Posted February 25, 2016 by Ben Lilliston
At the Paris climate talks, negotiators chose not to address the sticky issue of trade rules, and how those rules undermine each nation’s efforts to address climate change. A new ruling today from the World Trade Organization (WTO) may make that willful silence more difficult. Today, a WTO dispute panel ruled in favor of an Obama Administration challenge to India’s solar program—a program that bears a strong resemblance to solar programs in many U.S. states.
India’s solar initiative, known as the Jawaharlal Nehru National Solar Mission (JNNSM), is designed to boost the nation’s renewable energy use and create local, green jobs. India’s program requires the purchase of domestically manufactured solar cells and modules in order for companies to receive a variety of government benefits, including favorable rates for electricity purchases. The U.S. Trade Representative charged that India’s “local content requirements” violate WTO national treatment obligations (which require foreign firms to be treated the same as domestic firms). The WTO agreed.
In responding to the WTO ruling, U.S. Trade Representative Michael Froman issued a warning to other governments attempting to support local, green businesses: “This is an important outcome, not just as it applies to this case, but for the message it sends to other countries considering discriminatory `localization’ policies.”
Prior to the global climate talks in Paris, India (the world’s third largest carbon polluter) announced a major effort to reduce greenhouse gas emissions. Expanding the nation’s solar capacity was a key part of that effort. India can choose to appeal the WTO ruling, negotiate with the U.S. to reform the program or face trade sanctions from the U.S. The decision creates enormous pressure on India to change the law. A recent WTO ruling against the U.S. Country of Origin Labeling requirement for beef, for example, led to Congress overturning the law before the actual levels of sanctions were even determined.
This is not the first time the WTO has ruled against renewable energy programs designed to create local, green jobs. Yesterday’s dispute ruling cited a 2013 WTO ruling in favor of an EU and Japanese government challenge to Ontario, Canada’s “feed-in tariff” renewable energy incentive program. That ruling determined that the Ontario program’s local content requirements for solar panels and other renewable sources favored domestic over foreign companies.
Today’s WTO solar dispute ruling also revealed the potential vulnerability of U.S. state solar programs. In India’s defense of its solar program, the country pointed out (subscription required) that several U.S. state programs are also structured to create green jobs and spur renewable energy by providing a variety of benefits for solar manufacturing and sourcing within each state. For example, Minnesota’s Solar Rewards Program enables residential and commercial customers to access a solar rebate program to install photovoltaic (PV) systems, but the PV module must be manufactured in Minnesota. Delaware provides solar renewable energy credits if 50 percent of the cost of energy equipment is manufactured in Delaware. Massachusetts has a rebate program requiring PVs to be manufactured in Massachusetts or have a “significant” presence in the state. Connecticut has incentive programs for the use of major system components manufactured or assembled in the state. According to the Sierra Club, nearly half of U.S. states have similar programs to promote renewable energy.
The WTO ruling comes on the heels of a major trade-related attack on U.S. attempts to address climate change. Last month, TransCanada sued the U.S. for $15 billion under special corporate rights provisions of the North American Free Trade Agreement (NAFTA), charging that the Obama Administration’s rejection of the controversial Keystone Pipeline was unfair and discriminatory. The Keystone XL pipeline would have transported tar sands oil extracted from Alberta, Canada through rural land in Montana, South Dakota and Nebraska into Steele City, where it connects to existing pipelines to send tar sands oil to refineries in the Gulf Coast.
The special corporate rights provision in NAFTA, known as the Investor State Dispute Settlement, also exists in the proposed 12-nation Trans Pacific Partnership (TPP). The TPP would give an additional 9,000 foreign corporations the right to challenge U.S. laws and regulations, like TransCanada, according to Public Citizen. These types of corporate rights cases under regional trade agreements are becoming more frequent—with a series of recent corporate wins under NAFTA which successfully challenged government decisions to limit environmentally destructive mining and fracking.
The Paris global climate deal in December hinged on voluntary commitments to reduce greenhouse gas emissions (GHGs) made by national governments. Those commitments were based on a variety of national and local-level policies designed to reduce emissions. While certainly a step forward, these national–level commitments to reduce GHGs are not legally binding. In contrast, the commitments countries have made at the WTO and in regional trade agreements like NAFTA and the proposed TPP are legally binding, and subject to trade dispute panels.
By bringing the India solar case at the WTO and expanding corporate rights to challenge climate policy under the TPP, the Obama Administration is leaving a damaging legacy for global efforts to address climate change. When trade trumps the climate, we all lose.
Posted February 25, 2016 by Shiney Varghese
The tragic situation in Flint is in many ways a cautionary tale of democracy subverted, one that ties directly to the United States’ refusal to recognize basic human rights such as the right to water. These rights are enshrined in international law, including in the 2010 United Nations General Assembly declaration that all nations have a duty to ensure safe drinking water and sanitation.
The U.S. contributed to laying the groundwork for recognition of this right when it passed the Safe Water Drinking Act in 1974, which put in motion a new national program to ensure the purity of the drinking water supply in the United States. That law was enacted after the Environmental Protection Agency (EPA) warned that “the old assumptions about the quality of drinking water were no longer valid,” and also in response to reports from around the country about water contamination in local water supply systems, including lead being found in the drinking water supply in Boston. The Act places the primary responsibility for enforcement and supervision of public drinking water supply systems and sources of drinking water clearly upon the state as a safeguard. It also requires that states to demonstrate their ability to enforce standards at least as stringent as the National Primary Drinking Water Regulations, including procedures for monitoring and inspection and that they adopt plans for the provision of safe drinking water should an emergency arise. Moreover, with the Public Notification Rule (PN), “the consumer becomes an enforcer and can exert pressure on the utility, the local government, and the State, demanding water that complies with the Federal and State regulations. The Safe Drinking Water Act has real ‘teeth’ from the Federal level down to each of us as consumers,” wrote James L. Agee, EPA Assistant Administrator for Water and Hazardous Materials, in 1975.
In essence, the Safe Drinking Water Act assumes a vibrant democracy, with public officials and local authorities being accountable. This assumption seems to have failed in Flint’s case. In fact, the State of Michigan failed not only in fulfilling its primary responsibility but even the test of safeguards. For a number of reasons, Flint residents were unable to enforce or make use of the provisions under the Safe Drinking Water Act.
