SEPTEMBER-OCTOBER 1997

Interview With Chairman Bob Smith of the
House Agriculture Committee

by Burton Eller

Eller: Mr. Chairman, you have taken an unusual path to the chairmanship of the House Ag Committee. You retired from Congress after serving 12 years as a member of the Republican minority, only to return two years later to become Chairman of the Agriculture Committee in a Republican majority. How has the Congress changed since your earlier service?

Smith: The body has changed very little, except that my Republican colleagues who remain are all Committee and Subcommittee Chairmen, who actually control the agenda as opposed to reacting to it. When I left, they were working tremendously hard, but to less effect. Now they run the place.

Eller: How does it feel to be a chairman and a member of the majority party after serving so long in the minority?

Smith: It’s definitely preferable to be in the majority and to set the agenda. There are many excellent Democratic members of the Committee and here in Congress, but I believe they would agree that the majority generally holds the cards. It’s easier in the Agriculture Committee because we rarely divide along partisan lines. When we divide, it’s along regional or commodity lines, for example. And that typically makes for better agriculture policy.

Eller: What is different about the agriculture and natural resources committees today compared to your early days as a committee member? How have the subject matter and jurisdictions evolved?

Smith: The subject matter and jurisdictions of both the Agriculture and Resources Committees have changed very little, but the atmosphere is a bit different. In Resources, the Committee’s past tendency to pursue aggressively preservationist measures has yielded to a greater focus on sound management of public lands, protecting private property rights, and ensuring that the federal government is a more hospitable neighbor. Here at Agriculture, the Freedom to Farm Act has substantially redefined the federal government’s role in Agriculture. That’s why we focus less perhaps on commodity prices and more on giving farmers greater tools to be successful.

Eller: Agriculture constitutes a major share of the U.S. economy and is one of our cornerstones in world trade. How can we maintain the economic vitality and competitiveness of domestic agriculture?

Smith: First, trade has to be a top priority. I’ve made it a priority here in the Agriculture Committee, leading trade delegations abroad and, working with the Administration, pressing foreign governments to honor their commitments to free and fair trade. But it has to be a priority in the Administration, on the farms, in our communities, and in the boardrooms of corporate America. Of course, our greatest asset in international markets is the American farmer’s ability to provide the highest quality product at competitive prices. That’s also why it’s critical that we renew our commitment to agricultural research, ensuring that we have the safest, most modern, productive, and diverse food supply. We are currently working on reauthorizing the agricultural research programs to ensure that America’s farmers and ranchers get the greatest amount of bang for our research buck.

Eller: Can we continue to open access to other countries and be competitive in world markets?

Smith: We have to. Trade is an essential part of a farmer’s livelihood. Exports currently account for 30% of U.S. farm cash receipts. Because we produce much more than we consume in the United States, exports are vital to ensuring that American farmers and ranchers receive a favorable price for their commodity. The future holds even greater promise for agriculture exports as world income and economic growth expand. Higher incomes for consumers mean improved and diverse diets, which in turn result in a greater demand for fruits, vegetables, and other high value products.

Trade agreements such as the Uruguay Round and the North American Free Trade Agreement (NAFTA) have been very successful, though this success has been tempered by continued barriers to trade, such as import restrictions, non-tariff trade barriers, and outrageously high export subsidies in some exporting countries. It is in farmers’ and ranchers’ best interest to take steps to further open markets around the world, while pressing the Administration to fully enforce current trade agreements and ensure that all nations keep their end of the bargain.

Eller: How critical is fast track negotiating authority for securing a positive trade environment for U.S. agricultural commodities?

Smith: Last year, U.S. agriculture exports totaled $60 billion and the agriculture trade surplus exceeded $26 billion. There is, nevertheless, ample opportunity for further expansion of agriculture trade. One of the means by which such opportunities can be secured is through trade agreements. In order to secure trade agreements, especially a multilateral trade agreement such as that anticipated in the 1999 World Trade Organization agriculture negotiations, fast track authority must be extended.

