Peter Friedmann’s May 2022 View from Washington DC: From Consensus to Controversy

 

One could get whiplash trying to watch developments here in DC, never more so than in the past few weeks.

 

But let’s go back a bit. At the beginning of this Congress, early in 2021, Congress came together and passed massive COVID relief spending bills – liberals who don’t mind spending Federal dollars, and conservatives who usually do mind, jointly passed unprecedented funding.  Then they settled back into the normal bickering and disfunction which was almost preordained by the almost even numbers of Republicans and Democrats (which limits the ability of the majority party to impose its will). With two Democratic Senators striking out on their own, neither following the Democratic leadership, nor joining the Republican opposition, and Vice President Harris required to come up to the Hill to break tie votes, big agenda items languish. Perhaps the biggest accomplishment of Congress this year was the confirmation of a Supreme Court justice, accomplished with less acrimony than some previous Supreme Court nominees whose confirmation was a harrowing spectacle.

 

Russia’s invasion of Ukraine was, on Capitol Hill, and in Washington DC generally, a unifying influence – House, Senate, White House, Democrats and Republicans all strove to show support for Ukraine, and continue to do so. Ukraine’s surprising and continuing military success against Russia, the lack of US troops in harm’s way, and the US public’s support for Ukraine, has certainly assured politicians looking ahead to the November midterms that it's “safe” to support funding to send weapons and provide intelligence to Ukraine. While Presidents have often been unable to gain consensus for spending to support military engagement overseas, President Biden has got it from Congress now, and will continue to have it.

 

So, it seemed that the big issue for the mid-terms was going to be the economy – inflation, gas prices, stock market. There isn’t much that any Congressperson can do about those issues. Which is frustrating for them, because they all know that elections typically turn on “the economy”. So, under this cloud, it was actually pretty calm around here.

 

Then the leaked draft Roe v Wade decision of the Supreme Court shattered the calm. There simply is no more contentious, divisive issue than abortion. While many have been anticipating a Supreme Court decision, there has been uncertainty as to the vote and thus the content of the decision. Thus, generally speaking, well-entrenched positions were not being voiced by Members of Congress, as long as there was no decision.  Chief Justice Roberts reminds the world that the leaked document was a draft, but thus far no one has given any reason to believe that the final vote of the justices will be any different than the 5-4 vote on the draft. So now the battle lines are drawn – we know them well: on both sides they are intense, heartfelt, passionate, uncompromising and supremely personal. Since the leak, legislation has been proposed and adding more justices to the Supreme Court has been advocated. At this point unlikely to pass, due to the even split of the political parties on the Hill.

 

Every member of the House of Representatives and one third of the Senators are standing for election in November. One suspects that we now have the three issues that will color their campaigns and their priorities for the next six months: Ukraine, the economy, immigration (the southern border), and abortion.  In the meantime we will continue to work to keep some attention on the ruptured supply chain, including ocean transportation, import duties, infrastructure.

 

Peter

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Peter Friedmann’s View from Washington DC

April 2022

 

There’s a lot in motion these days, in the world, in the country and in the Nation’s Capitol. But from the perspective of those of us who toil here in DC, there’s a common thread that impacts every decision inside the Beltway – INFLATION!  (Pardon the length of this ‘View’, but these are particularly complicated times.)

 

Voters, and people in general, may care about the war in Ukraine, about environmental issues, immigration, politics, but what they really care about is $5.87/gallon gasoline and $4/half gallon of milk, everything costing more. That is when voters turn incumbent politicians out of office. So no wonder, to preserve their jobs and Congressional Majorities, they are doing whatever they can to address the engines of inflation, with a nervous eye on the Mid-Term elections, only 5 months away. Let’s look at those “engines of inflation”

 

