Washington Insider-- Monday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

NPPC Concerned About Rules On Livestock Contracts

The National Pork Producers Council (NPPC) is expressing concern about USDA regulations on the buying and selling of livestock and poultry. USDA sent to the White House Office of Management and Budget (OMB) for review three rules, dubbed the "Farmer Fair Practices Rules," that would "help balance the relationships between livestock producers, swine production contract growers, and poultry growers and the packers, swine contractors, and live poultry dealers with whom they interact."

Issued by USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA) as an interim final rule and two proposed rules, the regulations are supposedly revisions of rules first proposed by GIPSA in 2010 to implement provisions Congress included in the 2008 Farm Bill.

The 2010 rules, however, went well beyond the congressional mandates of the Farm Bill and would have had a significant negative effect on the livestock industry, according to an analysis conducted by Informa Economics, which found they would have cost the U.S. pork industry more than $330 million annually. (An update of the analysis found that today it would cost the pork industry $420 million a year to comply with the rules.)

As a result, tens of thousands of comments, including 16,000 from pork producers, were filed in opposition to the 2010 rules, and Congress several times included riders in USDA's annual funding bill to prevent the agency from finalizing the regulations. But no rider was included in the fiscal 2016 agricultural funding bill, and USDA earlier this year indicate it would move forward with new rules.

"Pork producers are concerned that, like the 2010 proposed rules, the ones sent to OMB would have a negative effect on the pork industry, from producers to packers and ultimately consumers," said NPPC CEO Neil Dierks. "While the specifics of the actual rules are not yet clear, we're worried about their impact on the ability of producers to secure financing and to innovate and about them potentially leading to greater vertical integration without offering positive advantages to the industry and consumers."

Of particular concern, Dierks said, is the interim final rule on the "scope" of sections of the Packers and Stockyards Act (PSA) related to meat packers using "unfair, unjustly discriminatory or deceptive practices" and giving "undue or unreasonable preferences or advantages" to producers. While NPPC has yet to see the language of that rule, the 2010 version was overly broad, and most of the cost of complying with the 2010 rules would have come from that regulation.

USDA Secretary Tom Vilsack, in a letter sent to NPPC and to other agricultural organizations, said the interim final rule will "establish our interpretation of the [PSA] statute, which will then be entitled to judicial deference."

Senate Agriculture Chairman Pat Roberts, R-Kansas, said he was disappointed with USDA's advancement of GIPSA rules.

"While the impact of these rules is not fully known, if they are in any way similar to the 2010 GIPSA proposal, I have serious concerns that the U.S. livestock, poultry, and meat sectors will be tremendously burdened and experience irreparable harm during already difficult economic times," said Roberts.

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US to Challenge China at WTO on Raw Material Export Restrictions

A challenge to China's export restrictions on raw materials is being launched by the U.S. at the World Trade Organization (WTO).

The U.S. asked the WTO to launch dispute settlement proceedings on allegedly unfair Chinese export restraints, including export duties and quotas.

If the U.S. prevails in the case, it could reduce key input costs for various US manufacturers. The U.S. alleges that the restrictions violate the General Agreement on Tariffs and Trade (GATT) and the terms of China's agreement to join the WTO.

The total annual export value of the raw materials involved in the case exceeds $1.3 billion, according to the European Union, which is also challenging China's export restrictions.

This is the latest in a series of trade frictions between the U.S. and China that could loom large, especially if China responds to the trade cases by pursuing complaints on other products from the U.S.

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Washington Insider: New Climate Agreement

The Washington Post, among other media, is reporting this week on new agreements to regulate greenhouse gases. The Post says that "we learned last week that the Paris climate agreement will go into effect in November now that the European Union formally joined, tipping it past the threshold needed to become a reality."

In addition, this week, it points to another major international climate deal as some 200 countries adopted an amendment to the 1987 Montreal Protocol to phase down the use of hydrofluorocarbons (HFCs)which are "super-polluting, powerful greenhouse gases."

That deal boosted optimism among administration delegates and praise from President Obama. He noted that "in addition to today's amendment, countries last week crossed the threshold for the Paris Agreement to enter into force and reached a deal to constrain international aviation emissions," the president said. He argued that these steps show that "while diplomacy is never easy, we can work together to leave our children a planet that is safer, more prosperous, more secure, and more free than the one that was left for us."

The Post says that HFCs don't get much attention "but they matter. When the original Montreal Protocol phased out chlorofluorocarbons, which were destroying the planet's ozone layer, manufacturers had to find a replacement chemical to use as refrigerants and in other industrial applications. They turned to HFCs "which were much better for the ozone layer but, like CFCs, also are a strong global warming agent," a vastly more powerful than carbon dioxide. So one huge environmental crisis was, in effect, replaced by another problem.

That concern was being worsened by an expected "explosion" in air conditioning all around the world, especially in developing economies like India and which could result in so much HFC leakage that it could warm the global temperature by an additional half a degree Celsius by the end of the century and exceed warming thresholds outlined in the Paris agreement.

Under the Kigali Amendment approved early Saturday, the planned reduction of HFCs would have an impact similar to the removal of 80 billion tons of carbon dioxide from the atmosphere over the next 35 years, according to the Natural Resources Defense Council.

U.S. Secretary of State John Kerry, who was also on hand for the negotiations, said in a speech Friday that "it is not often you get a chance to have a .5-degree centigrade reduction by taking one single step together as countries, each doing different things perhaps at different times, but getting the job done."

Like many such deals, this agreement is somewhat messy. It allows developed and developing countries to have different "peak years" after which they must begin to bring HFC emissions down steadily. For developed nations like the United States, the "peak" date will be 2019, but for the majority of developing nations, it will be 2024, except for a few nations, including India and Pakistan, which will take a little longer, until 2028.

Some observers called that last aspect of the deal a "speed bump," but perhaps not a very serious one, the Post thinks. "We came to take a half a degree Celsius out of future warming, and we won about 90% of our climate prize," said Durwood Zaelke, head of the Institute for Governance & Sustainable Development.

"Every time we've done a past phase out, [the Protocol] has exceeded the dates, because the market moves faster," Zaelke said. Also, the U.S.-based Air-Conditioning, Heating, and Refrigeration Institute said his group is on board with the agreement. The group's president, Stephen Yurek, said "Our industry is hard at work doing the research on the HFC alternatives that will be used in the world's air conditioners, heat pumps and refrigeration equipment, and getting that right is certainly as important as reaching agreement."

The Post noted that in November when UN members gather in Marrakesh, Morocco for a key climate meeting, they will not only have the Paris agreement in force "far earlier than anyone initially expected, but will also be operating with a new HFC regime." The Post and the administration regard these developments as significant "international climate progress."

The diplomacy involved in bringing this diverse group of countries together on these agreements was difficult, and the implementation of the deals likely will be difficult, as well. However, it does seem to indicate progress among very different nations on a tough problem. It may indicate the potential for future progress on this and other global problems, Washington Insider believes.

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(GH/CZ)

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