Doha - now more than ever?

Is the sliding global economy another reason to push for a world trade deal? Maybe, but lawmakers still say a bad agreement would be worse than no agreement.

Senators Tom Harkin (D-IA) and Saxby Chambliss (R-GA), Chairman and Ranking Member respectively of the Senate Committee on Agriculture, Nutrition and Forestry, today led a bipartisan group of 22 senators in urging a balanced agreement in the Doha Round agricultural trade negotiations in Geneva. In a letter to President Bush, the lawmakers said that if substantial improvements are not made to the July framework, any modalities agreement will not benefit U.S. agriculture, the economy and will not have Congressional support.

“We continue to support a successful completion of the Doha Round of World Trade Organization negotiations, begun in 2001, but only if it achieves the principal objectives of the United States and the ambitious goals of the original ministerial declaration for agriculture, which ‘aimed at substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support,’” wrote the lawmakers. “A sound and balanced agreement should contribute significantly to global economic recovery, growth, and development.”

The full text of the letter can be found here: http://harkin.senate.gov/documents/pdf/DecemberMinisterial.pdf

FAS reports of note

I was scanning the USDA FAS Web site for attache reports of note. Here are a couple you might want to check out:

India agricultural situation - Aug. 14 From the report:
Signaling its willingness to return to the negotiating table for a global trade deal with the WTO, India said a resumption of the Doha development Round talks now depends on WTO Director General Pascal Lamy getting similar response from the U.S.

Also...

Tesco is planning to develop a wholesale cash and carry business in India, with an initial investment of $120 million in the first two years.


Japan food trends - Aug. 14 From the report:

Chinese medicinal cuisine, “yakuzen”, offers health benefits and medicinal efficacies similar to traditional Chinese medicine (TCM)* except it is prepared by a chef. One company offers such cuisines developed by a nutritionist and pharmacologist. A menu offers anti-aging items such as drinking vinegar.

WTO - Never been so close to an agreement

This just slid across the inbox from the WTO. Sounds like hope for a WTO agreement is hard to kill. From the WTO:

Director-General Pascal Lamy, in his remarks at the opening of the “Global Partnership for Development” conference in New Delhi on 12 August 2008, said that at the end of the Geneva talks last month “members told us very clearly that the negotiations should not be abandoned ... too much has been achieved now to simply leave it aside”. This is what he said:

Excellencies, ladies and gentlemen, dear friends. I wish to start by congratulating Pradeep Mehta for his perfect sense of timing. It would be difficult to think of a better time for this Conference to take place — and I am particularly grateful to CUTS for the invitation and for opportunity to come to India at this stage.

Before entering into the subject of “Global Partnership for Development”, I wish to share with you what we were told by the WTO Members last month, two days after the ministers failed to reach an agreement on the Agricultural and industrial pillar of the Doha Round modalities: we have never been so close to an agreement. This is not rhetoric. This is the truth of where we stand: what Ministers and senior officials managed to achieve in the week they spent in Geneva late July is absolutely remarkable.

In fact, in purely technical terms, the issues already agreed by the group of Ministers with whom I was holding the most intensive consultations — and whose countries represent more than 80% of world trade — would be sufficient for the drafting of schedules of commitments in Agriculture and NAMA.

The political reality, nonetheless, is that we must wrap up a few remaining issues, and build consensus amongst all Members, before we can start the scheduling process, which would lead to the conclusion of the Round.

Among these few remaining issues, the most difficult one is the question of the Agricultural Special Safeguard Mechanism for developing countries. There are two diverging views on the so-called SSM, which proved to be impossible to reconcile during the meeting in July.

One view is that developing countries need to have a safety net against import surges of agricultural products, in order to be able to protect their farming systems, and that this safeguard should be easy to use.

Another view is that, like all safeguards in the GATT and WTO, the SSM should be subject to certain conditions and limitations, in order to ensure that that it does not hamper normal trade flows and that it should not be abused.

In spite of these differences, what Members told us very clearly during the plenary meetings held at the end of the talks, is that the negotiations should not be abandoned at this point. In the view of our Members, too much has been achieved now, to simply leave it aside.

If I say this, it is because I remain convinced that the WTO's mandate regarding the gradual removal of obstacles to trade, framed with multilateral trading rules, constitutes an essential contribution to development and to the improvement of collective well-being. Trade is a development tool. A successful conclusion of the Round, by addressing obstacles to trade which today penalize particularly developing countries, can be a powerful instrument to fight for development in the hands of countries.

Let me give you one figure: if the Round is successfully concluded, the world would reduce by half the amount of imports tariffs paid today. There would be savings in the order to US 150 billion in tariffs. Developing countries would contribute to 1/3 of the savings, and would benefit from 2/3 of it. Developed countries would contribute with 2/3 of the savings. So, at the end of the day, developing countries would benefit from 2/3 of the increased market access resulting from the Round, and developed countries would benefit 1/3. This is truly a development Round.

This is just a snapshot of what could be saved but it does not say how much more trade would grow with the reduction of barriers. A lot of studies have been published with result varying depending on the assumptions made.

It also does not tell us how the gains from trade would be shared within each country. This is in the hands of each government and depends largely on domestic policies which span beyond the WTO reach.

