Washington Insider -- Thursday

Additional Support Proposed for Cotton

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

Roberts, Stabenow Differ on GMO Food Labeling Bill

The Senate Ag Committee has postponed the Feb. 25 markup session on a bill pushed by panel leader Pat Roberts, R-Kan., that would help food companies that do not want to comply with a scheduled July 1 Vermont state law designed to give consumers more information about GMO products.

The draft bill would invalidate state rules mandating labels for food containing genetically modified organisms. Instead, the bill proposes creating a voluntary federal labeling program. A notice from the panel said that the postponement was due to changes on the Senate floor schedule, and that a date for the session has not yet been scheduled.

But Sen. Debbie Stabenow, D-Mich., ranking Ag panel member, is pushing for a mandatory label and a two-year moratorium on state laws rather than permanent pre-emption.

Roberts said compromise is “doable,” but that he wants a law this year. Without federal action, “you are going to just have a hodgepodge where the food industry can’t sell their products,” Roberts said. Roberts said preemption of state food rules that impede commerce makes sense. “What is safe in one state certainly ought to be safe in another.

USDA Secretary Tom Vilsack said that Vermont’s law will “create chaotic circumstances” if it’s allowed to go into effect. “This needs to be fixed,” he said at a Feb. 24 hearing of the House Agriculture Committee.

Roberts said the Vermont law is biased against sugar beets, which would be disadvantaged against GMO-free cane sugar, and would hurt cattle ranchers who rely on corn for feed as well as soybean growers.

Interest-groups have released letters in support of Roberts’ bill, including the American Frozen Foods Institute, the American Feed Industry Association and the Grocery Manufacturers of America; opposition is coming from the Environmental Working Group and the Organic Consumers Association, among others.


Vilsack: Japan’s Hog Subsidies Must Comply With TPP

U.S. trade and agriculture officials have told their counterparts in Japan that if the Asian nation provides subsidies for its hog producers, the support must comply with the Trans-Pacific Partnership’s (TPP) goal of opening markets and reducing barriers.

“We are certainly sensitive to the concerns raised about Japan and the pork issue,” USDA Secretary Tom Vilsack said in a Feb, 23 conference call with American Farm Bureau Federation (AFBF) President Zippy Duvall. “We are encouraging Japan to take a look at this and to make decisions in a way that is consistent and not contrary to TPP.”

Vilsack said the Japanese know the U.S. is concerned about the hog subsidies. “We’ve been very specific about that. I can assure that the message has been conveyed,” Vilsack said, adding that he discussed the subsidies with the agricultural minister during a November 2015 visit to Japan. He said U.S. Trade Representative Michael Froman and chief agricultural negotiator Darci Vetter also have spoken with Japanese trade officials about the matter.

“There are ways this could be approached that would not create a serious problem with reference to TPP. Far be it from us to tell the Japanese exactly what to do; just that we need to make sure that as they act they are aware and appreciative of the need for consistency,” Vilsack added.

Duvall said Farm Bureau economists said that if the subsidies are trade-distorting, they “might therefore reduce the import needs and thus the U.S. gains. While a program of this type would limit the benefits, failure to enact the agreement would essentially concede the market to competitors such as Canada and possibly the European Union.” Overall, the AFBF economic report calls TPP a net win for agriculture although its benefits are uneven for specific farm goods.

Duvall detailed that U.S. beef and pork exports, particularly to Japan, are likely to increase, but US corn exports could decline as key member nations reduce their cattle herds and their need for corn-based animal feed. The report said the fall in corn exports could be offset by an increased domestic demand for animal feed to U.S. cattle raised and slaughtered for overseas sales. The model used in the AFBF report also projects increased demand from TPP nations for U.S. processed foods that include commodity crops used as ingredients.

The trade agreement would reduce or eliminate 18,000 tariffs on a variety of U.S. products, including agricultural crops and meats. Once fully implemented, TPP could raise livestock exports to member countries by $5.8 billion; $2.7 billion for crops, including fruits and vegetables; and net farm income by $4.4 billion, the AFBF report said.


Washington Insider: Additional Support Proposed for Cotton

There’s a modest kerfuffle in Washington now regarding a cotton industry request that USDA designate cottonseed as an oilseed so that it would become eligible for payments through farm bill programs.

The issue has been widely reported in both the urban and ag press. Secretary Tom Vilsack has decided that USDA lacks authority to grant the industry’s request. He is inviting Congress to use the appropriations process to provide better options for cotton growers.

Vilsack also commented on the issue in an op-ed. “Knowing that our tools to provide assistance have been severely limited, I have asked Congress to examine the appropriations language to see if they could grant USDA flexibility through legislative action,” he said. “We have made clear that we are not able to designate cotton as an ‘other oilseed’ under current authorities.”

The issue is not as straightforward as it might seem, observers say. Vilsack is worried that not only does he not have enough authority to approve the additional support, but that he needs political cover for the considerable cost involved—and for the trade implications of such a move. Clearly, the cost of a modified cottonseed safety net program has triggered alarms at the Office of Management & Budget.

Then, in a somewhat more recent development, a widely regarded former USDA Chief Economist, Dr. Joseph Glauber raised questions about the proposal. He was deeply involved in the Brazil cotton case, and in numerous trade negotiations when he was at USDA and is considered particularly well informed on such matters. He is now a senior research fellow at the International Food Policy Research Institute.

Glauber told the American Enterprise Institute in a recent session focused on the 2014 Farm Bill that an estimated $1 billion could be paid out annually if cottonseed becomes eligible for the safety net programs and that such a policy would put the program into the “amber box” payment category. That, he suggested, could prompt Brazil to pursue a new challenge at the WTO.

Glauber observed, “I don’t know how a WTO panel would rule on it, but that would be the vulnerability.” The Glauber argument has attracted an unusual amount of attention because the recent cotton case was such a significant loss for the United States.

The case dragged on for years before ending after the United States made a number of policy changes, and Brazil signed what the Congressional Research Service called a temporary Peace Clause with respect to any new WTO actions against US cotton support programs while the 2014 farm bill is in force. That agreement followed a 2010 temporary deal that had included large annual payments to avoid trade retaliation. And, it included a final payment of $300 million to the Brazil Cotton Institute with explicit use-of-fund conditions, CRS said.

So, it will be important to see what Congress decides to do with Vilsack’s request. The cotton industry has developed considerable Congressional enthusiasm for the additional support, but it clearly is encountering at least some opposition from the administration, as well as skepticism from other groups who are wary that this US policy shift could lead Brazil to retaliate, as it did in the earlier case that the United States lost. Now that the quiet, “discretionary” route through USDA seems closed--and, that unexpected criticism has emerged from a well-informed and respected source--it will be important for producers to watch closely whether Congress will proceed with the additional subsidy in the face of an expected Brazilian threat, or whether budget and policy concerns will derail the effort, Washington Insider believes.

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