U.S. and Korea Reach Free Trade Agreement

President Barack Obama announced that the United States and Korea reached an agreement on the Korean-U.S. Free Trade Agreement (KORUS), noting it is “expected to increase annual exports of American goods by up to $11 billion and support at least 70,000 American jobs.” According to the American Meat Institute (AMI) when the free trade agreement (FTA) is fully implemented, beef and pork exports to South Korea could increase by $2 billion and result in more than 26,700 new American jobs. The effective date for zero tariffs on some pork products was moved to Jan. 1, 2016, from the originally negotiated Jan. 1, 2014. The National Pork Producers Council (NPPC) commented: “With the date for a zero tariff moved back, we will lose some market share in the South Korean market to Chile. But as the low-cost producer of pork in the world, we’ll hold our own. We still will go to zero six months prior to the European Union. This is still a good deal for us.” (See “News Flash” below for more details on the agreement). According to the U.S. Trade Representative, Korea’s existing 40% tariff on beef will be eliminated over time. The National Cattlemen’s Beef Association (NCBA) estimates $325 million in annual tariff reductions once the tariffs are completely phased-out. The agreement will be sent to Congress next year for consideration.

Senate Passes FDA Food Safety Bill
The Senate overwhelmingly passed S.510, the Food & Drug Administration (FDA) Food Safety Modernization Act, by a vote of 73-25. This legislation provides historic changes to the FDA’s food safety policy. Key provisions include:
• Increases the number of FDA inspections at all food facilities;
• Enhances food-borne illness surveillance systems to improve the collection, analysis, reporting and usefulness of data on food-borne-illnesses;
• Enhances tracking and tracing of high-risk foods and directs the secretary of agriculture to establish a pilot project to test and evaluate new methods for rapidly and effectively tracking and tracing food in the event of a food-borne illness outbreak;
• Allows FDA to initiate a mandatory recall of a food product when a company fails to voluntarily recall the contaminated product upon FDA’s request; and
• Allows FDA to suspend a food facility’s registration if there is a reasonable probability that food from the facility will cause serious adverse health consequences or death.

The bill is now before the House of Representatives for consideration. The House passed its FDA food safety reform bill last year.

USDA Pork Pricing Committee — USDA’s Agricultural Marketing Service (AMS) has announced its intent to establish a Wholesale Pork Reporting Negotiated Rulemaking Committee. The committee’s charge is to develop proposed language to amend the Livestock Mandatory Price Reporting regulations. This is the result of the Mandatory Price Reporting Act of 2010, which directs USDA to engage in negotiated rulemaking to make required regulatory changes for mandatory wholesale pork reporting. The committee is to have representation from pork producers, packers, processors, and retailers; buyers of wholesale pork; USDA; and interested parties who participate in hog production or pork processing. The committee’s proposed rule will be published in the Federal Register for public comment.

Record Agricultural Exports — USDA is forecasting record $126.5 billion in U.S. agricultural exports for this fiscal year – $11.5 billion above the previous record set in 2008. Asia accounts for more than half of the increased exports. China is estimated to be a half a billion less than the top U.S. export market of Canada. USDA estimates livestock, poultry and dairy exports at $23 billion. Pork exports are estimated at $4.6 billion, beef exports at $3.7 billion.

Allow Ethanol Blender’s Tax Credit to Expire — Groups across a wide political spectrum are urging Senate leaders to let the ethanol blenders tax credit (VEETC), expire. In a letter to the Senate leadership, the groups said, “Congress has the opportunity to end the $6-billion-a-year subsidy to gasoline refiners who blend corn ethanol into gasoline. At a time of spiraling deficits, we do not believe Congress should continue subsidizing gasoline refiners for something that they are already required to do by the Renewable Fuels Standard.” The groups include Friends of the Earth, Freedom Works (conservative group that supports the Tea Party), Taxpayer’s for Common Sense, American Meat Institute and Grocery Manufacturers Association.

Dueling Senate Ethanol Letters — Two different ethanol-related letters were sent to the Senate leadership. A letter organized by Senators Kent Conrad (D-ND) and Chuck Grassley (R-IA), and signed by 15 senators, calls on Congress to renew the ethanol blender’s tax credit and the tariff on imported ethanol. In the letter the senators said, “This is not the time to reduce the supply of a domestic source of fuel and place at greater risk the thousands of well-paying jobs that the renewable fuels industry has created. Congress should demonstrate that it continues to recognize the need to develop domestic, renewable sources of fuel." Other senators signing the letter were Senators Tom Harkin (D-IA), Byron Dorgan (D-ND), John Thune (R-SD), Tim Johnson (D-SD), Debbie Stabenow (D-MI), Kit Bond (R-MO), Amy Klobuchar (D-MN), Al Franken (D-MN), Claire McCaskill (D-MO), Mark Kirk (R-IL), Ben Nelson (D-NE), Mike Johanns (R-NE) and Sam Brownback (R-KS).

Conversely, 17 senators signed a letter urging the Senate to let the blender’s tax credit and the tariff on ethanol imports expire. In a letter to the Senate leadership, the senators wrote: “Eliminating or reducing ethanol subsidies and trade barriers are important steps we can take to reduce the budget deficit, improve the environment, and lessen our reliance on imported oil.” Those signing the letter were Senators Dianne Feinstein (D-CA), Jon Kyle (R-AZ), Richard Burr (R-NC), Jim Webb (D-VA), Barbara Boxer (D-CA), John McCain (R-AZ), Tom Coburn (R-OK), Jack Reed (D-RI) Ben Cardin (D-MD), Mike Enzi (R-WY), Bob Bennett (R-UT), Sheldon Whitehouse (D-RI), Susan Collin (R-ME), Bob Corker (R-TN), Jeanne Shaheen (D-NH), Mark Warner (D-VA) and Chris Coons (D-MD).

National Debt Commission Recommends Ag Cuts — The National Commission on Fiscal Responsibility and Reform (Debt Commission) on Friday failed to receive the necessary votes to adopt its report dealing with the national debt. The vote was 11-7, but needed 14 votes in favor. The commission had recommended reducing agricultural program spending on mandatory agricultural programs by a net $10 billion from 2012 through 2020. The commission recommends reductions in direct payments when prices exceed the cost of production or other reductions in subsidies; limits on conservation programs such as the Conservation Stewardship Program (CSP) and Environmental Quality Incentive Program (EQIP); and reducing funding for the Market Access Program.

P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.