subject to emergency status would total $833 million in outlays from fiscal 2020 to 2029.
- The International Trade Commission, an independent agency, said in April 2018 that USMCA would “if fully implemented and enforced” increase real GDP by $68.2 billion, or 0.35%, and add 176,000 jobs to the U.S. economy.
— White House wants to make sure this time the corn and biofuel industries are on board relative to the coming EPA RFS volume announcement. Trump administration officials, including National Economic Council (NEC) Director Larry Kudlow, have been holding sessions with the stakeholder lobbyists.
— Latest Farm Journal Pulse poll shows improving rural support for President Trump. Take a look at the approval numbers that have risen the past few polls:
— Other items of note:
House to hold separate votes on Trump impeachment articles. The full House will debate and vote separately on two articles of impeachment against President Donald Trump today, under a process set up by the House Rules Committee on Tuesday night. Trump laid out his defense against charges he abused his power and obstructed Congress while also ridiculing Democrats’ allegations. He accused House Speaker Nancy Pelosi (D-Calif.) of turning the House into a medieval “star chamber” in pursuit of his impeachment, lashing out at the speaker in a blistering, six-page letter and vowing her party would be punished by voters in the 2020 election.
The Department of Commerce announced five anti-dumping and countervailing duty determinations on certain steel from South Korea and Taiwan that was shipped to Vietnam for "minor processing" and then exported to the U.S. in order to circumvent duties already imposed on similar Korean and Taiwanese products.
— Markets. The Dow on Tuesday gained 31.27 points, 0.1%, to 28,267.16, while the Nasdaq Composite rose 9.13 points, 0.1%, to 8,823.36. The S&P 500 added 1.07 points, less than 0.1%, to 3,192.52, extending its gain so far this year to 27%, the broad index’s best run in six years.