Let me give you another example: if the Round is concluded with success, the US could see the amount of trade distorting subsidies reduced to US 14.5 billion. True, this is more than the US currently spends. But if this ceiling is not set, the US will be able to spend much more than that in trade distorting subsidies as soon as food prices decline. In fact it has done so in 8 of the last 10 years. True also that this figure is still high and that many of you would think that the amount would be zero. But let me clear, without the Round the amount could reach US 48 billion.

To come back to the WTO, the basic underlying philosophy shared by all WTO members is that gradual market opening is good. At the same time, we know that market opening is not, in itself, sufficient to create and ensure development. I cannot overstress this point: opening up of trade will only deliver real benefits if it is accompanied by other policies, which allow for flexibility and job security: education policy, employment policy, research or innovation policy to name a few.

Some of these must be implemented at national level while others are effective only if applied internationally through the joint-action of specialized agencies. And this is where a discussion on Global Partnership comes in.

Coherence between the various international public policies — and they are eminently complementary — is absolutely essential.

Harnessing globalization and ensuring global partnerships for development presupposes balanced international cooperation across the board. The best trade policy cannot alone promote growth and development. Sound macro-economic policies must be supplemented by structural policies.

The WTO favours trade openness as playing a vital role in members' growth and development. But as I said, this is only part of the task. An open economy is not a panacea for all the challenges of development, neither is it necessarily easy to accomplish, nor in many circumstances can it be effective unless it is embedded in a supportive economic, social and political context and in a coherent multi-faceted policy framework. And this is also about international coherence.

To use a phrase crafted by our Appellate Body, the WTO does not live in “clinical isolation”. Global problems require global replies — and the WTO must be part of the process of finding such replies.

Let's take the example of the Food Price Crisis. The negotiations in the WTO on agriculture subsidies and market access are part of the medium and long term solution to the food shortage. We know that we need to increase agriculture production in developing countries and one of the reasons why their production and exports have been discouraged is because of trade distorting subsidies and high tariffs in rich countries. Trade can play the role of better connecting supply and demand. This is true locally, regionally and world wide.

In this field, as in many others, the WTO is in constant dialogue with other international organisations and indeed gives legal weight to norms developed by them, as evidenced on many occasions by decisions made under the WTO's Dispute Settlement Understanding.

In practice, there are day-to-day exchanges that take place amongst secretariats of international organizations — UNCTAD, FAO, UNEP, World Bank, IMF, regional development banks, World Customs Organisation, OECD etc. Cooperation in global economic policy-making goes much beyond the WTO's formal and specific arrangements.

Trying to find solutions through global partnerships also helps reinforce more global governance, which I believe is needed if we want the world we live in to be less violent, be it social, political, economic or environmental violence, and more peaceful, plentiful and prosperous. Stable and updated trade rules, and a strong WTO, reinforced by a successful conclusion of the DDA, would be a key step in that direction.

I know that CUTS share this view and acts, through its various programmes, as an interface between civil society, government and international organisations, which is why we are very glad to see its presence reinforced with the opening of a new office in Geneva.

In these turbulent times, at a moment when multilateralism and international cooperation are challenged on many fronts, we need more organisations like CUTS to help us all build the necessary bridges.

Doha we hardly knew ye

Everybody - myself included - likes to dog and nitpick world trade talks until they collapse. Now there is plenty of remorse about lost opportunities. Is it really over? Here is some reaction rolling in

From Sen. Tom Harkin:
"U.S. Trade Representative Schwab made a significant offer to reduce trade distorting agriculture payments and other countries should have been more reasonable."

American Farm Bureau Federation's Bob Stallman

"It is regrettable that India and China were not prepared to negotiate improvements in agricultural trade for themselves and other developing countries."

Food fears frustrate global trade

A disagreement pitting the U.S. against China and India over agricultural subsidies remains unresolved as the so-called Doha Round of World Trade Organization talks, which has been dragging on since 2001, has ended as a dud.


From a BBC report:


The main stumbling block was farm import rules, which allow countries to protect poor farmers by imposing a tariff on certain goods in the event of a drop in prices or a surge in imports. India, China and the US could not agree on the tariff threshold for such an event. Washington said that the "safeguard clause" protecting developing nations from unrestricted imports had been set too low.


An earlier Associated Press article detailed how rising food prices worldwide and concerns about food security, particularly among poor nations, were at issue:


China and India were not alone. Faced with rising food prices, a number of developing nations have sought wide loopholes against opening up their farm markets — either by blocking certain strategic products such as rice or grains or through rules that would allow them to raise tariffs sharply if faced with a sudden flood of imports. Farming in the developing world is "not like manufacturing," said Trade Minister Mari Pangestu of Indonesia, the world's fourth most populous country. "It's not a machine you can just turn on or off." Rich and poor countries have clashed repeatedly in the round that was once billed as a recipe for lifting millions of people out of poverty. The trade body is hoping for agreement this week on lowering farm subsidies and industrial tariffs, setting the stage for an overall trade accord by the end of the year. Signs of a breakthrough last Friday were followed by more entrenchment over the weekend."

Cotton, sugar and rice are among commodities China wants to protect with tariffs, no mention of fresh produce.