The story really begins in the summer of 2014, if not before, long before Flint residents began trying, albeit unsuccessfully, to draw attention to their problems. Flint is the fourth largest metropolitan area in Michigan. For most of 20th century its economy was closely tied to General Motors and jobs in the auto industry. A number of factors, including trade agreements that resulted in the export of manufacturing jobs and closing of factories, saw the city becoming one of the poorest in the country in the first decade of 21st century, as captured in this somber photo-essay. A similar fate awaited Detroit as well. The flight of manufacturing, combined with corrupt leadership, saw Detroit filing for a historic $18 billion bankruptcy in mid-2013.
Michigan’s Governor, Rick Snyder, who assumed office on January 1, 2011, signed Public Act 4 into law less than three months later, giving him the authority to intervene early on in local affairs by appointing emergency managers with powers to break or modify agreements with workers. When, in a state-wide referendum in 2012, Michigan voters rejected this law, Gov. Snyder and other lawmakers responded by enacting Public Act 436; the new law was very similar but included a provision ensuring that it could not be repealed through a referendum! These laws have their basis in a law known as Local Government Responsibility Act, 1990, or Public Act 72, which allowed the appointment of Emergency Financial Managers (EFM) to help local government manage their finances.[i] The law had rarely been used in the ensuing two decades, according to experts at the Michigan State University,but was amended several times.
Under this law, all existing Emergency Financial Managers were to transition to Emergency Managers (EM), with additional powers. Governor Snyder used the provisions of these laws to appoint emergency managers to take financial control of struggling cities such as Flint (effective as of December 1, 2011, under PA 4) and Detroit (effective as of March 25, 2013, under PA 436)[ii]
Clearly these laws, as they stand today, subvert democracy: they strip local elected officials of power. Appointed by the governor, emergency managers are not answerable to citizens; yet, these emergency managers are granted immense power to rewrite city's contracts and to liquidate city assets to help pay off debts, regardless of how residents feel about these actions. In fact, residents have limited or no power to question the law itself.
Detroit made international headlines when the water utility cut off drinking water and sanitation services to thousands of Detroit residents—crews were shutting off about 3,000 delinquent accounts per week at one point in the summer of 2014. (The initial cutoff was in March 2014.) According to reports, while residents who were said to be indebted to the water utility had their service cut off, large scale water consumers who owed millions of dollars in arrears were not cut off. In October 2014, the UN human rights experts who visited Detroit in response to civil society requests said: “Disconnection of water services because of failure to pay due to lack of means constitutes a violation of the human right to water and other international human rights.”
One of the early proposals from Detroit Emergency Manager Kevyn Orr was to create a regional water authority, the Metropolitan Area Water and Sewer Authority (MAWSA). This was perceived by water activists as opening a “clear path for privatization,”as the city was to permit MAWSA to “operate the Detroit Water and Sewerage Department (DWSD)through a concession agreement or via a lease of water department assets.” The counties that were to join MAWSA balked at the hefty price they were to be charged, and some of them decided to develop their own regional water authority. Flint, which was under another Emergency Manager reporting to Snyder, was one of them. As the two cities, Detroit and Flint, could not find a mutually satisfactory solution, in April 2013 Flint joined the Karegnondi Water Authority, which would source its water from Lake Huron (and expects to be operational at the earliest by the summer of 2016), at the advice of the state. Flint's final year-to-year contract with Detroit expired in April 2014. To cut costs, Flint’s officials turned to the Flint River as a temporary source of water until the new pipeline was complete. On April 25, 2014, Flint shut off the water intake from Detroit, and connecting instead to the Flint River, despite years of missed warnings about the dangers of doing so.
Over the ensuing 18 months, the residents of Flint were consuming lead-contaminated water (a result also from yet another cost-cutting measure, that of avoiding corrosion control treatments despite Flint’s aged water infrastructure), and the rest of the story is well known.
As the calamity in Flint was unfolding in early 2016, I came across an announcement from the Chief Minister of Delhi, Mr. Arvind Kejriwal, that the Delhi Water Board (DJB) earned the equivalent of $25 million more in the last financial year than the year before, despite providing 20,000 litres of water without charge to Delhi households every month. DJB is the public agency responsible for supply of potable water to the National Capital Territory region of Delhi. For a city of Delhi’s size (Delhi is one of the most populated cities in the world, with more than 16.68 million people in 2011), in a developing country, this is no mean feat.
Arvind Kejriwal’s Party, the Aam Admi Party (AAP), came to power exactly a year ago, promising better services for Delhiites, especially for its poor. A career public official, Arvind left civil service to fight corruption in public services, and when Delhi, with the support of the World Bank, sought to privatize its water services (2001-2005), his organization was key to defeating those efforts. This required holding the then chief minister of Delhi accountable and exposing the unnecessary loans that India took that increased its debt to the World Bank, as well as showing World Bank’s own role in pushing for privatization. AAP emerged from the embers of the anti-corruption movement that swept through India in early 2011, around the same time as Governor Snyder’s Public Act was becoming effective in Michigan. For AAP and its supporters, “a system of governance that gives power to officials without providing transparency in their public dealings and societal supervision of their actions breed corruption.”
AAP responded to political corruption, and the dysfunctional public delivery system, by building democracy from the ground up. A newcomer to politics, it debuted in the 2013 state elections and won 27 out of 70 seats. It formed a minority government, which survived only briefly before being brought down by the two other opposition parties. But when AAP went back to the hustings in the next election in early 2015, it won an unprecedented 67 out of 70 seats in the Delhi Assembly. Within weeks of assuming power, AAP sought to fulfill its promise of the right to water—20,000 liters of free water, and a steep progressive pricing if consumption goes above 20,000—for every family. A year later, Delhiites are happier with their water services. They do not have to pay for water, and they can get water even if they are not connected to a piped water supply yet. Ordinary families also tend to conserve water to keep their total monthly use below 20,000 liters, since they know that the price rises steeply if the consumption goes above 20,000 liters.
