Agricultural Tariffs and Mexico- Background
Recall that Jonathan Roeder reported recently at The Christian Science Monitor Online that, “Cross-border commerce hit another red light late Tuesday when the Senate eliminated a pilot program that allowed some Mexican companies to ship goods deep into the United States.
“The $410 billion spending bill approved by senators Tuesday and scheduled to be signed by President Obama Wednesday [March 11] eliminated funding for the controversial program and could reinforce concerns that the US is turning to protectionism as it fights its deepest recession in decades.”
With respect to the pilot program, an article posted on Tuesday at The Wall Street Journal Online explained that, “A transborder trucking program was intended to be created under NAFTA in 1993, and has been a point of tension in U.S.-Mexico economic relations for years. Supporters said the program, which was designed to facilitate two-way border traffic, would bring lower consumer prices and new business.
“But the program was grounded by safety concerns and political objections during the Clinton administration. As senators, both Mr. Obama and Vice President Joe Biden voted against Mexican truckers in 2007.
“Under President George W. Bush, the Transportation Department eventually put a demonstration project in motion 18 months ago, hoping it would prove Mexican carriers could safely operate on U.S. roads. Instead, the program met fierce opposition.”
Reuters news added last week that, “The recently passed legislation to fund most U.S. government operations through the rest of the 2009 fiscal year included an amendment by Senator Byron Dorgan, a Democrat from North Dakota, to kill the trucking program.”
Agricultural Tariffs and Mexico- Product Implications
The AP reported on Thursday that, “U.S. officials are assessing the cost of new Mexican tariffs that take effect Thursday in retaliation for a U.S. decision to cancel a cross-border program that gave Mexican truckers access to their northern neighbor’s highways.
“The tariffs affect about $2.4 billion in annual trade and 89 U.S. products, ranging from fruit and wine to washing machines, according to the Mexican government. Assistant Economy Secretary Beatriz Leycegui warned the list could grow unless there is progress toward resolving the trucking dispute.”
The AP article explained that Mexico targeted a total of 36 agricultural products, and that some will be taxed at 10-15 percent, some at 20 percent, and indicated that fresh grapes would be hit with a 45 percent tax.
David Clark Scott noted on Friday at The Global News Blog (The Christian Science Monitor) that, “The shot at California fruit and nut producers is designed to get the attention of Democratic House Speaker Nancy Pelosi.
“Pears, trees, and potatoes?
“That’s designed to focus the attention of Oregon’s Congressman Peter DeFazio, who called Mexican trucks unsafe. Representative DeFazio, it turns out, is a member of the House Transportation and Infrastructure Committee.”
In addition, a news release issued on Thursday by the Texas Department of Agriculture stated that, “‘With Texas farmers and ranchers working hard to overcome severe drought and hurricane damage, it is unconscionable to add to their hardships by putting up roadblocks and interfering with free trade that has benefited both countries,’ [Texas Agriculture] Commissioner [Todd] Staples said.”
“Mexico represents the single largest buyer of Texas agricultural exports, totaling $3.1 billion last year. The tariff list includes peanuts, onions and potatoes – three important crops for Texas farmers. The value of Texas agricultural exports impacted by the tariffs totals approximately $10.2 million.”
The release added that, “Commissioner Staples has sent a letter to President Obama urging him to immediately work out a resolution with our neighbors to the south.”
Agricultural Tariffs and Mexico- Editorial Opinion
The San Jose Mercury News editorial board noted on Wednesday that, “Economic recessions tend to feed dangerous protectionist instincts, so it’s no surprise they’re surfacing now in Congress. President Obama must quickly intervene to thwart the latest measure and prevent a trade war with Mexico, America’s third-largest trading partner.”
The Boston Herald editorial board indicated on Saturday that, “According to a NAFTA committee ruling, Mexico is entirely in the right and we’re surprised it has waited this long to act. The shameful disregarding of treaty obligations, first by the Clinton administration and then by Congress, at the behest of the Teamsters Union is a dreadful example to other countries.”
Syndicated Columnist Charles Krauthammer opined on Friday that, “If you thought the AIG hysteria was a display of populist cynicism directed at a relative triviality, consider this: There are more than 6.5 million trucks in the United States. The program Congress terminated allowed 97 Mexican trucks to roam among them. Ninety-seven! Shutting them out not only undermines NAFTA. It caused Mexico to retaliate with tariffs on 90 goods affecting $2.4 billion in U.S. trade coming out of 40 states.”
The Washington Post editorial board stated today that, “Now, in retaliation, the Mexican government has ordered tariffs of 10 to 45 percent on some 90 U.S. products worth $2.4 billion in sales to Mexico each year: These include both manufactured items such as cellphones and agricultural ones such as pears and cherries. Mexico’s action is fully legal under the arbitrators’ ruling. Indeed, it has refrained from imposing the sanctions for years in pursuit of a negotiated solution. Mexico appears to be holding back on targeting really huge U.S. exports such as corn — as leverage for the good-faith negotiation with the Obama administration it says it seeks.”