Finding common ground among nearly 140 WTO member nations is challenging even during times of stability and growth, such as the 1990s, when China's rise as a manufacturing and export power pulled globalization into the mainstream of economic and political debate. (U.S. produce firms in the apple or garlic trade surely remember well in the '90s when Chinese exports pulled down floor prices for their respective products.)


The past decade has seen the rise of resource nationalism, as energy prices have jumped nearly 15-fold since oil bottomed out at $10/barrel in the late '90s. Poorer nations have felt the bite of fuel costs more than developed nations, and no doubt have seen how Russia and Venezuela purged foreign control of their oil resources and boast cash reserves equivalent to hundreds of billions of dollars to show for it.

In a time of economic uncertainty worldwide, nations' inclination to circle the wagons to protect domestic markets is understandable.
But the advance of global trade is a marathon, not a sprint. As trade negotiators plan their next move, the smart money will bet on growing reliance among nations for products and services -- including food.

Fresh produce Monday headline roundup

Here is a collection of headlines gleaned from the Web. The first links to the Food Safe discussion group, which questions the food industry's role in watering down traceability provisions in the 2002 bioterrorism law. There is also a report on the WTO talks and the link to banana tariffs in the European Union, reports of some design changes to Fresh & Easy, and New York's financial downturn. Plus, coverage from Hawaii reveals the continuing decline of the Hawaiian pineapple industry.

From the Honolulu Advertiser:

ML&P's pineapple production will drop by half, from about 2,000 acres to around 1,000 acres. Of the 274 jobs being cut, 204 are in the company's pineapple division of 441 employees.
And if the drastic reduction doesn't turn around the money-losing operation, then what's left of pineapple production in Hawai'i could disappear.

Traceability and a strong FDA: Is the industry listening?

Tomato farmers see prime crop go to waste

Safe to eat?

Change to tariffs on bananas splits the EU

New York concerned recession is coming

Tesco to freshen its stores for Fresh & Easy

Country of origin labels coming for food

After Iowa raid, immigrants fuel labor inquiries

Aldi wins converts

Pineapple could vanish from Hawaii

Obesity risk: being chained to your desk

Illegal immigration trashing southern Arizona desert?

Europe can't get bananas right

It's a topic that's been in the news for years. In fact, in 1992, I wrote this piece for The Packer:

For Hans, Pedro and the Chiquita lady, the best thing that could happen to the post-1992 European banana trade probably won't.
European consumers, Latin American banana growers and multinational marketing companies all have reason to be disappointed with recent policy developments in the European Community -- a region that accounts for one-third of the world's banana imports.
Instead of fulfilling banana marketers' dreams of unrestricted banana imports into a unified post-1992 Europe, the European Community Commission in April revealed plans to expand the EC's policy of giving preferential treatment to former colonies and dependents in Africa and the Caribbean while restricting and taxing banana imports from so-called ``dollar banana'' countries in Latin America.
The repercussions mean Hans could pay more German marks per banana, Pedro could lose his farm in Costa Rica and the Chiquita lady could have more bananas on her hat than she cares to balance. Dole, Del Monte, Turbana and other banana companies will have their hands full as well.


Fast forward 16 years and here is the latest news from Europe on bananas from a Reuters report:

A long-running row over bananas that threatens to derail talks on a new global trade pact simmered on Tuesday with no immediate solution in sight.
The dispute, turning on the terms for European Union imports, pits producers from Latin American countries and the United States against other poor African, Caribbean and Pacific (ACP) countries and the EU.
"I hope we can have contact with some of the banana countries in the next 24 hours and see what prospects there are for working together," a European diplomat told Reuters.
But no formal negotiations were scheduled.
For some producers the row threatens a key economic sector.
They are prepared to block World Trade Organisation (WTO) talks this week seeking a breakthrough in the Doha negotiations for a global trade deal in order to press their demands, just as the banana dispute nearly scuppered Doha's launch in 2001.
"We're ready to walk away if there is nothing on bananas," said a diplomat from Ecuador, the world's top banana exporter.
The EU has lost nearly a dozen trade disputes over bananas. It has now changed its import rules and levies a tariff of 176 euros ($280) a tonne except for fruit from ACP countries, mainly former European colonies, which enjoy duty-free access.
COMPROMISE PROPOSED
Latin American growers say this is still discriminatory.
ACP countries point to the growing Latin American share of the European market and say they need more time to adjust.
WTO chief Pascal Lamy proposed a compromise for the EU and the Latin Americans under which the EU tariff would fall to 116 euros over seven years, with an initial cut of 26 euros.
A "peace clause" would also deem outstanding disputes settled and protect the EU from future challenges to the regime.
The EU, despite misgivings from ACP growers and the French Caribbean and Spanish Canary Islands, accepted the offer.
But the Latin Americans on Friday sought further talks, prompting EU officials to say they could go no further.
"The process is ongoing and (Lamy) is available to help facilitate an agreement in any way that he can," WTO spokesman Keith Rockwell told a news conference.
Failure to settle bananas separately would mean bringing the dispute into the already complex and shaky WTO talks.
Latin American exporters say including bananas in the WTO's negotiations on tropical products would result in much bigger tariff cuts than those accepted by the EU.
But the ACP countries could seek to counter any such move by putting bananas on a list of products they export and which would retain high import tariffs so as not to erode the European trade perks they have historically enjoyed.
The Latin Americans and ACP countries have been negotiating over 42 overlapping items on their lists, and the Latin Americans proposed letting the ACPs keep 30 products while they hold 12 on their list, said Ronald Saborio Soto, WTO ambassador for Costa Rica, which chairs the tropical products group.
But agreement will be impossible if both put bananas on their lists because of failure to resolve the dispute.
Colombia, keen to reach a free-trade agreement with the EU, has accepted Lamy's proposal. But other Latin Americans such as Ecuador and Costa Rica are proposing a tariff of 109 euros over 5 years with a downpayment of 35 euros.
"This is not a rejection of Lamy's proposal," Saborio told Reuters. "We can accept Lamy's architecture. We are only proposing some modest changes to the numbers."
Otherwise the Latin Americans could insist that bananas be treated like any other farm product in the Doha round, which would cut their tariff to 76 euros, or put it on the tropical products list -- "There's nothing more tropical than bananas" -- which would see the tariff plunge to 26 euros, he said.
Saborio said the Latin Americans could even agree to the peace clause for the EU -- a key concern of Brussels -- although that was still to be negotiated.
"The EC has indicated that they don't want to move. They say we can take what Pascal Lamy put on the table," Saborio said. "They may take that view but then we will have big trouble in other tropical products."

