Posted June 23, 2016 by Tara Ritter   

CarbonCarbon MarketsClimateClimate Change

Used under Creative Commons license via Wikipedia, image by Arnold Paul cropped by Gralo.

The Clean Power Plan is the predominant plan in the U.S. to address climate change. The Environmental Protection Agency (EPA) is encouraging states to set up regional carbon markets to comply with the plan; however, carbon markets to date have not achieved their intended goals. If states follow the EPA’s advice and set up new carbon markets across the country, they must learn from past mistakes to prevent more of the same underwhelming results.

California’s Global Warming Solutions Act (AB 32) is the most prominent U.S. example of a carbon market that has resulted in unexpected outcomes. AB 32 includes a cap-and-trade program to reduce the state’s greenhouse gas emissions to 1990 levels by 2020. The program sets a statewide emissions cap and then distributes emissions allowances to industries covered under the regulation (“covered entities”). A majority of the allowances are given away for free—a reversal of the polluter pays principle—and the remainder are auctioned off quarterly. Each year, the emissions cap and the number of free allowances each covered entity gets are ratcheted down. Ratcheting is intended to increase the value of allowances, but this strategy has not worked as of yet.

On May 18, 2016, the California Air Resources Board held its quarterly auction of allowances. Just over 10 percent of the allowances up for auction sold, and all of them sold at the price floor. This left California $600 million short of projected revenues. Although the purpose of the carbon market is not to generate revenue for the state—it’s to reduce greenhouse gas emissions—the May auction’s outcome demonstrates that allowances may not be scarce enough to drive competition for them and raise their value.

One reason for the low allowance sales and prices at the auction is the secondary market, which the state set up for covered entities to buy and sell allowances outside of the quarterly auctions. Speculators bought up allowances in earlier auctions hoping to buy and sell them for a profit on the secondary market when prices rose. But, with too many allowances on the market at low prices and with the future of the cap-and-trade program beyond 2020 in question, the allowances were dumped at even lower prices on the secondary market. At the May auction, it was cheaper to buy allowances on the secondary market than at the official auction.

The California market’s structure requires auction revenues to be used for projects that reduce greenhouse gases and environmental burdens, specifically in disadvantaged communities. Many power plants, coal mines and fracking sites are located in communities, often rural areas, already burdened by high poverty rates. These communities pay the price of the pollution through worsened public health and deteriorated natural resource bases. Because the auction revenues fell short in May, anticipated investments in California climate programs will now be much lower than expected. Cap-and-trade mechanisms have proven to be an unreliable and insufficient funding source and should not be the primary source of funding for critical climate change programs.

California’s cap-and-trade system is not the first carbon market to underperform. The Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade system among nine northeastern states, had an overabundance of allowances for years that were also sold at the market’s floor price. The EU Emissions Trading System (EU ETS) is no different; due in part to an economic recession and an over-allocation of allowances at the outset, allowance prices fell from over 20 Euros/ton in 2011 to just 2.75 Euros/ton in 2013. In order for a carbon market to be effective, it must sufficiently limit allowances and maintain high enough prices to motivate industries to reduce their emissions. Without an effective cap or price on carbon, polluters will continue polluting at whatever rate their profit objectives dictate.

The United States now has a nationwide carbon reduction policy through the Clean Power Plan, and states have until 2018 to create State Implementation Plans outlining how they will meet their emissions reduction goals. Although the EPA has encouraged carbon markets as a cost-effective way for states to meet their targets, carbon markets are not the only way to limit emissions and raise public revenue. If the Clean Power Plan does drive the creation of more carbon markets, it’s imperative that states learn from the mistakes of past markets by pricing allowances high enough, making the number of available allowances low enough and continually ratcheting down the number of allowances available to create real motivation for emissions reductions. The Clean Power Plan must avoid building more carbon markets that don’t live up to their promise. 

Posted June 10, 2016 by Karen Hansen-Kuhn   

TradeTTIPTPPFree trade agreements

Used under creative commons license from world_trade_organization.

U.S. Trade Representative Ambassador Michael Froman at the Tenth WTO Ministerial Conference in December 2015 in Nairobi Kenya

The proposed Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union has been negotiated in secret – preventing the public from knowing what exactly is on the negotiating table. In May, TTIP text was leaked by Greenpeace Netherlands. The leaked text provides a snapshot of the status of the talks. Review of the leaked TTIP text—U.S. and EU proposals along with an EU “Tactical State of Play” document— provides important insights into the direction of the trade talks, and raises alarm bells for advocates of fair and sustainable food and farming systems. This is part five in a five part series.

Both the U.S. and EU have stated their intention for TTIP to be the “gold standard” for other agreements. This could mean that rules set in TTIP could become the default position at the World Trade Organization (WTO) and other trade talks. Early in the TTIP talks, the U.S. proposed a special chapter that would encourage the EU and U.S. to work together to eliminate “localization barriers to trade”—measures that favor local content or preferences for local businesses—used by other countries not party to TTIP. It’s not clear if that idea ever saw the light of day, but now, the EU is proposing a chapter on Agriculture that could also serve to unite pressure on developing countries to conform to EU and U.S. proposals.

The EU has proposed an Agriculture chapter in TTIP, something not included in previous bilateral or plurilateral agreements the U.S. has negotiated. It proposes disciplines on agricultural-export credits along the lines agreed to at the Nairobi WTO meeting in December 2015, as well as other changes to subsidies and food aid programs. While progress on those issues could be helpful, these kinds of commitments in TTIP could also be used to ensure that the U.S. and EU present a united front on other issues that have been controversial in global trade talks and overwhelm developing country concerns.

The EU State of Play memo from March notes that, “As regards export competition, the U.S. is opposed to the inclusion of any discipline in TTIP that would go beyond the Nairobi outcome. It pointed to a non-binding language in TPP that resisted calls from [other TPP] members to undertake specific commitments. The U.S. proposed adding to the TTIP the language on export restrictions agreed in TPP and committed to propose an alternative language on cooperation in agriculture.”

