CRS Reports

SBA Economic Injury Disaster Loans for COVID-19

The current coronavirus disease (COVID-19) outbreak may have significant economic implications for businesses and nonprofit organizations including negative impacts on imports, global supply chains, and tourism. Furthermore, if COVID-19 becomes widespread or prolonged it may slow global growth, and some businesses may be forced to furlough or lay off workers. This Insight considers whether the Small Business Administration (SBA) could provide economic injury disaster loans (EIDLs) to eligible businesses and organizations that have suffered substantial loss as a result of COVID-19. EIDL Overview EIDLs provide eligible small businesses and nonprofit organizations up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. Loan proceeds can only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury and to resume normal operations. Interest rates for EIDLs are statutorily set at 4% per annum or less and can have maturities up to 30 years. EIDLs are available only to businesses and private and nonprofit organizations that are located in a declared disaster area, have suffered substantial economic injury, are unable to obtain credit elsewhere, and are defined as small by SBA size regulations. Potential Triggers There are three disaster declarations that could make EIDL available: the SBA Administrator issues an EIDL declaration under the Small Business Act upon certification from a state governor that at least five small businesses have suffered substantial economic injury as a result of a disaster; a physical disaster declaration is issued by the SBA Administrator under the Small Business Act in response to a gubernatorial request for assistance; or the President issues a major disaster declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act that authorizes both Individual Assistance (IA) and Public Assistance (PA). EIDL Declarations Though it has never been tested for an infectious disease outbreak, on February 4, 2016, the SBA made EIDLs available to Genesee and adjacent counties in Michigan following a disaster declaration request from Michigan’s governor related to public water contamination in Flint, MI. Given that precedent which the SBA referred to as a “historic health emergency,” it could be argued that an EIDL declaration by the SBA Administrator would be the most likely type of trigger to provide EIDL assistance to businesses. However, an EIDL declaration for COVID-19 would (1) require a governor to certify that five or more business concerns are economically injured as a result of COVID-19, and (2) require the SBA Administrator to determine that COVID-19 meets the definition of a disaster under the Small Business Act. Five-Business Threshold EIDL declarations cover designated counties, but COVID-19 may be geographically diffuse. As a result, there may be instances in which a governor has five or more business economically affected by COVID-19 that are not in the same political subdivision. Disaster Definition under the Small Business Act It is unclear whether COVID-19 meets the Small Business Act’s definition of a disaster. The definition states the term “disaster” means a sudden event which causes severe damage including, but not limited to, floods, hurricanes, tornadoes, earthquakes, fires, explosions, volcanoes, windstorms, landslides or mudslides, tidal waves ..., riots, civil disorders or other catastrophes, except it does not include economic dislocations (15 U.S.C. 636 (b)). 13 C.F.R. §123.2 elaborates on the definition: Disaster declarations are ... specific geographic areas ... damaged by floods and other acts of nature, riots, civil disorders, or industrial accidents such as oil spills. [They] are sudden events which cause severe physical damage, and do not include slower physical occurrences such as shoreline erosion.... However, for purposes of economic injury disaster loans only, they do include droughts and below average water levels in ... the United States that supports commerce by small businesses ... Past examples include ocean conditions causing significant displacement ... as well as contamination of food or other products for human consumption.... Strictly interpreted, COVID-19 may not be considered a “sudden event” and not tied to a “specific geographic area.” It should be noted, however, that EIDL has been provided for incidents that are not sudden such as droughts and, as just mentioned, the Flint water contamination incident (which arguably is also a public health incident). This may suggest to some that the definition of a disaster under the Small Business Act could be interpreted broadly to include an EIDL declaration. Major Disaster and Physical Disaster Declarations As mentioned earlier, major disaster declarations under the Stafford Act that provide IA and PA also trigger EIDL. Potential issues of interest associated with major disaster declarations are twofold: (1) the list of incidents in the definition of a major disaster under the Stafford Act does not include outbreaks of infectious diseases. In the past some incidents were considered ineligible due to definitional reasons (such as the major disaster denial for the Flint water contamination incident); (2) the thresholds used to determine whether to provide IA and PA are based on damages to homes and public infrastructure. It is unlikely COVID-19 would cause physical damages. Emergency declarations under the Stafford Act do not have the definitional and threshold challenges posed by a major disaster declaration. Emergency declarations, however, do not authorize EIDL. Though the thresholds for a physical disaster declarations under the Small Business Act are significantly lower than major disaster declarations (generally, at least 25 homes or businesses or a combination of the two have uninsured losses of 40% or more), as noted it is unlikely a COVID-19 incident would cause physical damages. Issues for Congress Given the existing statutory constraints, if Congress wishes to make EIDL assistance available to small businesses and nonprofit organizations affected by COVID-19, it may consider amending the Small Business Act to provide explicit statutory assistance following an infectious disease outbreak, or amending the Stafford Act to make EIDL assistance available under an emergency declaration.

Mar 6, 2020

The Defense Production Act (DPA) and COVID-19: Key Authorities and Policy Considerations

As the coronavirus (COVID-19) outbreak develops, the United States faces drug and medical supply scarcities due to disrupted supply chains and increased demand. In response, the President may exercise emergency authorities under the Defense Production Act of 1950 (DPA; 50 U.S.C. §§4501 et seq.) to address supply shortages and economic development impacts, and may have begun the process of doing so. This Insight considers DPA authorities that may be used to address domestic essential goods and materials shortages caused by the outbreak, and explores potential policy considerations for Congress. For more information on the health and epidemiological aspects of COVID-19, see CRS products R46219 and IF11421. DPA Provisions and Recent Use The DPA confers broad presidential authorities to mobilize domestic industry in service of the national defense, defined in statute as various military activities and “homeland security, stockpiling, space, and any directly related activity” (50 U.S.C. §4552.) including emergency preparedness activities under the Stafford Act, which has been used for public health emergencies. Many of these authorities are delegated to executive agencies under Executive Order 13603. Current DPA authorities include, but are not limited to: Title I: Priorities and Allocations, which allows the President to require persons (including businesses and corporations) to (1) prioritize and accept government contracts for materials and services, and (2) allocate or control the general distribution of materials, services, and facilities as necessary to promote the national defense. Title I prioritization authorities are regularly utilized by the Department of Defense (DOD) to acquire critical military capabilities and less frequently by the Department of Homeland Security (DHS) for disaster response and preparedness needs. The allocations authority has not been invoked since the Cold War, such as to promote energy development in 1974. Title III: Expansion of Productive Capacity and Supply, which allows the President to provide economic incentives to secure domestic industrial capabilities essential to meet national defense and homeland security requirements. DPA Title III is specifically intended to “create, maintain, protect, expand, or restore domestic industrial base capabilities” (50 U.S.C. §4533). Authorized incentives include loans, loan guarantees, direct purchases and purchase commitments, and the authority to procure and install equipment in private industrial facilities. DOD regularly utilizes Title III authorities and operates a standing DPA Title III program funded by annual congressional appropriations. Title VII: General Provisions, which includes key definitions and other distinct authorities. These provisions grant the President the authority to establish voluntary agreements with private industry; the authority to block proposed or pending foreign corporate mergers, acquisitions, or takeovers that threaten national security; and the authority to employ persons of outstanding experience and ability and to establish a volunteer pool of industry executives who could be called to government service in the interest of the national defense. For a more in-depth discussion of DPA authorities, see CRS Report R43767. DPA Authorities and COVID-19 As the DPA’s definition of national defense encompasses homeland security issues, the DPA could potentially be used to respond to public health emergencies, though this has not occurred before. At the President’s discretion, DPA authorities could be employed to address concerns over medical supplies shortages due to the COVID-19 outbreak. Case Study: Using DPA to Expand Medical Protective Gear Production As an example of how DPA authorities could be exercised, consider the availability of personal protective equipment (PPE), such as respirator masks, amid the outbreak. Reported PPE shortages may be due to significantly increased consumer demand related to the outbreak itself, and supply chain disruptions resulting from containment measures in China and elsewhere. Under Title I, the President could prioritize domestic production of PPE to ensure sufficient national stockpiles, and allocate them according to the needs of the emergency. Under Title III, the federal government could use authorized incentives to expand domestic capacity for PPE manufacturing to meet the needs of the emergency. Under Title VII, the President could establish voluntary agreements with private industry—which might normally be subject to anti-trust statutes—to coordinate industry PPE production. Policy Implications for Congress The decision whether to employ DPA authorities generally lies with the President. However, in addition to Congress’s inherent oversight authority, the DPA statute outlines several specific congressional equities: Title I authorities can only be used for wage and price controls if accompanied by a joint resolution of Congress (50 U.S.C. §4514). This could be applicable in this case in the production and sale of PPE, drug treatments or vaccines, or other necessary goods, and would require coordination between the Administration and Congress. Budget authority for Title III direct loans and guarantees must be specifically included in an appropriations act passed by Congress (50 U.S.C. §4531). Title III projects that cumulatively cost more than $50 million must be authorized by an act of Congress, and the President is required to notify the committees of jurisdiction (the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs), and provide 30 days for comment (50 U.S.C. §4533). A large-scale effort to expand outbreak-related production capacity may require sums far greater than $50 million. However, the DPA confers broad waivers to its Title III requirements: During a period of national emergency declared by Congress or the President; or upon determination by the President, on a nondelegable basis, that action is necessary to avert an industrial resource or critical technology item shortfall that would severely impair national defense capability. (50 U.S.C. §4531(d)(1)(B)) Another area of possible congressional interest is DPA funding, which is appropriated annually. The FY2020 appropriation to the DPA fund was $64.4 million; the President’s FY2021 budget requested $182 million for the DPA fund (p. 276). DPA appropriations could also be made as part of a supplemental appropriations package if the DPA fund is exhausted and/or to provide resources for other DPA authorities.

Mar 6, 2020

COVID-19: Federal Travel Restrictions and Quarantine Measures

Mar 5, 2020

International Food Assistance: FY2020 Appropriations

U.S. international food assistance programs provide food, or the means to purchase food, to people around the world at risk of hunger. Congress funds these programs through two appropriations bills: the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act—also known as the Agriculture appropriations bill—and the Department of State, Foreign Operations, and Related Programs (SFOPS) Appropriations Act. The Agriculture appropriations bill funds the U.S. Department of Agriculture (USDA) except for the Forest Service. The SFOPS appropriations bill funds the U.S. Department of State, U.S. Agency for International Development (USAID), and other non-defense foreign policy agencies. Both bills provide funding for U.S. international food assistance programs. Appropriations for agricultural development programs, such as Feed the Future or international agricultural exchange programs, are not considered part of food assistance spending. Appropriations for U.S. International Food Assistance, FY2015-FY2020 (in billions of current U.S. dollars) / Source: Compiled by CRS, using enacted appropriations acts and FY2020 House and Senate Agriculture and SFOPS appropriations bills. Notes: FFP=Food for Peace; EFSP=Emergency Food Security Program; CDF=Community Development Fund. Other includes FFP Title I Administration and Food for Progress. Congress funds EFSP within the International Disaster Assistance (IDA) account, but does not designate a specific amount for EFSP. FY2015-FY2019 EFSP amounts are actuals from USAID. The FY2020 EFSP amount is a CRS estimate based on the average IDA allocation to EFSP. For FY2020, the Further Consolidated Appropriations Act, 2020 (P.L. 116-94), provided an estimated $4.091 billion in funding for U.S. international food assistance programs. This was an 11% decrease from the $4.581 billion provided in FY2019. Division B of the act provided $1.945 billion in agriculture appropriations for international food assistance programs, including $1.725 billion for the Food for Peace (FFP) Title II program and $220 million for the McGovern-Dole International Food for Education and Child Nutrition Program. Division G of the act provided an estimated $2.146 billion for international food assistance in SFOPS appropriations. This included $80 million in the Community Development Fund and an estimated $2.066 billion for the Emergency Food Security Program (EFSP). Congress funds EFSP within the International Disaster Assistance (IDA) account but does not designate a specific amount for the program. USAID allocates IDA funds to EFSP and other non-food humanitarian response programs. The estimated FY2020 EFSP appropriation is a CRS calculation based on a five-year average of the percentage of IDA funds allocated to EFSP. In its FY2020 budget request, the Trump Administration proposed to eliminate the FFP Title II, McGovern-Dole, and Food for Progress programs, which Congress funds within Agriculture appropriations. The Administration proposed to consolidate multiple accounts, including accounts within Agriculture and SFOPS appropriations that fund international food assistance and other humanitarian assistance, into a new International Humanitarian Assistance account. Congress did not adopt these proposals. In addition to funding U.S. international food assistance programs, the FY2020 Agriculture appropriations bill included policy-related provisions that directed the executive branch how to carry out certain appropriations. The Explanatory Statement accompanying P.L. 116-94, as well as committee reports accompanying the House and Senate Agriculture and SFOPS appropriations bills, also included policy provisions related to international food assistance. For example, one provision directed that a certain amount of the funds appropriated for the McGovern-Dole Program be used for local and regional procurement—food assistance purchased in the country or region where it is to be distributed rather than purchased in the United States.

Mar 4, 2020

U.S. Farm Income Outlook: February 2020 Forecast

This report uses the U.S. Department of Agriculture’s (USDA) farm income projections (as of February 5, 2020) to describe the U.S. farm economic outlook for 2020. Two major indicators of U.S. farm well-being are net farm income and net cash income. Net farm income represents an accrual of the value of all goods and serviced produced on the farm during the year—similar in concept to gross domestic product. In contrast, net cash income uses a cash flow concept to measure farm well-being: Only cash transactions for the year are included. Thus, crop production is recorded as net farm income immediately after harvest, whereas net cash income records a crop’s value only after it has been sold in the marketplace. According to USDA’s Economic Research Service (ERS), national net farm income is forecast at $96.7 billion in 2020, up $3.1 billion (+3.3%) from 2019. The forecast rise in 2020 net farm income stands in contrast with a projected decline of over $10.8 billion in net cash income (-9.0%). Last year’s (2019) net cash income forecast included $14.7 billion in sales of on-farm crop inventories, which helped to inflate the 2019 net cash income value to $120.4 billion. The 2020 net cash income forecast includes a much smaller amount ($0.5 billion) in sales from on-farm inventories, thus contributing to the decline from 2019. Government direct support payments to the agricultural sector are expected to continue to play an important role in farm income projections. USDA projects $15 billion in farm support outlays for 2020, including the $3.7 billion of 2019 Market Facilitation Program (MFP) payments—the third and final tranche of payments under the $14.5 billion program. If realized, the 2020 government payments of $15 billion would represent a 36.6% decline from 2019 but would still be the second largest since 2006. The $23.6 billion in federal payments in 2019 was the largest taxpayer transfer to the agriculture sector (in absolute dollars) since 2005. The surge in federal subsidies in 2019 was driven by large payments (estimated at $14.3 billion) under the MFP initiated by USDA in response to the U.S.-China trade dispute. The Administration has not announced a new MFP for 2020. Weather conditions and planting prospects for 2020 are unknown this early in the year. Commodity prices are under pressure from abundant global supplies and uncertain export prospects. Despite the signing of a Phase I trade agreement with China on January 15, 2020, it is unclear how soon—if at all—the United States may resume normal trade with China or how international demand may evolve in 2020. Farm asset value in 2020 is projected up year-to-year at $3.1 trillion (+1.3%). Farm asset values reflect farm investors’ and lenders’ expectations about long-term profitability of farm sector investments. Another critical measure of the farm sector’s well-being is aggregate farm debt, which is projected to be at a record $425.3 billion in 2020—up 2.3% from 2019. Both the debt-to-asset and the debt-to-equity ratios have risen for eight consecutive years, potentially suggesting a continued slow erosion of the U.S. farm sector’s financial situation. At the farm household level, average farm household incomes have been well above average U.S. household incomes since the late 1990s. However, this advantage derives primarily from off-farm income as a share of farm household total income. Since 2014, over half of U.S. farm operations have had negative income from their agricultural operations. USDA Farm Income Projections as of February 5, 2020 This report discusses aggregate national net farm income projections for calendar year 2020 as forecast by ERS on February 5, 2020. It is the first of three ERS forecasts for 2020: The second farm income forecast is expected on September 2, 2020, and the third is expected in November.