TK: Latin American producers have never received their due from Europe and it sounds like they are not going to take it any more, to the peril of global trade talks.

Argentina citrus semi annual 2008

All give and no take - that's Argentina's citrus trade outlook for 2008. Here is the link to the semi-annual report on Argentina citrus from the USDA FAS. No mention of the status of the quest by Argentina lemon exporters who are seeking access to the U.S. market. From the report summary:

Citrus production for calendar year (CY) 2008 will decrease nearly 21 percent to 2.47 million metric tons (MT) due to a frost in July 2007. High international prices are favoring exports over domestic consumption and processing, so exports are expected to fall only slightly. Imports continue to remain low as in previous years, with only seasonal purchases of grapefruit.


On trade....

CY 2008 citrus exports are forecast to decrease slightly relative to CY 2007 in all categories due to lower production. Despite the lower production, the packing houses will do their best to take advantage of the high international prices at expense of the processing sector and domestic consumption. Due to quality constraints, more fruit will be sent to the Russian Federation and other markets that accept a third quality standard.


TK: Another USDA FAS report on the Canadian agricultural situation covers possible changes to that country's origin labeling law, in addition to notes about ongoing WTO talks.

WTO: New life?

The all but forgotten WTO trade talks are making some credible news this week. A link from the World Trade Organization.

WTO agriculture negotiations resumed on Monday 26 May 2008 with a new round of talks on the latest revised draft “modalities” circulated a week earlier. In this meeting of the full membership, the talks’ chairperson, Ambassador Crawford Falconer of New Zealand, said a smaller group of 37 delegations representing all coalitions and major players would continue to negotiate during the week as members try to narrow their differences further.

In the next meeting of the full membership, on Friday 3O May, they would decide whether to continue into the week of 2 June, he said.

More on forbidden fruit

I covered the NYT Forbidden Fruit article in this post, and the opinion piece is being circulated with vigor on various blogs. Dan Owens, right in the Blog for Rural America also criticizes the f/v industry with gusto over the planting restriction on program crops.


Overall, this is an example of a classic flaw in market economies. When a firm or industry reaches a certain size, it begins to invest resources in preventing competition instead of furthering innovation. The fruit and vegetable industry is paying big bucks to lobbyists to keep the planting prohibition, thus discouraging competitor entry into their market (discouraging local foods is merely a side effect). The argument that fruits and vegetables "never got anything out of the farm bill" was always hogwash- they ensured almost no Midwesterners would ever compete with them. And now they're arguing for billions of dollars in government support in the next farm bill- but not to compensate for removing the planting prohibition. That's a deal they won't make. They want more money because the flood of fruit and vegetable from other countries has grown immensely since the last farm bill, and shows no sign of slowing down.

TK: Whether or not the planting restriction is in place in the next farm bill is an open question - the White House wants it out because of the WTO - and it is certainly open season on the f/v industry by at least some Midwest farm interests and also local food advocates. I don't recognize the f/v industry in the above paragraph. "Paying big bucks to lobbyists," looking for billions in support," "keeping out competition." I hope no self-respecting corn or cotton farmer getting a couple of hundred thousand dollars a year in government checks ever speaks those words about the f/v industry.

20 years and counting

New Zealand has had enough. As I was working on some details relating to the WTO panel appointed to hear Brazil and Canada's complaint against U.S. farm subsidies, I noted this item on the WTO Web site:

New Zealand requested a panel for the first time (WT/DS367/5) to review measures affecting market access of its apples into Australia. Australia did not agree to the panel. New Zealand said it had sought access for its apples into the Australian market since 1986. New Zealand considered that the measures prohibiting its apples into the Australian market were not scientifically justified and were inconsistent with the SPS Agreement. New Zealand regretted that the consultations held in October 2007 did not resolve the matter. Australia was disappointed that New Zealand had requested a panel and added that the bilateral channels were the most effective way to deal with such a matter. Australia said it remained open to further consultations and stated that the measures identified by New Zealand were science based and in full compliance with its WTO obligations.