The overall trade objectives in the fast track bill call for a reduction in trade barriers that limit market opportunities, including those aspects of foreign government policies directly related to trade. The proposal does incorporate several references to agriculture in its principal trade negotiating objectives. It cites the following agriculture objectives: reducing or eliminating tariffs within definite time frames; reducing or eliminating subsidies that decrease market opportunities or distort markets; addressing rules that unfairly decrease market access or distort agriculture markets through (1) state trading enterprises, (2) actions affecting new technology, including biotechnology, (3) sanitary and phytosanitary restrictions, (4) technical barriers to trade, and (5) the administration of tariff rate quotas. Fast track legislation also includes objectives to improve import relief mechanisms, with a focus on perishable agriculture.

I believe the fast track bill contains a comprehensive listing of the agriculture issues related to trade and should go a long way in beginning to address the issues raised by United States farmers and ranchers. I’m pleased that agriculture is so prominent in the fast track proposal and that the key issues facing agriculture trade are in the trade negotiating objectives.

Eller: What are your trade-related priorities while chairman?

Smith: As Chairman of the Agriculture Committee I have made agriculture trade one of the Committee’s highest priorities for the 105th Congress. Simply moving trade up on our list of priorities, giving it the attention and care it deserves, is perhaps our greatest goal. Fulfilling that mission, the Committee traveled to Argentina, Chile, Mexico, Canada, Thailand, and the Philippines earlier this year and will go to New Zealand and Australia in December. These trade delegations will serve the Committee well in preparation for further trade negotiations, especially the 1999 WTO agriculture negotiations. By meeting with government officials and others interested in expanded worldwide trade, the committee has been successful in breaking down some barriers to trade and increasing discussions between the U.S. and other governments.

Our Committee has worked closely with the Administration, speaking with them as one voice, on all matters related to agriculture trade. The committee will be working closely with the Administration–both the U.S. Department of Agriculture and the U.S. Trade Representative–to achieve these goals.

I have had discussions with Secretary Glickman and Ambassador Barshefsky and we agree that the 1999 WTO negotiations will not be a forum to re-negotiate the gains achieved in the 1994 Uruguay Round Agreement. Instead, we want to move forward with liberalization of worldwide agriculture trade–and we will achieve that together.

Eller: Food safety has become a major public policy issue for producers, processors and consumers. Meat and poultry products have historically been inspected more than any other foods. Yet, the Secretary of Agriculture is critical of current USDA inspection authority. What could you recommend to Secretary Glickman for improvements to the inspection system? How might the Department establish more effective partnerships with producers and processors in the future?

Smith: It’s important to begin any discussion of this subject with the reminder that the United States currently has the finest meat & poultry inspection system in the world. While I agree we should constantly search for ways to improve this system, we have to give ourselves credit for the excellent job we now do.

Because the consequences of food safety failures are so frightening, policy makers are often forced to react in a crisis climate. Our goal should always be the application of sound science to achieve real food safety benefits. I encourage everyone to let science guide inspection reform, and resist the urge to issue splashy press releases.

We have been active on the meat inspection front, particularly since last summer’s Hudson Foods recall. Recently, 23 Members of Congress joined with me in writing the Food and Drug Administration, urging it to make a decision on the petition, which they have had for several years, to approve the use of low level radiation and electronic pasteurization with red meats. This technology, which has demonstrated tremendous potential to eliminate pathogens on meat products, has already been approved for pork and poultry.

Another important element in the ongoing effort to enhance food safety is research. The fact of the matter is that we know surprisingly little about the nature of threats to our nation’s food supply or the technology available to combat them. This is why research and education are fundamental to our efforts.

During the Forestry, Resource Conservation, and Research Subcommittee mark-up of Agricultural Research legislation on September 25th, an amendment was adopted which directs the Secretary of Agriculture to establish a Food Safety Research Information Office at the National Agricultural Library. In cooperation with the other relevant agencies, such as the CDC, FDA, and NIH, public institutions and, if they choose, private research interests, this office will provide the scientific community information on publicly funded and, to the greatest extent possible, privately funded research initiatives.

The amendment also calls on the Secretary to sponsor a “National Conference on Food Safety Research.” This conference will begin the crucial task of prioritizing food safety research. These conferences, which would become annual events for at least five years, would then allow for updates of science, technology, and public health as they relate to food safety.

During a recent Senate Agriculture Committee hearing, a number of Senators argued that additional punitive regulatory authorities would do nothing to reduce risks in our food supply. I recently wrote Agriculture Secretary Glickman on the subject of legislative proposals to improve our meat and poultry inspection system. The letter states that: “Proposals designed to address this issue [of food safety] need to be directed, first and foremost, at the problem of pathogens and their threat to human health.” I believe this is the measure which should be used to judge every legislative proposal.