Agricultural Tariffs and Mexico- A Look Ahead
Christopher Conkey reported on Saturday at The Wall Street Journal Online that, “The Obama administration began efforts Friday to ease an erupting trade dispute with Mexico by starting work on a new program to give Mexican truckers broader access to U.S. highways.
“Transportation Secretary Ray LaHood met with officials from the State Department and the Office of the U.S. Trade Representative to design a cross-border trucking program ‘that will meet the legitimate concerns of Congress and our [North American Free Trade Agreement] commitments,’ said a White House spokesman.
“A person familiar with the meeting said the participants ‘are going to work to get a proposal everyone likes before [President Barack] Obama’s trip to Mexico in April.’”
The Journal article explained that, “Business interests ranging from Pennsylvania-based Hershey Co. to the USA Rice Federation are urging the White House to permit qualified Mexican truckers to drive on U.S. roads.”
Mark Landler reported in today’s New York Times that, “While resistance in Congress to Mexican trucks is long-running, based in part on safety and environmental concerns, American officials worry it will cause broader frictions with Mexico.
“‘It’s very worrisome to the Mexicans because it’s seen as protectionism,’ said Thomas A. Shannon Jr., the assistant secretary of state for Western Hemisphere affairs, who is working with other officials to devise a new pilot program for trucks that will satisfy critics in Congress.”
David Rogers reported on Friday at Politico.com that, “President Barack Obama’s new budget will produce a string of annual deficits averaging in excess of $926 billion over the next decade and more than triple what taxpayers pay each year in interest charges on the national debt, according to new estimates released Friday by the Congressional Budget Office.”
Mr. Rogers added that, “Democrats, who begin writing their own spending plans next week, will be under pressure to find more short term savings in the president’s budget in order to show more progress toward deficit reduction. The administration had hoped to see the deficit down to $570 billion by 2014, for example, but CBO puts the number at $749 billion—a very hard target for Congress to accept.
“The pressure to make cuts has already begun in the Senate Budget Committee where Chairman Kent Conrad is pressing to scale back new appropriations requested by the president for the fiscal year that begins Oct. 1. At the same time, the North Dakota Democrat may come under pressure himself to go after agriculture subsidies, which he has thus far protected but are being targeted by Obama in the case of wealthy farmers.”
More specifically, the new CBO estimate indicated on page 17 that, “In addition, the President’s budget includes savings from several changes to agriculture programs, including reducing payments to some agricultural producers, decreasing subsidies for crop insurance, and imposing new fees for government inspection activities. CBO estimates that if those proposals were enacted, they would reduce spending for agricultural programs by about $13 billion over the 10-year period, relative to CBO’s baseline projections.”
Meanwhile, the Congressional Research Service released a report last week entitled, “Farm Commodity Proposals in the President’s FY2010 Budget,” which was written by Jim Monke on March 17.
The CRS report stated that, “President Obama’s budget outline for FY2010—in the context of fiscal discipline—includes several proposals to reduce federal spending by $16 billion over 10 years on the farm commodity and crop insurance programs. Reaction to the proposal has been generally negative from groups that are affiliated with or supportive of agriculture. The most vehement reaction has been to a proposal to eliminate direct payments to farms with more than $500,000 of sales.
“Any change would require legislative action by Congress; it would not be part of the annual appropriations process. Such action would be viewed as ‘reopening’ the 2008 farm bill, which most in the agriculture community see as a five-year contract with farmers. The agriculture committees are neither obligated nor likely to take up the proposal. If budget reconciliation is ordered by the budget committees, and the agriculture committees are tasked to find savings, then the President’s farm proposals may draw more attention—but even then, the proposal likely would be modified or a different budget-saving approach could be chosen.”
The CRS report contained these helpful graphics, and noted that, “Specific to the Administration’s proposal, about 17%-21% of farms selling corn, soybeans, or wheat have sales over $500,000. Their sales account for 51%-59% of the national production of corn, soybeans, and wheat (Table 5).
“About 36% of farms selling cotton, and 43% of farms selling rice have sales over $500,000. Their sales account for 75% of the national production (Table 5).”
In a related article, Andrew Martin reported in yesterday’s New York Times that, “After being largely ignored for years by Washington, advocates of organic and locally grown food have found a receptive ear in the White House, which has vowed to encourage a more nutritious and sustainable food supply.
“The most vocal booster so far has been the first lady, Michelle Obama, who has emphasized the need for fresh, unprocessed, locally grown food and, last week, started work on a White House vegetable garden. More surprising, perhaps, are the pronouncements out of the Department of Agriculture, an agency with long and close ties to agribusiness.”
The Times article stated that, “In mid-February, Tom Vilsack, the new secretary of agriculture, took a jackhammer to a patch of pavement outside his headquarters to create his own organic ‘people’s garden.’ Two weeks later, the Obama administration named Kathleen Merrigan, an assistant professor at Tufts University’ and a longtime champion of sustainable agriculture and healthy food, as Mr. Vilsack’s top deputy.