TK: Australia's foot dragging on the importation of New Zealand apples is legendary, but of course the U.S. is no spring chicken when it comes to looking at access for Chinese apples, either.

Reaction from Down Under:

NZ continues apple battle with Australia

And from the land of kiwi:

Aussies block WTO probe into New Zealand apple ban

California and NAFTA - Myth and Reality

Roberta Cook of UC Davis had this powerpoint presentation from 2005 about "NAFTA at 11" that offers some great insights about factors influencing trade relationships.If you haven't voted in the Fresh Talk NAFTA poll yet, this may swing your vote to the option of "positive impact." She makes these summary points:

Exchange rates and the WTO have influenced California ag much more than NAFTA.
Mexico’s decision to join the GATT in 1986 had a greater impact on reducing trade barriers in the Mexican market.
Prior to joining GATT Mexico had high average tariff rates and major nontariff barriers in the form of licensing restrictions.
Mexico made a decision to “unilaterally disarm” in ’86, partly as an internal strategy for controlling food costs and inflation.
Mexican fruit and veg average tariffs were already reduced from around 50% to a max of 20% prior to NAFTA.
Licensing restrictions were removed on most ag products, including fruit/vegs. This began to open Mexico to US exports prior to NAFTA. (ag licenses: 320 in ’85, 57 in ’90)
The US trade-weighted average tariff rate for Mexican fresh vegetable imports was 7% prior to NAFTA. There were only a few fruits and vegetables facing high ad valorem tariff rates (like 25% on asparagus, 35% on melons.) Grapes were already duty free (big growth in Sonoran grape exports since NAFTA not due to improved market access).
Arguably, the US had the most to gain from improved market access since Mexico had higher average tariffs.

TK: Cook provides her take on myths and realities:

Myths and Realities
Myth:
It is an advantage to be underdeveloped.
Reality:
US ag benefits from:
enormous support in RD&D from govt. institutions such as USDA and from the land grant university system.
enormous public sector investments in transportation and infrastructure of many types, including water storage and distribution.
extensive private sector research targeting specific crop needs.
a transparent and relatively responsive govt.
unimpeded access to the largest consumer market in the world and usually a transportation cost advantage.
Myths and Realities
Myth:
Because fruit and vegetable production is labor-intensive, countries with low wage rates naturally have the advantage.
Reality:
Fruit and vegetable production is capital, technology, management, research, marketing, and infrastructure intensive.
Mexico’s advantage is generally seasonal (climatic advantage) rather than a cost advantage.
Exceptions: crops requiring bunching at harvest – green onions, radishes, asparagus, give Mexico a cost advantage; and avocados.
Myth:
A given wage rate differential is equivalent to the same differential in labor costs.
Ag labor is abundant everywhere in Mexico.
Mexican growers provide few social services to workers.
Reality:
Labor is generally less well trained and efficient, offsetting some of the wage rate advantage.
Certain areas also experience labor shortages.
Labor management can be challenging in Mexico due to social and policy issues.
Common to provide housing and schools.

Myth:
Food safety and pesticide practices are substandard in Mexico.
Reality:
Important to distinguish between domestically-oriented growers and export growers.
Although it depends on the grower/exporter, practices have improved markedly for exporters and many now are third party certified and implementing GAPS.
It is possible to find operations in Mexico with superior food safety controls.

NAFTA ever after

I asked the question in this week's Fresh Talk poll, "Has NAFTA been good for the U.S. produce industry?" I thought I would troll the Web for a few links about NAFTA, and this link from a left-leaning think tank analyzes the impact of NAFTA on Mexican farmers. Obviously this has not been written by the USDA, but it does point out some of the challenges faced by Mexican grain producers. After discussing massive farm subsidies, the author Laura Carlsen says:

What does this do to the Mexican market? An IATP analysis reveals that in 2001 corn cost an average of $3.41 a bushel to produce in the United States and sold on the international market for $2.28 a bushel. Food First, a California-based policy institute, reports that California rice costs between $700 and $800 an acre to produce but received $650 an acre on the world market and that U.S. wheat is exported at 46% below cost.

There's a name for this—dumping—and it is supposedly prohibited under both NAFTA and World Trade Organization (WTO) rules. According to the above calculations, the over five million tons of U.S. corn sold in Mexico in 2001 carried a dumping margin of 25%. Analyses from past years show dumping margins of over 30%. Dumped U.S. surpluses erode producer prices; the value of Mexican corn dropped 64% between 1985 (when Mexico signed the General Agreement on Tariffs and Trade—GATT) and 1999. They also leave Mexican producers without a market. The United Nations Development Program estimates that worldwide U.S farm subsidies cost poor countries about $50 billion a year in lost agricultural exports.