Finally, a provision was included in the Agriculture Appropriations Conference Report to provide $420,000 for a study by the National Academy of Sciences on the scientific and organizational needs for the FSIS, the FDA, and other federal, state, and local agencies with responsibilities for food safety.

Eller: Fruits and vegetables have come under increased fire as the source of food-borne illness. What changes in produce inspection and testing are likely?

Smith: The Food and Drug Administration currently samples a very small portion of the fruits and vegetables consumed in the United States. This is true for items which are imported or produced domestically. This is not necessarily inappropriate, because these samples are not random but based upon an assessment of risks. Any proposals to increase the levels of inspection or testing should be based upon science and not arbitrary goals set by bureaucrats. Again, this is an area where more research would be helpful.

Eller: Will Congress consider comprehensive food safety law changes? If so, when?

Smith: Our laws governing food safety, while still doing a credible job, could probably use some updating. Unfortunately, food safety is a matter of such sensitivity that any comprehensive reform of the law would prove to be very challenging. The problem is that even having the debate frequently damages consumer confidence, without necessarily improving the system. In the end, I think success would be dependent upon a willingness of all the interested parties–the Administration, producers, processors, consumer groups, the public health community and Congress–to work together in developing a science-based consensus.

All too often, however, press release politics reigns. Unless and until everyone agrees to put aside their individual agendas and work together, I'm afraid comprehensive reform of our food safety laws will be sacrificed on the altar of public relations.

Eller: The FAIR Act of 1996, better known as the farm bill, began phasing most commodities away from government subsidies and to the free market by the year 2002. Are we, in the meantime, likely to see constituent pressure for the return to traditional price supports? How does the budget agreement affect this possibility?

Smith: If there is an across-the-board, dramatic, and prolonged downturn in commodity prices, it is probable that some will call for increased federal support payments to producers. Having rid themselves of the excessive regulation that accompanied the old price support system, the realization that a return to financial subsidies would mean a return to heavy-handed federal regulation would probably cause many producers to have second thoughts about asking for a return to the old days.

Even if there were wide-spread farmer support for a return to the old price support system, the budget constraints of the federal government would make that virtually impossible without increasing taxes or cutting other programs to pay for it. Barring a truly disastrous economic outlook for farmers, it is very unlikely that Congress, made up of members largely from urban and suburban areas, would be willing to take either of those steps.

Eller: Does crop insurance play a greater role in risk management as price supports diminish?

Smith: For the first time in decades U.S. agricultural producers will have full planting flexibility to rotate crops resulting in a reduction of chemical and fertilizer use. This new flexibility for producers will place a larger emphasis of risk management on individual producers, who will bear more responsibility for managing risk on the farm.

USDA recently studied the effects of the 1996 farm bill on the management of farm resources. Of the panelists involved, 31% indicated that more attention to marketing and risk management will be the biggest change in the management of farm resources in the next five years.

Crop insurance is one of the most important risk management tools available to producers. The range of products such as revenue assurance, income protection, and crop revenue coverage afford the producer the needed flexibility to manage production risk, marketing risk, or financial risk. Assuring that crop insurance products meet the requirements of an increasingly demanding and innovative industry is one of the biggest challenges ahead for Congress.

Eller: Sugar and peanuts largely escaped reform in last year’s farm bill. The government still regulates the supply and establishes the price for these commodities. What is the future of government programs relative to these commodities?

Smith: Future trade negotiations and the work conducted by the Commission on 21st Century Agriculture will largely dictate the future of government programs for peanuts and sugar. Added pressure to further reform U.S. sugar and peanut programs will likely occur if future trade negotiations are successful in liberalizing foreign programs such as the European Union's sugar regime, which includes import restrictions, internal support prices, and export subsidies.

On the domestic front, the Commission on 21st Century Agriculture is tasked with determining what specific federal legislation is appropriate after the year 2002. By January 1, 2001, the Commission will make a "look forward" report to Congress that will include specific legislative recommendations. The status of the sugar and peanut programs since passage of the farm bill will be considered as a part of this process.

Eller: What do you think of a legislative proposal to set national environmental standards for the handling of animal waste?

