Posted December 21, 2016 by Dr. Steve Suppan
On December 5, the Commodity Futures Trade Commission (CFTC) announced it had voted to propose for the fourth time the position limit rule required by the 2010 Dodd Frank Wall Street Reform and Consumer Financial Protection Act. A Wall Street lawsuit in 2012 and the time required for CFTC staff to review an avalanche of industry comments delayed finalization of the rule. The CFTC published a fact sheet outlining the main features of the re-proposed 910-page rule and naming the 25 contracts subject to position limits.
Position limits on commodity derivatives contracts were proposed to prevent market manipulation and excessive speculation in agricultural, energy, base metals and precious metal contracts. During 2007-2009, excessive speculation by Commodity Index Traders, such as Goldman Sachs and Morgan Stanley, resulted in high and extremely volatile commodity prices. The commodity exchange self-regulation of positions, under the deregulatory Commodity Futures Modernization Act of 2000 (a 262-page bill attached to a must pass budget resolution), failed to prevent both excessive speculation and market manipulation, e.g. by Kraft Foods’ and Mondelez’s decade-long price fixing of the Chicago Board of Trade wheat contract.
The December 5 announcement ended the CFTC’s efforts to finalize the rule during the Obama administration. On December 14, Senators Maria Cantwell, Sherrod Brown and Diane Feinstein wrote to CFTC Chairman Timothy Massad to criticize the failure to finalize the rule, despite Massad’s stated intent in May to do so this year.
The Republican member of the Commission, Christopher Giancarlo, a fierce critic of position limits, is likely to become the Chairman of the CFTC in the Trump administration. Given President-elect Trump’s promise to repeal large parts of the Dodd-Frank Act, the CFTC may not be required to do further work on the re-proposed rule after receiving comments by the March 2017 deadline. As succinctly put in The New York Times, “Are we going back to the precrisis nonregulation of derivatives?”
If so, said Dennis Kelleher, CEO of Better Markets, “then it’s time to start the countdown clock to the next financial crash which will make the last one look mild by comparison.” Are we doomed to suffer another, more severe and widespread financial crash under proposed Dodd Frank replacement legislation, such as H.R. 6392, which weakens the standards for designating systematically important financial institutions subject to stricter oversight?
Position limits are just one tool applied to regulate the smallest value asset class under CFTC jurisdiction. The Wall Street opposition to position limits is part and parcel of its opposition to transparent, standardized and near real time reporting of trades in larger value contracts, such as interest rate derivatives. Such reporting and aggregating of trade data positions by U.S. parent firms and their myriad foreign affiliates helps regulators determine whether defaults or liquidity crises among trading counterparties pose threats to the U.S. financial system that could result in another crash.
IATP first advocated for a position limit rule, as a signatory to a Commodity Markets Oversight Coalition letter in June 2009, for a bill that would become part of the Dodd Frank Act. We have continued to do so ever since, most recently submitting comments to the CFTC in July on the third version of the rule. Seven years later, is an effective position limit rule dead? Has the IATP’s work and the greater work of many other organizations to advance the rule been in vain?
It could be argued that finalizing a CFTC position limit rule would be fruitless unless the European Union regulators likewise finalize their rule, opposed by many of the same global banks and trading venues that opposed the CFTC rule. On December 1, the Brussels-based NGO Finance Watch announced they would recommend that the European Parliament reject the European Commission-adopted position limit regulations that European Union member state regulators would adapt and enforce by January 1, 2018.
Finance Watch charged that the regulations ignored important and clear guidelines in the Parliament’s Market in Financial Instruments Directive (MiFID) for setting position limits. If the Parliament rejects the Commission-adopted regulations, under the EU financial regulatory process, they will be sent back to the European Securities and Markets Authority for redrafting. Redrafting, and adoption by the Commission and then the Parliament, would likely mean that there would be no European position limit rules before the summer of 2017 at the earliest.
In the meantime, in order for European and other foreign firms to trade on U.S. commodity markets, the CFTC staff writes “regulatory relief” letters that extend the date by which those firms must comply with CFTC rules. For example, on November 21, the CFTC announced that it was extending—until December 1, 2017—“regulatory relief” for commodity derivatives contracts traded over-the-counter (OTC or swaps), i.e. not traded on regulated exchanges. Is repeated year-long “regulatory relief” from compliance with Dodd Frank and MiFID rules a permanent victory for Wall Street and the City of London banks and exchanges?
IATP has tried to take the long view on market regulatory reform. Rulemaking, compliance procedures and training, and developing computer software for trading, data record keeping, aggregation, verification and reporting under new rules must be achieved comprehensively to restore integrity to financial markets. It took eight years after the Commodity Futures Modernization Act of 2000 for Wall Street firms and their foreign affiliates to blow up asset price evaluations and trigger the global Great Recession. It will take many more years to implement and enforce reform of the derivatives markets, if the proposals to repeal and replace Dodd Frank are enacted under the Trump administration.
One wind at the back of Dodd Frank derivatives rule supporters is international regulatory organization initiatives about the unrelenting wave of rule violations and crime by global banks. In a comment on an International Organization of Securities Commissions consultation paper on cross border derivatives trading, IATP cited a 2015 letter from Financial Stability Board Chairman, Mark Carney to the G20 Finance Ministers and Central Bank Governors: “The scale of misconduct in some financial institutions has risen to a level that has the potential to create systemic risks. Fundamentally, it threatens to undermine trust in financial institutions and markets, thereby limiting some of the hard-won benefits of the initial reforms.”
