Washington Insider -- Wednesday

By DTN's Washington Insider

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

Results of Recent European Parliament Elections Could Slow TTIP Talks

The recent European Parliament elections saw the rise of a number of parties critical of the proposed Transatlantic Trade and Investment Partnership (TTIP) free trade agreement, according to John Emerson, the U.S. ambassador to Germany.

"There is no question that the new parliament is somewhat less free-trade oriented than the current parliament," Emerson told the press. "That makes the job of obtaining ratification a little bit more challenging."

The new European Parliament will be seated later this year, and if Ambassador Emerson is correct in his assessment, his worry about ratifying a proposed agreement may be premature. Simply getting to a TTIP agreement now looks increasingly difficult and distant.

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Japan Looks Boost Competitiveness of Farm Sector

Japan's government is considering a proposal that would allow non-food companies to own nearly 50% stakes Japanese farming operations, almost double the current 25%. It also wants streamline approvals of land sales by individuals to farming corporations. The goal is to increase corporate participation in agriculture to boost the competitiveness of the nation's farms.

The average farm size in Japan is less than 10 acres, and low productivity has been a hallmark of the sector for decades. According to Hiroshi Moriyama, the head of the ruling party's farm-reform committee, the rule changes would increase the number of agricultural ventures between farmers and companies and reduce the power of JA-Zenchu, the nation's largest farm lobby and an opponent of the U.S.-led Trans-Pacific Partnership trade plan.

The plan being advanced by the government of Prime Minister Shinzo Abe is politically ambitious, given the power of the country's farmers and agricultural organizations. However, Abe has set a goal of greatly increasing the nation's exports of a number of key farm commodities, and it is highly unlikely that that goal can be met with the current organizational structure of its farms.

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Washington Insider: USAID Clunker

It is common for U.S. organizations from many state and federal agencies to organize formal and informal "show and tell" opportunities for firms to showcase their wares overseas — and, to work hard to build market links through technical assistance for buyers or U.S. products and materials.

Sometimes these work well, and sometimes they don't. For example, most of the commodity organizations have worked for decades to build test facilities and to demonstrate the returns from using high-quality U.S. feed products as local industries modernize to meet changing consumer needs. In some cases, these efforts have created whole new industries with strong U.S. links. Many of these have been paid for by U.S. producer check-off funds.

Against that background of steady effort, well organized and focused, comes a second kind that seems far less promising. Raj Shah, administrator of the U.S. Agency for International Development announced to the press that he is on his way to Odessa because he is sure that "from international crisis comes business opportunity" in Ukraine.

Shah gives every sign of being mobilized by an administration that believes the "Ukrainian problem" is a challenge and so has made it a "top U.S. foreign-policy priority — strengthening ties with the troubled nation and pulling its orbit westward." Bloomberg reporters and editors say that Shah has in mind rounding up major companies like Cargill Inc. and Bunge Ltd. who can "play a crucial role in developing a country with a struggling economy and a rich farm sector."

So, "we're bringing agricultural companies, ag traders, infrastructure investors together there from the region and from all over the world, especially from the United States," Shah said. "Now is the time, get in again, get in early."

Shah also says he thinks Ukraine, the breadbasket of the former Soviet Union, "has regained its status as a farm power in the decades since that nation's collapse." However, he notes that the world's third-biggest corn shipper and sixth-biggest wheat exporter has fallen on tougher times with the unrest, as southeast regions of the country fall into "a low-grade war between Ukraine's military and pro-Russia separatists."

Still, Shah thinks that last month's election of Petro Poroshenko as Ukraine's president offers a change to make long-needed reforms to civil society in the nation, an area where USAID intends to assist, Shah said. Unlike past years, "strong political motivation" now exists to make changes from the top, Shah said.

And unlike some development projects eyed skeptically in the U.S. for having less-clear ties to national interests, helping Ukraine is a clear fit with broader U.S. foreign policy goals, he said. Strengthening Ukraine's farm trade is a "critical national security priority," he said. He's from the government, it seems, and he's there to help.

Nobody is much surprised that USAID has activities underway in Ukraine. The agency has, for example, especially effective projects that focus on the never-centralized fruit and vegetable sectors to show the rest of agriculture how much better these firms are at expanding markets and investment than the old centralized operations.

The fact is, the main commodity sectors in Ukraine have been hard nuts to crack for outside investors, who have labored in that vineyard for many, many years. And, what will USAID do now that is new and different? We don't know and Shah is not really saying. This is leading to not-so-delicate suggestions that USAID "doesn't really have a clue what they will do that hasn't been done, probably many times!"

One international expert noted that Ukraine's problems are "systemic, endemic, structural and extend to corruption, lack of credit and capital, lack of extension services and access to technical assistance, lack of market facilities and expertise and commercial structure such as enforceable contracts, price reporting, standards, grades, norms and much more.

By western standards, the needs are "nothing fancy, just the basics that would attract investment and the advanced technology that brings with it. Given that, investment would be expected to follow and development to occur, but modestly and slowly," the observer, an old hand at working deals in Ukraine, said.

This impression, if it is as widespread as now appears, is bad news for Shah who seems to think USAID and the government see things no one else does and that all that is needed is for a "clarion call" and investors will flock to the scene. That is true, experts are saying, but will they stay and will then invest?

That may well be quite another matter requiring more skill, more time and more money. In the meantime, to be blunt about it, the Shah pitch to Bloomberg seems to be near the height of naiveté. Producers, no stranger to foreign investment and assistance, need to watch this effort carefully as it proceeds, Washington Insider believes.

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