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.

U.S. Cheese Makers Repeat Objections to EU-Canada Free Trade Deal

The Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada signed last week in Ottawa will raise artificial trade barriers restricting market access for U.S. cheeses to the Canadian market, according to representatives of the U.S. dairy industry.

At issue are Europe's geographical indication (GI) provisions that protect the place names of its agricultural products as if they were copyrighted. The GI provisions are particularly alarming for U.S. cheese manufacturers because they grant automatic protection to the EU for five cheeses: "asiago," "feta," "fontina," "gorgonzola" and "Munster."

In Europe, only cheeses produced in one of the five specified regions above can carry those names, and Canada has agreed in the CETA pact to abide by Europe's GI provisions. To distinguish Europe's "real," GI-protected cheeses from those produced and sold in Canada, labels will use modifiers such as "kind," "type," "style" and "imitation." This change will require similar changes to the labels of those "types" of cheeses that are produced in the United States and intended for export to Canada.

Canada already has in place a highly restrictive import regime when it comes to dairy products, and its agreement with the EU can be expected to tighten the border with the United States even more. But the U.S. dairy industry will face an even larger issue in the future when geographical indications are negotiated in the bilateral Transatlantic Trade and Investment Partnership agreement between the United States and Europe. GI provisions are not the only topic capable of wrecking the TTIP, but they are at or near the top of the list of sensitive issues. (For other items in this category, see the next story.)

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European Official Says EU Food Safety Standards Will be Off the Table in TTIP Talks

The man tapped to become Europe's next health and food safety commissioner this week made it clear that European Union food safety standards would not be sacrificed to secure a Transatlantic Trade and Investment Partnership (TTIP) deal with the United States.

During his confirmation hearing, Lithuanian Vytenis Andriukaitis said high food safety standards are the "cornerstone" not only for protecting human health but also for the reputation and success of EU food sales overseas.

His position on the subject is one that should be expected by the European Parliament and that also would be expected from a candidate for a food safety position in the United States. However, among the items on which Andriukaitis said he would not budge are beef produced with growth hormones and poultry that is decontaminated with a chlorine wash, both of which are accepted in the United States and both of which have reduced U.S. exports to Europe for years.

So the question for TTIP negotiators will not be whether both and Europe and the United States are in favor of food safety (both are), but rather what each side means by the term and how each proposes to achieve that goal.

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Washington Insider: Brazilian Cotton Case Settled

For the past several days, the farm press has been buzzing that the long-standing dispute between Brazil and other cotton exporters and the United States has been settled. Yesterday, additional details emerged as the dispute that has embarrassed the United States since 2004 ended when Secretary of Agriculture Secretary Tom Vilsack and U.S. Trade Representative Michael Froman signed a deal with their Brazilian counterparts.

The main facts of the case are that more than a decade ago, in 2004, a World Trade Organization dispute settlement panel found against a number of U.S. farm support programs for cotton and other commodities. It concluded that these policies and programs included prohibited subsidies to growers and required that the United States change several policies or face retaliatory measures from Brazil, including sanctions on a number of non-agricultural imports from the United States.

The United States made some of the requested changes administratively, but those and the few modifications in the 2008 farm bill were not considered sufficient by Brazil. It continued to threaten heavy sanctions, but did not press to impose them, primarily because of their potential for raising prices for consumers in Brazil, analysts said.

Then, the United States made a temporary deal in 2010, agreeing to pay Brazil $147 million annually to its cotton sector, temporary because Brazil was still requiring changes in U.S. programs that had not satisfied the original complaint.

During the recent farm bill debate, the issue continued to fester. As U.S. producers moved away from the direct payments that had become too embarrassing to continue, the cotton industry crafted and lobbied for a highly subsidized "STAX" program as a replacement. The industry argued that the change should, and would satisfy Brazilian claims. Sources in Brazil called the new program worse than the old one and suggested new litigation might follow.

The ante on the fight crept upward as the United States stopped its payments to Brazil during the sequester last year. All of this led to very considerable angst in U.S. ag circles as the Brazilians talked about reviews of all U.S. farm policies, including the new insurance-based highly subsidized safety nets in the new 2014 farm law.

Now, it looks like the Brazilians may have won yet again. The United States will make a one-time, $300 million payment to the Brazilian Cotton Institute, which provides technical assistance to growers. In return, Brazil will give up the right to retaliatory measures against U.S. trade supports and won't launch new complaints, provided the United States maintains its current export credit guarantee terms and the upland cotton provisions contained in the 2014 farm bill.

Critics argue that $300 million is a lot of money, especially when added to earlier payments.

And, there are still questions about what the United States will get for its payments, especially if U.S. policies encourage more cotton planting even amid low prices.

Still, the U.S. agriculture industry is breathing a collective sigh of relief to have a settlement in hand, even if the costs are high.

To others, this deal is yet another reminder of the erosion of U.S. leadership toward better access to global markets — especially as we continue to pursue trade policy disputes on both the Canadian and Mexican borders to protect the country of origin labeling program that our trading partners dislike and as our leadership in the Doha talks is increasingly challenged by India.

Maybe new trade leadership will spring forth from somewhere — one party or the other, or the administration — but it is increasingly difficult to see what that source might be, Washington Insider believes.

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