International Trade/Border Adjustment Tax
News & Highlights
Candidate Donald Trump promised to renegotiate or throw out major trade agreements in order to
preserve and promote American jobs. Since taking
office in January, he has begun to make good on those
campaign promises. The Trump Administration has
withdrawn from negotiations on the Trans-Pacific
Partnership (TPP) and has given formal notice for
In addition, both Administration officials and Congress
have made tax reform a 2017 priority, and have floated
numerous recommendations for specific changes to the
tax code. While debate over actual legislation has not yet
begun, the fight is well underway on several key provisions that may soon be on the table. Action on both trade
negotiations and tax policy could have significant impact
on the fruit and vegetable industry.
The U.S. fruit and vegetable industry is highly dependent upon international trade, both exports from the U.S.
and imports into the country. However, specific patterns
of trade vary greatly between different commodities.
Overall, the U.S. agricultural sector is strongly pro-trade,
with exports playing a major role for most row crop
commodities. While the U.S. fruit and vegetable interests do not always align with these partners, many of
us have felt the sting of retaliation from other countries
when trade disputes arise. Therefore, agriculture is currently unified around the goal of positive win-win trade
negotiations with other countries.
With regard to NAFTA, there is a strong interdependence of the fruit and vegetable sector across all three
countries. Trade across the NAFTA members serves both
consumers and deeply connected supply chains in all
countries, providing significant jobs not only in agriculture but in processing and distribution. Increasingly, fruit
and vegetable capital investment in production, packing, processing and distribution is flowing freely among
investors in all three countries. While traditionally more
U.S. and Canadian producers may have been investing in
Mexico, Mexican producers are increasingly investing in
the U.S. and Canada as well.
During the renegotiation of NAFTA, we anticipate that
the USA will seek to find a win-win-win solution that
will serve all of our members. We have seen how some
of our members have been disadvantaged by some aspects of the current NAFTA agreement. We are encouraged by the Administration ‘s direction, and hope that
their efforts will be realized without tariffs and retaliatory actions.
The proposed border adjustment tax (BAT tax) has
become one of the most controversial tax policies being advanced by House Speaker Paul Ryan and Ways
and Means Committee Chairman Kevin Brady. A
BAT tax would levy a tax on imported goods, while
exempting exports from U.S. taxation. The concept is
that U.S. exports face an extra tax burden while paying
U.S. tax, and then a foreign country’s Value Added Tax
(VAT) when the product is sold in that country. However, many economists do not see the tax patterns of
internationally traded goods as that simple, and many
policymakers are highly skeptical of a BAT tax or are
directly opposed to the idea altogether, including many
It appears that the majority of agriculture also shares
these concerns, which were expressed in a recent
House Agriculture Committee hearing on the impact of
tax reform on U.S. agriculture. While there are many
concepts in tax reform that are quite favorable such as
elimination of the estate tax, reduction in corporate tax
rates, and immediate expensing of assets, most groups
fear a BAT tax could have unforeseen impact on the
food and agriculture sector and could outweigh gains
with tax reform.
B. Immigration/Guest Worker Programs
No issue generated more controversy and passion
during the 2016 Presidential campaign than immigration. Candidate Trump promised a tougher approach to
enforcement of U.S immigration laws. Since coming
to the White House, he has taken steps to increase
enforcement and deportations of undocumented individuals, focusing first on those with criminal records
but too often collecting others in these actions. For the
produce industry, securing a stable, skilled workforce
remains our most important challenge. Too many
growers and shippers are scrambling to find workers to
bring time-sensitive crops in from the field and on to
Since taking office, President Trump has issued several
Executive Orders pertaining to enforcement. The
first, Border Security and Immigration Enforcement
Improvements, is the “build the wall” executive order,
directing Customs and Border Patrol to “secure the
southern border of the United States through the immediate construction of a physical wall on the southern
border.” This order also directs the hiring of 5,000
more border patrol officers. The order does not specify
how the wall would be paid for, but does request a
report on all U.S. foreign aid to Mexico over the last
The second, Enhancing Public Safety in the Interior
of the United States, applies to immigration enforcement in the interior, and specifically targets so-called
“sanctuary cities” by cutting off their federal funding.