A similar idea had been floated in Detroit. “Make those with higher incomes pay more for their water,” said Gloria House of the Detroit People's Water Board, an activist group that essentially wants those who owe for their water to get it for free, "[t]he only humane course of action in a city with the highest poverty rate in the nation is to have people pay for water based on income." Unfortunately, her argument fell on deaf ears in Detroit. Not only that, many businesses in fact did not have their water shut off, despite being in arrears.
Of course, despite the efficiency improvements, conservation measures and effective provision of free basic water services by DJB, by no means is the situation rosy. An important challenge for Delhi is ensuring the reliability and sustainability of its water sources, as has been pointed out during water crises in previous years. As the crisis over last weekend, February 20-21 shows, Delhi’s access to water is precarious, even if it was resolved quickly this time. In addition, the AAP faces many challenges as it addresses historic liabilities of various kinds— economic, social and cultural. The majority of its sanitation workers belong to the Balmiki community, the lowest of the low castes, working in inhumane conditions. One of AAP’s promises was to regularize these sanitation workers who tend to be contractual workers with very low pay and a large number of dependents. AAP has yet to make good on that promise. Most of Delhi’s water delivery and sanitation infrastructure is in dire need of repairs. Moreover, many settlements have so far been considered illegal, and are not yet connected to water services. Delhi, too, will need infrastructure assistance, both to make it safer for sanitation workers and to extend pipelines to unconnected areas that are currently served through water tankers.
It is heartening to see that the U.S. House of Representatives has passed its first piece of legislation to require the EPA to alert residents of high lead levels in circumstances where state officials or a local utility does not, clearly a positive fall-out of the Flint water crisis. No matter what happens in the Senate, it sends a strong political signal to EPA.
However, I cannot stop comparing Michigan, a state in the oldest democracy, and Delhi, capital of the largest democracy. In Michigan, under Snyder’s leadership, we see how democracy was subverted, mostly to the detriment of disadvantaged sections of society. In Delhi, under Kejriwals’ leadership, we see baby steps being taken to build accountability to people, benefiting the middle class and the poorer sections of the society. Most importantly, even as the right to safe water in adequate quantity is being violated in Michigan’s cities, in Delhi, AAP is able to not only recognize citizens’ right to free water, but also fulfill that obligation in a cost effective manner.
[i] Public Act No. 101 of 1988 for the first time allowed direct state intervention in the affairs of local units of government other than school districts. Public Act 72 of 1990 replaced Act 101 and extended its provisions to school districts.
[ii] Flint was under an EFM from 2004-2006, when they had limited powers
Posted February 23, 2016 by Shefali Sharma
While the debate continues about holistic management and what “true cost” actually means for livestock production models and climate change, technocrats and governments are busy establishing standards for carbon intensity reduction in industrial animal agriculture. These discussions are proceeding at a rapid pace and remain largely obscure—both in terms of the technical language used and in terms of visibility.
For instance, the Livestock Working Group of the Global Research Alliance on Agricultural Greenhouse Gases, established at the Copenhagen climate talks in 2009, is forging ahead with defining standards for emissions inventories for livestock production. The goal is not to change or transform animal production to become more climate-friendly, but rather to find ways to reduce emissions within an ever-expanding, unsustainable, industrial model of production.
Countries report these inventories to quantify their reductions of emissions (intensity) to meet international commitments on climate change that served as a basis for the Paris climate agreement. The most recent newsletter of the Working Group reports:
Farmers and national statistics have a much better chance of reporting how much their animals eat on average, and thus to capture changes in emissions and emissions intensity over time. More importantly, the only chance to reduce emissions in Tier 11 inventories is to reduce the number of animals, whereas Tier 2 inventories allow countries to report reductions in emissions intensity arisingfrom increased productivity. Advanced inventories thus demonstrate a win-win for agricultural and economic development goals and reducing the amount of emissions per unit of food produced.
The newsletter reports on a September 2015 workshop held with Southeast Asian countries to help them determine which livestock emissions they would prioritize and how to inventory them. As with the problematic counting of carbon in soils, the focus appears to be on simplifying quantification and a singular focus on mitigation, rather than concerns articulated by Olivier De Schutter, Hans Herren and Emile Frison.
Governments are rapidly embracing the key notion behind this alliance: how to continue our current economic model of production while producing less emissions. This means exacting even more meat and milk from animals than we currently do in the extremely extractive and debilitating industrial animal production model. The French government, for instance, has embarked on a massive pilot project:
To help the French dairy sector continue to achieve reductions in emissions intensity, a ‘LIFE CARBON DAIRY action plan’ has been introduced that aims to reduce the carbon footprint of milk production by 20% over 10 years, thereby avoiding emitting 140,000 tons of CO2 eq. The plan, funded by the European Commission (LIFE) and the French Ministry of Agriculture, is being rolled out across six pilot areas representing 65% of national production.
While much may be good or problematic in this plan, the fact is that very few details are available. The brochure for the project notes that “Carbon credit mechanisms may also be incorporated in the future in order to compensate for any negative economic effects.”
It is no coincidence that an alliance started in Copenhagen by governments that wanted to quantify agriculture emissions and trade them on carbon markets, is helping developing countries set up emissions inventories for this sector. Eventually, these inventories will be helpful in establishing carbon offsets for governments that can pay for them and allow their corporations to continue polluting.
On the other side of the spectrum is a growing demand for reducing meat and dairy consumption as a critical way to deal with the climate problem related to livestock. IATP would clarify and advocate for the reduction of industrial meat and dairy consumption, since it is particularly this model of production that is rapidly growing to meet demand. A report by Chatham House states:
If meat and dairy consumption continues to rise at current rates, the agricultural sector alone will soak up 20 of the 23 GtCO2e yearly limit in 2050, leaving just 3 GtCO2e for the rest of the global economy. Even under the most ambitious of decarbonization scenarios, it will be near impossible for emissions from other sectors to drop to such levels by the middle of the century.
A shift away from industrial meat production will not be easy, as global meat companies have become increasingly politically powerful. For example, last year, the U.S. meat industry spent $3 million just to stop the U.S. government from enacting dietary guidelines that recommended a reduction in meat consumption.