Deutsche Bank, for example, a major recipient of 2007-2010 Federal Reserve Bank bailout money, harbors a “culture of criminality,” according to one Deutsche Bank whistleblower. Deutsche Bank continues to negotiate with the Justice Department to reduce the amount of money it owes for U.S. government purchases of its “toxic” (unsellable at any price) derivatives contracts. It’s not hard to imagine that the bank would call out to Donald Trump, who owes Deutsche Bank at least $300 million, for some “regulatory relief.’ As Deutsche Bank continues to violate CFTC rules, including position limits, it likely will need more “regulatory relief.”
It would be unfair to the CFTC to end this blog with reference to the morass of the incoming Trump administration’s conflict of interests with the Trump organization’s main banker and the perils for the financial system of returning to pre-crisis non-regulation.
The December 5 announcement also stated, “In a separate vote, CFTC approved final aggregation regulations, which are a key component of the CFTC’s existing position limits regime.” The rule establishes the framework for exchanges to aggregate their trading data for reporting to and monitoring by CFTC staff to prevent market manipulation of prices and excessive speculation. The aggregation rule describes who must aggregate and report positions to the CFTC and who is exempt from doing so. However, the aggregation rule applies only to nine agricultural contracts. If the content of the final position aggregation rule is the same as the 2015 proposed rule, it is unlikely to be nullified under the terms of the Congressional Review Act.
IATP’s short comment on the 2015 supplement to the draft aggregation rule was critical of industry-proposed exemptions from aggregation. We wrote, “As the [technological] means to aggregate derivatives data in near real time become more feasible, the [industry] will to not aggregate seems to become stronger.” IATP noted that extensive exemptions from aggregation granted by the CFTC would run counter to the effort of the 36-member government Financial Stability Board to agree on an aggregation mechanism for over the counter (off exchange) trading data in all asset classes, not just commodities. Once operational, such a mechanism would enable FSB member regulators to access foreign trade data to determine whether cross border derivatives trading posed risks to their financial systems.
It appears that the CFTC position aggregation rule is at best one step forward and two back for global derivatives trade data aggregation and surveillance. IATP will be commenting this month on the CFTC’s proposed cross border trading rule. A blog in early 2017 will consider the interface of that rule with the position aggregation rule.
Posted December 19, 2016 by Dr. Steve Suppan
There is little doubt that many supporters of the Donald Trump candidacy for President expect President-elect Trump to carry out his promise to deport millions of undocumented immigrants and to keep out more immigrants by building a wall along the U.S.-Mexico border. (The Center for Migration Studies estimated 11 million undocumented immigrants in the United States with about six million from Mexico.)
However, according to a 2014 report commissioned by the American Farm Bureau Federation, about half of all hired farm workers are undocumented immigrants. U.S. industrial-scale animal agriculture and horticulture depend on “the abundant supply of undocumented workers available and their willingness to accept transitory, seasonal, or physically arduous work that pays introductory wages that are unattractive to the U.S.-born.” According to a U.S. Department of Agriculture survey of farm labor, non-supervisory wages for all farm workers reported in 2012 averaged $10.80 an hour. How will the Trump administration both protect the agribusiness migrant labor dependent business model and fulfill the campaign promise to protect American jobs by deporting the undocumented?
Candidate Trump has said his administration would renegotiate the North American Free Trade Agreement (NAFTA) to get a better deal for the United States. Senator Sherrod Brown (D-OH) has called on the President-elect to make NAFTA renegotiation “an immediate priority once in office.” If there is bi-partisan support for renegotiation, how might it affect migrant farm workers?
As IATP’s Karen Lehman testified to Congress in 1993, the terms of the NAFTA agriculture chapter would drive a very conservatively estimated 600,000 to 700,000 Mexican farmers (and their families) off their land to the United States to look for work. According to a Mexican legislator, as of January 2015, about 550,000 Mexican farmers a year migrate to the United States. Stemming futures flows of Mexican farmers into the undocumented U.S. agricultural workforce will require renegotiating NAFTA to prevent agricultural export dumping, i.e. exporting at prices below the cost of production, with which the unsubsidized Mexican farmers cannot compete.
Measures to end dumping will not be popular with agribusiness donors to Congressional elections and so are unlikely to be included in a renegotiated NAFTA. The flow of undocumented labor into U.S. agribusiness very likely will keep coming, both from Mexico and via Mexico, from the Central American Free Trade Agreement countries.
As if to anticipate that flow, the Farm Bureau currently advocates an “uncapped Agricultural Worker Visa Program (AWP) [that] will ensure agriculture’s future legal workforce.” For migrant farm workers currently residing in the United States, the Farm Bureau proposes—subject to requiring a worker’s commitment to agricultural labor “for several years”—an immigration policy according to which “the workers could obtain permanent legal status and the right to work in whatever industries they choose, including agriculture.”
“Permanent legal status,” much less citizenship with voting rights, is likely a non-starter with the incoming Congressional majority and their electoral support base. Thus, the Farm Bureau proposal looks at updating the 1942-1964 temporary Mexican Farm Labor Program. The Farm Bureau and the U.S. Chamber of Commerce supported the creation of that long-term force of temporary agricultural labor, which sabotaged the ability of farmworkers to organize for better wages, working conditions and temporary housing. That kind of labor “reform” might well appeal to a Republican majority and to a Trump White House because it would enable agribusiness as usual.
There are many other causes of migration besides trade policy that drive farmers out of business and into emigration. According to the United Nations’ International Migrant Report 2015, global migration is estimated at 244 million, with 47 million immigrants residing in the United Statesand 76 million in Europe.