The TPP went beyond establishing disciplines on export restrictions to also limit developing countries’ ability to shield sensitive agricultural markets from imports. Article 2.26 of TPP on Agricultural Safeguards eliminates the Parties’ rights under the WTO to apply special tariffs in the event of import surges. This issue, as well as establishing developing countries’ rights to exempt key agricultural goods from trade liberalization in order to ensure food security and rural development, has been a key point of contention in the WTO talks. The inclusion of these issues in TTIP would likely mean that two of the world’s largest economies would work together in future multilateral trade talks in ways that override the interests of smaller economies.


Many of the issues included in the TTIP drafts go far beyond anything negotiated in previous trade deals. They could affect a broad range of national and local efforts to rebuild food systems on both sides of the Atlantic and entrench corporate interests in decision-making processes on chemical, health, consumer safety and environmental standards. And yet the exact nature of these proposals remain shrouded in secrecy. Full public debates on the content of TTIP should be based on current information and transparent processes at every step along the way, rather than periodic leaks of incomplete bits of text. Only then would it be possible to envision an agreement that serves to advance progress on fair and sustainable economies and food systems.

Read the other parts of this blog series:
Part 1: Secret science would help streamline biotech and other food product approvals
Part 2: Local governments could be required to abandon buy-local requirements
Part 3: Tariff reductions could disrupt local farming systems
Part 4: Proposals on regulatory cooperation would lower standards

The complete document is available at Five Key Takeaways from the TTIP Leak for Food Systems.  

Posted June 9, 2016 by Dr. Steve Suppan   Sharon Anglin Treat   

TradeTTIPFree trade agreements

Used under creative commons license from oragriculture.

The proposed Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union has been negotiated in secret – preventing the public from knowing what exactly is on the negotiating table. In May, TTIP text was leaked by Greenpeace Netherlands. The leaked text provides a snapshot of the status of the talks. Review of the leaked TTIP text—U.S. and EU proposals along with an EU “Tactical State of Play” document— provides important insights into the direction of the trade talks, and raises alarm bells for advocates of fair and sustainable food and farming systems. This is part four in a five part series.

“Regulatory Cooperation” is an apparently benign name for an insidious process that would be inserted into trade agreements to establish new tools for corporate “stakeholders” to frame and dominate the development of virtually any kind of public regulations as they are being developed or even to weaken or eliminate existing rules. The U.S. and other TPP members took a first run at it in that accord, although what resulted was mainly a voluntary forum. Leaked drafts of the plurilateral Trade In Services Agreement (TISA) call for similar disciplines on Domestic Regulations. The TTIP push for Regulatory Cooperation also advances that idea, with slightly different approaches coming from the EU and U.S.  

Many civil society organizations have indicated the real dangers of increased corporate influence on the development of public health and safety standards posed by the texts on Regulatory Cooperation made by both the U.S. and EU. The U.S. proposals for cost-benefit analysis of new rules, in addition to putting new burdens on regulatory agencies, would create new procedures and data requirements that could be used as evidence in TTIP investor-state cases. Corporations and other investors would be able to sue governments in private tribunals for compensation over all “regulatory actions” including how rules to protect consumers and the environment are enforced. The Regulatory Cooperation chapter is a “horizontal” chapter with application throughout the agreement, but many components of these proposals are also embedded in specific chapters of TTIP.

The second paragraph of the U.S.-proposed “Science and Risk” article in the SPS chapter, for example, would forbid regulators from adopting a food or plant safety regulation until and unless they have evaluated “any alternatives to achieve the appropriate level of protection being considered by the Party or identified through timely submitted public comments, including where raised, the alternative of not adopting any regulation.” This paragraph would enshrine the U.S. practice of allowing an exhaustive process of “timely submitted public comments” by industry to slow down or even stop new regulations, including regulations to protect public and environmental health.

In essence, the U.S. proposes to export the “guilty until proven innocent” burden imposed on U.S. agencies seeking to enact new rules to the European Commission and EU member states. European NGOs have rightly recognized that this SPS chapter proposal and other examples of regulatory cooperation in TTIP would essentially result in the corporate takeover of the EU regulatory process.

We should not read too much into the fact that the leaked provisions of the EU and U.S. horizontal regulatory chapter are mostly bracketed and thus not agreed to. The Tactical State of Play memo notes “good progress” in the regulatory cooperation negotiations and that the EU and U.S. texts are “complementary in many respects.” Regulatory cooperation proposals publicly released by the EU on March 21, 2016, which are more current than those reflected in the leaked documents, confirm that the EU and U.S. proposals are becoming more similar in approach. If enacted, this could create huge roadblocks to public interest laws on both sides of the Atlantic.

Next: Coordination on agriculture policy could undermine the interests of developing countries

The complete document is available at Five Key Takeaways from the TTIP Leak for Food Systems.  

Posted June 8, 2016 by Shefali Sharma   

AgricultureTradeTTIPTPPFoodFree trade agreements

Used under creative commons license from beantin.

The proposed Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union has been negotiated in secret – preventing the public from knowing what exactly is on the negotiating table. In May, TTIP text was leaked by Greenpeace Netherlands. The leaked text provides a snapshot of the status of the talks. Review of the leaked TTIP text—U.S. and EU proposals along with an EU “Tactical State of Play” document— provides important insights into the direction of the trade talks, and raises alarm bells for advocates of fair and sustainable food and farming systems. This is part three in a five part series.

Though the main critique of TTIP has been its sweeping impacts on rule making and standard setting in the two regions, further agricultural tariff liberalization will have a major impact, in particular in the E.U.  The leaks offer a first look at which agricultural goods will be on the line. While average tariffs on goods traded between the U.S. and EU are quite low, those figures obscure substantial differences on key products, some of which currently protect vulnerable farming sectors that are already suffering from low prices and unstable markets. In a memo describing tariff reduction offers dated November 20, 2015, the EU notes the intention under TTIP to eliminate tariffs on 97 percent of goods. While exactly how this will play out will only become clear during the final “endgame” of the negotiations, the memo describes substantial, and in many cases, abrupt changes in tariffs on farm goods. As of November, the EU was offering to lower more tariffs than the U.S., but in the latest round of negotiations in April, the U.S. reaffirmed its goal for total tariff elimination. The EU still opposes this position in the interest of its most sensitive agriculture products.