It will take a lot more than asking governments to reduce subsidies for industrial animal production, as Sheldon Frith suggests, to measure true costs and stop the tide of corporate money (read Power) that continues to successfully stop initiatives and measures intended to make corporations pay for the damage they are doing.
Moreover, until we stop free trade agreements such as the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), we will continue to see the literal expansion of meat markets for powerful transnational corporations who use the World Trade Organization, bilateral and regional “free” trade treaties to lower standards and eliminate tariffs for industrially produced meat products, thereby wiping out small, independent and more sustainable systems of livestock farming.
Tier 1 inventories calculate emissions based i.e. kg of methane produced per animal per year (methane or some other emission factor). These factors are assumed to remain constant over time thus do not allow for reporting changes in emissions intensity. In contrast, Tier 2 inventories calculate emissions based on the amount of methane produced per kg of dry matter “or per kilojoule of gross energy consumed.” To paraphrase: The assumption is that the more efficiently an animal turns feed into muscle or milk, the less intensely it emits emissions.
Posted February 16, 2016 by Dr. Steve Suppan
In a February 4 speech at the Georgetown University Law School, Commissioner Sharon Bowen, of the Commodity Futures Trading Commission (CFTC), responded concisely to one of two questions she was asked to discuss: “Is Wall Street reformed? The short answer is no.” The following blog illustrates just a few details entailed in that “no.”
CFTC Chairman Tim Massad was summoned to the House of Representatives on February 10. Members of the Committee on Agriculture, which oversees CFTC’s legal obligations, asked him why the CFTC isn’t doing more with less to make it easier for Wall Street hedge funds to make a killing from the automated trading systems (ATS) that remain under-reported and thus “dark” to regulators. As the Wall Street Journal reported on January 26, “The market upheaval [in oil, stocks and currency prices] has provided near-ideal conditions for so-called commodity trade advisors or CTAs, hedge funds that use computer programs to guide how they trade.” ATS-exacerbated extreme price volatility is a very profitable playground for the still unregulated automated traders.
Of course, Chairman Mike Conaway of the Committee on Agriculture presents the purpose of the hearing in a different light: "Over the past couple of years, agriculture, energy and other commodity producers have faced a collapse in market prices. For many end-users [of commodity contracts], hedging in derivatives markets is the only way to plan for the future and survive these challenging economic times. Yet, in their hour of need, market participants are contending with regulatory missteps that have upended derivatives markets. Five years into Dodd-Frank, end-users have fewer service providers, face higher costs to access hedging services and see liquidity fragmented across arbitrary regional lines . . . I look forward to speaking with Chairman Massad on his plans for 2016 and how the CFTC will bring more order to the markets it regulates and more certainty for the end-users who rely on them."
There are a lot of assumptions in Chairman Conaway’s statement, beginning with the suggestion that farmers and ranchers and other commodity producers receiving below cost of production prices must off-set the price collapse by competing with the hedge funds and banks in the derivatives market. According to this statement, THERE IS NO ALTERNATIVE, e.g. the inventory management that attempts to balance supply and demand in all other economic sectors. But if you are a farmer or a rancher or a commodity advisor to agricultural producers without access to a High Frequency Trading terminal, you won’t be able to compete.
Chairman Conaway could call a hearing to investigate the causes of the price collapse in the beef cattle market, as documented in the Ranchers-Cattlemen Legal Action Fund-United Stockgrowers of America request in January to the Senate judiciary committee. R-CALF notes, “During the third and fourth quarters of 2015, cattle prices collapsed farther and faster than during any time in history and the unprecedented volatility in the cattle futures market rendered it useless for price discovery purposes.” Instead of investigating the cattle price collapse, Chairman Conaway has heeded Wall Street complaints to prevent the CFTC from monitoring the cross-border trades whose defaults triggered the Great Recession. Chairman Conaway repeats the Wall Street characterization of its cross-border evasion of such monitoring as “liquidity fragmented across arbitrary regional lines.”
One of the sources in the R-CALF request to investigate manipulation of the beef cattle market states that the price volatility cannot be explained by supply, demand, animal disease, adverse weather events or other fundamental factors. Instead the source proposes that price volatility in the Chicago Mercantile Exchange electronic market in cattle futures contracts has been driven by High Frequency Trading (HFT), a faster variant of automated trading systems.
HFT defenders argue that HFT traders must “spoof” other traders with algorithms placing trade orders with cancellation orders before the trades can be completed. “Spoofing,” this argument goes, prevents other HFT algorithms from hunting for large orders, to take advantage of their price information a nanosecond before other market participants. However, spoofing, by inflating the market with instantly vanishing capital, also exacerbates price volatility to the point where cattle and other commodity producers cannot hedge their price risks.
Chairman Conaway, who comes from the great beef cattle state of Texas, could have asked the CFTC to investigate HFT trading in the beef cattle futures market. But he didn’t make that request, because the hearing was pre-programmed, like that of an ATS. Chairman Conaway wants to convict the CFTC of Dodd Frank “regulatory missteps” that the Chairman and his Wall Street and meatpacker patrons want to blame for the failure of markets to enable transparent price discovery for commodity producers and users. Furthermore, if he were to make that request, Chairman Massad could reply, ‘we could undertake such an investigation and others if the CFTC had a budget to do so.’
In September 2014, Chairman Massad gave an interview to the Futures Industry Magazine about what he hoped the CFTC would accomplishto implement the Dodd Frank financial regulatory reform legislation. He came to government service in 2009 after twenty-five years of providing legal advice to Wall Street on the Over the Counter (not exchange traded or reported to regulators) instruments whose cascading defaults triggered the banks’ bankruptcies. He supervised part of the taxpayer-funded bailout of Wall Street and their major corporate clients, the Troubled Asset Relief Program. In other words, Chairman Massad knows from A to Z the industry that Dodd-Frank is attempting to reform.
