Washington Insider -- Thursday

By DTN's Washington Insider

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

WTO Arbitration Panels to Address Wide Financial Gulf at COOL Retaliation Hearings

Canada and Mexico may be physically next to the United States, but they are light years apart from the United States when it comes to their estimates of the damages done to the Canadian and Mexican livestock sectors as a result of U.S. country of origin labeling (COOL) laws.

After winning a World Trade Organization case against U.S. COOL laws, Canada and Mexico determined that their cattle and hog producers lost $2.4 billion and $713 million, respectively, as a result of COOL. Those are the numbers that the two countries will take to their WTO arbitration hearings in mid-September.

For its part, the United States pegged losses at only $43.2 million (Canada) and $47.6 million (Mexico) last year due to COOL. These numbers represent only about 2% of the losses Canada says its livestock sector incurred, and about 7% of Mexico's claimed losses.

The three countries will present their findings and methodologies to the arbitration panel next month, after which it will be up to the WTO to determine the permitted level of retaliation for each country. However, it is likely that Congress will repeal the COOL law either before those hearings take place or shortly afterward.

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McConnell Says 'No More Government Shutdowns' on His Watch

In spite of an Inside-the-Beltway expectation that the continuing budget impasse in Congress will lead to a government shutdown this fall, Senate Majority Leader Mitch McConnell, R-Ky., says he remains determined to avoid that outcome. And he told reporters this week that the only way to avoid a shutdown is to sit down with Democrats and the White House to negotiate a funding plan. "We have divided government, and different parties control the Congress and White House and, at some point, we will negotiate the way forward," McConnell said.

So far, Congress has not approved even one annual appropriations bill, and it appears unlikely to do so before the new fiscal year begins Oct. 1. This is hardly unusual: the last time all appropriations bills were passed individually prior to the start of the fiscal year was 1994. In all but one of the intervening years, Congress was required to pass at least one continuing resolution (CR) to keep the government funded while budget negotiations remained underway.

The problem for congressional Republicans this year is that there will be pressure from the more conservative wing of the party to add policy riders to a proposed CR that Democrats will not support. In this scenario, if Republicans refuse to drop their policy riders, then Senate Democrats would filibuster the CR, funding would run out on Sept. 30 and the government would begin shutting down on Oct. 1. Majority Leader McConnell says this will not happen and it will be instructive to see how he maneuvers the Senate through the budget shoals of September.

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Washington Insider: Ongoing Environmental Wars

While the Congress has been more than willing to criticize the Environmental Protection Agency and cut its funding, environmental concerns continue to grab headlines. For example, another large algal bloom is emerging in Lake Erie and the "dead zone" in the Gulf of Mexico — an oxygen-starved area that cannot sustain fish or other marine life — is growing faster than expected.

The National Oceanic and Atmospheric Administration reported recently that the zone's growth was accelerated by heavy June rains throughout the Mississippi River watershed. It estimates the size of the zone now at about the size of Connecticut and Rhode Island combined.

The more immediate of these threats concerns Lake Erie led senators from three bordering states to request that Agriculture Secretary Tom Vilsack develop a comprehensive strategy to improve water quality within the basin.

Sens. Sherrod Brown, D-Ohio, Debbie Stabenow, D-Mich., and Joe Donnelly, D-Ind., all members of the Senate Ag Committee, wrote to urge the secretary to develop an algae prevention plan that would encourage a long-term solution for the problem in the Western Lake Erie Basin. And, there was no denying the urgency of the issue. Just a year ago, Toledo shut down its water system temporarily in response to excessive levels of the toxin microcystin that was caused by a huge blue-green algal bloom in Lake Erie.

The letter points out that algae growth is fed by nutrient runoff from farms and requests that USDA increase its efforts to "engage farmers and livestock producers" as partners in improving water quality. The 2014 farm bill provided support for identifying short- and long-term strategies for improving water quality in the basin. The senators also want a coordinated effort to insure that federal programs are "utilized effectively with robust participation from state and local government, agriculture leaders, and conservation partners."

The writers, all Democrats, think that Vilsack should "release" additional Environmental Quality Incentive Program funding to share costs for farmers who plant cover crops, helping to reduce potential runoff of nutrients such as nitrogen and phosphorus.

Experts say that this year's harmful algal bloom could be the second-largest ever for Lake Erie. At the same time, research by the University of Toledo's Stone Lab that focuses on the health of Lake Erie suggest that the requests for planning and larger cost share programs may be too little, too late. Without "significant reduction," agricultural runoff within the basin is sufficient to spawn a blue-green algae bloom virtually every year, the lab reports.

The fact is, microcystins are not very well understood and that even toxicity levels are vague. Sen. Rob Portman, R-Ohio, told the press that standards are needed to support enforcement procedures.

The magnitude of these environmental threats is huge. For example, Lake Erie's algae could affect some 11 million people in Indiana, Michigan and Ohio. Toledo has taken steps to enhance its water-filtration system and upgraded its toxic bacteria-detection network and the institute a water-quality watch but still the new bloom continues to threaten the region's drinking water.

City officials announced as recently as July 29 that tests at the water-intake crib contained twice as much microcystin bacteria as the previous two days — 1.0 parts per billion. This level of microcystin meets the World Health Organization drinking water concentration for the blue-green algae toxin that can cause gastrointestinal distress, liver damage and, at high concentrations, and even death, observers say.

Last year, after Toledo shut down its drinking water system briefly, there was a storm of protest and heated arguments over whom and what was to blame, but, clearly whatever steps were taken were not sufficient. The Brown, Stabenow and Donnelley letter seems to suggest bureaucratic tweaks, plans and program boosts, but toxic drinking water would appear to call for more immediate efforts.

This seems to be a war where ag is a very significant player and producers across the region need to consider how to more positively and actively help meet these national environmental needs than has been done to date, Washington Insider believes.

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(GH/CZ)

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