Mar 3, 2020

Stafford Act Assistance for Public Health Incidents

This Insight provides a brief overview of presidential declarations under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (hereinafter the Stafford Act—42 U.S.C. §5121 et seq.) that could be authorized in response to public health incidents. It also provides examples of Stafford Act declarations that have been previously issued to address public health hazards, including infectious disease incidents, which may be relevant to the current outbreak of coronavirus disease 2019 (COVID-19). Overview The Stafford Act authorizes the President to issue two types of declarations that could provide federal assistance to states and localities in response to a public health incident: an “emergency declaration” or a “major disaster declaration.” Emergency Declarations An emergency is defined broadly, and arguably may include public health incidents. The Stafford Act defines an emergency as any occasion or instance for which, in the determination of the President, federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States (42 U.S.C. §5122(1)). Emergency declarations can be issued before an incident when a threat is detected (for example, before a hurricane makes landfall) to supplement and coordinate local and state, tribal, or territorial response efforts. As traditionally implemented, however, the Stafford Act does not supplant or supersede other federal authorities directed at public health incidents, such as those exercised by the Secretary of Health and Human Services. Emergency Declaration Assistance Emergency declarations typically authorize Public Assistance (PA), which supplements the ability of a state, territory, or tribe to respond to an incident. Emergency declarations may authorize two forms of PA: debris removal and emergency protective measures. Most assistance related to public health incidents has been delivered through emergency protective measures undertaken to reduce an immediate threat to life, public health, or safety, including emergency shelter and medicine, hazard communication, and provision and distribution of necessities. Individual Assistance (IA), which helps families and individuals respond to post-disaster needs, can also be made available through an emergency declaration. Emergency declarations do not authorize hazard mitigation assistance for projects that may reduce the loss of life and property from future disasters. Major Disaster Declarations Compared to emergency declarations, major disaster declarations authorize a wider range of federal assistance to states, territories, local governments, tribal nations, individuals and households, and certain nonprofit organizations to respond to and recover from catastrophic incidents. The state or territorial governor or tribal chief executive must request a major disaster declaration. The Stafford Act defines a major disaster as any natural catastrophe (including any hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this chapter to supplement the efforts and available resources of states, tribes, territories, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby (42 U.S.C. §5122(2)). The list of events that explicitly qualify for a major disaster declaration does not include outbreaks of infectious diseases. Decisionmakers who interpret the definition literally may be disinclined to issue a major disaster declaration for outbreaks. Under current law, a major disaster declaration has not been authorized in response to a public health incident of any type. Additionally, infectious disease outbreaks are unlikely to cause physical damage to public infrastructure—a key threshold used to determine eligibility for a major disaster declaration. Major Disaster Declaration Assistance In addition to the assistance provided through an emergency declaration, major disaster declarations authorize assistance for structural repair that may not be relevant for an infectious disease response. Major disaster assistance includes PA Permanent Work, to repair damage to public infrastructure; several forms of IA; and hazard mitigation assistance through the Hazard Mitigation Grant Program (HMGP) for projects that may reduce the loss of life and property from future disasters. Presidential Declarations for Public Health Incidents Since the 1960s, emergencies and disasters have been declared sporadically for public health incidents. Examples include major disaster declarations for the 1962 Louisiana and Mississippi chlorine barge accident, and emergency declarations for the evacuation of the New York Love Canal Chemical site in 1978 and 1980. These declarations were made under the authority of the Disaster Relief Act, federal disaster assistance legislation that preceded the Stafford Act and defined a major disaster more broadly. The Stafford Act in 1988 superseded the Disaster Relief Act and narrowed the definition of a major disaster. Under current law, public health incidents have only received emergency declarations. Below are examples of emergency declarations for public health incidents. West Nile Virus: New York and New Jersey On October 11 and November 1, 2000, President Clinton issued emergency declarations for New York and New Jersey to supplement state efforts to address the threat of the West Nile virus, a mosquito-borne virus. The assistance included state reimbursement of mosquito abatement eligible under the PA program. These are the only instances of a Stafford Act declaration in response to an infectious disease incident. West Virginia Chemical Spill On January 10, 2014, President Obama issued an emergency declaration for a chemical spill in West Virginia. The declaration helped deliver potable water and provided technical assistance to the state’s emergency management staff. Flint, Michigan Water Contamination On January 16, 2016, President Obama issued an emergency declaration for the state of Michigan for the Flint water contamination incident. The declaration provided water, water filtration equipment, testing kits, and other related items. For More Information CRS Report R46219, Overview of U.S. Domestic Response to Coronavirus Disease 2019 (COVID-19) CRS In Focus IF11421, COVID-2019: Global Implications and Responses CRS Report R43784, FEMA’s Disaster Declaration Process: A Primer CRS Report R41981, Congressional Primer on Responding to Major Disasters and Emergencies

Mar 2, 2020

Individual Tax Provisions (“Tax Extenders”) Expiring in 2020: In Brief

Six temporary individual income tax provisions were extended or reinstated by the Further Consolidated Appropriations Act, 2020 (P.L. 116-94). In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. These provisions are often referred to as “tax extenders.” Of the six provisions that were extended through 2020, three had expired in 2017 and were extended retroactively. They are the tax exclusion for canceled mortgage debt, the mortgage insurance premium deduction, and the above-the-line deduction for qualified tuition and related expenses. Two of the tax provisions extended through 2020 are health related. The first of these provisions was scheduled to expire at the end of 2019. The second had expired at the end of 2018, and thus was extended retroactively. They are the health coverage tax credit, and the 7.5% floor for the medical expense deduction. A sixth provision, the exclusion from gross income for volunteer firefighters and emergency responders, which had expired in 2010, was reinstated and expanded for one year, through 2020. This report provides background information on individual income tax provisions that will expire in 2020. For other reports related to extenders, see CRS Report R45347, Tax Provisions That Expired in 2017 (“Tax Extenders”), by Molly F. Sherlock, CRS Report R44990, Energy Tax Provisions That Expired in 2017 (“Tax Extenders”), by Molly F. Sherlock, Donald J. Marples, and Margot L. Crandall-Hollick, and CRS Report R44930, Business Tax Provisions that Expired in 2017 (“Tax Extenders”), coordinated by Molly F. Sherlock.

Feb 28, 2020

COVID-19: Federal Economic Development Tools and Potential Responses

The current coronavirus disease (COVID-19) outbreak has led to tens of thousands of cases and thousands of deaths worldwide. In addition to the disease’s mortality and public health effects, it may have potentially significant economic implications, including productivity losses, supply chain disruptions, labor dislocation, and potential financial pressure on businesses and households. Relatively few federal programs are available to provide timely economic relief to affected businesses. This Insight considers the outbreak’s economic development implications and policy considerations for Members of Congress who have shown interest in addressing the economic dimensions of this public health issue. COVID-19 Economic Development Implications COVID-19 is a newly designated disease caused by a previously undetected coronavirus. Most cases have been reported in China, with additional cases on every inhabited continent. Clusters of illness have occurred in South Korea, Japan, Singapore, Italy, and Iran. For more information on the health and epidemiological aspects of COVID-19, see CRS products R46219 and IF11421. The COVID-19 outbreak is foremost a public health issue. However, the epidemic itself and containment measures in China and elsewhere could have significant economic implications for the United States and globally. In the short-term, the COVID-19 outbreak is primarily a threat to businesses dependent on supply chains in China, or for exports there. However, many economists have warned that a more prolonged crisis may see broader economic disruptions if workplaces and schools are closed to contain the outbreak, and medical and food supplies dwindle due to disrupted supply and increased demand. In China, mass containment measures have disrupted global supply chains and capital markets. In the near term, the outbreak’s effects on the U.S. economy could be limited to localized disruptions for businesses and workers—particularly in communities dependent on technology manufacturing and tourism. In certain cases, supply chain issues may stall production, prevent companies from fulfilling orders, and potentially impact firm revenues. In a prolonged or wider epidemic, supply chain issues may further compound. Growth could slow further, and affected companies may be forced to furlough or lay off workers, and others may slow hiring. As demonstrated in China and elsewhere, social distancing measures can effectively stop local economic activity, which may impact localized labor markets, household finances, and governmental tax revenues and service delivery. Additional considerations include potential shortages of medical supplies and foodstuffs, other ancillary health effects, and the U.S. medical and public health system’s ability to cope with a significant outbreak. Considerations for Congress Many Members of Congress have heard concerns from constituents affected by supply chain-, exports-, and tourism-related disruptions from the outbreak. Relatively few federal programs exist to provide timely relief to businesses for outbreak-related disruptions. Some programs include The Small Business Administration (SBA) administers disaster and non-disaster loans for small businesses and organizations, and supports an extensive network of SBA-affiliated resource partners who provide management and technical assistance to small businesses; The Department of the Treasury’s Community Development Financial Institution Fund supports organizations that provide loans to businesses, homebuyers, community developers, and investors in distressed areas; and The Department of Agriculture’s (USDA) Rural Development program offers limited services to support rural businesses to create or retain jobs. In the event that disruptions continue and grow, public and non-profit organizations may consider tapping various federal economic development resources, including The Department of Housing and Urban Development’s Community Development Block Grant (CDBG) program may be used for technical assistance, community assets, and workforce development; The Department of Commerce’s Economic Development Administration programs may be used to diversify local economic bases; USDA programs can provide technical assistance and infrastructure support; and Federal regional commissions and authorities support economic diversification, workforce development, and technical assistance in their service areas. Federal economic development programs are generally not equipped to provide rapid support to firms or communities affected by public health emergencies, though unemployment compensation programs have the ability to rapidly respond and provide immediate income support. In response to a COVID-19 outbreak, Congress may consider measures used in past disasters or economic crises: CDBG authorities for disaster recovery (CDBG-DR) could be utilized to address the outbreak’s economic impact. Previous CDBG-DR uses included loans and grants to small and medium-sized enterprises (SMEs), workforce development, and community stabilization. Public health-related disruption eligibility for SBA’s Economic Injury Disaster Loans (EIDLs) could be made explicit. EIDLs provide up to $2 million to small businesses that suffer economic injury following disasters such as hurricanes. EIDLs may be awarded if the President issues a disaster or emergency declaration, or a disaster declaration by the SBA administrator upon request from a state governor. In response to the 2007-2009 recession, federal measures included direct interventions to stabilize industries and markets. A similar effort could support affected industries or supply chains, and/or federal loan guarantees to assist affected SMEs. In the recession, Unemployment Compensation benefits were temporarily augmented and extended, with some costs temporarily assumed by the federal government. Disaster Unemployment Assistance, which provides federally funded unemployment benefits to those unable to work as a result of a federally declared disaster and otherwise ineligible for regular benefits, could be a model for responding to public health emergencies. Following a federally declared disaster, the Internal Revenue Service (IRS) can provide tax relief to affected individuals. The IRS could provide such allowances to affected individuals and SMEs affected by a public health emergency. Other federal emergency authorities could be utilized in more severe scenarios for individual and public assistance. In such cases, localities with major revenue shortfalls from federally declared disasters—such as those highly dependent on a dislocated industry, such as tourism—could utilize Community Disaster Loans, which provide up to $5 million in liquidity and are potentially forgivable. The President may also call upon the Defense Production Act (DPA) to mobilize key segments of the economy in response to the outbreak. In major national emergencies, DPA authorities may be used to rebalance disrupted critical supply chains, and to allocate and procure emergency supplies.

Feb 28, 2020

U.S.-EU Trade Agreement Negotiations: Trade in Food and Agricultural Products

The Office of the U.S. Trade Representative (USTR) officially notified the Congress of the Trump Administration’s plans to enter into formal trade negotiations with the European Union (EU) in October 2018. In January 2019, USTR announced its negotiating objectives for a U.S.-EU trade agreement, which included agricultural policies—both market access and non-tariff measures. However, the EU’s negotiating mandate, released in April 2019, stated that the trade talks would exclude agricultural products. U.S.-EU27 Agricultural Trade, 1990-2019/ Source: CRS from USDA data for “Total Agricultural and Related Products (BICO-HS6). EU27 excludes UK. Improving market access remains important to U.S. agricultural exporters, especially given the sizable and growing U.S. trade deficit with the EU in agricultural products (see figure). Some market access challenges stem in part from commercial and cultural practices that are often enshrined in EU laws and regulations and vary from those of the United States. For food and agricultural products, such differences are focused within certain non-tariff barriers to agricultural trade involving Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBTs), as well as Geographical Indications (GIs). SPS and TBT measures refer broadly to laws, regulations, standards, and procedures that governments employ as “necessary to protect human, animal or plant life or health” from the risks associated with the spread of pests and diseases, or from additives, toxins, or contaminants in food, beverages, or feedstuffs. SPS and TBT barriers have been central to some longstanding U.S.-EU trade disputes, including those involving EU prohibitions on hormones in meat production and pathogen reduction treatments in poultry processing, and EU restrictions on the use of biotechnology in agricultural production. As these types of practices are commonplace in the United States, this tends to restrict U.S. agricultural exports to the EU. GI protections refer to naming schemes that govern product labeling within the EU and within some countries that have a formal trade agreement with the EU. These protections tend to restrict U.S. exports to the EU and to other countries where such protections have been put in place. Plans for U.S.-EU trade negotiations come amid heightened U.S.-EU trade frictions. In March 2018, President Trump announced tariffs on steel and aluminum imports on most U.S. trading partners after a Section 232 investigation determined that these imports threaten U.S. national security. Effective June 2018, the EU began applying retaliatory tariffs of 25% on imports of selected U.S. agricultural and non-agricultural products. In October 2019, the United States imposed additional tariffs on imports of selected EU agricultural and non-agricultural products, as authorized by World Trade Organization (WTO) dispute settlement procedures in response to the longstanding Boeing-Airbus subsidy dispute. Public statements by U.S. and EU officials in January 2020, however, signaled that the U.S.-EU trade talks might include SPS and regulatory barriers to agricultural trade. Statements by U.S. Department of Agriculture (USDA) officials cited in the press call for certain SPS issues as well as GIs to be addressed in the trade talks. However, other press reports of statements by EU officials have downplayed the extent that specific non-tariff barriers would be part of the talks. More formal discussions are expected in the spring of 2020. Previous trade talks with the EU, as part of the Transatlantic Trade and Investment Partnership (T-TIP) negotiations during the Obama Administration, stalled in 2016 after 15 rounds. During those negotiations, certain regulatory and administrative differences between the United States and the EU on issues of food safety, public health, and product naming schemes for some types of food and agricultural products were areas of contention.