Smith: U.S. agriculture is diverse and getting more so with each passing year, which makes a cookie cutter, "one-size-fits-all" approach unworkable. You cannot set national standards for an industry whose products and waste are treated differently over the next hill. Standards must be consistent with local agricultural production and flexible enough to deal with local landscape and weather conditions. That was one reason for developing the new Environmental Quality Incentives Program (EQIP) in last year's farm bill, where we provided livestock producers a share of funding to deal with waste management problems specific to their particular part of the country.

Eller: As we approach the 21st Century, what role do you believe the Federal Government should play in agriculture, and what programs, institutions or mechanisms should be available in the future to help farmers?

Smith: The Freedom to Farm Act created the Commission on 21st Century Agriculture to examine that very question. I certainly hope that the 11 members of that commission will provide Congress some thoughtful analysis of farmers' future needs. In my own mind, I have made agricultural trade expansion a cornerstone of the House Agriculture Committee's work because I believe that the future economic prosperity of American producers lies in expanded export opportunities. Without greater access to growing world markets, the enhanced flexibility and responsiveness that come from Freedom to Farm will be of little use.

A more independent farm sector will also need access to risk management tools like crop insurance and futures markets to help them cope with weather and price volatility. A vigorous agricultural research system to help producers keep pace with the growth in high technology agriculture from genetically modified crops to satellite-guided precision agriculture will also be vital to future success in agriculture.

Eller: What do you hope to accomplish during your tenure as chairman? What would you like to be your legacy as Chairman of the House Agriculture Committee?

Smith: If in my tenure, the Committee makes obvious progress in promoting agriculture trade, renewing and protecting the health of our nation's forests, provides stability for western family ranchers who graze livestock on federal lands, and keeps a constant watch over our national agriculture economy, then I will consider my service to have been a success. Agriculture, like the rest of our economy, is becoming more technologically advanced, and changes are inevitable. Making those changes work for the farmer and consumer alike is a big challenge, but it is very much within our reach, and we're hard at work on it.

Burton Eller is a government relations professional in the firm of McLeod, Watkinson & Miller. Mr. Eller has extensive prior experience as a lobbyist and CEO, and he currently represents the interests of several trade associations before the Congress and the Administration.

Food Safety Enforcement
Enhancement Act Draws Fire

by Richard Pasco

Secretary of Agriculture Dan Glickman unveiled the new "Food Safety Enforcement Enhancement Act" proposal on Aug. 29. Sen. Tom Harkin (D-IA), Ranking Member of the Senate Agriculture Committee, introduced the proposal as a bill (S. 1264), together with Senate Minority Leader Tom Daschle (D-SD), Sen. Patrick Leahy (D-VT), and Sen. Tim Johnson (D-SD), on Oct. 7. S. 1264 greatly expands USDA's authority to institute sanctions against meat and poultry product establishments by adding three new enforcement provisions that authorize USDA to:

1. stop the distribution and order the recall of adulterated or misbranded meat and poultry in situations that pose a reasonable probability of a threat to public health;
2. refuse or withdraw inspection based on willful or repeated violation of federal meat or poultry laws, and
3. impose civil monetary penalties against persons or companies for violations of the meat and poultry laws of up to $100,000 per day, per violation.

S. 1264 amends both the Federal Meat Inspection Act (FMIA, 21 U.S.C. 601 et seq.) and the Poultry Products Inspection Act (PPIA, 21 U.S.C. 451 et seq.) with almost identical language and provisions.

Notification and Mandatory Recall Provisions

A new section 411 of the FMIA would require persons, firms or corporations to notify the Secretary of the identity and location of adulterated and misbranded products. Thus, anyone in the supply chain -- from the slaughterhouse to the retail store and restaurants -- is required to immediately notify USDA.

Moreover, section 411 provides the Secretary with authority to issue orders to cease distribution and to recall adulterated and misbranded products if there is "a reasonable probability of a threat to public health." This section provides an additional mechanism to prevent such products from reaching consumers.

If there is a "reasonable basis for believing" that any carcasses, parts of carcasses, meat or meat products are adulterated or misbranded, section 411(a) requires that the Secretary be immediately notified of the identity and location of such products. The Secretary is to prescribe by regulation the means and manner that notification is to be provided.