In this interview, Chairman Massad noted frankly, “Unfortunately, we don't have the budget I would like to have to really make sure we can be doing all that we should be doing. We've got to rely on the industry to regulate itself, in many respects.” The reliance on industry self-regulation is one consequence of the anti-regulatory “starve the beast” practice of denying regulators the funds to uphold the law of the land. The CFTC budget is set by Congress, whose Republican majority voted to repeal major portions of Dodd Frank in 2011 and campaigned against Dodd Frank in the 2012 elections. Since then, most Republican members of Congress and some Wall Street Democrats have worked with Wall Street to help to prevent implementation of Dodd Frank.
Following Congress’ approval of the must-pass omnibus budget bill in December, Chairman Massad didn’t mince words: “The failure to provide the CFTC even a modest increase…sends a clear message that meaningful oversight of the derivatives markets, and the very types of products that exacerbated the global financial crisis, is not a priority. The CFTC’s appropriation simply doesn’t match our vast responsibilities, especially as the markets we oversee have grown enormously in size, importance and technological complexity.”
Why does the CFTC need a larger budget to pay for more computer and human resources? Dodd Frank expanded CFTC authority beyond agricultural contracts to cover energy, base and precious metals, interest rate, foreign currency exchange rates and other assets whose underlying value is the basis for Wall Street derivatives contracts. The initial face value of the traded contracts has increased about 40 fold compared to the unregulated or industry self-regulated pre-Dodd Frank markets. Dodd Frank also requires reporting to the CFTC the derivative contracts that Wall Street declared to be too “customized” to report. Purportedly customized trades between two parties without adequate capital reserves to cover losses resulted in the 2008 default cascade among the largest banks and hedge funds. While Wall Street has accepted that there be clearing houses to mediate and prevent default in such trades, it continues to resist the standardized, near real-time reporting of trades required of futures and options traders. About seven years after the Wall Street meltdown, the CFTC released a request for comment on proposed common data elements for customized “swaps” reporting.
Even if the CFTC were able to finalize its proposed rule on automated trading systems in 2016, Congress is very unlikely to vote for the necessary budget for the agency to prevent High Frequency Trading from driving market volatility, not just in the beef cattle market but in all commodities. President Obama’s February 9 proposal to Congress, which would increase the Fiscal Year 2017 CFTC budget by 32 percent to $330 million, is regarded as dead on arrival. Republican budget committee chairs have refused even to schedule meetings with the White House budget director, a rebuke without precedent in U.S. presidential budgetary history. The Republican majority once again has not presented its own budget proposal.
Chairman Conaway’s hostility to the CFTC budget does not extend to all budgets for agriculture. For example, he supported a $3 billion increase in the 2014 Farm Bill budget for subsidies to crop insurance companies after having voted to cut the Farm Bill by $20 billion over ten years in the non-binding but electorally useful resolution to balance the federal budget. Of the crop insurance vote, Chairman Conaway stated in November, “I’m as much of a budget hawk as anybody else. But at the end of the day, we have to be smart about how we do it.”
However, it’s apparently one thing to vote to increase the budget for crop insurer subsidies by $3 billion to please your constituents and quite another to increase the CFTC budget by a mere $90 million or even $20 million, if that increase displeases your Wall Street campaign contributors. It must be hard, in a rock solid Republican district, to vote beyond the two-year horizon of your electoral career. But the market “order” and the “certainty” for commodity hedge funds that Chairman Conaway demanded of Chairman Massad on February 10th will not be found by further weakening the CFTC.
One of the forecasters of the 2008 global bank defaults, Satyajit Das, wrote last month about how unreformed bankers, contracts and markets could trigger another Great Recession: “The root causes of the life-threatening 2008-2009 financial crisis remain unaddressed. Debt levels are higher now, and imbalances remain. . . Deep seated structural problems, including inadequate infrastructure, lack of institutions, corruption and environmental degradation, are now impinging on [global economic] activity.” None of these structural problems will be solved by attacking financial regulators and denying them resources to do their statutory duties.
The Dodd-Frank reforms are an important—if incomplete—step toward more effective price risk and volatility management and market transparency. Rather than taking stock of the progress so far and building on it, legislators continue to chip away at the gains and to starve regulators of the resources they need. Attacking the regulator will always be more remunerative in Washington than investigating the regulated, the law be damned.
Posted February 12, 2016 by Tara Ritter
On Tuesday, a Supreme Court decision temporarily halted implementation of the Environmental Protection Agency’s Clean Power Plan. The decision was prompted by a lawsuit from 29 states and state agencies challenging the EPA’s authority to impose the Clean Power Plan under the Clean Air Act. Implementation of the Clean Power Plan will remain suspended until June 2, 2016 at least, when a federal appeals court will consider the states’ challenge.
The Clean Power Plan is the first regulation to limit carbon emissions from existing power plants in the U.S. and it does so ambitiously, aiming to reduce electricity sector emissions to 32 percent below 2005 levels by 2030. Each state was assigned an emissions reduction target based on past emissions and capacity for future emissions reductions. Originally, states had until 2018 to create State Implementation Plans outlining how they would meet the targets, but this timeline could be altered depending on how the legal challenges play out.
When the Clean Power Plan was announced six months ago, states and industry groups that depend economically on coal were quick to attack the law, characterizing it as federal overreach. Tuesday’s Supreme Court ruling is a temporary win for the fossil fuel industry, but supporters believe the Clean Power Plan will ultimately be upheld by the federal appeals court. California, Colorado, Virginia and Washington have reported that they will continue implementing the Clean Power Plan despite the Supreme Court’s ruling, and 14 states have vocalized continuing support for the Clean Power Plan.
The Supreme Court’s ruling, though temporarily favorable for the fossil fuel industry, is a long-term loss for rural communities. Rural communities are disproportionately impacted by climate change, and as such, will suffer the most as decisive action on climate change is delayed. Rural communities are more likely to have natural resource-based economies than urban communities, and those industries will become less stable as climate change worsens. In addition, poverty rates are higher and housing stock is older, on average, in rural communities, which means that many rural residents spend a larger percentage of their income on energy costs. This will be exacerbated as heating and cooling needs increase in the face of more extreme temperatures and weather events.