The order also expands enforcement powers giving
immigration officers almost unlimited discretion in
instituting deportation proceedings to include any noncitizen not yet charged with a crime but who, in the
judgment of and immigration officer, poses a risk to
public safety or national security.
This stepped-up enforcement combined with no legis-
lative action leaves us with three action steps:
• Communicate with Administration leaders the dam-
age being done to U.S. agriculture due to rampant fear
across our worker communities.
• Continue to communicate to the Administration and
Congress our needs for a long-term fix creating a path to
legal status (not necessarily citizenship) for our current
workers and a new efficient guest worker program.
• Push the Administration to resolve the worst bureaucratic problems with the current H2A program, as farmers increasingly have no other choice than to move to
H2A in overwhelming numbers.
C. Farm Bill
The Farm Bill represents the federal government’s largest investment in the produce industry and the healthful nutrition of America’s children through increased
consumption of fruits and vegetables. With programs
including targeted research programs, export expansion,
programs designed to eliminate pests and diseases, access
to fresh fruits and vegetables and state block grants, we
have been successful in past Farm Bills to elevate annual
federal government investment to support the specialty
crop industry to over $600 million.
The process of developing the next Farm Bill began a
few months ago even though the law does not expire until
September 2018. Both the Senate and House Agriculture
committees will spend the spring and summer of this year
on hearings to receive testimony from interested stakeholders from across the country on a wide range of issues.
Once the committees complete their hearings, they are
expected to start developing a framework for legislation
which could be completed by the end of this year.
The Specialty Crop Farm Bill Alliance, of which the National Watermelon Association is one of 33 steering committee members, provides the leadership along with three
co-chairs from Florida Fruit and Vegetable Association,
National Potato Council and Western Growers Association. The Alliance has been the driving force coordinating
fruit and vegetable provisions in the last two Farm Bills,
providing Congress with a set of comprehensive recommendations from a coalition of more than 120 specialty
crop organizations from across the country, including
fruits and vegetables, tree nuts, wine grape growers, and
nursery and landscape organizations.
The outlook for the next Farm Bill is mixed, with many
of the traditional crops (corn, cotton, dairy, wheat)
experiencing significant economic challenges and thus
asking Congress for new financial support. Although
there is very little prospect of increasing overall funds for
the Farm Bill, our coalition will have to be aggressive in
protecting and advancing our priorities.
D. Regulatory Reform
Regulatory reform has been met with positive impact f
rom the new Administration. The business community
saw the Obama Administration take an increasingly aggressive approach to environmental rules and other regulatory areas that are relevant to our industry. To the new
Administration’s credit, we are now seeing a reversal of
that trend since President Trump and his administration
go to work to relieve some of the regulatory burdens that
have been placed on us.
An Executive Order signed by the President directed all
federal agencies to seek public comment on existing regulations that may be appropriate for repeal, replacement,
or modification. The order directed federal agencies to
establish Regulatory Reform Task Forces to identify
existing regulations that ( 1) “eliminate jobs, or inhibit job
creation;” ( 2) “are outdated, unnecessary, or ineffective;”
( 3) “impose costs that exceed benefits”; or ( 4) “create a
serious inconsistency or otherwise interfere with regulatory reform initiatives and policies.”
On March 29, EPA announced it would deny a petition
filed by activist groups that would have removed the crop
protection product chlorpyrifos from the market immediately, without undergoing the normal scientific regulatory
review process. Both USDA and EPA concluded that
claims in the petition were based on unreliable information from epidemiological studies. This product is used
on a variety of fruits and vegetables and has already been
the subject of extensive and lengthy review by EPA.
Agriculture stakeholders across the crop spectrum had
urged that the agency ensure that its regulation of the
product uphold the solid foundation of unbiased scientific data showing this product could be used safely and