Contrary to what EU negotiators have been saying about such protection, the leaks demonstrate that the EU is already willing to reduce—and over three to seven years eliminate—duties on 175 agricultural tariff lines (categories of agriculture products) that include live cattle, goat meat, milk and cream, nuts, fruit jam and fruit juice, animal feeding, and glues. In addition, the EU and U.S. have designated two percent of all their tariff lines in a special “T” category. These tariffs will be eliminated, but over an as-yet undetermined phaseout period that could extend beyond seven years. These products for the EU include poultry, ham and swine preparations, barley/maize, wheat and wheat flour, and fertilized eggs (other than chicken eggs). The U.S. has similarly placed certain swine and lamb products, 17 kinds of dairy and cheeses, chocolate and olives in the “T” category.  

In a “game of chicken,” the U.S. continues to reserve some tariffs on bovine meat products and 144 kinds of dairy and cheese products (as well as several industrial products such as cars) for less than full tariff elimination in order to push the EU to liberalize more agricultural goods. The EU is protecting 281 agriculture tariff lines that include products made from bovine, swine, poultry, dairy, fertilized chicken eggs, vegetables and fruit, rice, maize flour, starch and sugar). The EU has also indicated that although some tariffs will not be eliminated, tariff rate quotas (set quantities allowed in at reduced tariff rates) for beef raised without the hormones that are banned in the EU are likely to be set.1 This will mean much more pressure on the EU’s beef sector. Taken together, these commitments will have big impacts on EU farming systems. 

In many of these cases, the real issue is not just the tariffs. For instance, the EU was expecting the U.S. to abide by certain animal welfare provisions for egg-laying hens on a few tariff lines (for birds other than chicken) and also expecting an “economically meaningful” procurement offer by the February 2016 round before it makes further offers, according to the State of Play memo. The EU prohibition on beef produced with hormones, chlorine-rinsed chicken or sale of cloned animals for meat (to name a few of many examples) are considered non-tariff barriers in TTIP. These measures enhance public health and animal welfare while strengthening local production in Europe from floods of cheap imports produced with lower standards. These are going to be the crux of heated negotiations during the so-called “endgame” of the talks.

Many of the same agribusinesses already operate on both sides of the Atlantic, and at least part of the reduction of agricultural tariffs is about making it easier for those companies to trade across borders. This tariff memo describes the EU’s so far frustrated ambitions for the trade deal, and some of the concessions it is prepared to offer in exchange. It’s hard to discern from this how U.S. farms would be affected. However, changes in public support and volatile and plummeting global prices for dairy products have already left dairy farmers on both sides reeling. Meanwhile, the EU and U.S. negotiators are busy horse trading the lives of small dairy and meat producers and processors over the amount of car parts and other goods each side is willing to liberalize. This will lead to a bad deal for family farmers on both sides of the Atlantic.

Next: Proposals on regulatory cooperation would lower standards

The complete document is available at Five Key Takeaways from the TTIP Leak for Food Systems.  

1. “U.S., EU To Increase Tariffs Subject To Immediate Elimination, But Clash On Eliminating All,” Inside U.S. Trade, April 29, 2016. 

Posted June 7, 2016 by Sharon Anglin Treat   

Local FoodTradeTTIPTPPProcurementFree trade agreements

The proposed Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union has been negotiated in secret – preventing the public from knowing what exactly is on the negotiating table. In May, TTIP text was leaked by Greenpeace Netherlands. The leaked text provides a snapshot of the status of the talks. Review of the leaked TTIP text—U.S. and EU proposals along with an EU “Tactical State of Play” document— provides important insights into the direction of the trade talks, and raises alarm bells for advocates of fair and sustainable food and farming systems. This is part two in a five part series.

One of the EU’s key offensive interests in the trade talks has been to open U.S. public procurement programs at all levels of government to bids by EU firms, removing policies that support local employment, local content or portions of contracts set aside for small businesses. While many states have agreed to those kinds of commitments in previous trade deals (although the number has dwindled in recent agreements), this could mean an unprecedented expansion to municipal and county governments and agencies. As indicated in the Tactical State of Play document, so far, the U.S. has been cool to proposals to commit local governments on procurement. Exactly which state or local governments or institutions would agree to those commitments would be indicated in an annex to the Procurement chapter text. That annex was not leaked, and probably doesn’t yet exist.

In addition to bracketed language in Article X.4.3 that would “immediately and unconditionally” cover both national and local government goods, services and suppliers, the EU is advancing a bold new “flow down” proposal, which would broadly cover local entities. In paragraph 4 of Article X.2 on Scope and Coverage, projects that are more than 50 percent funded or covered by national or local governments that have signed on to TTIP, but are not otherwise directly covered in the text, would be required to follow the rules those agencies have agreed to. This provision appears to be a catch-all that would sweep within its ambit not only state and local government projects but also nonprofit enterprises, utility districts, universities, hospitals and potentially state Medicaid contracts (“project” is not defined in the text, but services are covered). For example, since Medicaid provides medical transportation services to clients, these contracts would be covered by the procurement disciplines if funded more than 50 percent by a covered federal agency.

We do not know the U.S. position on this flow down proposal. However, if the TPP is the model for the U.S. position in the TTIP negotiations, that agreement excludes state and local procurement from the disciplines of the procurement chapter (with the proviso that negotiations to include sub-central procurement must commence within three years) and did not include provisions that would indirectly bind federally-funded projects. TPP Annex 15-A in Section A, Note 1 exempts USDA funded “procurement of any agricultural good made in furtherance of an agriculture support program or a human feeding program,” which protects many Farm to School local procurement programs.

