Washington Insider-- Monday

By DTN's Washington Insider

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

Grassley Bill Seeks USDA Inclusion in National Security Reviews

National security reviews of any major U.S. food and agriculture companies sought to be acquired by foreign investors would include USDA under a bill introduced by Sen. Chuck Grassley, R-Iowa.

Grassley introduced the Securing American Food Equity (SAFE) Act to permanently add USDA to the interagency Committee on Foreign Investment in the United States (CFIUS) review process. The SAFE Act would classify ag assets as critical national security infrastructure that CFIUS must consider before it approves the sale of any major U.S. food and ag companies.

A Grassley aide told Bloomberg BNA July 14 that it was still too early to comment on the bill's chances for advancing. Few lawmakers have had the chance to review the measure and it would be inappropriate to comment on who had said they would support it at this time, the aide said.

CFIUS reviews transactions that would result in the control of a U.S. business by a foreign person. The Treasury secretary chairs CFIUS and can add other agencies to the review process. CFIUS can recommend to the president that transactions be blocked if they are seen to pose a risk to national security.

Members of CFIUS include the heads on the Office of the U.S. Trade Representative and the departments of Commerce, State, Homeland Security, Justice, Energy and Defense. USDA isn't usually on the panel but can be asked to weigh in on a case-to-case basis.

"We're seeing more and more foreign investment in our agriculture assets, and it's something we need to be very aware of. The transactions that are occurring today will shape the food industry for decades to come. We need to be thinking strategically about who will control our food supply tomorrow," Grassley said in a July 12 press statement.

Several Senate Agriculture Committee members recently urged Treasury to include the Food and Drug Administration (FDA) and USDA in the review of a proposed $43 billion China National Chemical Corp. acquisition of Syngenta AG.

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USTR Says TTIP Could be 'Less Attractive' Due to Brexit

The UK leaving the European Union (EU) following the 'Brexit' vote could make the Transatlantic Trade and Investment Partnership (TTIP) less attractive to the U.S., according to comments by U.S. Trade Rep Michael Froman to a briefing with reporters hosted by the Christian Science Monitor.

Froman said July 14 that the U.S. certainly wants to continue TTIP negotiations with the EU, but the June 23 vote by the UK to leave the EU, known as Brexit, could lead to "adjustments of offers and expectations" by the U.S. for it to be able to close the negotiations.

"What we're wrestling with is that the UK is a very significant part of the EU," and Brexit could make TTIP "less attractive," Froman said during the briefing.

He noted that the UK is the fifth-largest economy in the world and the third-largest in the EU, representing 25% of government procurement opportunities in the EU, which will be "taken off the table" by Brexit. This would have an effect on what the U.S. offers and what the EU would have to offer in the negotiations, he said, without going into specifics of the confidential talks. Froman's office would not elaborate on his comments.

The UK also accounts for 45% of U.S. exports to the EU, he said: 20% of goods; 30% of services; 40% of aerospace; 26% of auto parts; and 48% of consumer goods, Froman detailed.

"We do want to maintain and deepen our relationship with the UK," he said in response to a question on a recently introduced congressional resolution for a U.S.-UK bilateral trade agreement.

Froman discussed the matter with his UK counterparts as recently as July 13. The UK is allowed to have trade discussions while being a member of the EU, but the UK is not yet permitted to sign new trade agreements, he said, adding that "where discussions end and negotiations begin is, I think, a gray area."

Froman said whether or not the UK will have sovereignty over tariffs once it leaves the EU depends on the structure of the exit agreement reached between UK and EU negotiators. Aside from a bilateral pact with the U.S., Froman said it is possible that the UK could rejoin the TTIP at some point in the future, or even the Trans-Pacific Partnership (TPP) agreement among the U.S. and 11 other Pacific Rim countries.

Froman said he is optimistic Congress will ratify TPP in 2016, noting, in a reference to the presidential election, "if it's not done this year, it's quite unclear when it would get done, given the broader political developments."

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Washington Insider: More Freedom for Layers

You may be forgiven for believing that the issue of cages for egg production was pretty well settled now that a number of large egg markets that have changed their standards but may not be the case. Over the weekend, the New York Times ran an article prominently in the business section that asserted the new layer "freedoms" in cage-free systems also introduce new health risks for hens, workers and consumers.

It cited a report by the Coalition for Sustainable Egg Supply, a group of animal welfare scientists, academics, egg farmers and big companies that focused on several troubling aspects of the newer aviary systems. The Times said that the group is backed both by both egg producers "which have little incentive to change their ways" and food companies that have pledged to go cage-free.

Perhaps most troubling, the report says, "hen mortality was much higher in the aviary system. When hens move around more freely, it is easier for them to spread germs. And hens in cage-free aviaries are also more aggressive than their cage-bound peers, pecking at one another and, in some instances, becoming cannibalistic."

In addition, it found that conditions for workers and the environment were worse. Ammonia concentrations, dust levels and particulate matter emissions were higher in aviaries than in conventional battery-cage systems.

The Times article takes a fairly broad view of the issue, and concludes, somewhat surprisingly, "In short, liberating hens from cages and holding them in aviaries doesn't necessarily make them, or the workers who handle them, any healthier." It says that "Big Food's embrace of cage-free eggs has been remarkably thorough and swift," but also notes, confusingly, a little later that "cage free eggs account for less than 10% of overall egg sales."

Overall, the Times thinks that the shift has been largely driven by "businesses, not by consumer tastes, or at least not yet," and that cage-free egg sales aren't growing especially fast. It says that the corporate world appears to be trying to get ahead of a problem before many consumers push for change. It also seems to say that the changes now underway are somehow not completely on the up and up.

Many large companies "would like consumers to believe that they developed a conscience overnight, and perhaps they have. More likely, they decided it was better to hop on the cage-free bandwagon now and accept extra costs, rather than be caught flat-footed later," the Times opines. "There's no doubt that some people, and a growing roster of companies, want eggs to come from hens that have been treated well. But it's not clear that the industry has figured out how to do that."

Then, it offers the somewhat surprising observation from an industry expert that the science "does not support the overall decisions that are being made in the marketplace."

"Producing billions of eggs a year is an inherently messy business," the Times notes. Just 200 or so farmers control almost all of the nearly 300 million egg-laying hens in the United States. Pasture-raising that many hens is not feasible, the Times says. And while cage-free aviaries may let hens stretch their wings, they're not necessarily better for the health of the animals, or the workers.

"If shoppers really want to buy eggs and have clear consciences, they may need to pay extra." Anything less than that means buying into an industrialized system of mass egg production, be it conventional or cage-free. It is clear that the Times believes the additional cost will be significant.

Clearly, the Times thinks that additional steps to guarantee consumers' clear consciences are highly important, and that may be so. However, at least a part of what has happened so far came because the old system was so unappetizing, and because a number of egg producers violated almost all social norms by selling contaminated eggs—and, were convicted of crimes. Certainly, it seems that many consumers are willing to pay something more to get rid of some of those problems.

Whether that instinct extends all the way to a "clear conscience" as defined by the Times remains to be seen. Eggs are already costing more, analysts say, but the fact that what has evolved is not nearly enough may come as unwelcome news to many consumers and some in the industry. So, the social evolution of the egg industry is a structural change producers should catch closely since it may have valuable lessons for other ag industries, Washington Insider believes.

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(GH/CZ)

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