One important emigration driver is climate change that is helping to degrade soil quality and fertility. Major investments to adapt to climate change by improving soil are absent and a recent report estimates that there will be about 50 million climate change refugees over the next decade.
President-elect Trump told The New York Times that he is “keeping an open mind” about climate change but he nominated a climate change denier to be in charge of the Environmental Protection Agency. If the Trump administration climate policy does not come with U.S. funding for farmers in developing countries to adapt to climate change, the Farm Bureau advocated pool of permanent temporary migrant farmworkers could become much larger much faster.
Posted December 16, 2016 by Dr. Steve Suppan
Congress has gone on recess without holding a vote to approve the Trans-Pacific Partnership (TPP) Agreement during the last days of the Obama administration. But on the day after the U.S. elections, Inside U.S. Trade reported that Senate Majority Leader Mitch McConnell reminded journalists that President Donald Trump will still be able to present new trade agreements for an expedited, no amendments vote under the 2015 Trade Promotion Authority Act. Free trade proponents are already fretting that Trump’s notion of a better trade deal would mean “protectionism.” But what does that term really mean?
Conventionally, “protectionism” describes government actions and policies, such as taxes on imports, i.e. tariffs, and import quotas to restrain international trade and to protect local economic development. “Free” trade is said to be the absence of such actions and policies, to maximize international trade and, in theory, produce benefits for all consumers and most workers.
However, as economist Dean Baker has written, “the TPP goes far in the opposite direction [from free trade], increasing protectionism in the form of stronger and longer patent and copyright protection.” He estimates that intellectual property protectionism increases prices of prescription drugs, software and other protected products by an equivalent to a several thousand fold increase in tariffs.
Furthermore, the investment chapter of the TPP and other “free” trade agreements increases protection for foreign investors by providing for private arbitration panels of corporate lawyers to sue governments for policies or actions believed to have diminished the value of their investments. The TPP does not allow governments to sue investors for cross-border damage resulting from their investments.
Notwithstanding unanimous transnational agribusiness support for the TPP, the view from rural America—62 percent of whom voted for Trump—is quite different. With farm incomes plummeting for the third year in a row, and the level of farm debt to income the highest since the farm mortgage crisis in 1985, Trump’s tying the message of rural economic pain to the TPP was not a hard sell. But what kind and extent of protection did the Obama administration provide for farmers and ranchers, and indirectly for their input suppliers and landlords, to enable agribusiness exports?
The 2014 Farm Bill payments to compensate for falling crop and livestock prices were locked in for 2016 and so did not figure in the election debates. The Congressional Budget Office estimates that for fiscal year 2017, U.S. taxpayers will pay farmers and ranchers about $10.2 billion for commodity support programs, plus about $5.5 billion for conservation programs.
However, despite these payments, farmer and ranchers are caught in a cost-price squeeze, since USDA estimates that the costs of production will continue to be greater than the prices offered by agribusiness for their raw materials. For example, wheat farmers will pay about $6.50 to grow a bushel and receive $5.21 a bushel at their local grain elevators. The American Farm Bureau Federation commissioned a study that claims the TPP would increase wheat prices by $0.02 a bushel by 2025.
A more fiscally conservative policy is available to increase prices paid to farmers and decrease taxpayer support payments—supply management— to adjust supply to demand. But agribusiness has long opposed any form of supply management, most recently in the TPP negotiations.
TPP proponents didn’t explain how more agribusiness exports would make farmers profitable in the market place and reduce their dependence on government payments for survival. According to a Farm Bureau lobbyist, Trump’s supporters believe the best way to protect farmers is to eliminate regulation: “Without a doubt the rural Americans that supported Trump supported him mostly on his comments about the EPA . . . When you ask farmers their biggest concern, it’s always regulation.”
The Republican Party promised in its Platform to empower states, not the EPA, to protect rural families, water and soil from toxics. But if President Trump signs a bill to cripple the EPA, and farm debt continues to rise relative to income, will regulation remain the Farm Bureau’s biggest concern? Gutting the EPA will not increase farm profitability, but it will help protect “least trade restrictive” policy, imports and exports.
Posted December 6, 2016 by Shefali Sharma
Last week in Berlin, Arbeitsgemeinschaft bäuerliche Landwirtschaft e.V. (ABL), Meine Landwirtschaft (a broad platform of over 50 organizations demanding an alternative agricultural system), PowerShift and Institute for Agriculture and Trade Policy (IATP) Europe launched the German version of our report Selling Off the Farm to highlight why trade agreements such as the Comprehensive Economic and Trade Agreement (CETA, between Canada and the EU) and the Transatlantic Trade and Investment Partnership (TTIP, between the U.S. and EU) will be disastrous for European agriculture. Given that German farmers are struggling in one of Europe’s biggest farm crises, a rise in imports from North American “factory” farms, lax food safety rules and greater corporate control will make an agriculture deal in CETA and TTIP very costly and perhaps the last straw for European family farms.
Like the European Parliamentarians in Brussels, ministers of the German Parliament (Bundestag) were surprised to learn how integrated the North American meat market is and even more shocked to learn that only two companies control 90 percent of the beef sector in Canada and only four in the U.S.
If CETA is implemented, 50,000 tonnes of beef (largely fresh, but nearly 1/3 frozen) will be allowed into the EU market on top of the 11,500 tonnes of high quality “Hilton beef” exports shared between the U.S. and Canada (granted after the WTO hormone dispute). CETA will allow Canadian Hilton beef to enter duty-free into the EU market. In addition, EU will allow 80,000 additional tonnes of Canadian pork duty free as part of CETA.