“[Gary Hirshberg, chief executive of Stonyfield Farm, the maker of organic yogurt] and other sustainable-food activists are hoping that such actions are precursors to major changes in the way the federal government oversees the nation’s food supply and farms, changes that could significantly bolster demand for fresh, local and organic products. Already, they have offered plenty of ambitious ideas.”
Mr. Martin indicated that, “[T]he author Michael Pollan has called on President Obama to pursue a ‘reform of the entire food system’ by focusing on a Pollan priority: diversified, regional food networks.” [Note: See related FarmPolicy.com update from March 11, 2009].
The article noted that, “Mr. Pollan, who contributes to The New York Times Magazine, likens sustainable-food activists to the environmental movement in the 1970s. Though encouraged by the Obama administration’s positions, he worries that food activists may lack political savvy.”
DTN Political Correspondent Jerry Hagstrom reported on Friday (link requires subscription) that, “When President Barack Obama nominated former Iowa Democratic Gov. Tom Vilsack to be agriculture secretary, big farmers and agribusinesses were thrilled because he supported biotechnology. ‘Foodies,’ who favor organic and local production and advocates for USDA’s roles in nutrition, conservation, food safety and rural development feared that Vilsack’s appointment meant USDA would not change much from the Bush administration promotion of production agriculture.
“Nearly two months into the administration, the critics of Vilsack’s appointment seem happy, while the very lobbyists who praised his appointment are nervous as the new secretary puts his own stamp on the department. What happened?”
Mr. Hagstrom explained that, “Farm lobbyists say they still believe Vilsack will be a good agriculture secretary because they believe the budget proposal came from the bowels of White House Office of Management and Budget. Vilsack was put in a position of trying to promote something he and USDA staff did not write. In an interview this week, Vilsack declined to comment on whether USDA or OMB had developed the budget proposal, but he said the budget reflects the administration’s priorities and that he supports them. Vilsack also noted that the day he took the job Obama told him that his three top goals for USDA are to improve child nutrition, develop renewable fuels and wean American agriculture from its dependence on fossil fuels.”
Friday’s DTN article concluded by stating that, “Some lobbyists believe Vilsack favors small- and mid-sized farmers over big farmers, but he denies that that’s the case. Farmers ‘along the spectrum’ are important, Vilsack said, and the big farmers can expect help from him on biotech and export assistance and will also benefit from his efforts to increase biofuels production and raise USDA’s profile across the administration. But it seems clear that if the big farmers believe they still need direct subsidies, they better get to know Vilsack and make a convincing case to him personally before the next farm bill comes up in 2012.”
Food Safety- Peanuts Seek Rebound
The editorial board at The Washington Post noted in today’s paper that, “Since 2006, the concept of food safety, as practiced by the federal government, has seemed oxymoronic. The recent concern about contaminated peanuts is but the latest in a series of food scares that included salmonella outbreaks involving tomatoes, peppers and spinach. With each occurrence, Congress thundered about the need to fix the way the nation safeguards its food supply, but little was done. Maybe more will happen now that President Obama has formed a Food Safety Working Group and selected a top-notch team to lead the Food and Drug Administration.
“A congressional hearing on tainted peanuts last week unearthed more reasons for queasiness. The private inspection company hired by Peanut Corporation of America (PCA) warned it of impending visits, giving the company plenty of time to tidy up what federal inspectors and others found during unannounced inspections: rat droppings, dead insects and rodents, and other unsanitary conditions. The troubles at PCA are symptoms of larger problems that need to be addressed.”
In a related article, Moni Basu reported in Saturday’s Atlanta Journal Constitution that, “When a deadly salmonella outbreak spread across the nation, Peanut Corp., the manufacturer of the tainted products, brought Blakely down faster than a tornado, uprooting the lives of plant employees and farmers like [Mike Newberry 51, a fourth-generation Early County peanut farmer].
The AJC article noted that, “Nervous Americans stopped eating a diet staple. Peanut butter sales plummeted. [Note: See related FarmPolicy.com update from Friday]
“An iconic industry in Georgia was in trouble.
“Warehouses brimming with last fall’s bumper crop of peanuts stayed full. Shellers, who buy from growers, didn’t sign new contracts.
“Newberry arrives at the courthouse square and joins thousands attending the ‘Peanut Proud’ festival. The event is little Blakely’s way of reminding America of what the inscription on its famous peanut monument proudly proclaims: Eat peanuts. They are good for your health. And essential for our pocketbooks.”
The article stated that, “Newberry, [s]ays this is the worst crisis he has known. His future depends on how well Blakely, the county seat, can remake its own tainted image — and that of its biggest crop.”
And Saturday’s article explained that, “But Newberry is rethinking what to plant this spring. He usually uses a third of his 300 acres to put peanuts in the ground every May. But who will buy them?
“In a normal year, Newberry pockets contracts before planting begins. But March is drawing to a close and he has none. [Brian Cresswell, acounty extension coordinator] says he doesn’t know of a single peanut contract in 2009.”