Washington Insider - Thursday

Russian Sanctions, U.S. Business Response

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

National Academies to Prepare New Report on Genetically Modified Organisms

The National Academies is putting together a new panel that will have the task of preparing a report that analyzes the experience with, and future prospects for, genetically engineered crops. The effort will be just the latest in a long series of studies and reports prepared and issued by the Academies.

The panel plans to update findings and questions raised in previous reports covering all aspects of GMO production. The panel's first meeting is scheduled for Sept. 15 through 17 at the headquarters of the National Academy of Sciences in Washington, D.C., and will be open to the public.

Since 1987, a series of independent committees of the National Academies have pointed out that "both transgenic and conventional approaches to adding genetic variation to crops can cause changes in the plant genome that result in unintended effects on crop traits." What this means in practice is that in one sense, all of the plants that we eat today have been "genetically modified" in one way or another. As a result, the committees have recommended that all new variations of food plants be carefully examined for possible adverse health or environmental effects.

However, each of the committees has emphasized that "the properties of a genetically modified organism should be the focus of risk assessments, not the process by which it was produced," a conclusion that has been largely ignored by the opponents of bioengineering.

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Army Corps of Engineers Points to Need for Improved Transportation by Water

The United States river transportation system is falling further into disrepair, says a high-ranking Army Corps of Engineers official, thus placing at risk the nation's ability to remain competitive in world markets in the future.

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Brig. Gen Peter DeLuca, who heads the Corps' operations on the Mississippi River, this week told an audience in Memphis that the country is not spending nearly enough on river locks and dams, higher-capacity port facilities and other transportation infrastructure projects that will be needed for U.S. exporters to meet expected future overseas demand for agriculture and energy products.

Legislation signed into law by President Obama earlier this year provided just over $12 billion for new water projects, a figure that is only half that provided in similar legislation passed seven years ago. According to DeLuca, much more is needed. The American Society of Civil Engineers agrees with the general, having given the current U.S. inland waterways infrastructure a rating of D-minus on its latest report card.

Of course, the Army Corps of Engineers and the nation's civil engineers both have vested interests in seeing that the amount of money targeted on infrastructure repair, improvement and enlargement grows each year. It should be just as clear that the United States will be unable to continue to enjoy a First World economy in the future if it allows its transportation system to slip to Third World standards.

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Washington Insider: Russian Sanctions, U.S. Business Response

While the national news is hinting that the Russian-Ukrainian crisis may be easing back, at least a little, the business press is reporting government preparations for new retaliatory measures against Western countries. Apparently, these are still in the "saber rattling" stage, to be wheeled into place if the West enacts more sanctions against Russia. At the same time, a key Russian business leader is reported to "oppose further escalation."

Dmitry Peskov, press secretary for Russian President Putin, didn't provide much detail about the measures being discussed. But, he clearly articulated the threat, by telling Russian state media, "In the case that our partners continue the nonconstructive and even destructive practice [of sanctions], then additional measures are being elaborated."

The remarks came after unconfirmed reports Monday that Russia might ban automobile imports in the future — a move that also may be in response to estimates that imports into the Russian auto market are set to rise. Local production supports expire in 2018 under Russia's accession agreement with the World Trade Organization, increasing competitive pressure on domestic automobile production business, analysts are telling the press.

The press also reported decisions by two U.S. companies who say they are dropping plans to work with OAO Rusnano, Russia's high-tech industry leader, citing Anatoly Chubais, chairman of the Rusnano executive board. And, Alcoa has delayed planned participation in a joint venture with Rusnano to produce drill pipes in Samara, Russia, Chubais added. Rusnano held out hopes of later participation in the project.

And Applied Materials Inc. canceled its planned supply of equipment for the production of advanced chips in a new high-profile factory, Crocus Nanoelectronics, that Rusnano is constructing in Moscow, according to Chubais. The company cited a ban on the supply of dual-use technology to Russia under U.S. sanctions, he said, adding that Rusnano has found a replacement supplier in China.

Rusnano also is facing sanctions on the financial side, with the postponement of a planned private equity fund with the European Bank of Reconstruction and Development which planned to invest more than $100 million, he said. EBRD has canceled all new investment projects in Russia for now.

Chubais stressed that the current political situation poses serious risks for businesses, and told the press that he hopes that the officials "will hear our common call to de-escalation." He added that he plans a statement to the effect that "escalation of sanctions brings both sides more harm than good."

Still, it is not clear how far the Western company pull-back will extend. For example, this week a major agribusiness firm reported that it had just completed a high-level executive reconnaissance across the region because, "we have customers, dealers, and most importantly, employees there. Staying away would have sent a bad signal. They needed to know we support them."

The team returned to the United States to report their confidence that if they are able to focus on the health and sustainability of their customers and dealers, they will emerge stronger with an even more promising long-term future.

Still, the picture of the future is murky for U.S. investors in spite of reports of agribusiness optimism. The more the tit-for-tat sanctions war escalates, the more new and tender investors will conclude that the region may be too risky for them.

It probably is futile to note that Russia badly needs this investment, and that a key part of the response to Russian machinations may be damaging to them, especially over the longer term Washington Insider believes.


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