The leaked TTIP text goes further than the TPP in restricting local development preferences, known as “offsets.”  It appears that EU and U.S. negotiators have agreed to a definition of “offset” in Article X.1(o) which is more expansive than that in the TPP. The TTIP text defines offsets as “any condition or undertaking that encourages local development or improves a Party’s balance-of-payments accounts, such as the use of domestic content, the licensing of technology, investment, countertrade and similar action or requirement.”  In contrast, the TPP definition limits the application of this prohibition to a “condition or undertaking that requires the use of domestic content” [emphasis added].

EU negotiators have previously made known their interest in negating in TTIP longstanding U.S. procurement policy that provide for set-asides or preferences for small businesses. The U.S. maintained those preferences in the TPP with language that exempts “any set-aside on behalf of a small- or minority-owned business” including “any form of preference, such as the exclusive right to provide a good or service, or any price preference” from the procurement rules. The TTIP leak did not include any similar protections. However, annexes and schedules of commitments and exclusions, while referenced, were not leaked.

The expansion of commitments on public procurements is one of the EU’s main offensive interests in TTIP. Whether or not the U.S. agrees to that idea will likely be left until the “end game” of the talks, when the most contentious issues are traded away.

Next: Tariff reductions could disrupt local farming systems

The complete document is available at Five Key Takeaways from the TTIP Leak for Food Systems.  

Posted June 6, 2016 by Dr. Steve Suppan   

TradeTTIPFoodFood safetyFree trade agreements

Used under creative commons license from USDAgov.

The proposed Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the European Union has been negotiated in secret – preventing the public from knowing what exactly is on the negotiating table. In May, TTIP text was leaked by Greenpeace Netherlands. The leaked text provides a snapshot of the status of the talks. Review of the leaked TTIP text—U.S. and EU proposals along with an EU “Tactical State of Play” document— provides important insights into the direction of the trade talks, and raises alarm bells for advocates of fair and sustainable food and farming systems. This is part one in a five part series.

To judge by the U.S. proposals in the leaked TTIP chapter on Sanitary and Phytosanitary (SPS) measures, which includes food safety rules, the U.S. Trade Representative (USTR) is seeking to export a flawed regulatory system to the EU, a system based on risk assessments that rely often on inadequate, secret data. While the leak indicates that the U.S. is trying to use TTIP to impose its weaker system for setting and enforcing SPS standards on the EU, this new transatlantic regulatory regime would also limit efforts in the U.S. to improve food safety standards and performance.

Risk assessments for imports of products not already approved in the importing Party (United States or EU) would be based on “available data.” In the U.S. experience, this means that regulatory approvals would not be determined on the basis of a weight of evidence in publicly available and peer-reviewed science, but on the basis of what risk managers and assessors—often in response to Confidential Business Information (CBI) claims—judge to be “reasonably available and relevant” scientific data. Article X.5 of the leaked text declares that, “each Party shall ensure that it takes into account relevant available scientific evidence, including quantitative or qualitative data and information.” This is a near repetition of the standard of evidence that the USTR successfully included in the TPP SPS chapter. (TPP, Article 7.9.5) Leaving aside the question of what are qualitative data, the key loophole in this provision lies in what scientific evidence is “available” for a risk assessment.

In the U.S. regulatory system, it is routine for commercial applicants to claim CBI status for evidence in an application to deregulate a product, and the CBI claim is seldom, if ever, denied. As a result, the data and information are what the commercial applicant wishes to submit, according to broad regulatory requirements, thus preventing a robust and independent risk assessment prior to commercial release. This approach would undermine the EU’s reliance on the Precautionary Principle, under which commercialization applications can be rejected when the science is not yet settled or when data is insufficient to enable a risk assessment.

For example, on April 13, 2016, the U.S. Department of Agriculture (USDA) informed the developer of a genetically engineered mushroom using CRISPR Cas-9 gene editing technology that based on information provided by the company, USDA would not regulate the GE mushroom. The agency, rather than performing a risk assessment to determine unintended effects resulting from the CRISPR Cas-9 techniques, simply trusts the information presented by the product developer as the basis for deregulating the gene-edited mushroom.  This deregulatory rationale is similar to that of the proposals from the transatlantic biotech industry group New Breeding Techniques Platform (NBT Platform) to exempt new agricultural technologies from regulation under EU law. Under the USDA and NBT Platform logic, if the genetic modification of a plant or animal does not result from the insertion of foreign genetic material, it is unnecessary to regulate it. No precautionary SPS measures applied to a novel technology are deemed necessary or even desirable.

In addition, the U.S. proposals would require EU authorities to explain not just their risk management decisions but also to discuss alternatives, presented in industry comments, to SPS regulations that are not part of each risk assessment. In essence, every step of regulation is subject to revision or reversal as a result of industry comments. At the same time as the U.S. demands of EU regulators complete risk assessment “transparency,” industry will be able to pick and choose which studies and data it presents for deregulation of its products. In sum, the “Science and Risk” approach, incorporated into the leaked provisions, increases the already steep burden of proof on governments to justify SPS rules while placing no burden on industry to demonstrate that its products, including novel foods and agricultural products, are safe.

The U.S. proposals include a new provision on “Regulatory Approvals for Products of Modern Agricultural Technology.” Article X.12 establishes an approval process for the sale or use of those products. This provision is disingenuous, since products of “modern agricultural technology,” including food and agri-nanotechnology, are not currently regulated and therefore are not approved by government agencies. Instead, they are deregulatedfollowing voluntary and confidential consultations with industry lobbyists. For example, the Center for Food Safety and five other NGOs sued the Environmental Protection Agency for failure to regulate engineered nanoscale silver in pesticide products.

If Article X.12 became part of the final TTIP deal, it would lock in this failure to regulate products derived from nanotechnology, genome editing and other novel technologies. TTIP would facilitate the commercialization of novel food and agricultural products following the U.S. model of confidential and voluntary consultations between the commercialization applicant and the regulator. If TTIP reinforces the U.S. practices of not monitoring novel products after entry into the marketplace, any reported harm to consumers or the environment resulting from those products likely would become the object of prolonged litigation, rather than prompt and pre-emptive regulatory action. While the Precautionary Principle would remain part of EU law, its implementation would be inhibited or circumvented by proposed TTIP requirements that emulate U.S. deregulatory practices.