Feb 27, 2020

Major Agricultural Trade Issues in 2020

Sales of U.S. agricultural products to foreign markets absorb about one-fifth of U.S. agricultural production, thus contributing significantly to the health of the farm economy. Farm product exports, which totaled $136 billion in FY2019 (see chart), make up about 8% of total U.S. exports and contribute positively to the U.S. balance of trade. The economic benefits of agricultural exports also extend across rural communities, while overseas farm sales help to buoy a wide array of industries linked to agriculture, including transportation, processing, and farm input suppliers. U.S. Agricultural Trade, Fiscal Years, 2014-19 Billion U.S. Dollars / Source: USDA, Economic Research Service (ERS), January 2020. A major area of interest for the 116th Congress during its first session was the loss of export demand for agricultural products in the wake of tariff increases imposed by the Trump Administration on U.S. imports of steel and aluminum from certain countries and other imported products from China. Some of the affected countries levied retaliatory tariffs on U.S. agricultural products, contributing to a 53% decline in value of U.S. agricultural exports to China in 2018 and a broader decline in exports across countries imposing retaliatory tariffs in 2019. To help mitigate the economic impact from export losses, the U.S. Department of Agriculture (USDA) authorized two short-term assistance (“trade aid”) programs to producers of affected agricultural commodities, valued at up to $12 billion in 2019 and $16 billion in 2019. Other major agricultural trade developments in 2019 included efforts to ratify the U.S.-Mexico-Canada Agreement (USMCA), trade negotiations with China, Japan, and the European Union, and continued review of U.S. participation in the World Trade Organization (WTO). The USMCA was ratified by Mexico and the U.S. Congress, and awaits ratification by Canada before it can enter into force. The United States and Japan signed an agreement increasing market access for many U.S. agricultural exports to Japan. This agreement, which does not require congressional approval, excludes provisions pertaining to non-tariff measures that could become future trade barriers for U.S. agricultural exporters. A second-stage negotiation toward a more comprehensive pact could commence in 2020. In January 2020, President Trump signed a “Phase One” executive agreement (that also does not require congressional approval) with the Chinese government on trade and investment issues, including agriculture. Under the agreement, China is not required to repeal any tariffs, but it has reduced certain retaliatory tariffs and is granting tariff exclusions for various agricultural products in order to reach a target level of U.S. imports—$32 billion (relative to a 2017 base of $24 billion) over a two-year period. The coronavirus outbreak since January 2020 may affect China’s ability to meet these commitments. In addition to further negotiations with Japan and China, the Administration has stated its intent to pursue trade agreements with the European Union, India, Kenya, the United Kingdom, and possibly other countries. The Trump Administration has also indicated that reforming the WTO is a priority for 2020. The WTO Ministerial Conference in June 2020 presents an opportunity to address pressing concerns over agricultural reform efforts. Among other agricultural trade issues that may arise in the 116th Congress are proposed changes to U.S. trade remedy laws to address imports of seasonal produce affecting growers in the Southeast, the establishment of a common international framework for approval, trade, and marketing of the products of agricultural biotechnology, and foreign restrictions on U.S. exports of meat that are inconsistent with international trade protocols. Additionally, U.S. beef and pork face trade barriers in several markets because of U.S. producers’ use of growth promotants and the feed additive ractopamine.

Feb 27, 2020

Introduction to the Federal Budget Process

Under the U.S. Constitution, Congress exercises the “power of the purse.” This power is expressed through the application of several provisions. The power to lay and collect taxes and the power to borrow are among the enumerated powers of Congress under Article I, Section 8. Furthermore, Section 9 of Article I states that funds may be drawn from the Treasury only pursuant to appropriations made by law. The Constitution, however, does not prescribe how these legislative powers are to be exercised, nor does it expressly provide a specific role for the President with regard to budgetary matters. Instead, various statutes, congressional rules, practices, and precedents have been established over time to create a complex system in which multiple decisions and actions occur with varying degrees of coordination. As a consequence, there is no single “budget process” through which all budgetary decisions are made, and in any year there may be many budgetary measures necessary to establish or implement different aspects of federal fiscal policy. This report describes the development and operation of the framework for budgetary decisionmaking that occurs today and also includes appendices that provide a glossary of budget-process-related terms and a flowchart of congressional budget process actions. Since the early years of the Republic, procedures and practices concerning the consideration, enactment, and execution of budgetary legislation have evolved to meet changing needs and circumstances. Many aspects of the framework for budgetary decisionmaking were established in the early years, including the idea that appropriations be considered separate from general policy legislation. The 19th century also saw Congress take action in several ways to exercise control over how federal agencies spent money. One approach involved enacting increasingly specific appropriations legislation to direct the use of funds. General restrictions on agency discretion were also imposed by statute. For example, beginning in 1870, antideficiency acts were enacted to prevent agencies from exceeding appropriations made by Congress for any fiscal year or obligating payments in anticipation of future appropriations. In the 20th century, the Budget and Accounting Act of 1921 created a statutory role for the President by requiring agencies to submit their budget requests to him and, in turn, for him to submit a consolidated request to Congress. Other important changes included the advent of direct (mandatory) spending and the enactment of the Congressional Budget and Impoundment Control Act of 1974, which provided Congress with a vehicle for making decisions about overall fiscal policy and priorities and also established the House and Senate Budget Committees and the Congressional Budget Office. Since 1985, budgetary decisionmaking has also been subject to various budget control statutes designed to restrict congressional budgetary actions or implement particular budgetary outcomes. Altogether, this evolution has resulted in the framework in which budgetary decisionmaking occurs today. Many budgetary actions result from permanent or long-term statutes, but the cycle for decisionmaking remains based on a characteristically annual timetable. The President is required to submit a budget request to Congress early in the legislative session. The President’s budget is only a request to Congress, but it establishes the President’s wishes regarding the direction of national policies and priorities and often influences the direction of congressional revenue and spending decisions. Congress can coordinate various budget-related actions (such as consideration of revenue and spending measures) through the adoption of a concurrent resolution on the budget to set aggregate budget policies and functional spending priorities for at least the next five fiscal years. Because a concurrent resolution is not a law—the President cannot sign or veto it—the budget resolution does not have statutory effect, so no money is raised or spent pursuant to it. Revenue and spending levels set in the budget resolution, however, do establish the basis for enforcement of congressional budget policies through points of order. In recent years, the use of a budget resolution has often been supplanted by the use of various deeming provisions that use alternate means to establish the basis for budgetary enforcement actions. Budget policies are subsequently implemented through action on individual revenue and debt limit measures, annual appropriations acts, and direct spending legislation. If Congress agrees to a budget resolution, it may later consider reconciliation legislation pursuant to reconciliation instructions included in the budget resolution. Reconciliation legislation is subject to expedited procedures that can be used to bring existing revenue and direct spending laws into conformity with policies established in the budget resolution. Action on annual appropriations measures allows Congress to set the level of discretionary spending annually. Congress passes three main types of appropriations measures: regular appropriations to provide budget authority to fund programs and agency activities for the next fiscal year, supplemental appropriations to provide additional budget authority during the current fiscal year if the regular appropriation is insufficient or to finance activities not provided for in the regular appropriation, and continuing appropriations (often referred to as continuing resolutions or CRs) to provide interim (or sometimes full-year) funding to agencies for activities or programs not yet covered by a regular appropriation.

Feb 26, 2020

Telehealth and Telemedicine: Frequently Asked Questions

The use of information and communication technology (ICT) in the health care industry is an emergent issue for Congress. The health care industry is using telehealth and telemedicine in two major ways: (1) to supplement in-person care for underserved populations who experience barriers to in-person care and (2) to supplant in-person care for patients who like the convenience of using technology to access their health care services. This report provides responses to frequently asked questions about telehealth and telemedicine. This report serves as a quick reference to provide easy access to information. Where applicable, it provides the legislative background pertaining to the question.

Feb 25, 2020

The Freedom of Information Act (FOIA): A Legal Overview

Originally enacted in 1966, the Freedom of Information Act (FOIA) establishes a three-part system that requires federal agencies to disclose a large swath of government information to the public. First, FOIA directs agencies to publish substantive and procedural rules, along with certain other important government materials, in the Federal Register. Second, on a proactive basis, agencies must electronically disclose a separate set of information that consists of, among other things, final adjudicative opinions and certain “frequently requested” records. And lastly, FOIA requires agencies to disclose all covered records not made available pursuant to the aforementioned affirmative disclosure provisions to individuals, corporations, and others upon request. While FOIA’s main purpose is to inform the public of the operations of the federal government, the act’s drafters also sought to protect certain private and governmental interests from the law’s disclosure obligations. FOIA, therefore, contains nine enumerated exemptions from disclosure that permit—but they do not require—agencies to withhold a range of information, including certain classified national security matters, confidential financial information, law enforcement records, and a variety of materials and types of information exempted by other statutes. And FOIA contains three “exclusions” that authorize agencies to treat certain law enforcement records as if they do not fall within FOIA’s coverage. FOIA also authorizes requesters to seek judicial review of an agency’s decision to withhold records. Federal district courts may “enjoin [an] agency from withholding agency records” and “order the production of any agency records improperly withheld.” Judicial decisions—including Supreme Court decisions—have often informed or provided the impetus for congressional amendments to FOIA. Although Congress is not subject to FOIA, the act may inform communications between the legislative branch and FOIA-covered entities. Under 5 U.S.C. § 552(d), an agency may not “withhold information from Congress” on the basis that such information is covered by a FOIA exemption (although the provision does not dictate whether another source of law, such as executive privilege, may shield information from disclosure). The executive branch has interpreted this provision to apply to each house of Congress and congressional committees, but generally not to individual Members, whose requests for information are generally treated as subject to the same FOIA rules as requests from the public. This interpretation is not uniformly shared, with at least one federal appellate court interpreting § 552(d) as applying to individual Members acting in their official capacities. In addition, although Congress is under no obligation to disclose its materials pursuant to FOIA, whether a congressional document possessed by an agency is subject to FOIA depends on whether Congress clearly expressed its intention to retain control over the specific document. Lastly, although FOIA is the primary statutory mechanism by which the public may gain access to federal government records and information, other laws—specifically the Federal Advisory Committee Act, Government in the Sunshine Act, and Privacy Act—also set forth rights and limitations on the public’s access to government information or activities.

Feb 24, 2020

COVID-19: U.S.-China Economic Considerations

Feb 19, 2020

U.N. Ban on Iran Arms Transfers and Sanctions Snapback

Feb 14, 2020

EU Climate Action and U.S.-EU Relations

Feb 14, 2020

Overview of U.S. Domestic Response to the 2019 Novel Coronavirus (2019-nCoV)

This report discusses selected actions taken by the federal government to quell the introduction and spread of the 2019 Novel Coronavirus (2019-nCoV) in the United States. 2019-nCoV is causing the third serious outbreak of novel coronavirus in modern times, following severe acute respiratory syndrome (SARS) in 2002 and Middle East Respiratory Syndrome (MERS) in 2012. The global health community is closely monitoring 2019-nCoV because of the severity of symptoms (including death) among those infected, and the speed of its spread worldwide. At this time, U.S health officials say the immediate health risk from the new virus to the general American public is low. However, federal agencies have ongoing activities to control and prepare for the spread of 2019-nCoV. Domestic response activities of federal agencies in collaboration with state and local governments include, among others: (1) investigation of 2019-nCoV cases and infection control measures in the community; (2) travel restrictions and/or quarantine requirements on certain travelers who have recently visited China; (3) medical countermeasure development; and (4) health system preparedness.

Feb 10, 2020

The Army’s Modernization Strategy: Congressional Oversight Considerations

In October 2019, the Army published a new modernization strategy aimed at transforming the Army in order to conduct Multi-Domain Operations (MDO) which are intended to address the current and future actions of near-peer competitors Russia and China. The Army’s Modernization Strategy is part of a hierarchy of strategies designed, among other things, to inform the Service’s respective modernization plans. These strategies include the National Security Strategy (NSS), the National Defense Strategy (NDS), the National Military Strategy (NMS), and the Army Strategy. The Army’s Modernization Strategy establishes six material modernization priorities: Long Range Precision Fires. Next Generation of Combat Vehicles. Future Vertical Lift. Army Network. Air and Missile Defense. Soldier Lethality. Because the Army’s Modernization Strategy covers the years from 2020 to 2035, the possibility exists for a variety of Army modernization hearings spanning a number of different Congresses. In this regard a common oversight architecture could potentially provide both an element of continuity and a means by which Congress might evaluate the progress of the Army’s modernization efforts. Such a potential architecture might examine: Is the Army’s Modernization Strategy appropriate given the current and projected national security environment? Is the Army’s Modernization Strategy achievable given a number of related concerns? Is the Army’s Modernization Strategy affordable given current and predicted future resource considerations? For FY2020, funding requested for programs related to the Army’s six modernization priorities, $8.9 billion, accounted for less than a quarter (23%) of its overall acquisition budget. The service projected $57.3 billion in research, development, test, and evaluation (RDT&E) and procurement funding for programs related to its six modernization priorities over the Future Years Defense Program (FYDP) from FY2020 through FY2024. This amount, if authorized and appropriated by Congress, would reflect an increase of $33.1 billion from spending projections for the five-year period in the FY2019 budget request. Meanwhile, the Army projected a total of $187.5 billion for its acquisition accounts (in nominal dollars) over this period, including $128.8 billion for procurement and $58.7 billion for RDT&E. Thus, for the FY2020 FYDP, funding for programs related to the Army’s six modernization priorities accounts for less than a third (31%) of its overall acquisition budget. This report provides a number of possible questions and observations related to a potential Army modernization oversight architecture which could serve to provide both an element of continuity for hearings and a standard by which Congress might evaluate the efficacy of Army Modernization.

