Washington Insider -- Friday

The End of Free Water

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

Business Groups Becoming Anxious About Impending WTO Ruling on U.S. COOL Law

There is a feeling among many in the U.S. business community that a World Trade Organization ruling on USDA's country of origin labeling (COOL) regulations will go against the United States, resulting in the likelihood that Canada and Mexico will begin imposing retaliatory sanctions on imports of U.S. products.

The WTO ruling, which some expect could be made public as soon as next week, was circulated to the principals in the case earlier this year and in the interim, officials representing all three –– Canada, Mexico and the United States –– have remained remarkably tight-lipped about the findings.

In anticipation that the WTO rules against the United States and says that the COOL regime runs counter to U.S. international trade obligations, the business community in this country is calling on Congress and USDA to be prepared to rescind immediately the parts of COOL that affect meat trade before they trigger retaliatory measures from the other two countries.

Neither the Obama administration nor anyone running for national office in November will welcome having this issued dropped on them just two weeks ahead of those elections. Nevertheless, the United States does need to be prepared –– if necessary ––to make some accommodation to the plaintiffs in the case or be prepared to see trade with two of our biggest overseas customers suddenly become more constrained.

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EPA Sued for Approving Enlist Duo Herbicide

It took almost no time for the Natural Resources Defense Council to sue the Environmental Protection Agency for approving the Dow AgroScience herbicide Enlist Duo. EPA announced its decision early Wednesday, NRDC announced its reaction a little later in the day.

The environmental group says that Enlist Duo –– a combination of 2,4-D and glyphosate –– would continue to greatly curtail the growth of milkweed, a plant unloved by farmers but necessary for the health and well-being of monarch butterflies. "This weed killer is more bad news for monarch butterflies, whose migrating population has dropped by more than 90 percent in recent years because glyphosate has wiped out the milkweed they need to survive," Sylvia Fallon, a senior scientist at the NRDC, said in a statement.

In its statement announcing its decision on Enlist Duo, EPA said it had thoroughly studied possible harms to all age groups, wildlife, the environment and agricultural workers, among other factors, before granting approval.

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Dow AgroSciences has indicated that it plans to market Enlist Duo beginning next year. But whether the courts will allow this plan to go forward remains to be seen.

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Washington Insider: The End of Free Water

New York Times business writer Eduardo Porter presented a chilling outlook this week concerning water. He says that the drought in the West is bad, as we know, and that it is being handled badly, which we are beginning to understand.

The deepest chill, however, comes from his view that "it will get worse." He cites experts who see "climate change and population growth" as adding stress for the water supply "from the drought-plagued West to the seemingly bottomless Great Lakes." This means, he thinks, increasingly draconian restrictions on water use.

There's more. The proliferation of limits on use will not solve the problem because regulations "do nothing to address the main driver of the nation's wanton consumption of water: its price."

That's both bad and good news. The good side is the expectation that most water problems can be readily addressed with innovation as Porter says expert opinion agrees. The problem, he thinks, is how far off the signals are today — and how central agriculture is in that assessment.

Porter says water is far too cheap across most American cities and towns, but 80% of the nation's water consumption is for agriculture, and price disparities there are even worse. Ag water rights are primarily subject to state law and in the West, they have been allocated by a method that closely resembles "first come first served." The first farm that drew water had a right to whatever it needed pretty much forever. Junior users, those who arrived later, had to stand in line.

Farmers pay if the government brings the water to the farm, say via an aqueduct from the Colorado River. But in most cases, the fees are minimal. Farmers in California's Imperial Irrigation District pay $20 per acre-foot, less than a tenth of what it can cost in San Diego. And the government has often subsidized farmers costs with approaches like interest-free loans to cover upfront investments.

These arrangement help explain why about half the 60 million acres of irrigated land in the United States use flood irrigation, "which is about as wasteful a method as there is." It also helps explain why underground water reserves declined by 53 million acre-feet between 2003 and 2014, about twice the volume of Lake Mead, says Porter.

This is hardly the only obstacle to conservation. A farm that doesn't use its full allotment of water risks forfeiting it for not putting it to "beneficial use." And any water saved automatically flows to other farmers with junior rights.

Farmers in many states are theoretically allowed to lease unused water, but that process is complicated and the many holders of junior rights can block them. California, Porter says, has granted rights to five times its average annual flow of surface water.

And, he sees perverse situations emerging. San Diego, for instance, is building the nation's largest desalination plant to produce fresh water at a cost of about $2,000 per acre-foot. But alfalfa growers in Southern California last year used hundreds of billions of gallons growing alfalfa that might fetch at best $340 a ton, or $920 per acre-foot of water.

Markets are responding in some areas and some water districts, like Irvine Ranch in California, have successfully introduced rising fee schedules that start low for a basic allotment covering families' essential needs but rising quickly with volume to make people think twice about refilling the swimming pool. New markets are springing up, and some farmers are able to sell their rights to developers rather than using them for low-value crops.

Seven states in the Colorado River system are starting a pilot program to test the market between farmers and urban water authorities to help maintain water volumes in Lake Powell and Lake Mead.

Still, Porter thinks farmers mostly are not yet charged for the water they use, a reflection of their political clout. Porter thinks this will change slowly, and over rural protests — but, increasingly, a solution is being demanded. He notes that the looming prospect of acute water scarcity is not only a Western problem — and that only two years ago, the drought in the Midwest was as severe as the current drought in California, and Lakes Michigan, Superior and Huron were at historic lows.

Porter also says that the historic state-level approach to water problems — grabbing more from those who have it — won't work any longer, because there is little to grab, and experts agree that trade must play a part.

"Without prices or trade," said Robert Glennon, an expert on water at Arizona University's College of Law, "we will just get more diversion of rivers, more dams and more wells." And nothing will be fixed.

Porter and the people he talks to believe that markets will work and that rational water prices will help fix the problem for a long time to come. He also thinks that will be a tough fight. Agriculture in many regions will be deeply involved and needs to be better prepared than it is today, Washington Insider believes.

http://www.nytimes.com/…


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(GH/CZ)

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