Next: Local governments could be required to abandon buy local requirements.

The complete document is available at Five Key Takeaways from the TTIP Leak for Food Systems.  

Posted June 2, 2016 by     Jack Stuart

AgricultureTradeTTIPFree trade agreements

Used under creative commons license from celinet.

The Transatlantic Trade and Investment Partnership (TTIP) has the potential to transform agricultural trade between the United States and the European Union. TTIP could potentially lower tariffs and non-tariff barriers on a range of agricultural goods. While the impact of this on U.S. and EU food and farm systems has been heavily debated, there has been much less discussion of its possible impacts on developing countries. Could TTIP make it more difficult for developing countries to export, particularly goods which many communities have come to heavily rely on for their livelihoods?

TTIP is at the forefront of the “new era” of trade deals in that it seeks to move beyond simple reduction in tariffs towards regulatory harmonization on issues such as labor and environmental standards. In an agricultural context, tariff barriers and regulatory harmonization in areas where the U.S. and the EU differ, such as pesticide use, have garnered the most attention in the negotiations. While many states are implementing innovative pesticide regulations, in general, U.S. standards are lower than those in the EU. However, the push for regulatory convergence within TTIP—advocated by lobby groups such as CropLife America—would push standards to the lowest common denominator, while reducing individual U.S. states’ ability to regulate pesticides, as well as future efforts to regulate pesticide use within the EU.

One question that remains is how will this deal affect other countries which currently export to the U.S. and Europe? While the projected benefits of TTIP are heavily disputed, the scale of TTIP, which would cover 40 percent of global trade, is not. As such, the potential that exports from developing countries could be displaced by increased trade between the U.S. and EU must be taken into account when analysing the potential impacts of TTIP.

Kenya’s horticulture industry provides an empirical example of how this could play out in practice. Total horticulture exports from Kenya total 350,000 metric tons or 0.2 percent of the global market share, 80 percent of which are green beans and peas. Furthermore, 60 percent of these exports are grown by small holders who farm using low technology and labor intensive techniques. Could TTIP lead to U.S. agricultural exports undercutting Kenyan exports due to privileged access to EU markets? This could happen if U.S. exports are directly competing for the same market space at the same time as Kenyan exports.

The Kenya export market for green beans falls into two seasons. The low demand period  from June to September is characterised by a supply surplus in Kenya, during the ”long rains” season and low demand from the EU market, as EU member states can produce their own crops during this period. The high demand period runs from September to March. During this period, the EU market cannot produce enough to satisfy domestic consumption and supply in Kenya is typically low because the ”short rains” season doesn’t allow for effective farming, meaning extensive irrigation is necessary to maximize production. The U.S. growing season, while varying from state to state, runs from May to October, so Kenyan growers could be facing increased competition from U.S. producers at a time when EU demand is already low.

The issue of tariffs

U.S. firms, which already export 11 percent of their domestic green bean production to the EU, stand to substantially benefit from a reduced tariff under the TTIP. The current tariff stands at 11.2 percent, which could potentially fall to zerp. The likelihood of this happening is significant because U.S. negotiators, mindful of the fact that U.S. agricultural exports to the EU have fallen from 15 percent in 2000 to seven percent today ($10.1 billion) in relation to the rest of the world, are prioritising access to the EU agriculture market as a key objective in the negotiations.

The EU has held out full tariff liberalization of horticulture and other products as a ratification condition of the pending Economic Partnership Agreement between the EU and the Eastern African Community, which includes Burundi, Kenya, Rwanda, Tanzania, and Uganda. For a brief period, when Kenya balked at ratifying that controversial deal, tariffs were raised to the level used under the EU’s preference program for developing countries, the Generalized System of Preferences (6.9 percent on horticultural goods). Once Kenya agreed to join, tariffs were lowered to zero as a temporary measure pending expected ratification of the deal, possibly in October 2016.

The issue of pesticide regulations

A key issue in the TTIP negotiations concerning regulatory harmonization is the question of pesticide use in agriculture, with the U.S. advocating for lower pesticide controls on U.S. exports entering the EU. If this happens, there could be considerable pressure on growers in developing countries to modify their use of pesticides so that they remain cost competitive when exporting to this new trading bloc.

The U.S. and the EU take very different approaches to pesticide regulation and environmental management, with the EU using the precautionary principle, which leads to stricter requirements of food safety standards. This difference can be seen in Maximum Residue Levels (MRLs), where the residues allowed on agricultural products are in some cases 5,000 percent higher in the U.S. than the EU. While it is difficult to discern the exact direction of the TTIP negotiations, the proposals put forward by CropLife America and the European Crop Protection Association point to a move towards U.S. pesticide regulations. This could subsequently increase MRLs compared to the more stringent pesticide standards currently in place in the EU and in individual U.S. states.

Kenya’s horticultural industry is very dependent on exports to the EU market. As such, if TTIP drives down EU pesticide standards, will Kenya have to follow suit to continue to be cost competitive with new U.S. imports into the EU? In terms of what chemical pesticides are actually banned and in what quantities, Kenya surprisingly displays a similar pesticide regime to the U.S. rather than the EU. For instance, pesticides such as Atrazine, Diphenylamine (DPA), Acetochlor, Simazine, Acephate, which are currently permitted for use in agriculture within the U.S. and Kenya, are banned under EU law. It could well be that the effects of lowering pesticides standards in TTIP would not directly affect the regulatory regimes in countries such as Kenya. However, this does not give us a full picture of pesticide use within Kenya, where companies that do export to the EU in practice, are required to comply with significantly lower MRLs. If standards were to change under TTIP, Kenyan horticulture producers, such as green bean farmers, could be put under pressure by the changing EU regulations to increase pesticide use. This could also open the door for fewer and larger farms, which would employ greater pesticide use, to substitute for the production currently provided by smallholder farms.