Feb 7, 2020

National Security Space Launch

The United States is making significant efforts to pursue a strategy that ensures continued access to space for national security missions. The current strategy is embodied in the National Security Space Launch (NSSL) program. The NSSL supersedes the Evolved Expendable Launch Vehicle (EELV) program, which started in 1995 to ensure that National Security Space (NSS) launches were affordable and reliable. For the same reasons, policymakers provide oversight for the current NSSL program and encourage competition, as there was only one provider for launch services from 2006 to 2013. Moreover, Congress now requires DOD to consider both reusable and expendable launch vehicles for solicitations after March 1, 2019. To date, only expendable, or single-use, launch vehicles have been used for NSSL missions. The NSSL program is the primary provider for NSS launches. Factors that prompted the initial EELV effort in 1995 are still manifest—significant increases in launch costs and concerns over procurement and competition. In addition, the Russian backlash over the 2014 U.S. sanctions against Russian actions in Ukraine exacerbated a long-standing undercurrent of concern over U.S. reliance on a Russian rocket engine (RD-180) for critical national security space launches. Moreover, significant overall program cost increases and unresolved questions over individual launch costs, along with legal challenges to the Air Force rocket development and launch procurement contract awards, have resulted in legislative action. In 2015, the Air Force began taking steps to transition from reliance on the Russian made RD-180 engine used on the Atlas V rocket. Some in Congress pressed for a more flexible transition to replace the RD-180 that allowed for development of a new launch vehicle, while others in Congress sought legislation that would move the transition process forward more quickly with a focus on developing an alternative U.S. rocket engine. Transitioning away from the RD-180 to a domestic U.S. alternative provided opportunities for space launch companies that sought to compete for NSS space launches. Because of the technical, program, and schedule risk, as a worst-case scenario, the transition could leave the United States in a situation in which some of its national security space payloads lack an available certified launcher. The Space and Missile System Center (SMC), together with the National Reconnaissance Office (NRO), released a request for proposals in May 2019 to award two domestic launch service contracts. DOD plans to select two separate space launch companies in the summer of 2020 that will be responsible for launching U.S. military and intelligence satellites through 2027. NSS launch has been a leading legislative priority in the defense bills over the past few years and may continue to be so into the future.

Feb 3, 2020

COVID-19: Global Implications and Responses

Jan 31, 2020

2019 Novel Coronavirus (2019-nCoV) Outbreak: CRS Experts

On December 31, 2019, the World Health Organization (WHO) was informed of a cluster of pneumonia cases in Wuhan, China. Illnesses have since been linked to a new strain of coronavirus, designated 2019 novel Coronavirus, or 2019-nCoV. As of January 29, 2020, WHO reports that more than 6,000 people have been infected, and more than 130 have died. Most cases and deaths are in China. The disease has spread to several other countries, including the United States. As the scope of the epidemic widened in China, the U.S. Centers for Disease Control and Prevention (CDC) stated on January 27, 2020 that “the immediate health risk from the new virus to the general American public is low currently.” The situation is rapidly changing, however, and both WHO and CDC post frequent updates.

Jan 31, 2020

European Bank for Reconstruction and Development (EBRD)

Jan 30, 2020

Digital Assets and SEC Regulation

In recent years, financial innovation in capital markets has fostered a new asset class—digital assets—and introduced new forms of fundraising and trading. Digital assets, which include crypto-assets, cryptocurrencies, or digital tokens, among others, are digital representations of value made possible by cryptography and distributed ledger technology. Regardless of the terms used to describe these assets, depending on their characteristics, some digital assets are subject to securities laws and regulations. Securities regulation generally applies to all securities, whether they are digital or traditional. The Securities and Exchange Commission (SEC) is the primary regulator overseeing securities offerings, sales, and investment activities. The SEC’s mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The existing securities regulatory regime generally aligns with this mission, and the SEC’s digital asset regulation generally follows the same regime. The SEC has used existing authorities to evaluate new product approval, provide individual regulatory relief, and solicit public input for policy solutions more tailored to digital assets. Digital assets have a growing presence in the financial services industry. Their increasing use in capital markets raises policy questions regarding whether changes to existing laws and regulations are warranted and, if so, when such changes should happen, what form they should take, and which agencies should take the lead. The current innovative environment is not the regulatory regime’s first encounter with changing technology since its inception in the 1930s. Some technological advancements led to regulatory changes, whereas others were dealt with through the existing regime. The general consensus is that regulatory oversight should be balanced with the need to foster financial innovation, but securities regulation’s basic objectives should apply. In addition, some believe that certain digital asset activities that may appear similar to traditional activities nonetheless require adjusted regulatory approaches to account for particular operating models that may amplify risks differently. In general, policymakers contending with major financial innovations have historically focused on addressing risk concerns while tailoring a regulatory framework that was flexible enough to accommodate evolving technology. Current developments that raise policy issues include the following: Initial coin offerings (ICOs). ICOs as a digital asset fundraising method can be offered in many forms using existing public and private securities offerings channels. Although ICOs may be useful fundraising tools, they raise regulatory oversight and investor protection concerns. Digital asset “exchanges.” Some industry observers perceive digital asset trading platforms as functional equivalents to the SEC-regulated securities exchanges in buying and selling digital assets. But these platforms are not subject to the same level of regulation, suggesting that they may be less transparent and more susceptible to manipulation and fraud. Digital asset custody. Custodians provide safekeeping of financial assets and are important building blocks for the financial services industry. Digital assets present custody-related compliance challenges because custodians face difficulties in recording ownership, recovering lost assets, and providing audits, among other considerations. The SEC is aware of the challenges and is engaging stakeholders to discuss potential issues and solutions. Digital asset exchange-traded funds (ETFs). ETFs are pooled investment vehicles that gather and invest money from a variety of investors. ETF shares can trade on securities exchanges like a stock. Currently, digital assets themselves are generally not sold on SEC-regulated national exchanges. However, if portfolios of digital assets were made available as ETFs, they may be sold on national exchanges. The SEC has not yet approved any digital asset ETFs because of market manipulation and fraud concerns. Stablecoins in securities markets. Stablecoins are a type of digital asset designed to maintain a stable value by linking its value to another asset or a basket of assets. Issues concerning stablecoins include market integrity, investor protection, payments, financial stability, and illicit activity prevention. Three legislative proposals relating to securities regulation were discussed at a House Committee on Financial Services hearing: the first proposal (H.R. 5197) would subject stablecoins to securities regulation; the second draft proposal would limit public company executives’ access to stablecoins; and the third proposal (H.R. 4813) would prevent “Big Tech” firms from offering financial services or issuing digital assets.

Jan 30, 2020

Safe Third Country Agreements with Northern Triangle Countries: Background and Legal Issues

Jan 30, 2020

Another Coronavirus Emerges: U.S. Domestic Response to 2019-nCoV

The Emergence of 2019-nCoV On December 31, 2019, the World Health Organization (WHO) was informed of a cluster of pneumonia cases in Wuhan, China. Illnesses have since been linked to a previously unidentified strain of coronavirus, designated 2019 novel Coronavirus, or 2019-nCoV. To date, thousands have been infected, mostly in China, and over 100 have died. The disease has spread to several other countries, including the United States. As the scope of the epidemic widened in China, the U.S. Centers for Disease Control and Prevention (CDC) stated on January 27, 2020, that “the immediate health risk from the new virus to the general American public is low currently.” With the situation rapidly changing, both WHO and CDC post frequent updates. Coronaviruses (see Figure 1) are common respiratory pathogens, usually causing mild illnesses such as the common cold. The global health community is closely monitoring 2019-nCoV because of the severity of symptoms (including death) among those infected, and the speed of its spread worldwide. 2019-nCoV is causing the third-serious novel coronavirus outbreak in modern times, following severe acute respiratory syndrome (SARS) in 2002 and Middle East Respiratory Syndrome (MERS) in 2012. Experts do not know the origin of 2019-nCoV, though genetic analysis and other features suggest an animal source. Figure 1. Coronaviruses, Electron Micrograph / Source: CDC Public Health Image Library: https://phil.cdc.gov/Details.aspx?pid=10270. Note: Surface projections on the viral envelope of a poultry coronavirus form the halo or “corona” that gives this virus group its name. Infection and Transmission Health officials and researchers are still learning about 2019-nCoV. According to CDC, 2019-nCoV typically causes respiratory infections characterized by a fever, cough, and sometimes breathing difficulty—a suite of symptoms that is common during influenza season. Features that have yet to be clarified include routes of transmission (e.g., through the air, from contaminated surfaces), the incubation period (the time between infection and the onset of symptoms), and whether an infected person without symptoms can transmit infection. Although it was first thought that all 2019-nCoV infections resulted from an animal contact, Chinese officials recently reported evidence of person-to-person transmission. The U.S. Domestic Response In the United States, communicable disease control involves collaboration among federal agencies, state health departments, and international partners. Authority to compel isolation (for sick patients), quarantine (for healthy exposed persons), and disease reporting generally rest in state law. The Secretary of Health and Human Services (HHS) and, by delegation, CDC have broad authority to assist in the control of communicable diseases through international cooperation, federal-state cooperation, and public health emergency response activities. In addition, CDC (by delegation) has explicit authority to detain, examine, and release persons arriving into the United States, and traveling between states, who are suspected of having a communicable disease. Case Identification and Investigation CDC has developed a diagnostic test for the 2019-nCoV virus, but it is not widely available. At this time, all testing is being done by CDC, which has announced plans to share the test with domestic and international public health partners. Until local testing is available, CDC urges clinicians to consider a patient’s travel history and a 14-day incubation period in deciding whether to obtain patient specimens (e.g., blood, urine) for testing. Health care providers are urged to report possible cases to state and local health departments, which then report to CDC. CDC is facilitating the collection and transport of specimens. Although CDC reports that no person-to-person transmission has been confirmed in the United States, disease investigation for confirmed cases involves contact tracing—identifying and evaluating individuals who had contact with the patient to determine if transmission has occurred. These investigations are generally conducted by state and local health officials. Clinical Guidance No vaccine or specific treatment exists for 2019-nCoV infection at this time. Based on knowledge of the novel virus and other coronaviruses, CDC has developed guidance for isolation and other precautions for patients under investigation or receiving supportive care for 2019-nCoV infection. A key goal is the prevention of disease transmission to health care workers, who may be exposed through high-risk procedures such as maintaining an ill patient on a ventilator. Travel Notices and Entry Screening CDC and the State Department have issued advisories to reconsider or avoid unnecessary travel to China, including a rare Level 4 advisory from the State Department to avoid all travel to Hubei Province. In collaboration with U.S. Customs and Border Protection, CDC is screening passengers returning on flights from certain areas of China at 20 U.S. airports, looking for symptoms of illness and disseminating information. On January 29, a U.S. government-chartered flight from Wuhan, China, repatriated 201 Americans, who have been screened for illness and advised on procedures to follow should symptoms arise in the coming weeks. Medical Countermeasures CDC and the National Institutes of Health (NIH) continue to study the virus to inform response efforts. NIH reports that a vaccine candidate is in development and could be available for initial clinical trials within three months. Considerations for Congress CDC and other federal agencies may have the authority needed to respond to the 2019-nCoV epidemic, but they may lack available funds to support their efforts. Annual appropriations and standing transfer authority provide the HHS Secretary with some flexibility. Under certain circumstances the Secretary may access a Public Health Emergency Fund, but the fund does not have an available balance at this time. Generally, funding has not been available under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) for the response to infectious disease outbreaks. As a result, Congress provided supplemental appropriations for the response to the recent Ebola and Zika virus outbreaks. Subsequently in 2018, Congress established an Infectious Disease Rapid Response Reserve Fund (IDRRRF) for CDC, providing $50 million for FY2019 (P.L. 115-245) and $85 million for FY2020 (P.L. 116-94), available until expended. These funds can be made available for an infectious disease emergency if the HHS Secretary either (1) declares a Public Health Emergency or (2) determines that the infectious disease outbreak has significant potential to occur and, if it occurs, the potential to affect national security or the health and security of U.S. citizens, both domestically and abroad. HHS Secretary Alex Azar has not declared the 2019-nCoV outbreak to be a Public Health Emergency, but has issued a determination allowing the allotment of $105 million from the IDRRRF for the 2019-nCoV response. The trajectory of the 2019-nCoV outbreak is unknown at this time. Congress may choose to conduct oversight of federal response efforts, and monitor the expenditure of funds, as the situation progresses.

Jan 29, 2020

Recent Slower Economic Growth in the United States: Policy Implications

The current economic expansion is the longest in recorded U.S. history, but it has not been characterized by rapid economic growth. From the beginning of the current economic expansion in the third quarter of 2009 to the second quarter of 2017, this expansion had the lowest economic growth rate of any expansion since World War II, averaging 2.2%. For the next five quarters, growth accelerated to 3.1%. However, growth has slowed since, averaging 2.1% over the next four quarters beginning in the fourth quarter of 2018. The slower growth rate has been widespread, but has been particularly concentrated in business investment and exports. Private forecasters expect this slower pace to continue in 2020. A similar growth pattern has not been observed in labor markets, as monthly employment growth was only slightly lower in the slower-growth period than in the faster-growth period. A number of developments have influenced growth since 2017: Fiscal policy. The federal budget deficit rose from 3.5% of gross domestic product (GDP) in FY2017 to 3.9% in FY2018. Deficit-financed tax or spending policy changes stimulate overall economic activity in the short run, but stimulus fades over time. The deficit increased partly as a result of P.L. 115-97, which cut taxes beginning in calendar year 2018, with the budgetary effects peaking in FY2019. Monetary policy. The Federal Reserve raised short-term interest rates gradually from a range of 0.25%-0.5% in December 2016 to a range of 2.25%-2.5% in December 2018. Higher interest rates reduce interest-sensitive spending, such as business investment and consumer durables. Rates were then cut in 2019 to a range of 1.5%-1.75%. Regulatory policy. The Administration reported that agencies have undertaken 393 deregulatory actions and 52 significant regulatory actions since FY2017, at a net benefit totaling $50.9 billion, based on agency estimates. Deregulatory actions that reduced costs for businesses could boost their output levels. Trade policy. Since 2017, the Administration has proposed a series of escalating tariffs and other import restrictions on major trading partners, such as China. In response, affected countries have often proposed retaliatory trade restrictions on U.S. exports. Trade restrictions have a mixed direct effect on growth through their impact on U.S. exports and imports. However, they are generally thought to have a negative indirect effect on growth through their impact on real income, financial conditions, and business investment. Stock market. Stock prices (as measured by the S&P 500 index) rose by 38% between November 4, 2016, and January 26, 2018, with little volatility by historical standards. Since then, volatility has risen. Favorable financial conditions make it easier for firms to finance investment and may lead asset holders to consume more through a wealth effect. Global growth. Global growth fell from 3.8% in 2017 to 3.6% in 2018 to a projected 3.0% in 2019. This reduces foreign demand for U.S. exports, all else equal. Over time, economists believe that the economy cannot grow faster than its trend or potential growth rate, which is determined by how quickly labor, the capital stock, and productivity grow. It appears that the growth rate has reverted to its trend growth rate since the fourth quarter of 20s18. Regulatory policy changes and fiscal stimulus may have contributed to the temporary increase in growth, but do not appear to have led to a permanent acceleration in trend growth. This slower rate of growth would be problematic if growth continued to decelerate toward zero, but most forecasters do not expect this to happen. On the contrary, this slower rate of growth could make a recession less likely because it reduces the probability that the economy will overheat, which has been the cause of some past recessions. It is unusual for fiscal and monetary policy to remain stimulative when the economy has fully recovered from a recession. As a result, there is less remaining headroom than usual for the Federal Reserve to reduce interest rates (monetary stimulus) or Congress to increase the deficit (fiscal stimulus) going forward. Policymakers face a choice between maintaining existing fiscal and monetary stimulus to maintain growth and removing stimulus so that there is more scope to employ stimulus in the next recession.