The supply chain crisis has been raging for three years now, with the world watching ships lining up halfway across the Pacific waiting to berth at LA and Long Beach ports. It’s creating congestion and delay, leading to shortages and increased costs of anything imported, or even assembled here in the US, comprised of imported components (such as automobiles). The supply chain crisis is contributing to the highest rate of inflation in decades. To try to get a handle on this crisis, Congress is on the verge of passing the Ocean Shipping Reform Act of 2022, which the President has already promised to sign., What difference will it make? It will not suddenly result in additional ocean carrier capacity, the end of the chassis shortage, nor eliminate port congestion, and reduce spiraling costs of imported goods.. But it can provide hundreds of millions of dollars of relief each month to importers and exporters who have been trying to keep their businesses afloat in the face of mounting detention and demurrage invoices. The OSRA will provide the FMC with the tools to enforce the Commission’s 3 year old Interpretive Rule on Detention and Demurrage Charges, setting forth the criteria as to what constitutes a ‘reasonable’ charge, and what does not. It could lead to increased number of containers and bookings available to US exporters. It will create a less intimidating means for importers and exporters to seek FMC review of disputed charges. While the carrier practices (the costly detention and demurrage) have been a particular motivation for retailers and other importers to lobby for OSRA passage, it is the exporters’ plight that seems to have captured policymakers’ hearts, as revealed by the statements of Senators, Representatives and Cabinet Secretaries.

 

West Coast ILWU-PMA Longshore Contract:  Top of mind for all exporters, importers, truckers, rail and ports is: “what happens when the current longshore contract expires June 30 – less than 3 months from now!” All desperately seek to avoid the disruption which has accompanied each contract expiration, forcing carriers to reroute ships, and causing exporters and importers to divert or otherwise replace cargo (at great expense). There is trepidation among retailers, agriculture exporters, manufacturers and all others, as June 30 approaches. The central issue between the terminals and the Ocean carriers? Automation of West Coast marine terminals. The terminal operators and carriers say it is essential if our US ports are to match the efficiency levels of Asa and European ports; ILWU fears massive job losses.

 

The contract has the White House’s attention as never before. The supply chain is stretched beyond its limit. Inflation is rampant, the costs associated with the supply chain crisis are blamed for much of the cost increases to consumers. Further disruption would push those costs “off the rails”. Just 5 months before the Mid-Term Congressional elections which will determine which party controls the Congressional agenda for the remainder of President Biden’s term.

 

The White House has appointed Secretary of Labor Marty Walsh to lead efforts to avoid disruption, as the ILWU and the employers (West Coast terminal operators and ocean carriers) argue over whether to permit automation of the West Coast terminals – the central issue in this year’s negotiations. Exporters, importers, manufacturers, agriculture, customs brokers and forwarders, truckers are all pressing the ILWU, the PMA and the WH to not all our West Coast ports to slow even further, even as many are starting to make plans for alternative gateways in the Gulf and EC, in case negotiations do not resolve issues, prior to the contract lapsing.

 

Once again, several Senators have “introduced the Prevent Labor Union Slowdowns (PLUS) Act to change the National Labor Relations Act to define a labor slowdown by maritime workers as an unfair labor practice. The bill also makes it an unfair labor practice for labor unions to block modernization efforts at ports and specifies that refusing to work automated vessels is an unfair labor practice.”  Obviously, the bill has been and will again be fiercely (and successfully) resisted by ILWU, ILA and all labor unions, as well as many in Congress and the Administration. There will also be attention focused on the ocean carriers’ unprecedented profits. So this could be a contentious negotiation All eyes remain on June 30, even while the Administration’s eyes are on looking ahead to the impact of these negotiations, on inflation – which will determine the outcome of the November midterms.

  

Customs & Border Protection can help or hinder trade, by their actions can increase costs of importing. US DOT Secretary Pete Buttegieg has often stated that it will take an “all of govt approach” to effectively address the supply chain crisis. So the question arises: if USDOT and USDA and FMC are engaged, what about the Federal agency that greats and processes every import brought into the US, by ship, by rail, by air? Is CBP part of the “whole of govt” that is addressing the supply chain crisis? What is it doing, what is its responsibility? Is CBP, at headquarters, at the Districts, at Centers of Excellence, and in the field considering the impact of their decisions and actions, on the supply chain? Or are they focused on enforcement, revenue, without regard or even awareness of their impact on the flow of commerce?

 

We are concerned about recent messaging from CBP HQ that suggests increased focus on enforcement, and less focus on facilitation.  Proposed mandates contained in “Customs in the 21st Century” are worrisome, even holding US licensed customs brokers to standards that are unrealistic, yet threaten the brokers with unprecedented exposure to penalties and other liabilities. In addition, actions in the field suggest that the “whole of govt” campaign against the supply chain crisis, has not filtered down to all in the field.