Assessing the potential knock-on effects of TTIP on developing countries is conjecture until we know the makeup of the regulatory harmonization and the final text is released. However, the changes that have been proposed by corporations, in addition to impacting trade between the U.S. and the EU, could have significant effects on developing countries such as Kenya, especially around the standards used in the production of export crops. If these changes do result in increased use of questionable pesticides in developing countries, what would be the impacts on public health or the environment in those communities? The impact of TTIP on developing countries has not been part of the TTIP debate and more space is needed to further analyze how this massive trade deal will affect the developing countries who already export to the U.S. and the EU.

Posted May 18, 2016 by Dr. Steve Suppan   

FoodFood safetyHealthNanotechnology

Used under creative commons license from roebot.

A new report from Friends of the Earth (FoE), “Nanoparticles in baby formula: Tiny ingredients are a big concern,” will prompt a lot more commentary than can be summarized in this blog.

Two questions likely to be raised in all commentaries:

  1. Why did the manufacturers of six brand name baby formula decide to risk the value of their brands by adding molecular-sized nanomaterials to their infant formula, whose inhalation from powdered formula is a probable health hazard to babies, childcare providers and the workers manufacturing the formula?
  2. Why did the Food and Drug Administration (FDA) allow the makers of two Gerber® formulas, two Similac® formulas, one Enfamil® formula and one Well Beginnings™ formula to manufacture and sell these products without the consultation with FDA scientists that the agency very strongly advised in its 2014 voluntary guidance to industry? (IATP submitted comments in 2012 to three of four draft-guidance documents on nanomaterials in FDA-regulated products.)

Answering these questions may seem as simple as, well, child’s play. The simple answer is if governments refuse to regulate, companies will do what they perceive to be in their economic interest. As anyone who has watched children play, their activity is not simple.  

The FoE report should motivate these companies to withdraw the nanomaterials from their formula products, as requested in a FoE letter, which IATP has signed on to. It is difficult to forecast whether the sign-on letters to the FDA and the Occupational Health and Safety Administration (OHSA), urging them to regulate nanomaterials and nanotechnologies, will have any more success than past regulatory petitions and lawsuits. The letter to the FDA demands that the agency regulates nanomaterials and recall all brands of baby formula that incorporate nanomaterials, if the companies do not withdraw the products from the market. The letter to OSHA urged the agency to “adopt nano-specific regulations to protect workers from and inform them of potential exposure.”

FoE commissioned nanomaterial researchers at Arizona State University to test baby formula products purchased, at random, in retail outlets in the San Francisco Bay area. The laboratory detected four nanomaterials, including nano-hydroxyapatite (HA), which the European Union Scientific Committee on Consumer Safety has advised should not be used in cosmetic products. Conventional HA is a protein source derived from cow’s bones, but is also used as a stabilizer and an abrasive. Nano HA, particularly in its needle-shaped form, may act like other needle-shaped nanomaterials that cause lesions on the lungs similar to those causing lung cancer and mesothelioma.

Mayo Clinic researchers are investigating whether nano HA could result in an excessive and undesirable calcium intake. The companies apparently added the nano HA as a way to boost infant calcium intake without the added expense of using the greater volume of conventional HA. Other nanomaterials added to the baby formula likely aimed to achieve other technical objectives, such as retarding formula spoilage or increasing formula consistency.

The reluctance—indeed, refusal— to regulate nanomaterials and nanotechnology products is partly due to the general animus against regulation coming from Congress, at the behest of industry lobbyists, as purported “regulatory reform.” The procedural burdens and demands for an industry cost analysis, before rule implementation, has paralyzed U.S. rulemaking, This is now threatening to become a feature of the Transatlantic Trade and Investment Partnership (TTIP) under the guise of “regulatory cooperation.”

Yet, the known hazards of nanomaterials in baby formula, as reported by FoE, may force the FDA to undertake regulatory action to persuade the companies to voluntarily withdraw their nano-baby formula products from the market. If the products remain on the market, the reputation of the U.S. government’s massive promotion of and at least $24 billion investment in nanotechnology will be at risk of widespread consumer backlash.

Posted May 16, 2016 by Robert G. Wallace   

Used under creative commons license from urbanseastar.

Over the past year, the Star Tribune, the largest paper in the Minneapolis-St. Paul metro area, has published almost all its articles on the outbreak of highly pathogenic H5N2 in its business section. 

The placement is telling and reminds us that the paper views the virus, which has killed 50 million poultry across 21 states, as a matter for food companies and investors. It seems the ecologies and epidemiologies in which we are all embedded are to be treated as mere subsets of commodity economics.

An update last week, published—where else? —in the business section, repeated unsupported declarations about the origins of the outbreak. The newspaper claims the virus originated in Asia; migratory waterfowl brought it here and spread it; and farmer error is to blame for the outbreak. Anything but the poultry sector itself.

In January, the Star Tribune reported on a University of Minnesota study funded by Hormel’s Jennie-O division, a funding source the newspaper failed to mention. The study reported that Upper Midwest farmers tilling fields near poultry barns, which produced clouds of fomites, likely helped spread the H5N2 virus early in the outbreak.

The study’s statistical analysis indicates other possible causes of the spread of the infection include the composting of infected birds near barns; the spatial proximity of infected farms; and the presence of truck-washing stations, which, deployed to stop the outbreak, may have helped spread it. In short, the Hormel-funded study suggests that the spread of H5N2 is the fault of both farmers and the state’s botched cleanup and that the problems are found in specific practices on-site. 

These conclusions have led to instituting the "Danish entry" method of biosecurity, wherein farm workers must step into disinfectant, wash their hands, and change into their work clothes before entering the barn. Some farmers, the Star Tribune reports, have built enclosed walkways between barns and bought enough equipment to supply each barn separately.  

The possibility that the industrial model itself resulted in a strain that hit only the region’s largest operations is left unconsidered in the study. The study’s conclusions, hardly a surprise, were locked in by the questions asked. “To identify possible risk factors,” its authors' write,

the University of Minnesota research team developed a detailed survey that asked turkey farmers questions about their farm and surrounding environment, presence of wild birds and farm management practices.

The study is honest as far as one accepts its initial premises. One must start somewhere as it is, and why not with such a preliminary survey? That seems reasonable enough. Setting aside the limits of case-control studies, including this one’s small sample restricted to Jennie-O farms, the analysis is righteous in its albeit simplistic risk modeling. And yet the study is also corrupt to its conceptual core.

