Washington Insider--Thursday

The New Sugar War

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

Senators Request GAO Study on Feasibility of Single Food Safety Agency

At the request of four Democratic U.S. senators, the Government Accountability Office will undertake a study of possible strategies for consolidating the U.S. food safety system in order to increase efficiencies, reduce costs and improve safety. The four –– Sens. Dick Durbin of Illinois, Dianne Feinstein of California, Richard Blumenthal of Connecticut and Kirsten Gillibrand of New York –– requested the review of a currently fragmented system where 15 different federal agencies enforce at least 30 food safety laws.

Proposals to improve food safety by combining regulatory and inspection authorities have been around more than a decade, including those made in several previous GAO studies. In fact, GAO has listed the issue on its High Risk Report since 2007, calling attention to inconsistent oversight, ineffective coordination and inefficient use of resources when it comes to federal food safety activities.

The first part of Newton's First Law of Motion posits that "an object at rest stays at rest." In other words, objects tend to keep on doing what they're doing. The same can be said of the U.S. food safety system, especially when so many varied interests –– both inside and outside government ––combine to preserve the status quo. And those who support a more efficient, effective and streamlined U.S. food safety authority face a formidable foe in the status quo, likely making progress painfully slow.

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U.S. Calls for WTO Arbitration on Mexico COOL Retaliation Request

The United States has requested arbitration regarding Mexico's attempts to seek $713 million in retaliation over the U.S. country of origin labeling (COOL) rules at the World Trade Organization. The action sets in motion a 60-day period for the two sides to attempt to reach an agreement. The United States previously requested arbitration on Canada's request for trade retaliation totaling around $2.5 billion in the same case.

The U.S. request for arbitration was not unexpected and is unlikely to change the timeline for trade retaliation by the two countries. If the WTO maintains its practice of combining the Canadian and Mexican COOL cases, it would not proceed on Canada's request until after a June 29 Dispute Settlement Board meeting requested by Mexico. That, in turn, would delay Canada's arbitration proceedings by around two weeks. If the WTO follows the timeline reached by the parties in 2013, the arbitration proceedings would likely finish at the end of August, although some observers see the final decision possibly slipping into September.

It remains to be seen whether Congress will simply repeal the U.S. COOL law (which the House already has voted to do and which would satisfy both Canada and Mexico) or choose to try yet again to write a labeling law that would comply with international trading rules. If Congress chooses the latter course, it is difficult to see circumstances that would lead to Canada and Mexico holding off permitted retaliation while that process plays out.

The Senate Agriculture Committee will hold a hearing on COOL today.

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Washington Insider: New Sugar War

U.S. sugar policy and politics have long been considered out of step with those of other commodities that emphasize competition in foreign markets. And, it has successfully resisted reforms imposed on other sectors.

Now, there are reports of extensive new efforts for change, though calls for reform are not new. The difference, the Washington Post says, is the inclusion of prominent conservative groups, along with the Corn Refiners Association which is investing heavily in an effort to unwind the lucrative breaks sugar enjoys.

The Corn Refiners, according to the Post, just hired 10 outside lobbyists for an aggressive, unorthodox attack on the federal sugar program. Their first target is the agriculture appropriations bill, now moving through a House committee.

The modern sugar program depends on an elaborate system of import quotas, price floors and taxpayer-backed, price support loans to prop up domestic growers. The industry is both very small and very powerful and includes beet farmers in the Upper Midwest and cane growers in the South. It has built a politically diverse and powerful coalition of supporters across party lines, from Sen. Marco Rubio, R-Fla., to Sen. Al Franken, D-Minn.

However, it is not just the Corn Refiners who are now working against big sugar, the Post says. A team of left and right interests, lobbyists and organizations are involved including environmentalists and consumer groups as well as trade associations for bakers and confectioners. John Bode, CEO of the Corn Refiners group is spearheading the effort.

A key objective is to make support for sugar reform a litmus test for conservative candidates, much as the Export-Import Bank has been in the first half of this year. Grover Norquist of Americans for Tax Reform told the Post that both issues are "cronyism in its undiluted, inexcusable majesty. Both have survived because they perfected the skills to control Congress for their own profit. If they go down, no political subsidy will be safe. The implication of these wins is bigger than the ban on earmarks." The conservative Club for Growth also praised the expanding campaign.

The refiners represent some of the world's biggest and most influential agriculture conglomerates — including Archer Daniels Midland and Cargill — that produce sweeteners, ethanol, corn oil, feed and other corn products. Bode, a former assistant secretary of agriculture during the Reagan and George H.W. Bush presidencies, called sugar "a mere footnote in American agriculture production, but they make more political contributions than the rest of agriculture combined. That's why they have defeated all attempts at reform since 1980."

Dan Holler, communications director for Heritage Action told the press that their odds of winning go up when they isolate sugar from the broader farm bill fight. Pointing to the failed 2013 proposals to change the programs, Holler said that going after sugar is "a whole lot further along" than the push to kill the Export-Import bank at this point in 2012.

Following the bitter farm bill fights of the past two years, observers have often commented on the relatively modest efforts made by budget hawks in those debates — and of sugar's ability to avoid reform in that process.

Still, it is not clear how the Corn Refiners will succeed in this new effort. Sugar probably is second only to cotton in defending its regional interests over long, long periods of time — and, the corn refiners bring at least a modest amount of negative consumer opinion to the fray.

While Bode's new supporters promise an interesting campaign, sugar has bipartisan, multi-regional support that has an incredible track record of fending off attacks from many directions. Certainly, this will be a fight producers should watch carefully as it merges, Washington Insider believes.


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(GH/CZ)