Mexican farmers cannot and should not be forced to compete with grains sold at less than U.S. production costs. They lack credit, economy of scale, fertilizers, chemical weed and pest controls, farm equipment, and most importantly, significant government supports. As U.S. farm support increases, Mexican government programs have followed International Monetary Fund (IMF) prescriptions and all but disappeared. During the period from 1990 to 1994, Mexican farmers received 33.2% of their yearly income from the government. For 1995 to 2001, that figure had dropped to 13.2%.

In addition to subsidized prices, cheap and ready access to U.S. financing has played a key role in the glut of grain imports to Mexico, which has devastated domestic prices. The Center for the Study of Rural Change in Mexico (CECCAM) reports that an overriding incentive for importers has been financial. U.S. exporters and government export-financing organisms, particularly the Commodity Credit Corporation (CCC), offer low-cost loans to Mexican importers buying U.S. grains. Although rates have decreased in recent years, prevailing credit rates in Mexico in the mid-1990s were over 30%, while the CCC offered between 7-8%. For Mexico-based import companies, the CCC's sweetheart rates were like rain in a drought.

Mexican Agriculture after
14 Years of NAFTA

Importing food, exporting farmers ...

• Every hour, Mexico receives $1.5 million dollars worth of food imports
• In that same one-hour period, 30 farmers leave Mexico for the United States
• 40% of Mexicans' food is imported
• Over 1.5 million rural jobs were lost in 12 years

A dying countryside...

• Agriculture's share of GDP dropped from 10% to 3.4% between 1981 and 2006
• Rural population dropped from 40% to 30% in that period
• 388 municipalities have become ghost towns due to out-migration
• Genetically modified corn has contaminated native strains
• Corn production for ethanol threatens to reduce corn for human consumption and raise consumer prices for Mexico's main staple food
• Arable land is increasingly dedicated to illegal drug production
• Erosion renders useless thousands of acres of productive land a year

Statement of Administration Policy

Here is the link to the White House statement of Administration Policy on farm bill programs. It's a triple whammy: the f/v planting restriction, f/v program and the transfer of border inspectors back to USDA all get a thumbs down from the White House. Here are some highlights ( or low lights), but note the difference between "oppose" and "strongly oppose.":


At a time when net farm income is projected to increase by over $28 billion in one year, it is irresponsible to further increase commodity price supports that make payment programs more market-distorting. In addition, it is alarming that the Senate farm bill shifts the timing of farm payments in a fashion that does not allow for the proper accounting of $9.8 billion in actual government outlays. The Administration hopes these concerns can be addressed by continuing to work with Congress. However, if the bill were presented to the President in its current form, his senior advisors would recommend that he veto the bill.

The final farm bill must:

• better reflect the program reforms, and not exceed the spending levels, as proposed in Administration’s farm bill legislative proposal in connection with the President’s fiscal year 2008 budget submission;
• include reforms in marketing loan benefits for all years of the farm bill to address the "pick your price" issue;
• remove the provisions that make it more difficult to defend farm programs against trade challenges and distort our ability to advance the goal of free trade in international markets;
• eliminate timing shifts and unrealistic program sunsets that mask $22 billion in hidden costs to the taxpayer; and
• eliminate tax increases.

On items of interest to f/v interests:

The Administration also supports fully lifting the fruit, vegetable, and wild rice planting restrictions to eliminate any question that direct payments are "green box" in light of the WTO rulings in the Cotton dispute with Brazil.

The Administration opposes the Committee’s expansion of the Fruit and Vegetable Program to all States, which would increase direct spending by nearly $1 billion over five years. The Administration’s farm bill proposal increases the availability of fresh fruits and vegetables through the school meal programs, which make better use of existing purchase authorities and existing programs.

Potential Floor Amendments
The Administration understands that amendments may be offered to facilitate trade with the Cuban regime, raise the wage cost of agriculture-related construction, such as ethanol facilities, and disrupt Federal organizations that conduct agricultural inspections. The President’s senior advisors would recommend that he veto the bill if it contains any such amendments. Therefore the Administration strongly opposes any amendment that:
• would loosen current sanctions and restrictions against Cuba. The Administration believes that it is critical to maintain sanctions and restrictions to deny economic resources to the Castro regime. Lifting the sanctions now, or limiting our ability to enforce them, would provide assistance to a repressive regime at the expense of the Cuban people.
• attempts to include an expansion of the Davis-Bacon provisions. An expansion is contrary to the Administration’s long-standing policy of opposing any statutory attempt to expand or contract the applicability of Davis-Bacon Act prevailing wage requirements.
• would transfer the Agricultural Inspection Function from the Department of Homeland Security (DHS) to USDA. Such a transfer of thousands of employees would divert attention from the real mission to prevent the entry of harmful plant and animal pests, disease, and threats to our agricultural resources and food supply. Furthermore, a transfer would degrade enforcement and seriously undermine the integrated border enforcement capabilities created with the formation of DHS. A transfer would also delay efforts to identify needed improvements in agricultural inspection, and set the program back for several years while another readjustment occurs for both USDA and DHS.
In addition, the Administration would strongly oppose any amendment that would appear to alter the roles and responsibilities of USDA, DHS and other departments defined in Homeland Security Presidential Directives (HSPD) 5, 7, 8, 9 and 10, and the Homeland Security Act of 2002.

