April 2018
Co-op Matters

A Battle Ahead

Policy expert offers AFC members a glimpse into the probable short-term future of U.S. agriculture.

John Gilliland offered closing remarks at AFC’s annual meeting. Photo credit: Morgan Graham

 
   
   
   

Of his 22 years working in the nation’s capital, John Gilliland told Alabama Farmers Cooperative members during the group’s 81st annual meeting that 2017 was the busiest year he’s experienced in his career. The Pike Road native serves as a consultant with the Washington-based law firm Akin Gump Strauss Hauer & Feld, where he advises clients on matters related to international trade, health care and tax policy.

Drawing from his experience with and knowledge of U.S. trade and agricultural policy, Gilliland offered AFC members a glimpse into how the events of 2016 and ‘17 stand to impact U.S. agriculture in 2018 and beyond. According to Gilliland, farmers should pay close attention to what will be happening in regard to foreign trade, legislation and, in addition to the outcomes of elections in 2018 and 2020, the Congressional redistricting taking place after the 2020 Census.

 

Trade deals

The Trump administration has made no secret of its aversion to business as usual in Washington, and in no arena is that more obvious than in its attitude toward international trade, Gilliland said. While the trend prior to 2017 had been toward removing barriers to free trade, the current administration seems focused on trade remedies. These remedies are generally designed to protect American businesses from unfair competition caused by foreign companies and governments, but they could also have negative ramifications for U.S. agricultural producers. With much of this work aimed at leveling the playing field with China, Gilliland warned of the possible repercussions America’s farmers could face.

"If we get into a retaliatory relationship with China," he said, "our sorghum farmers, for example, will see difficulties related to Chinese trade actions."

Trump is also pushing a renegotiation of the North American Free Trade Agreement. Though NAFTA has been a success for American agriculture since it went into effect in 1994, Gilliland noted that balancing the needs of the manufacturing and agricultural sectors in a rewrite could be challenging. It will be important that a renegotiated NAFTA preserves current market access opportunities for U.S. agriculture exports.

 

Legislative action

In 2018, farmers, like many Americans, will begin to realize the benefits of the Tax Cuts and Jobs Act passed by Congress just before the end of 2017. And while most in the ag sector are happy with the legislation, one last-minute change contained in the bill has private grain buyers up in arms.

The repeal and replacement of Section 199 of the federal tax code, argue those entities, will incentivize sales to cooperatives, directly and negatively impacting private companies. Section 199 was replaced with language to allow producers who sell their products to cooperatives – instead of private entities – to write off 20 percent of the profit of those sales.

At the time of publication, members of Congress and representatives of cooperatives and private companies were working to draft a fix for the so-called "199A effect." Gilliland noted Congress will have an opportunity to enact that legislation in late March, as a part of an omnibus spending package. However, if Congress misses that opportunity, Gilliland warned it could become increasingly difficult to enact any further changes to the tax code until after the November midterm elections. Likewise, any movement on immigration reform or infrastructure investment legislation will likely be slowed down by the 2018 election.

In the meantime, Gilliland reported work continues on the Farm Bill in both the House and Senate, though progress has been slower than congressional leaders hoped. House leadership remains focused on moving their version by this spring, with the Senate close behind. As with other major legislative initiatives, members of Congress could find their task more difficult as the midterm elections approach. If work on the Farm Bill is not completed by September, an extension of current authority will be needed.

 

Elections and redistricting

Referring to the election, Gilliland said that if 2018 is a battle for control of Congress expect 2020 to be a war – not only at the national level but the state level as well. Because 2020 is not only a national election year but also a Census year and the Census determines how many members each state can send to Congress, the stakes are unusually high. Additionally, because state legislatures are typically tasked with drawing the boundaries of Congressional districts, competition for seats in state houses will be more intense than usual.

"For some time now, the country’s population has been shifting to the Sun Belt, the ‘red’ states," Gilliland said.

If those majority Republican states pick up Congressional seats as several did following the 2010 count and their state legislatures are also Republican-controlled, the resulting make-up of Congress could be unfortunate for Democrats nationally and could stand to influence America’s agricultural sector for at least another decade.

While the outlook Gilliland presented may have sounded daunting to some, incoming AFC Board Chairman David Womack did not seem fazed by the news.

"Agriculture has always been a challenging line of work," Womack said. "It’s just like any other business – there are ups and downs, and you have to give it your best to make it work."

 

Mary Catherine Gaston is a freelance writer from Americus, Georgia.