As the study reports, spatial proximity represents nearly five times the odds ratio than the next factor, so why the undue focus on individual farm practices? What about the size, density and interconnectedness of monoculture poultry operations arrayed across whole counties? What alternate food models are left out when only Jennie-O farms make up the totality of samples?

What of the political power that agribusiness exercises on local counties, including staffing regulatory agencies? What are the consequences for the study’s scientific integrity when it fails to disclose the conceptual premises of its funding source? What critical scientific investigation is left afield and unpursued when land grant universities are turned into agribusiness R&D?

In contrast, poultry industries outside the United States appear to be turning away from such lucrative obfuscation. Starting late last November, France’s duck and goose sectors were hit across eighteen southwest departments or subregions by simultaneous outbreaks of highly pathogenic avian influnezas H5N1, H5N2 and H5N9.

“It is an unprecedented situation to see the emergence of three different strains in such a short time,” World Organization for Animal Health Director General Bernard Vallat told Reuters. A fourth strain, H5N3, was reported in December in the departments of Landes and Pyrenees-Atlantiques.

French poultry farmers have responded by moving to end industrial production as it has been long practiced. Biosecurity changes, similar to those Minnesota poultry farmers are now implementing, are being pursued, but with the understanding, long recognized in the scientific literature, that such changes are insufficient. Unlike in the U.S., sector-wide regulation is also now introducing up to a four-month break between flocks during which, farmers are expected to clean-out and disinfect their barns.

Many French farmers recognize the painful production loss that results from such a radical change as a necessary intervention. Deadly influenza is acting, as one farmer states it, as a “system boundary” for industrial husbandry. That is, raising so many genetically homogeneous birds in tight quarters inside barns and across agricultural landscapes is unsustainable. Industrial poultry represent so much food for deadly flu. Virulent strains typically burn out when susceptibles die off, but under the industrial model the natural cap on virulence is removed and the thousands of available birds permit such strains to spread unimpeded.

Other French farmers, already just surviving on thin economic margins, are choosing to sell off their operations. For them, the changes—loss in production and increase in biosecurity investment&mdas;are too costly to continue farming, even if costs are passed onto consumers. 

Whichever choices farmers in France make, it is widely recognized across the commodity chain there that the industrial model is to blame for avian influenza's success. 

American agribusinesses, the researchers who work for them, and the reporters who cover their outbreaks have avoided investigating the structural causes of the disease, a refusal treated here as much a matter of state pride as business as usual.

Rob Wallace is an evolutionary biologist presently visiting the Institute for Global Studies at the University of Minnesota. He is an advisor for the Institute for Agriculture and Trade Policy and has consulted on influenza for the UN's Food and Agriculture Organization and on ecohealth for the Centers for Disease Control and Prevention. His forthcoming book, Big Farms Make Big Flu, will be published in June.

Posted May 11, 2016 by Dr. Steve Suppan   


Used under creative commons license from scrippsjschool.

Defenders of high-frequency trading (HFT) claim that they provide necessary capital to commodity derivative markets that enable commercial users of commodities to trade in “liquid” markets, i.e., to manage price risks by buying and selling what they want, when they want. However, HFT orders provide capital to the market milliseconds before computer-automated trading systems (algorithms) cancel those orders. In other words, HFT provides phantom liquidity by emitting trade order price and volume “noise,” but very rarely executed trade information that is usable by commercial traders. HFT administers nearly continuous micro-shocks to price formation.

Farmers and ranchers rely on derivatives markets to set benchmark prices and price trends for forward contracting of grains and oilseeds to local grain elevators and of livestock to stockyards. When HFT “hot money” creates price volatility and price surges with little, if any, relationship to supply, demand and other fundamental factors, derivatives prices no longer help forward contracting. The “hot money” traders induce price volatility not only on U.S. markets, such as the Chicago Board of Trade, but also on Chinese commodity markets.

An April article by a commodity trade advisor at Archer Daniels Midland, the agribusiness mammoth, asked “Who Are the Big Soybean and Grain Buyers?” His answer: “High Frequency Trading, Formula Trading, Algorithmic Trading; Any Name Works.” Then he erroneously added, “High frequency trading, whether it is in commodities, stocks or bonds, is being monitored by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).” Monitoring suggests that HFT data are reported to the CFTC, which would then determine whether HFT entities are complying with CFTC rules. Alas, were it so.

HFT is not yet regulated, so HFT trade data are not reported to regulators. HFT positions are closed out before the end of the trading day making them not subject to position limits, which prevent market manipulation and excessive speculation by non-commercial traders. HFT data are not publicly available but can be purchased from such data-feed services as Thomson-Reuters, which advertises, “2 petabytes of microsecond, time-stamped tick data—dating back to 1996—covering more than 45 million OTC [over the counter] and exchange-traded global instruments.” Two petabytes are more than eight times all the data held in the U.S. Library of Congress, as of 2011.). According to 2013 testimony to the German Parliament by the Brussels-based NGO, Finance Watch, removing rules on minimum tick sizes (price increments) has given HFT trading strategies their competitive edge over trade conducted in historically meaningful price increments.

(Almost five years after the HFT crashed the stock exchanges in May 6, 2010, as chronicled by Michael Lewis’s book Flash Boys, the SEC HFT rulemaking was limited to proposing that HFT traders register with a self-regulating national securities organization. The SEC rule will apply to about 125 firms, who will be required to comply with the best practices of the industry’s Financial Industry Regulatory Authority.)

In December 2015, the CFTC issued a rulemaking proposal on automated trading systems. The proposal stated that the CFTC was not ready to propose a HFT-specific rule, though CFTC staff detected 35 mini-flash crashes in 2015 in oil prices alone. In March, IATP submitted comments on the proposed rulemaking, arguing that both the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act (Dodd-Frank Act) and HFT market events, studied by the CFTC, provide ample justification for the CFTC to write a HFT rule. Under the CFTC’s authority, such a rule should go beyond the CFTC’s proposed rule for addressing the computerized automation of trading of all asset classes under the CFTC’s authority.