Jan 28, 2020

Forest Service: FY2019 and FY2020 Appropriations

Jan 24, 2020

Corruption in Honduras: End of the Mission to Support the Fight Against Corruption and Impunity in Honduras (MACCIH)

On January 19, 2020, Honduran President Juan Orlando Hernández allowed the mandate of the Organization of American States (OAS)-backed Mission to Support the Fight Against Corruption and Impunity in Honduras (MACCIH) to expire. The U.S. Congress had provided significant financial and political support for the MACCIH throughout its four-year mandate as the mission helped Honduran institutions deter and investigate high-level corruption. A bipartisan group of Members had also repeatedly called on President Hernández to extend the mission’s mandate. The MACCIH’s closure could negatively affect U.S. policy in Honduras, including efforts to address the underlying conditions driving high levels of irregular migration to the United States. More broadly, the closure may illustrate the challenges surrounding efforts to sustain anti-corruption measures in other countries. Corruption in Honduras According to many analysts, corruption in Honduras is deeply entrenched. Honduran officials, including national legislators, have diverted significant state resources into their pockets and political campaigns and used the state apparatus to protect and direct resources to their private-sector allies. From 2014 to 2016, for example, investigations by the National Anti-Corruption Council—a civil society organization—reported that at least $300 million was embezzled from the Honduran public health care system. Government officials reportedly funneled some of those funds to private businesses through fraudulent contracts and used the remainder to enrich themselves and finance political activities, including President Hernández’s 2013 presidential campaign. As Central America has become the primary transit route for South American cocaine destined for the U.S. market, drug traffickers have co-opted some Honduran officials. In October 2019, Juan Antonio “Tony” Hernández—a former member of the Honduran congress and President Hernández’s brother—was convicted in U.S. federal court for conspiring to import cocaine into the United States. According to the U.S. Department of Justice, Tony Hernández worked with—and solicited bribes from—Mexican, Colombian, and Honduran drug traffickers to move multi-ton loads of cocaine through Honduras. He also arranged for Honduran police to kill competitors and provide armed security for cocaine shipments. Tony Hernández reportedly made millions of dollars through drug trafficking and bribes, some of which financed his brother’s 2013 and 2017 presidential campaigns. Other prominent Hondurans, including the son of a former president and several members of the Honduran congress, have been charged or convicted for similar offenses. Progress with the MACCIH Honduras made some progress in combatting corruption with the MACCIH’s support. Launched in January 2016, the MACCIH’s mandate was to support, strengthen, and collaborate with Honduran institutions to prevent, investigate, and punish acts of corruption. The mission successfully advocated for several reforms to Honduras’s legal framework, including the creation of anti-corruption courts with nationwide jurisdiction and campaign finance regulations. MACCIH officials also worked with Honduras’s specialized anti-corruption prosecution unit to jointly investigate and prosecute high-level corruption cases. As of December 2019, those integrated teams had presented 11 cases, resulting in the prosecution of 112 people, including 80 cabinet ministers, legislators, and other government officials. In the first case to go to trial, former First Lady Rosa Elena Bonilla de Lobo (2010-2014) was sentenced to 58 years in jail for misusing nearly $800,000 intended for social assistance programs. The MACCIH was exploring more than 20 additional lines of investigation when President Hernández allowed the mission’s mandate to expire. The MACCIH’s anti-corruption efforts generated fierce backlash from many of those who had benefitted from the status quo. The Honduran congress repeatedly sought to weaken the mission’s proposed anti-corruption reforms and undermine MACCIH-backed investigations. Moreover, in December 2019, the Honduran congress approved a nonbinding measure opposing an extension of the MACCIH’s mandate. The MACCIH won the confidence of the Honduran public, however, as a November 2019 poll found that 75% of Hondurans wanted the mission to remain in the country. Implications for U.S. Policy The MACCIH’s closure represents a potential challenge to U.S. policy in Central America. Since FY2016, Congress has appropriated nearly $3.1 billion through the U.S. Strategy for Engagement in Central America to foster prosperity, strengthen governance, and improve security in the region. High-level corruption has undermined all three of those objectives in Honduras by deterring investment, siphoning scarce resources away from government agencies and development projects, and facilitating criminal co-optation of the country’s security forces. Facing difficult living conditions and few prospects for improvement at home, an estimated 283,000 Hondurans (3% of the population) sought entry into the United States in FY2019. Although the Honduran government asserts that it remains committed to combatting corruption, the U.S. State Department argues that the Hernández administration has “put forward no credible alternative” to the MACCIH. The U.S. government could try to fill the vacuum left behind by the mission by offering technical assistance and protection to Honduran prosecutors, who often face threats for investigating high-profile cases. The Further Consolidated Appropriations Act, 2020 (P.L. 116-94), for example, provides $45 million for offices of attorneys general and other entities and activities to combat corruption and impunity in Central America; $3.5 million of those funds were intended for the MACCIH. The act also empowers the Administration to exert pressure on the Honduran government by withholding 50% of security assistance until the Secretary of State certifies that the Honduran government is combating corruption and impunity. It is not clear, however, that combating corruption is among the Trump Administration’s top priorities in Honduras. Although the Administration called on Honduras to renew the MACCIH’s mandate, several recent meetings between U.S. and Honduran officials have focused primarily on migration issues. On January 9, 2019, for example, Acting Secretary of Homeland Security Chad Wolf praised Honduras as a “valued and proven partner” and pledged continued support to the country after President Hernández agreed to begin implementing an agreement that could require some individuals who arrive at the U.S.-Mexico border to apply for asylum in Honduras rather than in the United States. Moreover, some analysts argue the Administration’s muted response to the termination of the similar International Commission Against Impunity in Guatemala (CICIG) sent a signal that closing the MACCIH would not damage U.S.-Honduran relations.

Jan 23, 2020

Diplomacy with North Korea: A Status Report

Jan 22, 2020

U.S.-China Phase I Deal: Agriculture

Jan 22, 2020

Possible Use of FY2020 Defense Funds for Border Barrier Construction: Context and Questions

On January 13, 2020, the Washington Post reported that the Trump Administration plans to reallocate $7.2 billion in Department of Defense (DOD) appropriations to construct barriers along the U.S.-Mexico border. Of this amount, $3.7 billion would reportedly come from deferring congressionally approved military construction (MILCON) projects. An additional $3.5 billion would be redirected through DOD’s Drug Interdiction and Counter-Drug Activities account (hereinafter counter-drug transfer account). If the Administration were to carry out the actions as described by the Washington Post, DOD would be using the same authorities it exercised in FY2019, when it transferred $6.1 billion in defense funds for border barriers. In this case, FY2019 and FY2020 defense funding for border barriers would total $13.3 billion. Background On February 15, 2019, the Trump Administration announced plans for redirecting up to $6.1 billion from existing FY2019 DOD programs and projects to border wall construction, using a complex mix of emergency- and nonemergency-related authorities. These actions were challenged in litigation that remains ongoing. During FY2020 budget deliberations, Congress considered a number of legislative provisions that would have constrained the Administration’s use of similar authorities. These included provisions to reduce annual defense transfer thresholds, limit DOD’s emergency construction authority, and prohibit the use of defense funds for physical border barriers in general. In late July 2019, congressional leadership announced they had come to an informal understanding, as part of a budget agreement that excluded “poison pills” and limited changes to transfer funding levels and authorities from annual appropriations measures. Ultimately, Congress refrained from including legislative language in the FY2020 appropriations and authorization acts that would have reduced transfer thresholds or prohibited the Administration from repeating the transfer actions it had undertaken in FY2019 to support border barrier construction. At the same time, Congress declined to support the Administration’s FY2020 budget request to provide an additional $7.2 billion in MILCON appropriations. Of this amount, $3.6 billion would have replenished military construction projects depleted by emergency transfers in FY2019 and $3.6 billion would have directly supported additional border barrier construction. Figure 1. Recent Border Barrier Funding Actions (Defense Only) / Source: CRS. Authorities Used in Previous Transfers In FY2019 the Administration redirected $6.1 billion from defense projects and programs using a combination of authorities (including 10 U.S.C. §2808 and 10 U.S.C. §284) that it could again employ using FY2020 appropriations. See Figure 2. Figure 2. Comparison of Authorities Used in FY2019 to Transfer Defense Funds for Border Barrier Construction / Source: CRS graphic based on analysis of identified statutes. Notes: Emergency authority colored orange. Nonemergency colored blue. National emergencies may be terminated by Joint Resolution, subject to presidential veto. There are currently 34 national emergencies in effect. Drug smuggling corridors are not defined in law, but Customs and Border Protection considers the southern border to encompass in its entirety a series of drug smuggling corridors. Separate reprogramming authorities and processes are used for military construction appropriations. 10 U.S.C. §284 Counterdrug Transfers for Border Barriers in FY2019 In FY2019, DOD reprogrammed $2.5 billion from a variety of nondrug defense programs into the counter-drug transfer account and then out to the U.S. Army Corps of Engineers (USACE) for border barrier construction. The Administration relied on two authorities to reprogram funds into the counter-drug transfer account: the General Transfer Authority (for base appropriations) and the Special Transfer Authority (for overseas contingency operations, or OCO, appropriations). In turn, funds in the counter-drug transfer account may be used for a variety of counternarcotics activities, including those pursuant to 10 U.S.C. §284. DOD used this combination of reprogramming and transfer actions twice in 2019: first in March ($1 billion) and again in May ($1.5 billion). See Figure 3. Figure 3.How DOD Reprogrammed FY2019 Defense Program Savings / Source: Under Secretary of Defense (Comptroller), Reprogramming Action FY2019-01 RA (March 25, 2019) and FY2019-02 RA (May 9, 2019). 10 U.S.C. §2808 Emergency MILCON Deferrals When the President declares a national emergency requiring the use of the Armed Forces and invokes the emergency authority under 10 U.S.C. §2808, the Secretary of Defense is permitted to undertake construction projects “not otherwise authorized by law that are necessary to support such use of the armed forces.” Such construction is funded using unobligated MILCON appropriations—effectively deferring previously approved MILCON projects until Congress provides replenishing appropriations. DOD developed the following criteria to identify projects with unobligated balances it would not consider deferring under 10 U.S.C. §2808: No military housing projects. No projects that were already awarded a contract. No projects with projected award dates before FY2020. The Department’s final selection indefinitely deferred 127 previously authorized MILCON projects. Figure 4 below shows the distribution by location. Figure 4. MILCON Projects Deferred in FY2019, Pursuant to 10 U.S.C. §2808 ($3.6 billion) Percentage of appropriations by location / Source: CRS analysis of DOD September 3, 2019, notification to congressional defense committees on projects to be deferred by the use of 10 U.S.C. §2808. Notes: Percentages represent amount by category. For example, projects deferred in Germany represent 25% (approximately $468 million) of the “Foreign Locations” category total of $1.8 billion. Similarly, projects deferred in Puerto Rico represent 59% (approximately $402 million) of the $687 million in the “U.S.-Affiliated Locations” category. Issues for Congress Are there plans to redirect defense funds to border barriers in FY2020? If so When were they developed? Why was Congress not informed of them during negotiations on the FY2020 funding bills in order to ensure defense funding patterns reflect Congressional priorities? What portion of FY2019 funds redirected for border barriers has been obligated? Will Congress consider limiting DOD’s authority to redirect additional defense funds for border barrier construction? What happens if the emergency declaration is revoked? Will Congress replenish funds for any MILCON projects deferred pursuant to 10 U.S.C. §2808? What criteria might DOD use to identify MILCON projects eligible for deferral under 10 U.S.C. §2808 in FY2020? How much are the estimated future costs to DOD for operating and maintaining completed barrier construction, and from which appropriation account will the funds be derived? How might anticipated new transfers affect overall defense readiness? How is DOD selecting border barrier projects to undertake? Is it based on potential speed of construction or CBP analysis of need?