The Clean Power Plan would not only address the causes of climate change; it would also provide opportunities to transition away from the current extraction-based energy system that has historically hurt rural communities. Extractive industries like coal and natural gas impact the landscape and natural resource base, but they also drive a boom-and-bust cycle that leaves rural communities with little once the extraction is complete. A study by Headwaters Economics found that though fossil fuel extraction creates enormous wealth, most of that wealth leaves the region where the extraction occurs. In contrast, renewable energies like wind and solar do not deplete the natural resource base and are more often locally owned and controlled. Much of the country’s renewable energy production will happen in rural communities, providing an opportunity to move away from the historical patterns of resource and profit extraction. Tuesday’s Supreme Court decision perpetuates the harmful status quo and slows the opportunity for rural communities to build an energy system that retains benefits locally.
It’s often assumed that rural communities are opposed to action on climate change, but that narrative oversimplifies the diverse range of perspectives held in rural America. Many rural communities are already focused on building local resilience by addressing climate change, including the cities of Morris and Grand Rapids in Minnesota. In addition, a group of rural leaders and organizations released a policy document last year outlining priorities for addressing climate change in rural communities. The document emphasizes clean energy and community-based energy projects, as well as energy efficiency initiatives and assistance for rural communities to transition away from extraction-based economies. The Clean Power Plan is an opportunity to fulfill these recommendations, and the Supreme Court’s decision stands in the way of what many rural residents want.
On a global level, what the United States does to address climate change matters. Stalling the Clean Power Plan could weaken the collective commitments made at the Paris climate talks to lower greenhouse gas emissions around the world. The Clean Power Plan would take a step towards slowing climate change and set a global signal that the United States is ready to act. It would also create jobs, stabilize energy prices, and offer a way for rural communities to build resilience. Tuesday’s Supreme Court decision went beyond just delaying action on climate change; it dealt a blow to rural communities and the ability to build sustainable economies that are resilient in the face of increasing extreme weather events.
Posted February 2, 2016 by Ben Lilliston
This blog first appeared as a contribution to #Livestockdebate hosted by the European coalition ARC2020 (Agriculture and Rural Convention 2020). You can read contributions to the #Livestockdebate from other experts at the ARC2020 website.
Last month, workers entered ten massive, confined turkey and chicken operations in Indiana and sprayed foam designed to suffocate the birds. When the cold temperatures froze the hoses, local prisoners were brought in to help kill the birds manually. Other operations shut down the ventilation systems killing the birds as heat temperatures rose. More than 400,000 birds have been euthanized so far in an effort to contain a new strain of avian flu in the U.S. Last year, approximately 45 million birds were killed to contain the spread of a different avian flu strain in the U.S. These epidemics are not limited to poultry: two years ago, a massive piglet virus outbreak killed millions of pigs (an estimated 10 percent of the U.S. hog population).
The rapid spread of new disease strains, made worse by a changing climate, is one very visible reason why the expansion of factory-style animal production is viewed as unsustainable. As Olivier De Schutter, Hans Herren and Emile Frison point out in commenting on livestock’s ecological footprint, this industrial model of meat production “yields too many negative outcomes on too many fronts to be justifiable.”
Although this industrial model of animal production originated in the U.S., it is now truly global. Global meat industry giants include: Brazil-based JBS, considered the largest meat corporation in the world; China-based Shuanghui, the world’s largest hog producer; and U.S.-based Tyson Foods, the world’s largest poultry producer.
While this model of production is now global, the U.S. experience exposes many of its unintended and often unspoken consequences. The Pew Commission on Animal Agriculture identified a host of negative impacts from industrial animal production in the U.S. on rural communities, public health, the environment and animal welfare. In North Carolina, groups have called for the government to launch a civil rights investigation into how the concentration of hog farms and associated manure lagoons in largely minority communities have caused environmental and health problems. The dangerous work and poor treatment of U.S. meat and poultry workers have given rise to allegations of international human rights violations.
Of course, this is more than a U.S. problem. In December, the Institute for Agriculture and Trade Policy hosted a webinar in which animal industry experts outlined eerily similar systems in the U.S., Brazil and India, which force contract poultry growers to take on enormous financial risk without having the power to negotiate fair prices. China’s embrace of industrial animal production is accelerating the model’s growth both inside and outside of China.
This factory-based model of animal production is gaining increased scrutiny at least partially because of its large climate footprint. Much of agriculture’s estimated percent of global greenhouse gas emissions can be linked to the rise of animal agriculture—whether from methane emissions or through the use of synthetic fertilizer to produce the massive amounts of corn and soy needed for animal feed.
The U.S. example is again instructive. Manure-related methane emissions from confined animal operations now account for roughly 30 percent of California’s total methane emissions. The increased use of liquid waste lagoon systems in U.S. dairies led to a 115 percent increase in emissions from 1990 to 2012. Corn and soy-fed ruminants raised in confined systems produce more methane than grazing livestock. A U.S. government report concluded that enteric emissions decrease when shifting the feed of dairy cows from silage and grain toward more grass.
The multiple benefits of a more diversified farming approach, which includes animal production as part of an agroecological system, are becoming increasingly evident. The multi-year International Assessment of Agricultural Knowledge, Science and Technology for Development, which included 900 experts in 110 countries and international agencies including the World Bank and UN Food and Agriculture Organization, concluded that agroecological systems are good for farmers, food security and building climate resilience. Yet public policies—whether through trade agreements or national farm policies—continue to support the meat industry’s exploitive system of production.
As the meat industry scrambles to inoculate massive confinement facilities from diseases like avian flu or the piglet virus, there seems to be little consideration that the model itself is badly broken.
Posted February 2, 2016 by Karen Hansen-Kuhn
One reason the TPP is in such trouble, especially in the United States, is that we’ve heard this story before. Passing NAFTA, CAFTA or other free trade agreements was supposed to mean more and better jobs, improved farm incomes and increasing prosperity all around. But that’s not what happened. In the wake of NAFTA, manufacturing jobs have evaporated, family farms have been decimated and income inequality has increased. Projections that this time around the TPP would generate increasing prosperity are met with a healthy dose of skepticism or outright disbelief.