While the EU dismisses these significant volumes as only 0.04 percent and 0.06 percent respectively of total European beef and pork produced—European farmers calculate a very different conclusion:
For several years, Canadian pork has sold for up to 60 percent less than European pork. In 2014, despite the price crash in the European pork sector, the Canadian price was still 25 percent lower. In part this is because Canadian pork producers are paid 15-35 percent less than their European counterparts. Should CETA allow for an opening of those markets, under current conditions Canadian producers would be able to offer their products in the EU at a much cheaper price than comparable EU producers.1
Pork Farmer and ABL Chair Martin Schulz, who was present at meetings at the Bundestag and at our public debate with MPs, emphasized that even small quantities of pork imports dramatically depress prices in the EU since the EU market has a surplus. The imports allowed through CETA would be devastating to thousands of independent pork farmers who cannot compete with the vertically integrated contract farming system of North American pork production.
The extreme concentration and contract system has created a dramatic shift out of pork farming in Canada and competition with this North American giant is likely to speed up the transformation of European family farms into contract labor as well:
The Canadian meat industry lauds CETA, indicating that it would create many more jobs in the country’s meat sector. It also looks forward to the technical negotiations to remove any other trade barriers in the form of food safety (such as chemical rinses to wash meat carcasses) –indicating quite clearly that the industry plans to use the built-in regulatory cooperation agenda in CETA to continue lowering EU standards once the agreement is enacted.
Germany was the second stop for our Selling Off the Farm tour as Sujata Dey from Council of Canadians and IATP’s Sharon Treat continue this week through Hungary, France, Slovenia and Poland. Along the way, they are highlighting the fundamentally different structures of the North American and European agriculture market and why these agreements would hurt European agricultural producers.
1. “CETA’s threat to agricultural markets and food quality.” In Making Sense of CETA, 2nd Edition, pgs. 51-58.: https://power-shift.de/making-sense-of-ceta-en/
Posted December 1, 2016 by Shefali Sharma
Our tour across Europe on Selling Off the Farm Corporate Meat’s Takeover Through TTIP and its links to the EU-Canada Comprehensive Economic and Trade Agreement (CETA) launched on November 29 at the European Parliament. IATP’s Senior Advisor, Sharon Treat, Waldemar Fortuna from the Polish organization, IGO and I met with several members of the European Parliament (MEPs), including coordinators of different political parties that will decide CETAs fate in early February.
In the last two years, there has been an unprecedented awakening by ordinary citizens across Europe about the damage that free trade agreements do to policy making in the public interest. People have begun to understand that treaties, such as CETA and the Transatlantic Trade and Investment Partnership (TTIP), give transnational corporations even more power to expand and consolidate than they already possess. Many citizens have begun to challenge key elements of these agreements—such as the provisions that allow these corporations to sue governments for enacting public policies that might dampen their profits.
We set out to highlight key concerns that our research revealed about how agreements such as TTIP (and CETA) undermine their jobs as Parliamentarians, particularly when it comes to issues Europeans really care about like cloning, GMOs, and how meat is produced and processed. It became evident quite quickly that while many agreed or hesitatingly admitted that perhaps TTIP went too far in that realm, they were more than relieved to be able to say that CETA was no problem at all.
While politics in many of their countries involves serious crises in the agriculture sector—crashing dairy prices, rising input costs, a struggling beef production sector, the phasing out of small family farms—many of them believed that the competition with Canada would be beneficial to European farmers. Some Eastern European MEPs felt that joining the EU had transformed their economies in a positive direction, so certainly further opening up to free trade deals with industrialized countries will also be beneficial.
Never mind that CETA contains many of the same provisions that TTIP would, or that the Canadian meat market is not really “Canadian,” but rather North American. One of the clear outcomes of the North American Free Trade Agreement (NAFTA) has been the integration of the North American meat and feed industries. As a result, the meat industry can shuttle animals between the U.S., Mexico and Canada to cut costs of production and still market products as made in Canada or the U.S. That is until the U.S. implemented Country of Origin Labeling (COOL) for meat that required processors to state where the animal was born, raised and slaughtered. Ironically, Canada and Mexico, on behalf of the North American Meat Industry, put an end to this much desired consumer demand. They brought a challenge to the World Trade Organization, complaining that the U.S. law goes against free trade, and they won. The congressional lackeys of the meat industry in the U.S. were only too happy to repeal the law.
The European Parliamentarians have failed to understand this dynamic, that a free trade deal with Canada on agriculture, particularly meat, is also a deal with the United States—because these companies are neither American or Canadian. They are both. And what this means is that CETA, like TTIP, will hasten a very different agriculture system than what most European farmers and consumers want.
JBS and Cargill together control 90 percent of beef processing in Canada. And perhaps by 2019, JBS will be headquartered in Ireland. It is the world’s largest meat processor and also one that has aggressively bought out major brands in the U.S. and worldwide. Though currently headquartered in Brazil, having received substantial support from Brazil’s national development bank BNDS to become a “national champion,” the company had plans to move to Ireland this year, but BNDS shot this down recently. However, JBS’s shareholder agreement with BNDS ends in 2019 after which the company would be free to relocate to Europe.
The disconnect between these Parliamentarians and the voters they represent couldn’t be more stark—and I was reminded of Donald Trump’s election as President. How badly the Democrats had miscalculated the disenfranchisement of Americans from their democracy, how angry they are at corporate control of that country—that they are willing to elect someone, even a corporate tycoon, who says that he will end corporate control, create jobs and end free trade deals that hurt American citizens. I am afraid for the European Parliament and for the European Project, because as long as they continue to ignore the protests and petitions and rightful critiques of these free trade deals, they are likely to repeat the same mistake that has, in part, led to Brexit and Trump.
