Washington Insider -- Friday

By DTN's Washington Insider

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

Keystone XL Pipeline Vote May Not Happen on Monday

The Senate debate on energy efficiency legislation and approving the Keystone XL pipeline is nearing an end, with only a last-minute compromise between Republicans and Democrats standing in the way of a final vote. And, of course, such a compromise remains highly unlikely.

Earlier this week, Senate Majority Leader Harry Reid, D-Nev., held out hope that a deal could be worked out before the next procedural vote on Monday. However, GOP senators remain upset due to a procedural device that Reid used to limit amendments on the measure, and observers predict that Republicans will conduct a filibuster that would prevent the measure from moving to the floor for a vote.

We will see on Monday whether either side will blink on the issue. But at this point it appears unlikely that the Senate will vote on the Keystone XL pipeline next week.

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U.S. Calls on Developing Countries to Limit Subsidies to Agriculture

In an odd turn of events, it now appears that emerging market countries are increasing their subsidies to agricultural producers at the same time that traditional subsidizers like the United States and European Union are cutting theirs. And this trend is drawing increased attention at the World Trade Organization.

Earlier this week, U.S. Trade Representative Michael Froman called on the largest emerging market countries to hold the line on their subsidies for agricultural producers. Speaking at a meeting of trade ministers in Paris, Froman pointed out that the largest emerging markets have not even responded calls for updated information on their subsidy spending that he said is necessary to get the stalled WTO Doha Round agriculture talks back on track.

The Cairns Group of agricultural exporting countries issued a paper in March that said total trade-distorting domestic support (TTDS) "increased exponentially" in China, from $320 million in 2001 to $13.9 billion in 2008, the last year for which figures are available. For India, TTDS increased from $8.2 billion to $16.4 billion over the same period.

The United States has supported its agricultural sector since the mid-1930s. It will be instructive to see whether emerging market governments that now have extra cash to spend on development projects choose not to support their farmers for at least a few years more.

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Washington Insider: Local Meat Inspection Takeover

If an expose by CNN is to be believed, USDA has a lot of explaining to do about the operation of its meat inspection services in a California plant.

In one of the largest bureaucratic understatements in recent memory, USDA is telling the press that it is investigating "personnel issues" at a California slaughterhouse. These "issues" actually involved shenanigans beyond belief and dangers to thousands of consumers.

Apparently the Rancho Feeding Corporation plant operated under federal inspection part of the time. But, part of the time, it also seems to have operated without the inspector's oversight and bought cancerous animals and processed and shipped dangerous meat. The plant's strange activities were revealed only after findings of contaminated meat triggered one of the biggest meat recalls in years.

Investigators have told the press that they believe that Rancho not only bought diseased dairy cows and processing them when government inspectors weren't there, but that once the cows were slaughtered, employees hid the warning signs of cancer by trimming off diseased parts, using a fake approval stamp or even replacing the heads of sick cows with ones from healthy animals. However, officials also say they are not certain which employees were involved.

How could this happen? How could such a two stage operation — part federally inspected and part not — actually operate? Nobody knows yet, for sure but plenty of people are deeply embarrassed and awaiting reports from federal investigators.

Then, the story gets even stranger. USDA is hinting that a government inspector and a Rancho foreman involved in an inappropriate romance cooked up the scheme and managed it. But, even if that is true, how could such an operation take place without others noticing, picking up a phone and calling a supervisor? Well, USDA is not talking, pending completion of its "thorough investigation into personnel issues related to this case."

Federal officials "familiar with the investigation" say that the U.S. attorney's office in San Francisco is looking into the relationship between the inspector and foreman, but so far officials haven't connected it to the plant's problems.

In the absence of almost any substantial information, politicians are holding forth, as you might imagine. For example, Democratic Rep. Rosa DeLauro of Connecticut, an important member of the House Appropriations Committee's Ag subcommittee fulminated to the press, calling CNN's report, "deeply troubling." "I am deeply concerned that the Food Safety Inspection Service failed to prevent this deception from happening," she said.

DeLauro's colleagues were equally indignant. Democratic Rep. Jared Huffman, whose district includes the now-defunct Rancho plant in California, says he wants answers. Instead, he says, he's gotten only "crickets" from the U.S. attorney's office, meaning silence.

So, nobody comes out of this mess clean — not USDA, not the inspectors and certainly not the politicians who have responsibility for USDA oversight. It seems clear that within the Rancho plant, a criminal conspiracy flourished that may have endangered thousands of consumers — and, that the inspectors didn't report it and USDA didn't find it.

What is clear that USDA has an enormous consumer relations problem with an investigation that needs to be reported carefully, fully and quickly if the damage to the agency's reputation is to be repaired, Washington Insider believes.

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