Washington Insider-- Wednesday

By DTN's Washington Insider

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

Japan to Propose Boosting US Rice Imports in TPP Deal

Japan will propose increasing US rice imports during its negotiations over a trade deal between the two countries, giving ground on a sensitive agriculture product to reach a regional agreement.

The measures will be proposed in Tokyo this week, said two officials who have knowledge of the country’s negotiations over the Trans-Pacific Partnership (TPP), a 12-nation trade deal. They asked not to be identified because the talks are confidential.

An accord between the US and Japan about access to each of the respective markets for products such as rice, pork and automobiles would only take effect if incorporated into the TPP. Japan may propose increasing purchases of US rise by as much as 100,000 metric tons a year while leaving a tariff system in place, according to Masayoshi Honma, agricultural and resource economics professor at the University of Tokyo.

“As Japan wants its rice to be excluded from the tariff-elimination goal of the TPP, the government must come up with an alternative measure to improve foreign access to the Japanese rice market,” said Honma, who advised Shinzo Abe during his first term as prime minister.

Rice, wheat, barley, beef, pork, dairy products, sugar and starch crops are considered politically sensitive products that have to be protected, according to Hiroshi Oe, Japan’s TPP ambassador.

Abe will visit Washington later this month to meet with President Barack Obama over issues ranging from defense to trade. Japanese farmers are a central constituency of Abe’s Liberal Democratic Party.

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WTO Cuts 2015 Global Trade Growth Outlook to 3.3% From 4%

Global commerce is expected to grow just 3.3% this year, the World Trade Organization (WTO) said today, lowering its previous forecast of 4.0% due to weak global economic growth and rising geopolitical tensions.

The trade body also said preliminary estimates showed trade had expanded just 2.8% last year, missing September’s forecast of 3.1%.

“Trade growth has been disappointing in recent years due largely to prolonged sluggish growth in GDP following the financial crisis,” said WTO chief Roberto Azevedo.

“Looking forward, we expect trade to continue its slow recovery but with economic growth still fragile and continued geopolitical tensions, this trend could easily be undermined,” he warned. Last year was the third consecutive year in which trade grew less than 3%.

Azevedo warned that a systemic shift might be underway and that trade expansion would no longer far outstrip overall economic growth as it had largely been doing for decades. The WTO chief pointed out that “the 2.8% rise in world trade in 2014 barely exceeded the increase in world GDP for the year, and forecasts for trade growth in 2015 and 2016 only surpass expected output growth by a small margin.”

Azevedo said that the 2015 forecast was based on an assumption that global GDP would expand by nearly 3.0%, while the 2016 forecast depended on economic growth reaching over 3%.

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Washington Insider: Bad Eggs—Legal Pressure to Support Food Safety

In 2010, Quality Egg, then known as Wright County Egg Co., and a second Iowa farm together recalled more than 500 million shell eggs. The Centers for Disease Control and Prevention had traced nearly 2,000 illnesses to the eggs being recalled. In the end, they concluded that more than 56,000 people may have been sickened.

The farm Quality Egg was owned and run by the DeCosters, father and son. Mr. DeCoster, 81 years old is the principal owner and his son, 51, is the chief operating officer. Both faced a number of criminal charges over both the 2010 salmonella outbreak and the food safety lapses that preceded it.

The prosecutors argued that as early as January 2006, tests on the company’s dead layer hens revealed the existence of salmonella and other contaminants in their organs. Voluntary testing done from 2008 to 2010 showed that the number of positive tests for salmonella in the egg farms’ environment and hens’ organs continued to rise until the outbreak. The prosecutors also showed that the DeCosters were “generally aware” of the bad test results but not that their eggs were actually contaminated.

The company had hired experts in pest control and poultry disease who recommended vaccination and other measures, but those steps did not stop or remove the contamination or prevent the illnesses, the prosecutors reported in a memo to the court. Subsequently, the company admitted that workers knowingly shipped eggs with false processing and expiration dates to mislead state regulators and retail customers. And, they bribed a US Department of Agriculture inspector at least twice to approve sales of poor quality eggs.

While there was conflicting evidence on when and how the DeCosters learned about the bribes, the prosecutors argue that they illustrate “the contempt Quality Egg has shown for USDA’s role in enforcing minimum quality standards for eggs.” Similarly, the government has no evidence the DeCosters were aware of the mislabeling but points to that as “another example of the company’s deliberate circumvention of food safety regulations through illegal conduct,” the prosecutor wrote.

In the face of the evidence, both DeCosters pleaded guilty last year to introducing adulterated eggs into interstate commerce. Under the terms of the plea agreement, prosecutors did not ask for a specific term of jail, home confinement or probation. But their 14-page memo outlined an astounding pattern of illegal and unethical food safety practices that repeatedly happened on their watch, and argued that tough sentences were required to send a message to other corporate executives to “act responsibly when it comes to food safety.”

This week, a US District Court judge in Iowa, sentenced the DeCosters to three months in jail following their guilty plea. They were allowed to plead guilty to a misdemeanor count of selling contaminated food across state lines.

While the judge stopped short of sentencing the two to the maximum in the agreement, their penalties were significant. The DeCosters’ company, once among the nation’s biggest egg producers is no longer active but was sentenced to pay a $6.8 million fine and placed on probation for three years. Each principal was sentenced to pay a $100,000 fine.

Press reports indicate that the Justice Department’s case against the DeCosters is seen as part of a broader push by federal prosecutors to seek criminal convictions against executives at companies implicated in foodborne-illness outbreaks. Last year, prosecutors secured a guilty verdict against the former head of a Georgia peanut-processing company for felony charges linked to a deadly 2008-09 salmonella case. That followed the conviction of Colorado cantaloupe-farm owners on misdemeanor charges related to a 2011 listeria outbreak.

Some observers argue that the DeCoster penalties, while heavy, will prove insufficient to deter other food companies who choose to cut corners to avoid adequate food safety precautions. And, while the jail sentences likely will get the attention of many food company executives such cases tend to be slow moving and difficult to prosecute.

Because food safety inspection funds for FDA are so modest and the number of food manufacturing firms so large the pressure to “do something” to improve the food safety record continues to build by the day. One result is expected to be increasingly frequent and tough prosecutions. Whether or not these provide the necessary incentive for firms to build effective private company safety measures remains to be seen and should be watched carefully by producers, Washington Insider believes.

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(GH/CZ)

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