Posted November 30, 2016 by Ben Lilliston
In country star Jason Aldean’s song Fly over States, he overhears first class passengers on a flight from New York to LA, looking down on the countryside and wondering, “who’d want to live down there, in the middle of nowhere.” Aldean then flips the dismissive line into a proud anthem about the middle of the country. Like the song, Donald Trump flipped the predictions of the professional political class and rode a wave of support from many people who felt over-looked in those fly over states all the way to the Presidency.
The power of the so-called fly over states in the election is impossible to ignore. The electoral maps tell the story. A swath of red, often mostly rural, states in the middle and south of the country, bookended by blue states on the coasts. Even within the few Midwest blue states like Minnesota and Illinois, you can see the stark divide between how urban and rural counties saw the candidates. A look back at the 2012 electoral map tells us this divide is not new, but perhaps wasn’t taken seriously by many Democrats because President Obama won. As the Daily Yonder reports, the long-standing urban-rural voting gap is widening. At least part of this voting gap can be attributed to the Democratic Party’s loss of credibility on a number of core issues that affect the lives of rural communities in those so-called fly over states.
The state of rural politics lies squarely within the condition of the rural economy. Rural communities have higher poverty rates, more persistent long-term poverty rates, and higher child poverty than urban communities. There’s been a steady decline in rural and small town main street businesses, accompanied by a decline in rural business lending. Nearly two out of three rural counties lost businesses, on net, from 2010 through 2014 – even as the rest of the country recovered from the recession. Rural infrastructure is seeing disinvestment and rural bridges and roads are increasingly being closed as public money shrinks. Rural grocery stores are disappearing and there is a significant digital divide that hampers rural businesses without broadband access.
These economic challenges, particularly the loss of rural-based manufacturing, provided the backdrop for Trump’s narrow (yet effective) attacks on free trade deals. In smaller towns, the loss of a manufacturing plant or anchor business hits harder than urban centers with more job opportunities. Though both parties have long supported free trade agreements that took American jobs offshore and kept wages stagnant, it was Bill Clinton who signed the North American Free Trade Agreement (NAFTA); and it was Barack Obama who, having failed to address the problems with NAFTA (as he’d promised to), actually expanded the NAFTA model to create the proposed 12-nation Trans-Pacific Partnership.
There is another storm returning to the rural horizon; an emerging farm crisis. Prices for many commodities are below the cost of production, farm debt to income is the highest in three decades, farmland values are decreasing, and dairy farmers are dropping by the hundreds. These neon warning signs of trouble in the farm economy were virtually absent from the Presidential campaign. The Democratic party platform afforded 80 words to agriculture, which, as John Nichols of the Nation pointed out, fell well short of the attention given by previous Democratic platforms.
Many Midwest farmers still bear the scars of the farm crisis of the 1980s, when farm foreclosures and suicides were part of the countryside. In his seminal 1987 piece, Crisis by Design, IATP’s founder Mark Ritchie documented how government policy steadily eroded programs that focused on keeping farmers on the land through fair prices in the marketplace. Over a series of Farm Bills, agribusiness lobbying drove an intentional push toward fewer, big farms, characterized by the blunt call for farmers to “get big, or get out.” The final dismantling of the older farm programs culminated in the Freedom to Farm Bill of 1995 during President Clinton’s administration. Journalist Sienna Chrisman picked up where Crisis by Design left off, in a recent article explaining how a broken farm policy has set the stage for the emergence of Trump.
Addressing an anti-competitive marketplace for farmers and ranchers, fueled by increasing corporate concentration in the agriculture sector, was a priority for Presidential candidate Obama in 2008. Within his first year, a series of field hearings held around the country were organized by the Department of Justice and Department of Agriculture focusing on the anti-competitive elements of the meat, poultry and seeds markets. But the issue quickly faded and no action was taken.
Trump’s rhetoric on agriculture mirrored the directness of his talk on trade. He charged that there is a “war on farmers” preventing them from being profitable, and laid the blame for that war not on a mix of factors including volatile, anti-competitive markets, but solely on regulators. Regardless of this dubious claim, Trump’s strong words filled the largely silent void left by Clinton and many Democrats when it comes to agriculture.
Health care is another major issue for many farm families and rural citizens cobbling together part-time jobs, unable to rely on the health insurance of larger employers. Rural communities have fewer public resources for emergency medical services, less elder care, and less child care available than urban communities. More than 60 rural hospitals have closed since 2010, and more than 650 are vulnerable to closing. Rural adolescents commit suicide at roughly twice the rate as their urban peers. A recent study from the Center for Disease Control found that of all professions, the risk for suicide was highest among the rural-based jobs of farmers, foresters and fishermen. Rural drug and alcohol treatment centers have less access to highly-trained counselors.
When premium rates from so-called Obamacare jumped recently—it was particularly felt in rural communities. Again, candidate Trump’s strong message, though simplistic, resonated: you can blame the disastrous Obamacare for all your health care problems.
Finally, it’s worth noting that the inability to hold Wall Street accountable for the financial crisis is yet another issue where Democrats have lost credibility with working people. The Obama Administration’s failure to jail a single Wall Street executive in the wake of the financial crisis that caused massive foreclosures and job losses—combined with Hillary Clinton’s secret, lucrative speeches to Wall Street—allowed Trump to paint the Democrats as part of a rigged system that is unable to stand up to Wall Street.