 

Some things aren’t changing. While Joe Biden and Donald Trump would never claim to have anything in common, they actually do in at least one area – trade policy. Two years into his Presidency, Joe Biden has made no effort to rescind the “Trump Tariffs on China”; so now they could be called the “Biden Tariffs on China”.  It is really no surprise, both Presidents have always talked about bringing manufacturing back to the US, and both have allied with and curried favor with labor unions.  With the supply chain crisis caused by the overwhelming volume of import cargo flooding into our ports, the calls to bring manufacturing “home”, as voiced by both Presidents (and thus avoid the need to ship everything across the seas, into the US), are only going to increase. On the other hand, those are increasing the cost of everything coming from China, a significant driver of inflation. Keeping the tariffs intact may curry favor with labor, doing so also fuels inflation, which could jeopardize the role and influence of the party with the closest relationship with labor.

 

Can ports expand to alleviate congestion and delay? On the East and Gulf coasts, the ports are expanding. The biggest ports are dramatically growing their footprint by adding large tracts of adjacent acreage. The somewhat smaller ports are doing the same, attracting significant addition cargo, and new vessel service by the world’s largest container carriers. Adding acreage is not an option for the West Coast container ports, there isn’t any adjacent land available. While inland load points are standard at most East and Gulf Coast ports, virtually none exist to serve West Coast ports. What’s a solution for the West Coast? One might be to build an entirely new container port, with deep draft, terminals that are minutes from open ocean. Can this happen, the only land is in very rural areas, lacking the major interstate highway access that serves all the major US container ports? One might use the spectacular growth of Prince Rupert as a model, as long as the rail service is sufficient. It is a concept being pursued by global investors at the Oregon Port of Coos Bay. Out of the box? Problematical? Ambitious? Certainly, but so was Prince Rupert, and other than automation, which is so controversial and opposed by the longshore union, there aren’t many options for growing port capacity on the West Coast.

 

 As if the world needs more uncertainty, Russia’s invasion of Ukraine appears to have united the world, at least that’s the impression if one watches US media outlets…but has it? Much is made of the fact that over 170 countries voted at the UN to sanction Russia;  it sounds significant, doesn’t it?  But less know is the fact that 41 countries did not, either against or abstained. And those 41 represent approximately 60 % of the world’s population, including economic powerhouses China and India. Gives one pause, doesn’t it?

 

The war may be in Ukraine, but the impact here in the US is tangible. It has created disruption in the global supply of oil, as many countries have raced to discontinue commercial relations. It has driven up the price of oil, and gasoline at the pump – the place where inflation becomes painfully apparent to all Americans. And Ukraine can no longer be a breadbasket to the world,  so global wheat prices are soaring, High gas prices have led to defeat for US Presidents in the past. President Biden is not the first to release Strategic Petroleum Reserves. It’s a “Hail Mary” to stem escalating prices at the pump, to moderate inflation, and to gain control over yet another (perhaps the greatest) threat to maintaining his Majority in Congress.

 

 

Peter

 

Peter Friedmann
OurManInDC@FederalRelations.com




 

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Peter Friedmann's View from Washington, DC  - March 2022

Bipartisan Pressure Building - Ocean Carriers and Inflation

 

Pressure is building to address the supply chain crisis generally, and ocean shipping in particular. Seems that everyone has seen the photos of ships lining up to berth at our ports. President Biden elevated the issue all the way into his State of the Union Address, while Congress is advancing bills with unprecedented speed, even as both Republicans and Democrats are calling for stronger legislation to curb ocean carrier practices. In fact it is probably the most biparetisan work being done in Washintion DC right now.

 

The White House has opined that ocean freight pricing is contributing to inflation: widely seen as a potential vulnerability to his party retaining Majority status in Congress, when voters head to the polls later this year. The President made this clear in his State of Union: "See what is happening with ocean carriers moving goods in and out of America?" Biden said. "During the pandemic, about half a dozen or less foreign-owned companies raised prices by as much as 1,000 percent and made record profits. Tonight, I am announcing a crackdown on companies overcharging American businesses and consumers." 