Under the limit

U.S. agricultural support payments are well below the World Trade Organization limits for trade distorting subsidies, the USDA is reporting.

From a news release:

WASHINGTON, October 4, 2007 - Acting Agriculture Secretary Chuck Conner today announced that the United States has submitted its domestic support notifications to the World Trade Organization (WTO) for the years of 2002-2005.
"The United States has an obligation to notify the WTO about its agricultural domestic subsidies," said Conner. "In our notification, we have informed the WTO that U.S. domestic trade-distorting support level remains below our $19.1 billion ceiling, demonstrating that the United States is in full compliance with our WTO commitments. We look forward to continuing to work with our WTO trading partners in broadening market access for all member nations."
The $19.1 billion ceiling applies to amber box support, which is a classification of payments in the WTO. Amber box support is one part of the overall trade distorting subsidy level. The current ceiling for overall trade distorting support in the U.S. is $48 billion under WTO commitments.
Amber box support includes payments linked to production or prices, and other trade-distorting support that became subject to negotiated limits under the Uruguay Round Agriculture Agreement.
Support that is classified as green box in the WTO includes major outlays for domestic food assistance, conservation programs and research. Green box support is provided under programs that are not subject to WTO limits because they do not distort trade, or do so only minimally.
The United States last notified the WTO of its domestic support levels in March 2004 for the years 2000-2001. Below is a summary of the newly reported U.S. domestic support levels.
($US billion)
Item 2002 2003 2004 2005
Amber Box $9.6 $6.9 $11.6 $12.9
Amber Box Limit (WTO ceiling) $19.1 $19.1 $19.1 $19.1
Green box - No Limit $58.3 $64.1 $67.4 $71.8

Johanns leaving? Conner in?

Agriculture Secretary Mike Johanns declined to say Sept. 13 at the WPPC whether he would run for the Senate seat vacated by Chuck Hagel of Nebraska. However, the AP is reporting that Johanns may make the announcement he will quit his USDA post to run for the Senate as early as Monday. I put a call in to Johanns spokeswoman Terri Teuber but she did not pick up this afternoon.

Johanns will go down as one of the most produce-friendly heads of the USDA ever. It is regrettable he apparently won't see through the publishing of final rule for the agency's WIC program that will add vouchers for fruits and vegetables to food packages. He also won't be on hand, at least in official capacity, for the signing of the 2007 farm bill Here is the audio link to his recent Sept. 13 speech at the WPPC.

One Washington lobbyist said Johanns was strongly encouraged to run because he is the strongest Republican in the field,. Since Republicans already look like they are in trouble in the 2008 elections, Johanns entry gives them a better position for the Hagel seat. While some may criticize him for not seeing the farm bill through, Johanns has to quit now and start raising money for the race, the lobbyist sai.

The lobbyist said there will be a short term extension of the farm bill this year that will be a part of a continuing resolution. That won't be a problem, but any long term extension of the farm bill would be a setback.

Deputy Secretary of Agriculture Chuck Conner is expected to become acting Secretary of Agriculture when Johanns resigns, the lobbyist speculated. He may serve out the term in acting capacity. Conner was the White House point man on the 2002 farm bill, and has detractors among Southern senators because of the Administration's push for subsidy limitations that impact cotton and rice producers. Conner has been no great friend of specialty crops in the past, but he will likely try to build on the foundation that Johanns has laid.
Conner does appreciate the fact that the assistance that specialty crop interests are seeking is WTO green box compliant and trade friendly.

Here is the bio for Conner:

Charles F. Conner was sworn in as Deputy Secretary of Agriculture on May 2, 2005, by Agriculture Secretary Mike Johanns.Prior to his tenure at the U.S. Department of Agriculture, Mr. Conner served on the National Economic Council beginning in November 2001 as a Special Assistant to the President for Agricultural Trade and Food Assistance, focusing primarily on Farm Bill issues.From 1997 to 2001, Mr. Conner was President of the Corn Refiners Association, Inc., a national trade association representing the corn refining industry. Prior to his tenure with the Corn Refiners Association, Conner held several staff positions with the Senate Committee on Agriculture, Nutrition, and Forestry. Mr. Conner served as both the Majority Staff Director (1995-1997) and the Minority Staff Director (1987-1995), of the Senate Agriculture, Nutrition, and Forestry Committee. He also worked as a Professional Staff Member for the Committee from 1985 to 1987. Prior to joining the Senate Committee in Agriculture, Nutrition, and Forestry, Conner worked as an Agricultural Legislative Assistant to Senator Richard G. Lugar.Mr. Conner grew up on a family farm in Benton County, Indiana, which remains in the family and is operated by his older brother, Mike.Mr. Conner received a Bachelor of Science degree in Agricultural Economics from Purdue University in 1980. He is married and has four children..

Headline roundup 8/15

A few headlines this morning.....



Apple dispute on the brink of WTO New Zealand's 45 year quest to get apples into Australia is still being held up, and kiwis are looking to the WTO for a solution.