Jan 16, 2020

Defense Primer: Army Multi-Domain Operations (MDO)

Jan 16, 2020

The National Bioengineered Food Disclosure Standard: Overview and Select Considerations

/ In July 2016, Congress enacted P.L. 114-216 (2016 Act), comprehensive legislation to govern the labeling of bioengineered foods. The 2016 Act required the U.S. Department of Agriculture (USDA) to establish the National Bioengineered Food Disclosure Standard (Standard). The Standard regulates labeling of bioengineered foods, a term defined in the 2016 Act. The act does not address or define other terms that some members of the public might associate with bioengineered foods, such as genetically engineered (GE), genetically modified, and genetically modified organism (GMO). The Standard guides the mandatory labeling of foods to indicate the presence of GE ingredients. As such, foods meeting requirements identified in the Standard must bear a bioengineered disclosure. The voluntary compliance period began on January 1, 2020, and mandatory compliance begins on January 1, 2022. The Standard provides details under the three key issues of applicability, disclosure options, and administrative provisions: Applicability discusses the definition of bioengineered and the USDA-maintained List of Bioengineered Foods (List). The Standard applies to foods derived from bioengineered ingredients, with some exclusions and exemptions. The Standard does not apply to refined products, like oils or sugars, that derive from GE plants but no longer contain any detectable deoxyribonucleic acid (DNA). Many groups interpret the Standard as not applying to foods derived from gene editing and other new technologies that do not use recombinant DNA. The Standard exempts from disclosure foods served in restaurants. Some have endorsed such exclusions and exemptions, and others have criticized them. Disclosure Options outlines acceptable disclosure options for most regulated entities, as well as additional options available for specific entities and types of food packages. Most regulated entities may disclose by symbol (pictured above), electronic or digital link, or text message. In some cases, a telephone number or website address may be acceptable. Some groups have praised the flexibility that this range of options provides regulated entities, while others have criticized these options as confusing. Administrative Provisions reviews compliance dates, record keeping requirements, and enforcement mechanisms, which include audits, examinations, hearings, and release of public findings. The 2016 Act provided few enforcement mechanisms to promote compliance. The Standard establishes how USDA may investigate accusations of non-compliance and how it may publicly release its findings. The Standard does not affect how foods derived from biotechnology are regulated for safety and approval for human consumption. The Coordinated Framework for Regulation of Biotechnology, a policy the White House issued in 1986, continues to govern how federal agencies, including USDA, evaluate and approve products developed using modern biotechnology. More generally, USDA and the U.S. Food and Drug Administration (FDA) continue to ensure that foods sold in the United States are safe and properly labeled. USDA’s Agricultural Marketing Service (AMS) developed the Standard within a broader societal context. Before the 2016 Act, some members of the public had demanded mandatory labeling of the presence of GE ingredients in foods, based on the consumer’s right to know. Other members of the public had opposed any GE labeling because of the scientific consensus that GE foods are safe to eat, and concern that labeling may introduce unwarranted doubts about food safety. Before the 2016 Act, several states had enacted GE labeling laws, creating concerns among industry and consumer groups. In response, Congress debated this and other federal GE labeling legislation. GE labeling programs may be voluntary or mandatory, and may indicate the presence or absence of GE ingredients. Several voluntary labeling programs predate the Standard’s mandatory labeling requirements. Public and private programs for the voluntary labeling of foods continue to indicate the absence of GE ingredients in foods. These include the Non-GMO Project and the USDA National Organic Program. Future considerations for Congress may include ongoing questions consumers may have concerning what it means for a food to be labeled as bioengineered; how regulated entities will respond to the Standard’s new requirements; how USDA will implement its responsibilities under the Standard; potential market impacts as demand for GE versus non-GE foods may change; and how the Standard aligns with international labeling requirements. Congress may choose to monitor implementation of the new Standard in accordance with its oversight responsibilities.

Jan 16, 2020

Presidential Pardons: Overview and Selected Legal Issues

Article II, Section 2 of the U.S. Constitution authorizes the President “to grant Reprieves and Pardons for Offenses against the United States, except in Cases of Impeachment.” The power has its roots in the king’s prerogative to grant mercy under early English law, which later traveled across the Atlantic Ocean to the American colonies. The Supreme Court has recognized that the authority vested by the Constitution in the President is quite broad, describing it as “plenary,” discretionary, and largely not subject to legislative modification. Nonetheless, there are two textual limitations on the pardon power’s exercise: first, the President may grant pardons only for federal criminal offenses, and second, impeachment convictions are not pardonable. The Court has also recognized some other narrow restraints, including that a pardon cannot be issued to cover crimes prior to commission. The pardon power authorizes the President to grant several forms of relief from criminal punishment. The most common forms of relief are full pardons (for individuals) and amnesties (for groups of people), which completely obviate the punishment for a committed or charged federal criminal offense, and commutations, which reduce the penalties associated with convictions. An administrative process has been established through the Department of Justice’s Office of the Pardon Attorney for submitting and evaluating requests for these and other forms of clemency, though the process and regulations governing it are merely advisory and do not affect the President’s ultimate authority to grant relief. Legal questions concerning the President’s pardon power that have arisen have included (1) the legal effect of clemency; (2) whether a President may grant a self-pardon; and (3) what role Congress may play in overseeing the exercise of the pardon power. With respect to the first question, some 19th century Supreme Court cases suggest that a full pardon broadly erases both the punishment for an offense and the guilt of the offender. However, more recent precedent recognizes a distinction between the punishment for a conviction, which the pardon obviates, and the fact of the commission of the crime, which may be considered in later proceedings or preclude the pardon recipient from engaging in certain activities. Thus, although a full pardon restores civil rights such as the right to vote that may have been revoked as part of the original punishment, pardon recipients may, for example, still be subject to censure under professional rules of conduct or precluded from practicing their chosen profession as a result of the pardoned conduct. As for whether a President may grant a self-pardon, no past President has ever issued such a pardon. As a consequence, no federal court has addressed the matter. That said, several Presidents have considered the proposition of a self-pardon, and scholars have reached differing conclusions on whether such an action would be permissible based on the text, structure, and history of the Constitution. Ultimately, given the limited authority available, the constitutionality of a self-pardon is unclear. Finally, regarding Congress’s role in overseeing the pardon process, the Supreme Court has indicated that the President’s exercise of the pardon power is largely beyond the legislature’s control. Nevertheless, Congress does have constitutional tools at its disposal to address the context in which the President’s pardon power is exercised, including through oversight, constitutional amendment, or impeachment.

Jan 14, 2020

Greenhouse Gas Emissions and Sinks in U.S. Agriculture

Jan 9, 2020

Kosovo: In Brief

Kosovo declared independence from Serbia in 2008, and it has since been recognized by over 100 countries. The United States and most European Union (EU) member states recognize Kosovo, whereas Serbia, Russia, China, and various other countries do not. Key issues for Kosovo include the following: Government formation. As of January 2020, Kosovo’s domestic political situation remains unsettled. Vetëvendosje (Self-Determination), the top-performing party in an October 2019 early parliamentary election, has been unable to form a government coalition. If current efforts fail, Kosovo could face a second early election. Resuming talks with Serbia. An EU-brokered dialogue to normalize relations between Kosovo and Serbia stalled in 2018 when Kosovo imposed tariffs on Serbian goods in response to Serbia’s efforts to undermine Kosovo’s international recognition. Despite U.S. and EU pressure, the parties have not resumed talks. Strengthening the rule of law. Vetëvendosje’s victory in the 2019 election is considered to partly reflect voter dissatisfaction with corruption. Weakness in the rule of law contributes to Kosovo’s difficulties in attracting foreign investment and complicates the country’s efforts to combat transnational threats. Relations with the United States. Kosovo regards the United States as a key ally and security guarantor. Kosovo receives the largest share of U.S. foreign assistance to the Balkans, and the two countries cooperate on numerous security issues. The United States is the largest contributor of troops to the NATO-led Kosovo Force (KFOR), which has contributed to security in Kosovo since 1999. Congress was actively involved in debates over the U.S. response to a 1998-1999 conflict in Kosovo and subsequently supported Kosovo’s declaration of independence. Today, many in Congress continue to support Kosovo through country- or region-specific hearings, congressional visits, and foreign assistance funding levels averaging around $50 million per year since 2015.

Jan 9, 2020

U.S. Killing of Qasem Soleimani: Frequently Asked Questions

The January 2, 2020, U.S. killing in Iraq of Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) Commander Qasem Soleimani, generally regarded as one of the most powerful and important officials in Iran, has potentially dramatic implications for the United States. For Congress, it raises possible questions about U.S. policy in the Middle East, broader U.S. global strategy, U.S. relations with partners and allies, the authorization and legality of U.S. military action abroad, U.S. measures to protect its service members and diplomatic personnel, and congressional oversight of these and related issues. This report provides background information in response to some frequently asked questions related to the strike and its aftermath, including: Who was Qasem Soleimani and why did the U.S. military kill him? How have Iranians reacted? How have Iraqis reacted and how does this impact Iraqi policy and government formation? How might the strike and Iraqi reactions impact the U.S. military presence in Iraq and the U.S.-led counter-ISIS campaign (Operation Inherent Resolve)? How does the killing of Soleimani impact Israel and its security? What has been the European reaction? Under what authority did the U.S. military carry out the strike? How have Members of Congress responded legislatively or otherwise? What is the U.S. force posture in the region? How do recent regional developments align with broader U.S. strategy? The information contained in this report, which will be updated periodically as events warrant, is current as of January 8, 2020. The following CRS products provide additional background and analysis of issues discussed in this report: CRS Report R44017, Iran’s Foreign and Defense Policies, by Kenneth Katzman; CRS Report R45795, U.S.-Iran Conflict and Implications for U.S. Policy, by Kenneth Katzman, Kathleen J. McInnis, and Clayton Thomas; CRS In Focus IF10404, Iraq and U.S. Policy, by Christopher M. Blanchard; CRS Report R42699, The War Powers Resolution: Concepts and Practice, by Matthew C. Weed; CRS Report RL34544, Iran’s Nuclear Program: Status, by Paul K. Kerr; and CRS In Focus IF11338, Diplomatic Security and the Role of Congress, by Cory R. Gill and Edward J. Collins-Chase.

Jan 8, 2020

H.R. 4674, the College Affordability Act: Proposed Reauthorization of the Higher Education Act, Summary of Major Provisions

The Higher Education Act of 1965 (HEA; P.L. 89-329, as amended) authorizes programs and activities to provide support to individuals who are pursuing a postsecondary education and to institutions of higher education (IHEs). During the 116th Congress, the House Committee on Education and Labor marked up and ordered to be reported the College Affordability Act (H.R. 4674), which would provide for the comprehensive reauthorization of most HEA programs. This report organizes the changes proposed by H.R. 4674 into seven themes: Expanding the availability of financial aid to postsecondary students. This would primarily be accomplished by increasing funding available through grant programs and by expanding student aid eligibility criteria. This includes increasing the total maximum Pell Grant award and expanding Pell Grant eligibility to new subsets of students, increasing funding for existing student aid programs, creating a new Direct Perkins Loans program, and modifying the need assessment and Free Application for Federal Student Aid filing process. Instituting borrower-focused student loan reforms. This set of proposed changes aims to ease a borrower’s student loan burden. It includes amending loan terms and conditions to be more generous once an individual has entered repayment on his or her loan, modifying and making efforts to streamline student loan administrative procedures, and expanding the availability of student loan refinancing options. Modifying educational, financial, and other institutional accountability requirements for receipt of federal funds. With respect to requirements IHEs must meet to participate in the Title IV federal student aid programs, these proposed changes include revising accreditation requirements, adjusting current participation metrics, and creating new participation metrics. They also include addressing regulatory requirements of Title IX of the Education Amendments of 1972, which prohibits discrimination on the basis of sex in educational programs or activities receiving federal funds. Revising public accountability, transparency, and consumer information requirements. This would primarily be accomplished by providing consumers with additional and more nuanced information to make more informed college-going and student loan borrowing decisions. Proposed changes include repealing the student unit record system ban and requiring annual student loan counseling. Expanding academic and personal supports to specific student populations. Proposed changes include creating several new programs and reauthorizing and increasing the authorization of appropriations for several existing programs, such as TRIO and Child Care Access Means Parents in School. Increasing financial support to IHEs, focusing on minority-serving institutions. These proposals involve reauthorizing and increasing the authorization of appropriations for numerous institutional support programs. Creating new grant programs for states and IHEs to reduce students’ postsecondary costs. This would be accomplished by authorizing grants to support a federal-state partnership to provide tuition-free community college.

Jan 7, 2020

FDIC Proposes Changes to Brokered Deposit Regulation

On December 12, 2019, the Federal Deposit Insurance Corporation (FDIC) proposed changes to current rules that restrict banks that are not well capitalized from accepting brokered deposits, a perennial point of contention between banks and regulators. Recently, banks and financial technology companies have developed or begun using new arrangements that may qualify as brokered deposits. This development has refocused attention on the issue. Background Core deposits are the funds individuals or companies directly place in checking and savings accounts, primarily to utilize the safekeeping, check-writing, and money-transfer services banks provide. Brokered deposits, in contrast, are funds that a third-party broker places in a bank on behalf of a client, typically to maximize interest earned and possibly also to ensure the client does not have any one bank account that exceeds the FDIC’s $250,000 insurance limit. Core deposits are sticky—depositors are unlikely to switch banks due to differences in interest rates, because they face costs and inconvenience when doing so (e.g., filling out new direct deposit forms, getting new checks, and changing automatic bill payment information). In contrast, brokers typically monitor interest rates offered at numerous banks and move funds from one bank to another with higher interest rates, even if the difference is small. Regulators traditionally have been wary of brokered deposits due to their potential lack of stability as a funding source, and banks that overly rely on them or use them to lend imprudently could face an increased risk of failure. Banks face liquidity risk—their assets cannot be converted into cash as easily as depositors can withdraw funds. A bank run is a classic illustration of this: depositors demand their deposits back en masse, but the bank does not have the cash to meet its obligations. Similarly, if deposit brokers withdraw funding en masse, a bank could become distressed. The risk of failure increases further if a bank seeks brokered deposits to expand in a relatively risky manner, such as by making loans in volatile or unfamiliar markets. Bank runs on core deposits have been rare since the creation of federal deposit insurance because core depositors have less incentive to run when they are confident they will not suffer losses in the event of a bank failure. In contrast, if a bank does not offer high-enough interest rates, brokers would still have an incentive to withdraw large amounts of deposits quickly in order to move them to a bank offering higher rates. Despite their relative lack of stickiness, brokered deposits—when prudently accepted and used for carefully underwritten lending—can be a useful and beneficial source of funding for a bank. Brokered deposits, though sensitive to interest rates, can be less costly than issuing debt and capital instruments to raise funds. Meanwhile, population and economic growth rates limit how strongly wholly new bank account demand grows. Thus, attracting core deposits may require offering high-enough interest to entice existing core account holders to switch banks. In addition, banks and certain third-party service providers, including financial technology companies, have argued that brokered deposit restrictions are outdated and should not apply to certain technology-enabled arrangements. For example, deposits gained by certain internet advertising arrangements involving targeted advertising and bank referrals can qualify as brokered deposits. Current Regulation and the FDIC’s Proposal The FDIC’s Study On Core Deposits and Brokered Deposits, done pursuant to Section 1506 of the Dodd-Frank Act (P.L. 111-203), describes how regulators became concerned about brokered deposits during the savings-and-loan (S&L) crisis of the 1980s, a systemic event in which more than 1,000 depositories failed, costing taxpayers $124 billion according to one estimate. Regulators noticed a pattern at certain depositories wherein the institution would increase reliance on brokered deposits, grow quickly (often by making loans in new or risky market segments), and become distressed. Analyses presented in the FDIC study and academic papers it cites indicate that a higher proportion of broker deposits relative to core deposits at a bank is correlated to—though not necessarily the cause of—greater probability and cost of failure. To address the problems revealed by the S&L crisis, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA; P.L. 101-73). Among other things, FIRREA added Section 29 to the Federal Deposit Insurance Act (P.L. 81-797). Section 29 generally prohibits banks that are not well capitalized from accepting deposits from a “deposit broker.” It also provides a definition of that term and enumerates nine exclusions not included in that definition. However, the definition and the exclusions require a degree of interpretation by the FDIC to implement their regulations. Banks have argued that the FDIC has been too broad in its interpretation of what a deposit broker is, and as a result certain banks have been precluded from accessing useful funding sources that are dissimilar (e.g., more stable, not interest rate maximizing) from the deposit broker businesses FIRREA intended to address in the now 30-year-old law. In the case of a type of arrangement called reciprocal deposits, Congress agreed that brokered deposits restrictions should be relaxed and amended Section 29 in the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (P.L. 115-174). However, certain industry observers argue further loosening restrictions will unnecessarily expose banks to the risks associated with brokered deposits and the FDIC’s Deposit Insurance Fund to losses. In December 2018, the FDIC issued a request for comment that indicated it sought to modernize the brokered deposit regulations given recent technological developments. On December 12, 2019, it issued a notice of proposed rulemaking that included proposed changes and asked for further comments. The proposal seeks to address issues raised by third-party arrangements, which are often technology-based or -enabled. Broadly, under the proposal the FDIC would do the following, among other things: change the definition of “deposit broker” such that the degree of control the third party has over the movement of funds has greater importance; and create criteria and an application process for third parties to qualify for a certain exception from the deposit broker definition.