Hostility to the Dodd-Frank Act remains intense on much of Wall Street and among the members of the U.S. Congress who receive electoral donations from Wall Street. A complaint of Dodd-Frank derivatives rules “reformers” is to claim that the rules hurt derivatives “end users,” archetypically farmers, but also including corporations who, e.g. package and sell their off-balance sheet debt as an “asset.” A House of Representatives subcommittee hearing on commodity exchanges on April 28 repeated that assertion. Committee members urged the CFTC to abandon its modest proposal, which would require traders to set aside a very small portion of their overall capital against possible losses and to put down a small amount of cash (margin) in order to trade, arguing that the measures would reduce liquidity and increase transaction costs to traders.

“Regulators must be mindful that any new rules do not inadvertently increase market participants’ business costs and constrain liquidity in the marketplace. While the rules may be aimed more towards financial institutions, the smaller end-users like farmers, ranchers, and small businesses rely on these intermediaries to manage their risks,” said Committee Chairman Mike Conaway. As IATP stated in a February blog, it is a time-honored practice for Dodd-Frank opponents to claim they are defending the interests of farmers and ranchers by seeking, for financial speculators, the same regulatory exemptions that CFTC rules already provide for farmers, ranchers and other commodity users.

What is truly strange about the industry-official pleadings of former CFTC Commissioner Scott O’Malia, former CFTC Chairman Walter Lukken and other hearing witnesses is that derivatives trading volume in all asset classes, and particularly in commodities, is at a near record high, indicating there are no liquidity or margin constraints to trading. According to an April report by the World Federation of Exchanges (WFE): “Commodity derivatives volumes increased 26 percent in 2015 [over 2014 volumes], exceeding 4.3 billion contracts traded. This growth meant that commodity futures surpassed single stock options to become the most traded class of derivative contract[s] in 2015.”

The WFE survey aggregates trade data reporting from 64 member exchanges, including those of Chicago, Atlanta and New York. The survey does not include off-exchange over-the-counter (OTC) derivatives, whose lack of adequate capital reserve and margin requirements helped to bankrupt some of the world’s largest financial institutions in 2008-09, when the value of those contracts collapsed. Of course, the survey does not include HFT data, since there are no rules to require exchanges to report that data to regulators.

As the IATP comment on HFT noted, much of commodity trading has shifted from the unregulated commodity index traders, who drove commodity prices and excessive speculation from 2007 to 2010, to today’s likewise unregulated HFT commodity traders. The Wall Street resistance to HFT regulation is part of a broader war of attrition, aided by members of Congress, to prevent implementation of Dodd-Frank at any cost.

In a remarkable policy brief in February, Better Markets showed how the CFTC Chairman Timothy Massad caved in to Wall Street lobbying and refused to advance Dodd-Frank mandated rules in the face of evidence of damage to market integrity both within U.S. borders and in cross-border trading designed to evade CFTC regulation. What makes Chairman Massad’s passivity very hard to comprehend is that he administered the $700 billion Troubled Asset Relief Program (TARP) of emergency loans for losses incurred on derivatives contracts that Wall Street couldn’t sell at any price. Perhaps the $20 billion that he announced TARP earned for the government, after the loans had been paid back, has lulled him into thinking that the next Wall Street-default cascade will result in just another public money mega-management challenge.

But the U.S. Federal Reserve Bank, and not TARP, did the heavy lifting in the Wall Street bailout. The Fed created more than $29 trillion in loans, with practically zero interest, on the full faith and credit of the United States to rescue the biggest U.S. banks, their global subsidiaries and foreign central banks that bailed out their private banks. Critics of the Fed’s 2007-2010 emergency loan program, while recognizing the necessity of the Fed bailout, are asking whether both Wall Street and the regulators have developed an unhealthy dependence on the Fed to rescue them from the next failure to regulate. Could unregulated HFT trigger another series of global financial institution defaults requiring another Fed scale bailout?

HFT is both a technological means to trade and a trading strategy. Unregulated HFT could transmit a new global financial contagion in a matter of minutes, if not seconds. “Kill switches” (shutdown algorithms) are supposed to stop HFT when prices become too volatile even for HFT trader algorithms to manage. By the time the kill switches function, HFT could have distorted agricultural derivatives prices—that are transmitted as the volatile U.S. forward contracting prices that the farmer or rancher has to accept as “fair”—because the next day’s price could be even more volatile and less predictable.

What happens if HFT traders transact unregulated cross-border trades on emerging market exchanges that lack reliable kill switches, but are wired to major market exchanges? Imagine that climate-change related debt is packaged in New York or London and traded as collateralized debt obligations (CDOs) on exchanges in Beijing or Nairobi. The underlying CDO “asset,” the climate-change related debt, is underpriced because corporate clients and banks of the CDO trade instrument inaccurately report or don’t report the climate change value at risk, a problem that the intergovernmental Financial Stability Board is currently surveying. (IATP submitted responses to the survey questions but the FSB has not published responses received.) According to another 2016 survey, “nearly half of the world’s biggest [500] asset owners are doing nothing to mitigate climate risk.” The survey estimates their climate risk exposure at $38 trillion. However, even this colossal sum underestimates the exposure because climate change adaptation costs are not reported in the survey.

HFT technology, by itself, cannot create a global financial crash. However, HFT technology can transmit and amplify a financial crisis when the at-risk value is large enough, volatile enough and unreported in public exchanges, such as underreported and underpriced bank and corporate climate risk exposure. To not regulate HFT because the technology can only transmit and not by itself create defaults among global financial institutions is the Icarus height of hubris. 

The next global financial institution bankruptcies will likely not have the same asset class and trading-venue origins as those of the 2008-2009 defaults. What neither the CFTC nor the exchanges nor Wall Street will be able to restore after a HFT-driven market collapse is confidence that the financial markets will not prey on their citizens and that Washington will not condone and even abet these predatory practices. A sustainable economy cannot be built with rigged markets and cowed regulators. 

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