Washington Insider-- Friday

By DTN's Washington Insider

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

Organic Produces Closer to Establishing Checkoff Program

USDA's Agricultural Marketing Service has proposed to alter regulations covering checkoff programs for conventionally produced commodities in a way that exempts more organic farmers, handlers and importers from paying into those programs. The proposal opens the way for a separate checkoff for organic producers.

USDA estimates that rechanneling checkoff funds from traditional grower groups to an organic checkoff could raise as much as $13.6 million for organic stakeholders to invest in the industry. AMS already oversees more than 20 commodity-specific checkoff programs that are governed and funded by producers. Checkoff fee withheld at the point of first sale are pooled to fund research, education and promotion programs for agricultural commodities.

There are more than 18,000 certified organic producers across the United States, with industry sales in 2013 hitting a record high of more than $35 billion, according to USDA. Therefore it is difficult to see how greater promotion of organic crops can make them much more popular and in demand than they already are. But the industry could soon have millions of extra dollars to find out.

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Canada, Mexico Appeal WTO Ruling on U.S. Country of Origin Labeling Rule

Canada and Mexico this week informed the World Trade Organization that they will appeal a WTO compliance panel's decision on U.S. requirements covering country of origin labeling of meat even as the United States pursues its own appeal.

An earlier WTO panel ruling that the COOL regulations violate trade rules was largely a win for Canada and Mexico, but the two countries disagreed with certain legal findings in favor of the United States. It is those findings that will be at the center of their appeal.

The case will be considered by a WTO appellate panel. If the compliance panel's ruling against the United States is upheld, it would open the door to retaliatory sanctions against the United States until the rules are eliminated or otherwise brought into compliance. Canada has threatened to target nearly 40 US products.

COOL was first authorized in the 2002 farm bill and has presented problems in both the domestic and international arenas ever since. It is hoped that this issue can be resolved in 2015 and that trade among the three North American Free Trade Agreement nations can return to a more normal pattern.

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Washington Insider: Ending the Five Decade Cuban Embargo

As was widely reported, at noon on Wednesday President Obama spoke to the public at the same time Raul Castro addressed Cuba. Both focused on U.S.-Cuba relations. The joint commitments to better relations were emphasized by the release two Americans, including Alan Gross who had been detained for five years and another American who had been held twenty years. The United States also released three Cubans convicted of spying on anti-Castro groups in Florida.

U.S. officials also said the administration now plans to open talks on a full range of issues that divide the governments, including the economic embargo that has been in place since the Kennedy administration. President Obama said new plans represented the "most significant changes in U.S. policy towards Cuba in 50 years." The United States also is looking to open an embassy in Havana in the coming months, he said.

The White House also said it will review the designation of Cuba as a state sponsor of terrorism, ease a travel ban for U.S. citizens, ease financial restrictions, increase telecommunications links and begin efforts to lift the 54-year-old embargo which most observers suggest has failed in its objective of bringing down the Cuban economy.

While the embargo has become extremely unpopular across agriculture and a number of other industries for some time, it is clear that any legislative move to modify or eliminate it will arouse the political instincts of its supporters and take time and a major effort to push such a change through the new Congress.

A key reason why Cuba is so important to agriculture is its heavy reliance on imports for perhaps 75% of its food. U.S. producers have been able to take advantage of some of that demand under a 2000 law that partially reopened trade even though many aspects were still embargoed.

Looking forward, some analysts suggest U.S. ag exports to Cuba could reach or exceed $500 million or more, especially since that figure exceeded $700 million in 2008 after several hurricanes hammered the island. U.S. farm exports to Cuba include corn, poultry, soy and soy products, feeds, pork and wheat. In addition, there is potential for increased sale of higher quality cuts of beef, which currently are limited to use in the tourist industry.

The keys for the potential for U.S. agriculture exports are two-fold: (1) the push for Congress to eliminate the current embargo, something which will face high hurdles next year in a GOP-controlled Congress, and (2) the banking changes the president mentioned.

However, Bill Reinsch, president of the National Foreign Trade Council, observed that while the U.S. agricultural sector could stand to gain significant benefits from the relaxing of trade restrictions, the boom may not come quickly since the Cuban "economy is not in very good shape." "They don't have very much money, so I don't expect some commercial bonanza," he said.

The announced changes do not need congressional approval, but lifting the statutory embargo would. President Obama said he was acting within the limits set by Congress. In addition, he said he looks forward to "engaging Congress in an honest and serious debate about lifting the embargo."

It turns out that the policy change that allows Cuban payments to be made while goods are in transit — as is normally done — will make Cuban purchases much easier to finance, according to several ag groups. Cuba, with a population of more than 11 million, had imports of $13.8 billion in 2013 along with imports of services of $2.4 billion, according to the Federation of International Trade Associations.

In spite of strong support for ending the embargo, there were immediate criticisms along with charges that the administration is coddling a repressive and hostile regime, emphasizing that the "serious debate" the president welcomed may also be bitter and prolonged. It also may force additional recognition of the fact that trade embargoes, especially for foods, rarely work, especially when they are not supported widely. For the five decades the embargo has been in place, U.S. competitors enjoyed protected access to a key market denied to U.S. producers.

Nevertheless, there is always the temptation to try once more to "starve" one nation or another into compliance to end their "bad behavior." Now, it looks like the Cuban embargo may join the Russian embargo of 1980 — and many others — on the bone-pile of failed policies. If that indeed happens, there will be many observers who suggest that it is long past due, Washington Insider believes.

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(GH/CZ)

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