Jan 6, 2020

The Cable Franchising Authority of State and Local Governments and the Communications Act

Companies that provide cable television service (cable operators) are subject to regulation at the federal, state, and local levels. Under the Communications Act of 1934, the Federal Communications Commission (FCC or Commission) exercises regulatory authority over various operational aspects of cable service. At the same time, a cable operator must obtain a franchise from the state or local franchising authority for the area in which it wishes to provide cable service. The franchising authority often negotiates various obligations as a condition of granting the franchise. Under the Cable Communications Policy Act of 1984 (Cable Act), cable operators must obtain franchises from state or local franchising authorities, and these authorities may continue to condition franchises on various requirements. Nevertheless, the Cable Act subjects franchising authorities to important limitations. For instance, the Cable Act prohibits franchising authorities from charging franchise fees greater than 5% of a cable operator’s gross annual revenue and from “unreasonably” refusing to award a franchise. In a series of orders since 2007, the FCC has interpreted the Cable Act to authorize an expanding series of restrictions on the powers of state and local franchising authorities to regulate cable operators. In particular, these orders clarify (1) when practices or policies by a franchising authority amount to an unreasonable refusal to award a franchise; (2) the types of expenditures that count toward the 5% franchise fee cap; and (3) the extent to which franchising authorities may regulate non-cable services provided by cable operators. Franchising authorities, in turn, have successfully challenged some of the FCC’s administrative actions in federal court. The U.S. Court of Appeals for the Sixth Circuit upheld many rules in the FCC’s orders, but it also vacated some of the FCC’s rules in the 2017 decision in Montgomery County v. FCC. In response to the Montgomery County decision, the FCC adopted a new order on August 1, 2019, which clarifies its interpretations of the Cable Act. Among other things, the order reiterates the FCC’s position that in-kind (i.e., non-monetary) expenses, even if related to cable service, may count toward the 5% franchise fee cap and preempts any attempt by state and local governments to regulate non-cable services provided by cable operators. Some localities have criticized the order for hampering their ability to control public rights-of-way and for reducing their ability to ensure availability of public, educational, and government (PEG) programming in their communities. Several cities have filed legal challenges to the order, which will likely involve many complex issues of statutory interpretation and administrative law, along with constitutional questions regarding the FCC’s ability to impose its deregulatory policy on states. This report first outlines the FCC’s role in regulating cable operators and franchising authorities, beginning with the Commission’s approach under the Communications Act through the passage of the Cable Act and its amendments. The report then turns to a discussion of recurring legal issues over the FCC’s power over franchising authorities. The report concludes with a discussion of possible legal issues that may arise in current legal challenges to FCC regulations and offers considerations for Congress.

Jan 3, 2020

The Office of Federal Student Aid as a Performance-Based Organization

The Office of Federal Student Aid (FSA), within the U.S. Department of Education (ED), is established as a performance-based organization (PBO) pursuant to Section 141 of the Higher Education Act (HEA). FSA is a discrete management unit “responsible for managing the administrative and oversight functions supporting” the HEA Title IV federal student aid programs, including the Pell Grant and the Direct Loan programs. As such, it is the largest provider of postsecondary student financial aid in the nation. In FY2019, FSA oversaw the provision of approximately $130.4 billion in Title IV aid to approximately 11.0 million students attending approximately 6,000 participating institutions of higher education (IHEs). In addition, in FY2019, FSA managed a student loan portfolio encompassing approximately 45 million borrowers with outstanding federal student loans totaling about $1.5 trillion. Among other functions, FSA develops and maintains the Free Application for Federal Student Aid (FAFSA); obtains funds from the Department of the Treasury to make aid available to students; contracts with numerous third parties to provide goods and services related to Title IV administration, such as student loan servicing; provides oversight of the numerous third parties (e.g., contracted student loan servicers and IHEs) that play a role in administering the Title IV programs; and provides information to third-party stakeholders—such as students, the public, and Congress—regarding Title IV program operations and performance. Responsibility for developing and promulgating policy and regulations relating to the Title IV programs, however, remains with the Secretary of Education. Congress established FSA’s PBO structure under the Higher Education Amendments of 1998 (P.L. 105-244) in response to a belief in Congress and ED that the Title IV student aid programs were “severe[ly]” mismanaged and that ED was in need of restructuring to improve federal student aid delivery. In general, PBOs are intended to be business-like, results-driven organizations that have clear objectives and measureable goals designed to improve an agency’s performance and transparency. PBO leaders are to be held professionally accountable for meeting organization goals, with continued tenure and a portion of compensation linked to these measures of success. In exchange, PBOs and their leaders are granted greater discretion to deviate from certain government-wide management processes and to operate more like private-sector companies. Specific to FSA’s structure as a PBO, the HEA vests management of FSA in a chief operating officer (COO) who is appointed based on demonstrated ability and without regard to political affiliation. Each year, the COO and the Secretary must agree on and publicly make available a five-year performance plan for FSA that establishes measurable goals and objectives addressing a variety of statutory specifications, such as FSA’s responsibilities in improving customer service to stakeholders and reducing costs of administering the Title IV student aid programs. The COO is required to annually submit to Congress a report on FSA’s performance. In addition, each year the COO and the Secretary, and the COO and FSA senior managers, enter into performance agreements that set forth measurable organizational and individual goals. The COO and senior managers are eligible to receive bonus compensation based on an evaluation of work performed relative to the annual goals specified in their annual performance agreements. The HEA provides FSA with some flexibilities with regard to traditional federal rules around hiring, compensation, and procurement. Since FSA’s creation as a PBO, it has experienced some notable successes, including the Title IV aid programs’ removal from the Government Accountability Office’s High Risk List in 2005, the transition to 100% direct lending under the Direct Loan program, and implementation of the Internal Revenue Service (IRS) Data Retrieval Tool. Since FSA’s establishment, the programs it administers have grown substantially larger, and the federal student aid programs and benefits have become substantially more complex to administer (e.g., with the addition of numerous loan forgiveness and income-driven repayment plans). In recent years, particularly over the last decade, several issues have arisen related to FSA’s Title IV program administration. In broad terms, they pertain to oversight of entities participating in and helping with administration of Title IV programs, transparency, and accountability to certain stakeholders and consumers (i.e., aid recipients). Oversight issues relate to FSA’s oversight of IHEs participating in the Title IV loan programs. Criticisms have focused on FSA’s assessment of the well-being of IHEs and ability to proactively mitigate risk in the Title IV programs. Other concerns relate to FSA’s oversight of its contracted student loan services, including its monitoring of such entities and the accountability of servicers to FSA in certain areas of their performance. Concerns have also been raised about the shortage of operational guidance FSA has provided to loan servicers to enable them to ensure they are meeting Title IV statutory and regulatory requirements and to assist borrowers in navigating the aid programs. Transparency issues relate to the extent to which FSA makes available information about the Title IV programs’ performance and operations to relevant parties. Congress, other entities with oversight responsibilities, and other federal agencies sometimes have imperfect information on Title IV program performance and operations, which can make it difficult to make informed, well-honed policy or enforcement decisions. In addition, consumers may be faced with incomplete information on the Title IV programs and the IHEs that participate in such programs, which may make it difficult to make informed college-going and financial decisions. Stakeholder and borrower accountability issues include the extent to which FSA is fulfilling its statutory mandate to consult with relevant stakeholders in developing performance plans and annual reports and whether FSA is leveraging information garnered from stakeholder interactions to make program administration improvements. They also relate to whether FSA is sufficiently responsive to customer needs, especially given that FSA administers programs for which, arguably, there are no comparable competitors. As Congress contemplates the reauthorizations of the HEA, it might consider whether any adjustments should be made to address any of these issues and, if so, the extent to which any efforts to address issues might involve or affect FSA’s PBO function and structure.

Dec 30, 2019

Fifth Circuit Holds the Individual Mandate Unconstitutional: Implications for Congress

Dec 23, 2019

“Stage One” U.S.-Japan Trade Agreements

On October 7, 2019, after six months of formal negotiations, the United States and Japan signed two agreements intended to liberalize bilateral trade. One, the U.S.-Japan Trade Agreement (USJTA), provides for limited tariff reductions and quota expansions to improve market access. The other, the U.S.-Japan Digital Trade Agreement, includes commitments pertaining to digital aspects of international commerce, such as cross-border data flows. These agreements constitute what the Trump and Abe Administrations envision as “stage one” of a broader trade liberalization negotiation, which the two leaders first announced in September 2018. The two sides have stated their intent to continue negotiations on a more comprehensive deal after these agreements enter into force. Congress has an interest in U.S.-Japan trade agreement negotiations given congressional authority to regulate foreign commerce and the agreements’ potential effects on the U.S. economy and constituents. USJTA is to reduce or eliminate tariffs on agriculture and some industrial goods, covering approximately $14.4 billion ($7.2 billion each of U.S. imports and exports) or 5% of bilateral trade. The United States is to reduce or eliminate tariffs on a small number (241) of mostly industrial goods, while Japan is to reduce or eliminate tariffs on roughly 600 agricultural tariff lines and expand preferential tariff-rate quotas for a limited number of U.S. products. The United States framed the digital trade commitments as “gold standard,” with commitments on nondiscriminatory treatment of digital products, and prohibition of data localization barriers and restrictions on cross-border data flows, among other provisions. The stage one agreement excludes most other goods from tariff liberalization and does not cover market access for services, rules beyond digital trade, or nontariff barriers. Notably, the agreement does not cover trade in autos, an industry accounting for one-third of U.S. imports from Japan. Japan’s decision to participate in bilateral talks came after President Donald Trump threatened to impose additional auto tariffs on Japan, based on national security concerns. Prior to the Trump Administration, the United States negotiated free trade agreements (FTAs) that removed virtually all tariffs between the parties and covered a broad range of trade-related rules and disciplines in one comprehensive negotiation, driven in significant part by congressionally mandated U.S. negotiating objectives. Nontariff issues often require implementing legislation by Congress to take effect, and Congress has typically considered implementing legislation for past U.S. FTAs through expedited procedures under Trade Promotion Authority (TPA). The Trump Administration, however, plans to put the stage one agreements with Japan into effect without action by Congress. The Administration plans to use delegated tariff authorities in TPA to proclaim the USJTA market access provisions, while the U.S.-Japan Digital Trade Agreement does not appear to require changes to U.S. law and is being treated as an Executive Agreement. Japan’s Diet (the national legislature) ratified the pact in December 2019. The Administration expects the agreements to take effect in early 2020, with negotiations on the second stage of commitments to begin within four months. The Trump Administration’s interest in bilateral trade negotiations is tied to its withdrawal from the Trans-Pacific Partnership (TPP) agreement in 2017, which included the United States and Japan, along with 10 other Asia-Pacific countries. In general, TPP was far more comprehensive than the stage one U.S.-Japan agreements, as it would have eliminated most tariffs among the parties and created rules and disciplines on a number of trade-related issues, such as intellectual property rights and services. Japan’s FTAs with other countries, including the TPP-11, which entered into force among the remaining TPP members in 2018, and an FTA with the European Union (EU), which took effect in 2019, have led to growing concerns among U.S. industry and many in Congress that U.S. exporters face certain disadvantages in the Japanese market. The USJTA will largely place U.S. agricultural exporters on par with Japan’s other FTA partners with regard to tariffs, but unlike the TPP and its successor, the agreement excludes some agricultural products, such as rice and barley. It also does not include rules, such as on technical barriers to trade (TBT) and sanitary and phytosanitary measures, and therefore will not address various nontariff barriers U.S. agriculture and other industries face in Japan. Thus, U.S. agricultural exporters may continue to be at some disadvantage in the Japanese market compared to those from TPP countries or the EU. In general, Congress and U.S. stakeholders support the agreements due to the expected benefits to U.S. agriculture and cross-border digital trade. At the same time, the overall economic effects of the agreement are likely to be modest due to the limited scope of the agreement. Many observers contend the deal should not be a substitute for a comprehensive trade agreement and view the second stage of talks as critical to U.S. interests. If more comprehensive negotiations begin in 2020, they may become intertwined with other bilateral issues, such as concerns among many Japanese officials that the United States has a waning interest in maintaining its current influence in East Asia, and upcoming negotiations over the renewal of the U.S.-Japan agreement on how to share the costs of basing U.S. military troops in Japan. Some Members of Congress have also raised questions over whether the staged approach to the U.S.-Japan negotiations is in the best interest of the United States, and what it may mean for future U.S. trade agreement negotiations. There are also questions about whether the agreements adhere to multilateral trade rules under the World Trade Organization (WTO), given their limited scope, and whether the Administration has adequately consulted with Congress in its negotiation and implementation of the new agreements.