 

White House policy papers released the same day explain that this means that Dept of Justice lawyers are going to scrutinize carrier pricing and policies – to determine if manipulated jointly by the carriers, and possibly to take action.. Two days later, the Senate hearing on the Ocean Shipping Reform Act. 25 Senators, half Democrat, half Republican are co-sponsoring, up to 50 expected. The bill is being fast tracked, just as the House version of OSRA, which bypassed the usual time-honored Committee deliberation process, to be passed by the House twice, with overwhelming majority votes. 

 

Yet appears that even these bills are insufficient for some on Capitol Hill. Most dramatic, a new bipartisan bill would strip ocean carriers and marine terminals of the antitrust immunity they have enjoyed since 1916. If passed, the 12 major remaining global carriers would no longer be allowed to jointly agree on their practices, ports of call, no longer jointly discuss/set freight rates. 

 

One can see the political connection between ocean freight rates, and fears of inflation. Two Congressmen, including most notably Rep. Jim Clyburn (D-S.C.) - the individual widely seen as facilitating Joe Biden's key South Carolina Democratic Primary win -- are demanding that 3 of the world's largest container carriers  turn over internal pricing information.  They claim that carriers “may have engaged in predatory business practices during the pandemic, making scores of essential goods needlessly expensive for consumers and small businesses”. 

 

So, today the carriers find themselves fending off Congress, the White House and the  Federal Maritime Commission.  If there is a silver lining to all this activity it may be this: the political parties may have found something they agree on – all the legislation is bi-partisan, each is cosponsored by almost equal numbers of Democrats and Republicans.

 

Peter

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Peter Friedmann’s View from the Hill - January 2022

Hunting for Rats on Capitol Hill

 

Perhaps the most exciting thing happening in the Nation’s Capitol this week is taking place on Capitol Hill—but it’s not what you think. A Snowy Owl, a resident of Canada infrequently seen this far south, has taken up residence here in D.C. Birdwatchers are flocking to photograph it as it perches on Union Station, moving among monuments and neighborhoods on the Hill, and on the Capitol building itself. Why now? Ornithologists tell us this owl is drawn to our current really cold weather, and plentiful supply of a favorite prey: rats. As most cities, we have plenty of rats around here, leading to the question: why has our visitor chosen, of all places, to make itself at home on Capitol Hill?

 

Actually, there is more going on that bears watching this year, all of it in the shadow of the November “Midterms.” Those elections will determine which party is in the Majority and controls the agenda, hearings, and nominations for the following two years. If Democrats retain their Majority in both House and Senate, they will be able to confirm the President’s nominees for judgeships and advance the President’s agenda (or at least continue to try). If Republicans take the Majority, then the President’s agenda will come to a halt; if the Majority shifts in the Senate, no more of the President’s nominees will be confirmed. On the other hand, if Democrats increase their numbers in the Senate, a sole Senator (for instance, Joe Manchin) will no longer be able to stymie their agenda. If the Republicans take the House Majority, the “January 6 Committee” will cease to function.

 

In recent years, following every Presidential election the opposite party gains seats in Congress. Republicans advanced under Clinton, Democrats under Bush, Republicans under Obama, Democrats under Trump. Naturally, the Biden White House is concerned. So far, 26 Democratic members of Congress have announced their retirement, while 12 Republicans have done so.

 

As we watch developments unfold in the run-up to the Midterms, keep in mind three things I love about Capitol Hill and politics:

 

• First, things change on a dime. What is obvious one day is often ridiculous the next. Eleven months (the time left until the November elections) is a lifetime in Washington.

 

• Second, the “common wisdom” (CW) is frequently proved wrong. In March 2016, the CW said “no way” Donald Trump would win the Republican nomination, much less be elected President … until he was. In Spring 2020, CW said Joe Biden had no chance to win the Democratic nomination … until he did. And CW says that Congress can’t act quickly … but that’s not always true. While most major regulatory bills take years to pass, last year the House passed the complex only four months after introduction. Lightning fast!

 

• Third is the frequency of unintended consequences, facilitated by the shortsightedness of our elected representatives, the consequence of having to seek re-election every two, four, or six years. Today, their collective time horizon is just 11 months. In November they will learn whether the voters will let them keep their jobs.

 

With that as background, what are the hot legislative issues on Capitol Hill right now?

 

Build Back Better. Stymied by insufficient Democratic votes in the Senate to override Joe Manchin’s opposition. There seems to be a subtle nervousness, among both Democrats and Republicans, about spending so much money in the face of dramatically accelerating inflation and then having to defend that to voters 11 months from now.