Much of the post-election analysis has emphasized the inability of Clinton to galvanize the so-called Obama coalition – as if simply mobilizing those non-rural voters in the future will solve all problems. According to Politico’s Helena Bottemiller Evich, the Clinton campaign intentionally decided not to spend resources on rural voters, apparently only assigning a single staff person to rural outreach in their Brooklyn office late in the campaign. A similar disinvestment in rural policy and outreach took place at the Democratic National Committee and the House and Senate rural policy outreach committees, writes rural strategist Matt Barron.
The Democratic and Republican party infrastructures are not alone in overlooking many key rural issues. The private philanthropic community was recently called out by USDA Secretary Tom Vilsack for not funding in rural America. A recent USDA report found that rural communities, which account for 19 percent of the population, received only six to seven percent of foundation grants from 2005 to 2010.
There is an urgent need for new ideas and real solutions to the challenges facing rural America. Last year, Farm Aid held its 30th anniversary concert and brought together leading family farm activists of the 1980s. They talked about the dark economic times of that period and the personal trauma that many families went through, but also the very real danger of violence in the countryside at that time. Mark Ritchie talked about how essential it was “to build a movement based on peace…. If we’re not there to address peoples’ real hurt, if we’re not there to provide a real analysis of where this is coming from and if we’re not there to take real action, the right wing and the extremists will go in and scoop up people who are angry and frustrated—people who’ve done all the right things and served their country in all kinds of ways.”
Climate policy and politics provides some cautionary lessons on what can happen when rural communities are considered an after-thought. Rural economies are particularly natural resource based, whether forestry, agriculture or mining. They are already experiencing climate change—and will have to be part of the solution. Yet, the rural-urban political divide widens when most climate-related proposals start with raising fuel and energy costs for rural families (who already have higher transportation and energy costs), and in some cases, putting rural people out of work as in the case of coal. Rural resistance to climate action has often been viewed as a “messaging” problem by environmentalists—rather than a need to better understand these challenges, and actually involve rural citizens in designing a new approach to climate policy.
In his mea culpa column, Rolling Stone’s Matt Taibbi writes that he and the media misread the election by following polls and experts instead of “hearing things first hand.” Taibbi writes, “Just like the politicians, our job was to listen, but we talked instead.” The New York Times public editor Liz Spayd chastised the paper for being too focused on brief interviews that often created caricatures, rather than taking “readers deeper into the lives and values of the people who just elected the next president.”
Many of the core issues facing rural America are shared by people in all parts of the country: economic uncertainty, wage stagnation, overwhelming personal and college debt, poor health care, and yes, a changing climate. Both political parties have done a good job dividing the country or worse, spreading a wave of apathy, without effectively addressing these issues. It will take a lot of work by people, organizations and institutions to pull it back together.
In his 2015 song Something More Than Free, country singer Jason Isbell sings about another value deeply rooted in so-called fly over states – the honor, dignity and pain of hard work. Isbell sings, “Sunday morning I’m too tired to go to church. But I thank God for the work.” Finding a more just, peaceful and inclusive path forward along with those who feel ignored and that the system is rigged – is the work for all of us.
(Coming soon from IATP—Ideas on what’s next)
Posted November 17, 2016 by Karen Hansen-Kuhn
Some dates get burned in our memories. One date that pops up for me each year is November 17, the day the U.S. Congress approved the North American Free Trade Agreement (NAFTA) back in 1993. Now, 23 years later, NAFTA is as controversial as ever. After a long battle in which civil society groups from all three countries worked together to draw public attention to the potential negative impacts and, even then, to propose alternative approaches to trade, the pact was narrowly approved in a late night vote.
Just days before the vote, all signs pointed to NAFTA’s defeat. But then, the power of back room deals to build a bridge in one district, to fund a study center in another (as well as assurances of side deals on things like tomato imports or cross-border trucking) overtook the opposition to the trade pact. Public Citizen later published an accounting of those deals, and the fact that many of the promises were never kept. Even before we knew the true cost of NAFTA—both in the questionable use of public funds and in the well-documented economic and environmental devastation that was to come in all three countries—it was a bitter defeat.
NAFTA was groundbreaking in many ways. It was the first major trade agreement involving countries at disparate levels of development. It extended far beyond the lowering of tariffs to address rules on energy, investment, intellectual property rights and other issues that empowered transnational corporations to shift production among the countries at will, drastically weakening the bargaining power of unions, farmers and small businesses. It introduced the investor-state dispute settlement (ISDS) provision that has allowed companies to sue governments over public interest laws, including the Keystone Pipeline challenge by TransCanada. It became the template for future trade deals with Central America, Peru, Colombia and others, and for the Trans-Pacific Partnership (TPP).
While civil society groups in the three countries had been working together to confront structural adjustment programs (neoliberal programs of deregulation, devaluation and privatization pushed by the World Bank and International Monetary Fund), this collaboration on the specific terms of a trade agreement, and the fact that it spanned both sectors and borders, was new and important.
Earlier this week, many of the members of Congress who led the opposition to the Trans-Pacific Partnership held a press conference to celebrate its defeat (at least for now). This resulted from years of efforts by Congressional leaders like Rep. Rosa DeLauro and massive campaigns led by unions, environmental groups, family farmers and others. Many of them returned to NAFTA. Rep. Marcy Kaptur spoke of the decades of work that led to this point. She should know. She participated in one of the first congressional delegations to Mexico on NAFTA, organized by the National Family Farm Coalition, and has continued to press the case in Congress and with colleagues in the three countries. She noted that, “The recent election results call on us all to recraft NAFTA and other agreements that are in place and to develop new models for fair trade.”