Dec 20, 2019

U.S. Announces Preliminary Phase One Trade Deal with China

The Trump Administration announced on December 13, 2019, a draft agreement with the Chinese government on a subset of trade and investment issues the Administration raised in March 2018 under Section 301 of the U.S. Trade Act of 1974. The Chinese government has not formally agreed to the agreement and neither side has signed it. China is currently reviewing the text, leaving open the potential for disagreement or renegotiation of terms. If the process goes smoothly, U.S. Trade Representative (USTR) Robert Lighthizer and Chinese Vice Premier Liu He could sign the agreement in January 2020 in Washington, DC, before starting phase two negotiations. The Administration identified four concerns about China’s behavior in its March 2018 Section 301 Report—forced technology transfer, cyber-enabled theft of U.S. intellectual property (IP) and trade secrets, discriminatory and nonmarket licensing practices, and state-funded strategic acquisition of U.S. assets—and subsequently imposed four rounds of tariffs on Chinese goods. China responded with four rounds of counter tariffs. Negotiations also sought to address President Trump’s concerns about the trade balance and incorporate Chinese offers in unrelated areas, such as financial services. The USTR said the two sides have drafted an 86-page text covering some aspects of IP, technology transfer, agriculture, financial services, exchange rates, and dispute resolution that could be made public over the next few weeks. The two sides have been working with a draft text since at least May 2019, when China reportedly returned a heavily marked up draft and held up purchase agreements until the United States agreed to lift some tariffs. The Administration may have released details of the draft agreement to justify its decision to delay tariffs scheduled to take effect on December 15 and to lock in terms with China. Reactions Some Members of Congress and most commentators assess the deal to be a first step in a longer effort to resolve U.S. trade concerns with China. Many observers call it a short-term truce, noting it falls significantly short of the Administration’s goal of a comprehensive settlement, leaving tough systemic issues on IP and technology transfer to phase two talks. The USTR agrees that the deal is just a first step, but notes that most U.S. tariffs remain in place and that the deal will have a strong enforcement mechanism. Critics counter that the Administration was too quick to settle and that by lifting and delaying some tariffs, it may have lost leverage. They see the Administration as responding to pressure to keep China relations stable and the U.S. economy on solid footing ahead of the U.S. presidential election in November. U.S. firms, especially smaller companies, facing tariffs that remain in place are still concerned about the effects on their businesses. Others note that China’s promise to buy an additional $16 billion in U.S. agriculture in the deal’s first year is well below the U.S. target of $25 billion. Beijing also has preserved space for China to implement its industrial policies in strategic sectors of concern to the United States. Critics argue the timing gives China credit for purchases of U.S. products it would have likely made anyway in areas such as pork, to address shortages ahead of the Chinese lunar new-year in late January, and stem inflationary pressures. Key Details and Issues to Watch Tariffs. The United States agreed to delay tariffs scheduled to take effect December 15, 2019, that would have affected approximately $160 billion worth of imports from China, particularly consumer electronics. For U.S. tariffs enacted on September 1, 2019, the deal cuts the tariff rate from 15% to 7.5%. The remaining U.S. tariffs enacted since March 2018 will remain in effect. According to a December 15 announcement by China’s State Council Tariff Commission, China has agreed not to proceed with its own scheduled December tariff increases (Appendix II) and will extend exemptions for autos, auto parts and some pork and soybean imports it announced in September; earlier tariffs, including tariffs China implemented on September 1 (Appendix I), remain in effect. Some question whether the deal will be enough to reassure business and supply chains that have been diversifying in the wake of tariffs. Purchases. China committed to purchase an additional $200 billion of U.S. agriculture, energy, and manufacturing goods over the next two years, with a detailed breakout by commodity; agriculture constitutes approximately $40 billion to $50 billion of the total. Beijing said it will buy $16 billion of U.S. agricultural goods in the first year of the deal and that purchases will be market-based, which may mean Chinese purchases could fall below U.S. stated goals. China’s purchases may potentially shift U.S. export flows from other markets but not generate new demand. Neither side has released details about commitments beyond year two. Currency. The Administration negotiated a currency commitment similar to Chapter 33 of the proposed U.S.-Mexico-Canada Agreement that includes a commitment to market-determined exchange rates, transparency and reporting requirements, and recourse to dispute settlement. Financial Services. China promised to selectively reduce some foreign equity limits and restrictions, likely in an effort to generate pockets of U.S. business support, but may slow implementation through licensing, as it has done previously. IP. China’s commitments on counterfeiting, patent and trademark, and pharmaceutical protections may reflect recent domestic actions. China’s new Foreign Investment Law imposes legal penalties for officials who disclose trade secrets, but Chinese industrial policies still incentivize government officials to obtain foreign knowhow. China’s State Council promised new IPR protections by 2022, including financial damages in patent infringement cases, but has been silent on industrial policies and procurement rules that require foreign firms to share or transfer IP and knowhow to China. Technology Transfer. USTR says that China will not force technology transfer and will not use state financing to make overseas acquisitions that advance China’s industrial policies. This may be difficult to enforce. The new Foreign Investment Law forbids forced technology transfer, but Chinese officials frequently state that foreign firms willingly give their technology. Chinese industrial policies, such as Made in China 2025 and the national semiconductor policy, remain in force, and the Chinese government can leverage informal powers. The U.S. business community has voiced concerns that China is doubling down on industrial policies, including recapitalization of government funds and the launch of a new plan and $21-billion government fund to support advanced manufacturing. In 2020, Chinese officials will be adjudicating the country’s next Five-Year Plan (2021-25) and supporting industrial plans that lay out plans for specific sectors. Enforcement. USTR says remaining U.S. tariffs will incentivize implementation of Chinese commitments. An enforcement mechanism will allow 90 days to resolve issues, after which either side can take proportionate action. Snapback tariffs may be difficult to justify without specific benchmarks and timelines. Phase Two. Core U.S. concerns on IP, technology transfer, and state subsidies appear to be left to phase two of the negotiations. These systemic issues have so far been intractable. They involve a web of reinforcing Chinese government plans and industrial policies that offer preferences and support for Chinese firms, both domestically and overseas, and often require foreign firms to partner and transfer technology, proprietary knowhow, and core IP with Chinese entities. China has used dialogue in the past to delay action on contentious issues. Phase two will test whether the U.S. approach can break new ground. Related CRS Products CRS Report R45949, U.S.-China Tariff Actions by the Numbers, by Brock R. Williams and Keigh E. Hammond. CRS In Focus IF11284, U.S.-China Trade and Economic Relations: Overview, by Karen M. Sutter.

Dec 19, 2019

U.S. Farm Income Outlook: November 2019 Forecast

This report uses the U.S. Department of Agriculture’s (USDA’s) farm income projections (as of November 27, 2019) and agricultural trade outlook update (as of November 25, 2019) to describe the U.S. farm economic outlook for 2019. According to USDA’s Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $92.5 billion in 2019, up $8.5 billion (+10.2%) from last year. The forecast rise in 2019 net farm income is largely the result of a 64.0% increase in government payments to the agricultural sector, with a projected total value of $22.4 billion (highest since 2005). USDA’s forecast of outlays for farm support for 2019 includes $14.3 billion in direct payments made under trade assistance programs intended to help offset foreign trade retaliation against U.S. agricultural products, as well as over $8 billion in payments from other farm programs, including the Wildfire and Hurricane Indemnity Program (WHIP). Without this federal support, net farm income would be lower, primarily due to continued weak prices for most major crops. Commodity prices are under pressure from large carry-in stocks from a record soybean and near-record corn harvest in 2018, and diminished export prospects due to the ongoing trade dispute with China. Should these conditions persist into 2020, they would signal the potential for continued dependence on federal programs to sustain farm incomes in 2020. Since 2008, U.S. agricultural exports have accounted for a 20% share of U.S. farm and manufactured or processed agricultural sales. In 2018, total agricultural exports were estimated at $143.4 billion (the second-highest export value on record). However, strong competition from major foreign competitors and the ongoing U.S.-China trade dispute are expected to shift trade patterns and lower U.S. agricultural export prospects significantly (-5.5%) to a projected $135.5 billion in 2019. Farm asset value in 2019 is projected up from 2018 at $3.1 trillion (+2.3%). Farm asset values reflect farm investors’ and lenders’ expectations about long-term profitability of farm sector investments. U.S. farmland values are projected to rise 2.1% in 2019, slightly higher than the 1.6% in 2018 but below the 3.0% of 2017. Because they comprise 83% of the U.S. farm sector’s asset base, change in farmland values is a critical barometer of the farm sector’s financial performance. However, another critical measure of the farm sector’s well-being is aggregate farm debt, which is projected to be at a record $415.5 billion in 2019—up 3.5% from 2018. Both the debt-to-asset and the debt-to-equity ratios have risen for seven consecutive years, suggesting a weakening of the U.S. farm sector’s financial situation. At the farm household level, average farm household incomes have been well above average U.S. household incomes since the late 1990s. However, this advantage derives primarily from off-farm income as a share of farm household total income. Since 2014, over half of U.S. farm operations have had negative income from their agricultural operations. Furthermore, the farm household income advantage over the average U.S. household has narrowed in recent years. In 2014, the average farm household income (including off-farm income sources) was about 77% higher than the average U.S. household income. In 2018 (the last year with comparable data), that advantage was expected to decline to 25%. USDA Farm Income Projections as of November 27, 2019 This report discusses aggregate national net farm income projections for calendar year 2019 as forecast by USDA’s ERS on November 27, 2019. It is the third ERS forecast for 2019 and follows an initial forecast made on March 6, 2019, when USDA forecast 2019 net farm income at $69.4 billion, and a second forecast made on August 30, 2019, when net farm income was forecast at a much higher $88 billion, largely the result of an increase in government payments to the agricultural sector. The initial March forecast is discussed in CRS Report R45697, U.S. Farm Income Outlook: March 2019 Forecast, by Randy Schnepf. The second forecast made in August is discussed in CRS Report R45924, U.S. Farm Income Outlook: August 2019 Forecast, by Randy Schnepf.

Dec 18, 2019

Changes to India’s Citizenship Laws

Dec 18, 2019

FDA Regulation of Laboratory-Developed Tests (LDTs)

Dec 16, 2019

USMCA: Motor Vehicle Provisions and Issues

Dec 13, 2019

Cloud Computing: Background, Status of Adoption by Federal Agencies, and Congressional Activities

Cloud computing is a new name for an old concept: the delivery of computing services from a remote location, analogous to the way electricity, water, and other utilities are provided to most customers. Cloud computing services are delivered through a network, usually the internet. Utilities are also delivered through networks, whether the electric grid, water delivery systems, or other distribution infrastructure. In some ways, cloud computing is reminiscent of computing before the advent of the personal computer, where users shared the power of a central mainframe computer through video terminals or other devices. Cloud computing, however, is much more powerful and flexible, and information technology advances may permit the approach to become ubiquitous. As cloud computing has developed, varied and sometimes nebulous descriptions of what it is and what it is not have been commonplace. Such ambiguity can create uncertainties that may impede innovation and adoption. The National Institute of Standards and Technology (NIST) has developed standardized language describing cloud computing to help clear up that ambiguity: Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This cloud model promotes availability and is composed of five essential characteristics, three service models, and four deployment models. Since 2009, the federal government has been shifting its data storage needs to cloud-based services and away from agency-owned, in-house data centers. This shift is intended to achieve two goals: reduce the total investment by the federal government in information technology (IT), which currently stands at about $90 billion each year, and realize other stated advantages of cloud adoption: efficiency, accessibility, collaboration, rapidity of innovation, reliability, and security. However, challenges remain as agencies shift to cloud services. According to a survey conducted in September 2018, federal IT managers expressed concerns about security in certain cloud environments, the complexity of migrating existing (“legacy”) applications to the cloud, a lack of skilled staff to manage certain cloud environments, and uncertain funding. Planning for cloud adoption by federal agencies began with the 2010 publication of “A 25-Point Implementation Plan to Reform Federal IT Management.” More recently, in the 2017 “Report to the President on Federal IT Modernization,” the Office of Management and Budget (OMB) pledged to update the government’s legacy Federal Cloud Computing Strategy (“Cloud First”). Fulfilling this requirement, the Administration developed a new strategy, Cloud Smart, which was published on September 24, 2018. The new strategy is founded on what the Administration considers the three key pillars of successful cloud adoption: security, procurement, and workforce. In the 116th Congress, there has been one cloud-related bill introduced and one cloud-related hearing held. The Federal Risk and Authorization Management Program (FedRAMP) Authorization Act (H.R. 3941) was introduced on July 24, 2019, by Representative Gerald Connolly. The bill would formally establish within the General Services Administration a risk management, authorization, and continuous monitoring process to “leverage cloud computing services using a risk-based approach consistent with the Federal Information Security Modernization Act of 2014.” On July 17, 2019, the House Committee on Government Reform Subcommittee on Government Operations held a hearing, “To the Cloud! The Cloudy Role of FedRAMP in IT Modernization.” The purpose of the hearing was to examine the extent to which FedRAMP has reduced duplicative efforts, inconsistencies, and cost inefficiencies associated with the cloud security authorization process.

Dec 12, 2019

TEACH Grants: A Primer

The Teacher Education Assistance for College and Higher Education (TEACH) Grant program is intended to encourage individuals to enter the teaching profession by providing recipients with grants of up to $4,000 annually to pursue coursework that leads to a certification in teaching. Congress authorized the TEACH Grant program in the College Cost Reduction and Access Act of 2007 (P.L. 110-84) to address concerns about growing demand for high-quality teachers, especially in low-income schools. To be eligible for a TEACH Grant, among other requirements, a postsecondary student has to meet certain academic achievement requirements and be enrolled in a TEACH-Grant eligible program of study. The TEACH Grant program is the only HEA Title IV program with an academic merit requirement. As a condition of receiving a TEACH Grant, a recipient must complete four years of teaching in a high-need field and in a school that serves low-income students, within eight years of completing his or her program of study. If a recipient fails to complete the required teaching service, his or her TEACH Grant is converted into a Federal Unsubsidized Direct Loan, which must be repaid in full including interest that accrued since grant disbursement. To be eligible to disburse TEACH Grants, among other requirements, an institution of higher education (IHE) must provide a high-quality teacher preparation program that is either accredited by a Department of Education (ED)-recognized accrediting agency of teacher education programs; or is approved by a state, includes a minimum of 10 weeks of full-time pre-service clinical experience, and provides or assists in providing pedagogical coursework. Additionally, such teacher preparation programs must provide or assist in providing supervision and support services to program completers when they are working as teachers. Program administration tasks are divided among IHEs, ED, and the loan servicer with which ED contracts. IHEs award and disburse TEACH Grants to recipients, while the loan servicer performs day-to-day administrative tasks after a grant has been disbursed. ED oversees both the IHE’s and the loan servicer’s functions. Since the inception of the program, over 300,000 TEACH Grants, totaling nearly $938 million, have been disbursed. Based on a Government Accountability Office (GAO) analysis, the estimated take-up rate of TEACH Grants by the potentially eligible population in the 2013-2014 academic year was 19%. According to an American Institutes for Research (AIR) study, among TEACH Grant recipients who began their eight-year service period prior to July 2014, 63% saw their grants converted to loans as of July 2016. Several issues related to TEACH Grants may garner congressional attention. The bulk of these issues pertain to program design, including the extent to which the program successfully identifies individuals who commit to teaching, the size of the TEACH Grant benefit, challenges associated with finding and sustaining a qualifying teaching placement, teacher preparation program quality at IHEs that disburse TEACH Grants, and the continued application of the “highly qualified teacher” definition to the TEACH Grant program. Other issues are related to program implementation, such as challenges associated with certification of teaching service and the absence of an appeals process. Lawmakers may also wish to consider other changes that have been proposed since the TEACH Grant program was authorized. Some of these include permitting partial payback of TEACH Grants converted into loans that is prorated based on the length of service fulfilled for recipients who do not complete the service requirement, allowing teachers whose roles or duties change to continue to fulfill their required teaching service with such new roles or duties, or replacing or sunsetting the program altogether.

Dec 12, 2019