Another part of the story is the strong opposition across borders. A big outcome of the NAFTA debate was the formation of strong ties among citizens’ groups in Mexico, the U.S. and Canada that refocused the discussion away from one country “stealing” jobs from another to a central emphasis on the role of transnational corporations in driving standards down to the lowest common denominator. An important element of the eventual defeat of the Free Trade Area of the Americas was the creation of the Hemispheric Social Alliance, allowing national and sectoral coalitions to coordinate analysis and actions across borders.
Last week Mexican civil society groups convened organizations from the NAFTA countries plus Peru and Chile to reenergize that collaboration in the context of TPP and build an action plan moving forward. It was great to see allies from Mexico and Canada, especially the coalitions that began during the NAFTA debate. It was inspiring to meet leaders from vibrant coalitions in Chile and Peru, as well as people working on digital rights and other issues that are relatively new in the trade debate.
We also found some new allies among legislators. Mexican Senators Manuel Bartlett Diaz and Layda Sansores San Roman convened a meeting of parliamentarians and civil society groups in the Senate that raised the profile of the TPP critiques and set the stage for future collaboration. Peruvian Deputy Yonhy Lescano challenged the notion that legislators don’t know what’s in the text, running through pointed critiques of intellectual property rights provisions that will impede access to medicines. Canadian parliamentarians Tracy Ramsey and Elizabeth May sent video messages to the gathering, and Quebec parliamentarian Andres Fontecilla urged continued joint actions from the streets to the legislatures, as well as leveraging international pressure at human rights bodies.
In addition to discussion of the impacts of past trade deals, several specific topics emerged:
Both the civil society groups and legislators stressed the importance of raising these issues at numerous UN bodies, including the Food and Agriculture Organization (which has a Latin American regional meeting of agriculture ministers coming up in March in Mexico), the Inter-American Commission on Human Rights, and the Convention on Biodiversity (which will hold its Convention of Parties in December in Mexico). This is not only to highlight the basic contradictions between countries’ human rights obligations and the trade commitments, although those are certainly real. It is also intended to start to draw other countries that might be considering joining the TPP in the future into the debate about the potential impacts on the right to food, labor rights and other issues of local and national sovereignty.
The groups will continue to share analysis of the TPP (now available as final text after a legal “scrub”), and to raise those issues broadly. The meeting culminated with a march of ten thousand Mexicans protesting privatization, corruption and free trade and shared plans to react to the TPP signing this week in New Zealand.
While it’s hard to escape the fact that the TPP agenda is driven in large part by the Obama Administration, the legislators and civil society groups issued a statement generously recognizing the “courageous conduct and decisive action of U.S. legislators who are sensitive to the voices of protest of many broad sectors and citizens organizations and therefore oppose the ratification of the TPP. We encourage joint hemispheric and international efforts to denounce the threat of the TPP and demand its definitive burial.”
The final declaration and action plan from civil society groups will be available here on February 3.
Posted January 15, 2016 by Dale Wiehoff
It didn’t take long to test USDA Secretary Vilsack’s prediction that the poultry industry is prepared for a new outbreak of Highly Pathogenic Avian Influenza (HPAI). On January 8, Vilsack gave an interview to USDA Radio News in which he said, “I think we’re in a much better position to detect it more quickly, to respond more effectively within 24 hours to depopulate flocks if we see a reemergence of this.”
Earlier today, the USDA released a statement confirming an outbreak of H7N8 virus, a different strain of HPAI than the one that killed 48 million birds in the US this spring. This latest outbreak occurred in a commercial turkey flock in Dubois County, Indiana. Plans are under way to kill the flock and dispose of the carcasses. News of the outbreak sent stocks tumbling for all the major poultry processors.
It is too early to tell if this appearance of H7N8 virus will be as devastating as the last round of HPAI, which subsided in June of last year. While the Indiana outbreak was the first reported in the U.S. in almost seven months, avian flu has continued to wipe out millions of birds in other countries. France in particular has been hard hit, with over 30 flocks destroyed to prevent the spread of the disease.
Just as bans on U.S. poultry products were being lifted around the world and vaccines developed, the poultry industry was breathing a sigh of relief. They shouldn’t have. Beyond prepositioning earth moving equipment and hazmat suits to bury the birds in the next outbreak, the USDA and the poultry industry have failed to deal with the inherently vulnerable model of poultry production. As long as the federal government is prepared to pay millions of dollars to “indemnify” the poultry industry for losses, there is little incentive to start asking the hard questions about how we raise chickens and turkeys. What is at risk is the day when H7N8 or H5N2 jumps the species barrier and infects humans. Who will indemnify those loses?
Posted January 7, 2016 by Juliette Majot
The ability of the United States to make its own decisions regarding how, where and why to build transcontinental oil pipelines has been challenged by TransCanada Corporation, which sued the U.S. yesterday for the loss of potential future profits associated with the cancellation of the Keystone XL pipeline. The move represents a threat to both U.S. national sovereignty and national security, given the role of energy policy in protecting the homeland. The suit could also establish a precedent for challenging sovereign rights to address climate change through energy policy, not just in the U.S., but in any country that is party to the North American Free Trade Agreement (NAFTA).
The standing of TransCanada to sue the American government is provided not in any formal U.S. legal judiciary setting, but through rules laid down in a trade regime, NAFTA. The terms of this agreement, and other similar trade agreements, are designed to protect the rights of foreign investors over the rights of the states in which they are investing.
If successful, the suit will incur more losses to U.S. citizens than those associated with sovereign rights and national security. TransCanada is asking for $15 billion dollars in lost potential future profits. Furthermore, in an additional suit filed in Houston, Texas, TransCanada is seeking to limit the power of the President of the United States in setting U.S. energy policy by claiming that the Keystone decision was unconstitutional.
So what is going on? On Wednesday, TransCanada formally announced its intent to file a trade dispute with the United States, claiming that rejection of the Keystone XL pipeline announced by President Obama in November 2015 was unfair based on the rules set in NAFTA, and that the November decision deprives them of future lost profits. In the opinion of TransCanada, the decision against Keystone was a political one designed to show U.S. leadership on climate change. In effect, what TransCanada is saying is, “our profits trump your national energy policy.”
The really bad news is that TransCanada has a strong case for saying so. Why? Because we have entered into trade agreements that DO trump our national sovereignty and we are heading straight into more of them with our eyes wide shut. TransCanada is helping open those eyes. And that is the very good news in all of this.