Of course, she’s not the first one to make that argument, but that’s kind of the point. NAFTA hurt manufacturing workers in the U.S. and family farmers in Mexico and there is nothing inevitable about it. We don’t need to be stuck with these rules forever.
There are other approaches to trade policy, starting with an open negotiation process that includes workers, farmers, and environmentalists, among others. Detailed negotiating objectives and draft negotiating texts should be published online before and after negotiating sessions so that civil society groups and legislators know exactly what is on the table. Without opening the process to the light of day, it is really inconceivable that we’d get results that are any different from the existing bad deals.
That press conference on November 15 was a much more hopeful moment than the dreadful NAFTA vote on November 17 so many years ago. It’s important to celebrate some wins, and to dig in to consider the hard and invigorating work moving forward to hold on to those gains and to insist on trade rules that rebalance not just trade deficits, but the deficits of fairness, sustainability and bargaining power that NAFTA left in its wake.
Posted November 4, 2016 by Josh Wise
Today is a Latin America wide day of action against the disastrous effects so-called Free Trade Agreements have had in undermining governments and the will of the people. Below is a public statement from the organizing groups, translated into English by IATP's Karen Hansen-Kuhn:
November 4: Latin America unites for democracy and against neoliberalism
The signing of Free Trade Agreements (FTA) has been the main vehicle for the globalization of the neoliberal-transnational model. Their drivers -the corporations and big media- promised wellbeing progress and development. But a quarter century later, we can say that FTAs have not met any of those promises.
To the contrary: in Latin America they have allowed the installation of extractive projects that threaten communities and the environment, have limited the action of States and have reduced the public budget, by putting corporate interests above the will of the people and life itself.
FTAs are about much more than trade among nations. Their pages include chapters on the liberalization of the services sector, protection of intellectual property and privileged conditions for foreign investors. The consequences in everyday life are categorical: rising prices of medicines, the privatization of public services such as drinking water and education, limits on access to the Internet, among others. The final effect is the deregulation of the private sector and reduction of the fiscal responsibility of businesses.
In short, free trade agreements seek to consolidate the power of transnational capital and in turn have captured the political authorities. They have even led to pressure on the environment that threatens the survival of the human species.
For all these reasons, on November 4 Latin America arises. We demand that no more FTAs are signed and we reject progress in the negotiations for the signing and ratification of Trans Pacific Partnership (TPP) and the Trade In Services Agreement (TISA).
Our countries face the threats of these new FTAs. Against this, in Chile, Argentina, Peru, Mexico and Colombia we say enough! We demand that our governments have the ability to regulate capital and to develop policies that allow us to live well and in harmony with nature. For democracy and against neoliberalism, peoples first, not profit. Latin America unites.
Posted October 20, 2016 by Sophia Murphy
As international trade diplomats contemplate the latest move in their world—a formal complaint by the United States about China’s use of price supports for its farmers, lodged at the WTO last week—I am in Delhi to present IATP’s most recent findings of U.S. agricultural commodity dumping in export markets. Dumping is the sale of goods for less than their cost of production. Dumping distorts markets, and especially in food markets, destroys livelihoods and opportunities for development.
In anticipation of the full report, here are some of the initial numbers. They show the return of dumping in 2015 for several major commodities. The dumping margin is: for wheat (33 percent), soybeans (11 percent), maize (14 percent), rice (2 percent) and cotton (49 percent). In IATP’s analysis, this renewal of relatively high levels of dumping for some commodities does not signal a simple return to the world before the price shocks of 2007-08. While production has responded well to higher prices, the risk of over-production—as well as environmental constraints as climate change takes effect—make high levels of volatility likely to persist in the medium to long term.
Dumping is usually raised by one government, which complains about another. The complaint focuses on the use of public support for sectors whose products are then exported at prices lower than cost.
IATP measures its dumping calculation a little differently.
These calculations do capture the role of government payments, which are especially high for cotton and historically have been high for rice. But the numbers also show that something else is going on. The level of government support just is not sufficient to account for the dumping margins we have measured. If the government is not paying the difference, or not all of it, who is?
The answers are speculative but suggest something about the structure of low value commodity markets, like soybeans and maize. If not the state, or not only, who else could be absorbing the cost of dumping? There are two other actors: the traders and the farmers. Is it the traders? It certainly is not the case that grain traders are operating at a loss. For instance, Cargill has more than doubled in size since I first looked at the company in 1999. Its gross turnover is now in the range of USD $1.1 billion. Commodity traders move in a financially risky world but they are not going bust by internalizing losses on underpriced U.S. agricultural commodity.
They may, however, be complicating the economic analysis. The traders are an oligopoly: just four companies between them trade more than 75 percent of grain that crosses an international market. This means there is scope for price distortion. Moreover, the traders do not just sell commodities to other processors. They are also processors themselves, producing feed for livestock, raising livestock, making food additives, and turning commodities into biofuels. This makes what economists call price discovery complicated: maybe the companies would take less than market value for raw commodities so as to keep their input costs low—making up the difference downstream—in their vertically integrated operations. The lack of transparency surrounding the operations of grain traders makes it difficult to know.