To get this financial carrot, eat your vegetables A health care insurer offers to lower deductibles in return for a healthy lifestyle. Sounds like a natural fit for a More Matters tie-in. From the story:
Vital Measures, the new program offered by UnitedHealthcare, lets participating employees earn credits to "buy down" the amount of their annual health plan deductible. Dollar amounts vary by employer, but in a typical case an employee whose health plan has a $2,500 deductible could earn up to four credits worth $500 each by maintaining a healthy weight, keeping blood pressure and LDL ("bad") cholesterol levels within target ranges, and not smoking. If the employee meets all four benchmarks, his or her out-of-pocket deductible cost could drop to just $500.


Best antioxidants in the produce aisle, nutritionists say Great coverage informing consumers of anti-oxidant benefits of f/v. A question - why don't we see more advertising of this benefit in the produce department? Arizona Republic story states:

Take a stroll down the aisles of your local grocery store and the word "antioxidant" pops out at you everywhere - teas, juices, chocolates, energy bars. All bill themselves as providing large doses of these entities that - if you believe the hype - might do everything from cure cancer to make you 10 times smarter.But what's the reality?Nutritionists and dietitians say you shouldn't try to buy your antioxidants in a bottle or box. Instead, you should embrace antioxidants in their natural state.
Experts recommend that you head over to the produce aisle and stock up on the original antioxidant heavy hitters, which include fresh berries, spinach, red peppers and a host of other fruits and vegetables. Some teas, such as green, red and white, also can deliver powerful antioxidant punches.Rather than worrying about swallowing a supplement each day or gobbling down that power bar with antioxidants, concentrate on getting those nine servings of fruits and vegetables that government guidelines recommend. Even clocking in at the previous recommendation of five servings a day would likely suffice, experts say.


Discovery tries to limit junk food marketing Discovery Communications announced that it would not allow the characters of its popular Discovery Kids channel to be associated with junk food. The decision is part of the network's battle against childhood obesity, according to to a press release. The characters of the kid-friendly programming can only be used in connection with healthy food. Birthday cake and other special-occasion sweets are the only exceptions.

Spotlight shifts to U.S. Senate Jerry Hagstrom reviews the dynamics of the farm bill debate in the Senate, with farm program states uneasy with the lack of clarity from Sen. Tom Harkin so far on the commodity title of the farm bill.

Peterson's victory

Here is the link to the audio file of Chairman Peterson's remarks and a Q and A in a teleconference with reporters on Friday. He is a tired but victorious chairman. I offer the complete hour long plus session on the blog with the advice that only farm bill junkies should download.Peterson is asked about if anything could have been done to prevent the squabble with Republicans over the tax issue. He is also asked about the WTO cotton case, the case for the transfer of border inspectors from the DHS to the USDA and a myriad of other issues. He was commended for his accessibility throughout the farm bill process, and in that respect I heartily concur. From the speedy manner that Peterson deal with markup to his availability for a weekly teleconference, Peterson has set the bar high for the Senate Agriculture Committee. He was asked during the press conference if the House bill could serve as the standard for the Senate's consideration. "Far be it from me to tell the U.S. Senate what to do.".... and then he proceeded to say that yes, the House farm bill has broad support from farm organizations and has found a way to satisfy a broad array of interests. Particularly on the issue of COOL, Peterson said there is not much more that the Senate could do to address the issue than what the House has done.

Some other coverage of Peterson this weekend:

Peterson on Farm Bill Passage

Harkin thinks Senate can improve on House farm bill

House passes new farm bill

WTO Cotton case : a fly in the ointment?

The first question asked of House Agriculture Committee Chairman Collin Peterson today in a teleconference was not about the farm bill, but the news of the WTO case on U.S. cotton subsidies.

From the AP:

The World Trade Organization largely ruled against the United States in an interim decision that it has failed to scrap a series of illegal subsidies paid out to American cotton growers, U.S. and Brazilian trade officials said Friday.WTO panels rarely change their findings between preliminary and final rulings, and the apparent result is a major victory for Brazil's cotton industry and West African countries that have claimed to have been harmed by the American payments.The interim ruling was handed out confidentially to the parties late Friday. A final verdict, expected in September, could open the door for billions of dollars (euros) worth of Brazilian trade sanctions against the United States.

TK: Peterson was not phased by this report when raised by Chuck Abbott of Reuters. He said an appeal will take three to six months, and seemed to indicate the USTR has not been as aggressive as they need to be in defending U.S. farm programs.

A visit with Desmond and Bill

I had the welcome chance to visit today with both trade expert Bill Bryant of Bryant Christie Inc. and noted economist Desmond O'Rourke, president of Belrose Inc., Pullman, Wash.

I asked them about trade promotion authority and the significance of the current lapse of the authority for President Bush. O'Rourke was the more pessimistic of the two.

“How can the greatest trading nation in the world not have its chief executive be able to negotiate treaties?” “It’s absolutely absurd for a country the size of the United States to tie its hands like that.”

Bryant noted that President Clinton did not have "fast track" or TPA through most of his presidency. It's not unusual for multi-lateral trade deals to span several presidents and he predicted the next U.S. president may wrap up the current WTO talks.

I also asked O'Rourke about a question that Nancy Foster of U.S. Apple recently indicated to me will be up for discussion at the U.S. Apple meeting in Chicago during August. Why have fresh apples done so well lately? I tell you what he said in a post later on today.