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.

FSA Chief: Sequestration Level Seen at 6.8% Provided No Changes in Discretionary Caps

Farm program payments are likely to be reduced in October by 6.8% for Fiscal 2016 compared to 7.2% in Fiscal 2015, USDA officials told lawmakers in testimony this week.

Farm Service Agency Administrator Val Dolcini noted that payments under “all the programs we administer, with the exception of CRP (Conservation Reserve Program), the marketing loan gain programs and LDPs, will be affected by sequestration.”

In addition, Risk Management Agency Administrator Brandon Willis told lawmakers that most crop insurance programs for farmers will not be impacted. “The crop insurance program that producers deal with every day will not be impacted,” Willis stated. “Other minor programs would be, but what producers are used to in terms of crop insurance would not be.”

However, Senate Majority Leader Mitch McConnell, R-Ky., predicted on Sept. 16 that the spending debate likely will end in the sequester-level discretionary caps being raised. If so, the 6.8% tentative figure from USDA would be lowered or perhaps even eliminated depending on the changes to discretionary caps.

McConnell also said that discussions on a stopgap spending bill have been launched with House Republicans, and he vowed again that there will be no government shutdown.

McConnell said his party is being “forced” into budget negotiations by Senate Democrats, who for months have pushed for leaders to equally raise the top-line limits imposed on defense and nondefense programs under the 2011 Budget Control Act. “They were quite candid about the reason they did that — they wanted to force us to spend more on everything,” McConnell said, referring to Democrats. “And so we are inevitably going to end up in a negotiation that will crack the Budget Control Act once again.”

McConnell said the deficit reduction law initially did a good job of keeping government spending under control, but that there has been “a lot of pressure in Congress to spend more.”

“It is my hope that we will end up having a continuing resolution into later this year, which will give time for us to engage with the administration in determining how much we’re going to spend and where we’re going to spend it,” McConnell said. “Unfortunately, this is the inevitable result of Senate Democrats not allowing us to proceed to any of the appropriations bills.”

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COOL Arbitration Decision Expected Nov. 27

A three-member WTO arbitration panel will issue a final decision Nov. 27 on whether Canada and Mexico are justified in imposing $3.2 billion in annual Canada and Mexico retaliatory trade measures against US. The three-member panel tasked with evaluating the COOL arbitration case said it would decide on that date whether Canada and Mexico had overestimated the actual harm caused to their respective livestock industries.

During a two-day arbitration hearing in Geneva this week Canada and Mexico each claimed that their estimates were accurate, based on real figures and represented appropriate damages stemming from the US application of discriminatory COOL rules. Meanwhile, the US repeated its concern that the Canadian and Mexican calculations were inaccurate, omitted key variables and led to inflated results that were 35 times greater than the US estimate of $90.77 million in combined annual damages.

The chairman of the COOL arbitration panel, Christian Haberli, said the hearing helped clarify some of the aspects of the case though he acknowledged the complexity of the different methodologies used. “I am struck by the lack of integration of North American economies,” Haberli noted at the conclusion of the two-day hearing. “This does not make the task of the arbitrator easier.”

The arbitration panel will next submit any additional questions to the parties by Sept. 21. Written replies to those questions are due Oct. 1 and any further responses must be submitted by Oct. 8.

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Washington Insider: Can Food Safety be Cheaper?

The Food and Drug Administration, which is responsible for the safety of most foods, except for meats and poultry, has new authorities under the recent Food Safety Modernization Act.

The changes are posing something of a challenge to FDA as its officials attempt to convince the Congress to pay the freight to make the new authorities effective. Recently Acting FDA Commissioner Stephen Ostroff and Deputy Commissioner for Foods and Veterinary Medicine Michael Taylor appeared before the Senate Agriculture Appropriations Subcommittee to make their case.

“The request that we made for this fiscal year for FSMA implementation, from my perspective, is absolutely critical to its success,” Ostroff said. The president’s budget request for fiscal year 2016 asks for a $109.5-million increase for FDA. Earlier this summer, the House and Senate Appropriations Committees allocated $41.5-million and $45-million increases, respectively, for FDA’s food safety activities.

“We do know, without question, that unless we receive the total amount of the request, that something is going to have to give in some aspect of what we’re doing,” Ostroff said. The consequence would be “some incredibly difficult choices.”

Subcommittee Chairman Jerry Moran, R-Kansas, said that FSMA funding is a priority of his and that although the subcommittee hasn’t been able to meet the president’s budget request, if the amount of money they have to work with changes, “We’re interested in reviewing and reprioritizing based upon what the needs are of FDA and others.” Still, Moran, expressed strong interest in finding opportunities to reprioritize existing spending during the implementation of FSMA and repeatedly asked FDA officials whether “there are any savings to occur?”

This is a tough question because the new law requires new approaches, and it will likely require more resources for its increased number of inspections. “It doesn’t mean we can stop spending the money that’s needed to support that workforce,” Taylor said. “We have to, in fact, invest in it so it can work in this modern, prevention-oriented way, in a much more sophisticated regulatory framework. It’s redeployment as opposed to adding on resources on top of resources that are still deployed doing the old thing.”

Bill Marler, a well-known food safety attorney who appeared before Congressional committees as the new law was designed says that the “primary guiding principle of the new food program is to “apply the rigors of Hazard Analysis and Critical Control Points to the 80% of the food supply regulated by the US Food and Drug Administration.”

Marler sees the new law as recognition that the former policy, which depended on companies’ interest in protecting their brands would probably never have provided the necessary safety oversight. As a result, FDA’s new regulations will set standards for testing, water quality, and other good manufacturing practices. “These new regulations have been slow to roll out since the passage of FSMA in 2010,” Marler says, “but they are coming and will ultimately set the ground rules for what FDA will expect from food production, both here and abroad.”

Marler also points out that FDA now has new mandatory recall authority, along with mandatory registration, mandatory reporting and increased product testing, which will “add muscle to an agency without the necessary resources for enough inspections.”

Marler also notes yet another new FDA tool, “criminal sanctions” and points out that the scope of that provision will become even clearer on Sept. 21 when former Peanut Corporation of America CEO Stewart Parnell “of Salmonella outbreak fame” could be sentenced to spend the rest of his life in prison. He sees this as yet another tough FDA tool to focus attention on those who produce our food.

Marler says that, in his view, “a CEO and board embrace of FSMA makes sense. Playing by the rules and not poisoning customers is good for business…It is a good thing to avoid the recall costs and other attendant losses, including your personal freedom.”

So, FDA with its new tools may well cost significantly more to operate, as FDA officials and the administration budget request emphasize. And, it will certainly face much higher expectations. Appropriations committees almost never provide all the funding bureaucrats want, and this case may not be an exception. Still, the new law is providing seriously more responsibility and deserves serious consideration for increased funding, Washington Insider believes.

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