 

Voting Rights Act. Here Democrats and Republicans agree, both see this bill (H.R. 4) as key to Democrats’ success at the polls in November. Democrats favor it, while Republicans oppose it and will use the tool of the filibuster to prevent a vote that the Majority Democratic party would win. Thus, the Senate’s Democratic Leader proposes changing Senate Rules to eliminate the filibuster, so the bill can pass on majority vote.

 

Please note, the following has nothing to do with the merits of the Voting Rights Act legislation; frankly, I am not sufficiently knowledgeable about the bill’s contents to have any position on it. My comments are solely about Senate procedure, the rule of unintended consequences, and the collective shortsightedness of Congress—which apply to so much that happens on Capitol Hill:

 

My favorite part of Washington politics—the rule of unintended consequences—comes into play here. This is an example of a Majority party seeking to eliminate the only tool available to the Minority party to prevent the Majority from enacting a particular law. But what happens if, at some future date, that Minority party becomes the new Majority party, as history has shown it surely will? The tables will be turned.

 

If Democrats eliminate the filibuster in order to pass the Voting Rights Act, then the filibuster will be unavailable in the future. Should Democrats seek to prevent Republicans (if and when they regain the Majority) from advancing some future Republican priority, the filibuster will be unavailable. They will be left muttering “seemed like a good idea at the time …”

 

Despite these and other important issues on legislators’ plates, a pressing question in D.C. remains: Will more people will be watching what goes on inside the Capitol building, or the visiting Snowy Owl on top of it? 

 

Peter Friedmann

OurManInDC@FederalRelations.com

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Peter Friedmann’s View from the Hill – December 2021

 

Supply Chain – Still Front and Center in 2022

 

Transportation and supply chain concerns were once reserved for the maritime trade press, but no longer. National media coverage is intense, and shifting from ships awaiting berths at terminals in San Pedro Bay and Savannah; to the role of this crisis as an engine of inflation. Here in Washington DC, inflation can be a paramount threat to anyone seeking reelection in the “midterms” in November (or to any President who depends upon his party retaining the Majority in the House or Senate, or both). One indicator of what we can expect in the coming year: a survey of the chiefs of staff of the 435 members of the House of Representatives revealed that fixing the supply chain will be the top legislative priority for more members of Congress than any other issue.

 

Apparently, this survey was accurate: in the closing weeks of the just-ended Session, the House passed the Ocean Shipping Reform Act of 2021 addressing supply chain issues, by a margin of 364 to 60. The substance of this bill aside, the politics were remarkable. First, while retailers, manufacturers, truckers, importers, agriculture all supported for this bill, key maritime stakeholders—ports, marine terminals, waterfront employers, and ocean carriers did not. In ‘normal’ times, that would have been sufficient to kill a maritime/port bill. This time, though, Congress advanced it; the President endorsed it. Second, despite toxic partisanship on Capitol Hill, this bill was an island of bipartisanship, from introduction through the final vote. And third, the House acted with unprecedented speed. The original Shipping Act of 1984 took three years to make its way through the legislative labyrinth. OSRA21 took four months. Of course, the Senate has yet to act, but as Senators represent similar constituents (consumers, farmers, retailers, manufacturers) it would be logical to expect similar results.

 

The Executive Branch has been engaged. The White House Supply Chain Task Force meets regularly and the Administration’s “Ports Czar” John Porcari is promoting supply chain improvements nationwide. Last week, the Secretaries of Transportation and Agriculture issued a joint missive pressing supply chain service providers to alleviate the crisis.

 

Will it work? It’s unclear. The benefits of the Administration’s pressure on ports to open West Coast marine terminal gates 24 hours a day (compared to the “normal” 8, and sometimes 12, hours) remain less discernable than hoped. But other initiatives are being pursued by the ports in collaboration (and funding) with the Executive Branch, or on their own: data sharing portals, container storage locations, “inland ports” or load points, etc.

 

The supply chain crisis and public agitation it is generating, remain a top priority here in DC. The people we elect are increasingly anxious and aggressive in pursuit of solutions.  2022 will again be a year when “supply chain” will be two words heard frequently on both ends of Pennsylvania Avenue….almost as much as “Omicron”.

 

Peter Friedmann

OurManInDC@FederalRelations.com

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