D.C. Watch: U.S. to increase trade enforcement

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Timothy Reif, the top legal officer at the Office of the U.S. Trade Representative, was at World Trade Organization headquarters in Geneva recently, holding meetings with trade ambassadors from around the world. His message? That the United States intends to step up its enforcement of trade deals and target the unfair trading practices. Some dismiss the “tough talk” as election year rhetoric to court the union vote and note WTO processes take years to get any result. Others note if the goal is winning political points, there are other actions the U.S. can take on its own, without the WTO.

But other Obama trade policies under scrutiny: House Ways and Means Chairman Dave Camp, R-Mich., held hearings this week with U.S. Trade Representative Ron Kirk fielding questions on a wide range of trade policy questions. Of particular interest were the following:

  • Progress of the Trans-Pacific Partnership negotiations, especially in light of the many issues raised by Canada, Japan and Mexico wanting to join.
  • Progress of the yet-to-be-implemented free trade agreements with Panama and Colombia that Congress approved and Obama signed last fall.
  • Administration's plans to reorganize federal agencies responsible for trade.
  • Whether the administration plans to seek trade promotion authority from Congress. (Without TPA, the U.S. could be frozen out of any future trade agreements.)

Live animal export boom for the U.S. USDA's Animal and Plant Health Inspection Service (APHIS) has approved seven temporary Export Inspection Facilities (EIFs) that reduce the distance animals have to travel prior to export and thus help exporters meet strict shipping deadlines. Cattle exports doubled in 2011, following a 50 oercent increase in 2010. For perspective, last year, APHIS processed 25 shipments totaling about 17,000 head of livestock (mostly dairy cattle) through a single new temporary EIF in Turner, Maine.

Ag Secretary Vilsack says tax code changes are vital for generational turnover of farmland. He also said the new farm bill should have some components aimed specifically at facilitating the transfer of farmland. Currently, people in the 15 percent tax bracket or lower pay no capital gains on appreciated assets. For people in the higher income brackets, the capital gains rate in 2012 is 15 percent. Through the end of 2012, the estate-tax exemption is $5 million for an individual or $10 million per couple. The maximum tax rate is also 35 percent and an heir also gets the benefit of basis value stepped up to the current market value at the time of the asset transfer.

But without extension or a “permanent fix” the exemption drops by 80 percent on Jan. 1, 2013, to $1 million for an individual or $2 million per couple. Further, the maximum capital gains tax rate jumps to 55 percent and the stepped-up basis also goes away altogether! Now consider that landowners are in a much different position than in 2002, when the estate-tax exemption first moved up to $1 million. At that time, an Iowa farmer could own nearly 480 acres before topping $1 million in asset value. Now, with average Iowa land values at $6,708, fewer than 150 acres tops $1 million in assets.

But are Vilsack and President Obama on the same page regarding tax “reform”? The Administration Budget released two weeks ago merely “softens the blow” warned by Vilsack above. It lowers the estate tax exemption a bit less (to $3.5 million) and raises the maximum capital gains a bit less (to 45 percent). But that tepid “compromise” drew strong criticism from some farm groups who welcomed Vilsack’s more strident position in remarks to the Outlook Conference. We’ll be expecting some “clarification” soon to reconcile the two views.

Although cellulosic ethanol is taking longer than expected to reach the market, now is not the time for the government to waver in its support of the industry, says Renewable Fuels Association President and CEO Bob Dinneen. RFA is pressing Congress to extend the Producer Tax Credit for cellulosic ethanol and the Accelerated Depreciation Allowance for Cellulosic Biorefineries.



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