What about the farmers themselves? Clearly they rely on transfers from the government, but as we say above, those transfers are not enough to cover all the dumping cost. It is worth distinguishing between variable and full costs. Our dumping measure looks at full costs. The variable costs are those that the farmer has to face each year: the costs of buying seed, tractors, petrol, etc. The full cost adds a return to the farmer’s own labour and to the land. Of course, meeting variable costs is a lower bar. Agricultural economists tell us that as long as the variable costs are met, production will continue, even if full costs are not. Why? Because a farmer can choose not to pay him/herself (they own the business); because many farm operations in the United States have other sources of income to support the farm; because the U.S. has large areas of productive land for which there is little alternative use; because agriculture is very intensive in factors of production that do not readily move—deep knowledge; expensive equipment; geographically specific characteristics of water availability, soil composition; and weather patterns.
It is also the case that U.S. agriculture has seen an expansion of very (very) large farms that are managed by a company rather than independent operators. Their scale enables them to lower fixed costs significantly below the average numbers IATP uses from the U.S. Department of Agriculture.
An honest and productive discussion of dumping would start from this complex situation to consider new solutions that are fair to farmers and consumers in the South and North.
Here is some of my arguments for the conference opening:
But is the right to spend money on agriculture—and to downplay the effects of those programs on other countries—a sufficient objective for WTO negotiations? Can we instead imagine trade rules that do a better job of supporting states in their obligation to realize the right to food? Rules that respect environmental constraints, especially climate change?
Yes, we can.
Posted October 18, 2016 by Shiney Varghese
As the 43rd session of the UN Committee on Food Security meets in Rome this week they will finalize the negotiated draft recommendations on “connecting smallholders with markets”, developed with inputs from several hundreds of civil society organizations, including IATP. It has been a long process to get here.
At least since the food price crisis, if not from earlier, agricultural development initiatives have identified “connecting smallholders with markets” as an important strategy for ensuring the livelihood security of smallholder producers. However, most initiatives focus on integrating farmers and other smallholder producers into food value chains (vertically integrated companies that source, process and retail their products, such as Pepsi Co and Nestle), rather than exploring what kind of marketing channels would best fit the local needs of food producers, and consumers.
Unsurprisingly when the UN Committee on Food Security (CFS) convened a technical team to organize a High Level Forum on connecting smallholders with markets, it supported the dominant ideas about markets. The Civil Society Mechanism (CSM) of the CFS questioned that assertion. The CSM represents 11 distinct constituencies, including smallholder producers such as pastoralists and fisher folk. As result of CSM efforts, the experiences of small-scale producers’ organizations, consumers and the urban poor were fed into the background document, as well as at the High Level Forum itself in June 2015. In October of that year the CFS initiated a work-stream on “Connecting smallholders with markets”. The ensuing discussions during the CFS annual summit last year sought to recognize the multiple, invisible markets that food producers, especially in indigenous communities, use for sourcing and selling their products and produce.
A case study on IATP’s experience of working with small acreage farmers (also known as smallholder producers in international contexts) in Minnesota is one of the several case studies that the CSM gathered from around the world to demonstrate the multiple ways in which smallholders manage their markets in a way that is beneficial to themselves and the consumers.
The IATP case study looks at a marketing initiative in two counties in Minnesota (MN), USA, which connects the Hmong American Farmers Association (HAFA) with the Head Start Program run by the Community Action Partnership of Ramsey and Washington Counties (CAPRW) in Minnesota. IATP’s experiences in this ‘Farm to Head start program’, demonstrate the need for targeted programs and policies to help these farmers access markets on their terms, and to ensure incentives for local food processors accommodate the distinct and locally specific needs of small acreage farmers. The multiple benefits include enhanced economic and social wellbeing of the communities; respect for the traditional food cultures of local communities, and ensuring that next generation is nurtured on healthy food habits.
Currently, marketing structures are dominated by vertically integrated multinational food chains. Both consumers and producers are looking for alternatives to the current marketing structures, and IATP’s purpose in sharing this case study was to show policy makers how new marketing channels are being explored in the United States. Examples from Minnesota include not only vibrant farm to institution networks (Farm to School; Farm to Hospital etc.) and farmers’ markets but also Community Supported Agriculture.
These case studies were shared with the world governments during an information session in the lead up to this year’s CFS summit, During the intergovernmental negotiations that followed, the CSM referred to the IATP case study along with those from Belgium, Brazil and France to show how food procurement policies can be tailored to support smallholders needs and their viability. In its report on the process, the CSM urged governments to continue to collect comprehensive information on local, national and regional food systems as a regular aspect of data collection systems and to make that information available to smallholders.
The CSM publication that came out last week on the topic addresses many of the issues involves and concludes that, “The ‘Connecting to Smallholders to Markets’ process and negotiated text have illuminated the vital issue of the links between smallholders, markets, and food security and nutrition. It is important that the recommendations are treated with the seriousness they deserve and are followed up on, at the CFS but above all at local, national and regional levels, with smallholders in a leading role. [………] To ensure effective follow-up and sound policies, it is vital to fill the existing gap of information and analysis regarding territorial markets. It is necessary to be able to map territorial markets and to better understand their functioning, their relationships with smallholders and food security and nutrition, the interplay between formal and informal markets, the links between territorial markets and sustainable agroecological production models. To this end, the negotiated recommendations call for:
Collecting comprehensive data on markets linked to local, national and/or regional food systems—both rural and urban, formal and informal – to improve the evidence base for policies, including age, gender, and geographic-disaggregated data, incorporating this as a regular aspect of data collection systems, and making this information available to smallholders(10i)
As the 43rd session of the UN Committee on Food Security meets in Rome this week to finalize the negotiated draft recommendations on “connecting smallholders with markets”, we are hopeful that these policy proposals will be integrated and mainstreamed not only within CFS but also in other UN processes, paving way for policies enabling fair marketing pathways around the world.