Thanks to TransCanada’s extraordinary actions, the lid has blown off intentionally obscure provisions of NAFTA that favor corporate interests over national sovereignty and security in a way that Americans can see and feel. That means that new trade agreements, including the Trans-Pacific Partnership (TPP), and the Trans-Atlantic Trade and Investment Partnership (TTIP), will no longer be able to hide similar provisions that are, by design, intended to grant special legal rights to corporations and further erode the national sovereignty of the U.S. and each and every nation that signs them.
Posted December 23, 2015 by Sophia Murphy
The World Trade Organization’s 10th Ministerial Conference, held in Nairobi, Kenya from 15-18 December came right on the heels of the final outcome of the 21st Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC). The contrasts were striking, and not just because of the shift from Europe to Africa, from northern winter to equatorial rains, and from environment to trade. There was also the level of interest: everyone who could not be in Paris was watching what went on there from afar, while few came to sit in the make-shift tents put up by the Kenyan Government as an NGO centre. The protest marches, organized by farmers’ organizations, gathered dozens of people rather than the several thousands who had come to WTO Ministerials past. The multinational lobbyists were few, many having turned their attention instead to plurilateral agreements such as the Trans Pacific Partnership, or TPP. Despite its long-standing support for the WTO and its agenda, The Financial Times newspaper did not even send its world trade editor. It seemed that the world could hardly have cared less.
Most importantly, the governments that met in Paris were evidently chastened by their repeated past failures and were at last willing to respond to the mounting political pressure to take action on climate, pressure that was evident in the demonstrations and civic actions that took place across the planet as the governments negotiated. Leaders came to Paris intent on finding a way through the political, economic and environmental complexities of reinventing the basis of economic life on the planet. We need the same for trade. Instead, the heart of the fight in Nairobi was over what the negotiating agenda should include. Many rich countries came to Nairobi wanting to tighten intellectual property rights, open up government procurement for foreign competition, and to deregulate investment and competition laws. Most poorer countries disagree vehemently with this agenda. They want to first complete unfinished business related to trade in agricultural commodities and industrial goods.
Juggling competing interests
The debate really matters because multilateral trade rules are a practical way to considering the deep power asymmetries that mar the international community. The alternative—plurilateral talks managed on a by-invitation basis—leaves the least powerful countries with no voice at all in the discussions. But it is a debate that needs domestic political support. Yet governments treat trade as a top-secret matter, frightened to even engage with parliaments, let alone citizens, on what is at stake. Industry groups get privileged access to their ministers and diplomats, while few countries bother to meet with public interest groups.
Thus, sadly, in Nairobi, governments had their sights set far—far—lower than they had in Paris. There were a few private interests there, keen to maintain privileges (the US cotton industry, for instance). But they had little to fear, despite the havoc their programmes cause for some of the world’s poorest people; the United States, as perhaps the single most powerful WTO member, was also not there for much more than blaming others for failure, despite their starring role in that drama. Just two days before the Ministerial began, the US Trade Representative published a scathing opinion piece in The Financial Times. (A piece I responded to at the time). More broadly, very few WTO members felt any domestic pressure to get a result in Nairobi and what pressure was evident was all in the name of shutting down debate and closing ranks.
This does not mean the Ministerial was not hard work: as one diplomat said to me, failure takes a lot of work, too. The diplomats met and argued, called impromptu briefings, and negotiated not just far into the night during the week, but also apparently felt the need for what has become the customary unscheduled additional day of talks to come up with a final declaration.
And the result? The press coverage goes from elegiac: “WTO Nairobi deals good for all”, Kenya’s The Standard; to the damning: “South suffers humiliating setback at Nairobi”, SUNS news service; to the view that the WTO is fading to irrelevance because developing countries cannot ‘get with the programme’: “Trade talks lead to ‘death of Doha and birth of new WTO’” in The Financial Times; a variation on which, importantly, did not blame developing countries for the result: “Doha is dead. Hopes for fairer global trade shouldn’t die, too” The Guardian. A sense of civil society organizations’ views can be seen in this story, also in The Standard, that covered the final NGO press conference, “Poor countries walk away empty handed, again.”
Little new trade liberalization out of Nairobi
Ultimately, the so-called defensive interests prevailed—there will be little new trade liberalization out of Nairobi. For the diehards (and I am one) it was satisfying to see developed countries commit to the immediate elimination of export subsidies in agriculture (though there are some exceptions that will take time to be phased out). Yet the push to end other distortions in international agricultural markets yet again went nowhere. The EU was practically begging to be allowed to end its export subsidies but needed the US to make concessions on its use of export credits and food aid. The US more or less refused, despite some pressure from IATP and other public interest groups that work on food aid before the Ministerial.
Meanwhile the vexed (and aging) “new issues” of investment, competition and public procurement that developed countries want to negotiate and developing countries edged their way a little closer to the negotiating table, though not much closer. There are lots of truly new issues the WTO could usefully look at—to name just a few, consider the subsidies given to oil and gas industries, the failure to manage price risk and volatility in food commodity markets, and the long-standing but unaddressed market distortions created by oligopolies in agricultural input and commodity trading sectors.
But no objective scan of the multilateral institutions today would alight upon the WTO as a place where governments get things done. The UN General Assembly has come through with an ambitious agenda of development issues that will absorb developed and developing country attention for the next 15 years with the Sustainable Development Goals, looking at poverty, inequality, vulnerability and more. The UNFCCC has—finally—turned a corner to shift the debate towards what each country will do itself, and just a little away from the obsession with what everyone else should do to curtail climate change. By contrast, the WTO membership is petulant; the governments refuse to lead by example, preferring instead to point the finger at other countries, blaming others for the lack of progress rather than looking closer to home first.
For the WTO to be able to contribute, its member states must adopt a mandate for the organization that moves away from a narrowly defined (and economically questionable) faith in open markets as a panacea for all the world’s ills. There is much open markets can do, and much they cannot. There is a rich debate under way about the future of the planet and the realization of sustainable development. The WTO—which could offer a lot to the debate and to the realization of positive change—is so far missing in action.