If the Secretary finds, through notification or otherwise, that any meat products are adulterated or misbranded, and there is a reasonable probability that consumption of such products presents a threat to public health, the Secretary would provide the opportunity to:

1. voluntarily cease distribution of the meat products;
2. notify all persons, firms, and corporations transporting, storing, or distributing such meat products to immediately cease distribution of such products;
3. recall the meat products; and
4. provide notice to consumers to whom such meat products were or may have been distributed.

Section 411(b) further provides that refusal to voluntarily cease distribution, make notification, recall the meat products, and notify the public within the time and in the manner prescribed by the Secretary, could lead to the issuance of an order. The Secretary would have the authority to issue an order requiring a person, firm or corporation to immediately“ 1) cease distribution of the meat products, and 2) notify all persons, firms and corporations transporting or distributing the articles. The Secretary would have the discretion, as necessary, to provide notice to consumers to whom such meat products were distributed.

Also, section 411(c) provides an opportunity for an informal hearing to be held as soon as possible, but not later than two days after the issuance of an order. The purpose of this hearing is to allow the affected person, firm or corporation the opportunity to contest the order by presenting evidence as to why the meat products should not be recalled.

The Secretary is granted the authority to require recall of the meat products if, after opportunity for a hearing, the Secretary continues to find that there is a "reasonable probability of threat to public health" (Section 411(d)). Upon this determination, the Secretary could require a recall. The Secretary's order would specify a timetable for the recall, require periodic reports describing the progress of the recall, and provide for notice to consumers to whom such meat products were or may have been distributed.

If, after such hearing, the Secretary determines that adequate grounds do not exist to continue the actions required by the order, the Secretary would be required to vacate the order. Of course, such expansive authority in the hands of the Secretary has raised fundamental questions about USDA being in the position of acting as both judge and jury.

Refusal or Withdrawal of Inspection Provisions

Section 412 provides the Secretary with additional grounds to refuse or withdraw meat inspection services for an indefinite period of time. Pursuant to section 412(a), the Secretary could refuse to provide or withdraw inspection from an applicant or recipient when it has been determined, after an opportunity for a hearing, that the applicant or recipient, or any person responsibly connected with the applicant or recipient, has committed any willful violation of the requirements of the act, or the regulations promulgated under the act. This new provision would not require a determination of unfitness, nor is a prior criminal conviction, or civil or administrative order or determination required.

In addition, section 412(b) authorizes the Secretary to deny or suspend inspection services if the Secretary deems such denial or suspension in the public interest in order to protect the health or welfare of consumers, or to assure the safe and effective performance of official duties under the act. The Secretary would have the authority to take immediate action against a violator, and denial or suspension would be effective upon service of the complaint or other such notice.

The determination and order of the Secretary are final and conclusive, unless the affected person, firm, or corporation files for judicial review within 30 days after the effective date of the order. Section 412(c) further provides that inspection would be refused or withdrawn as of the effective date of the order, unless the Secretary directs otherwise. The U.S. Court of Appeals for the circuit in which the applicant or recipient resides or has its principal place of business, and the U.S. Court of Appeals for the District of Columbia Circuit would have jurisdiction.

Civil Penalties

Section 413 authorizes the Secretary to assess civil monetary penalties for violations of any provision of the new act, the regulations promulgated thereunder, or any order issued pursuant to the act. Section 413(a) authorizes the Secretary to impose penalties of up to $100,000 for each violation of the act, the regulations, or an order, (such as a recall order). Each violation and each day would be a separate offense subject to civil penalties. Civil penalties could be imposed not only on inspected establishments, by on any person who violates the act.

Unlike section 412 which concerns the withdrawal of inspection services, this section specifically provides for a hearing in accordance with the Administrative Procedures Act (5 U.S. C. 554 & 556). The civil penalty would be based upon the gravity of the violation, degree of culpability, size and type of business, and any history of prior offenses.

An appeal of any civil penalty would be taken to a federal Court of Appeals, and the failure to pay any penalty would be referred to the Department of Justice for collection. The findings of the Secretary are to be set aside only if found to be unsupported by substantial evidence on the record as a whole (Section 413(c)).

In testimony before the Senate Agriculture Committee on Oct. 8, Agriculture Secretary Dan Glickman pointed out that civil penalties are not a new idea:

“This Administration has proposed them twice before, and 18 state meat and poultry inspection programs use them. North of the border, where 42% of our imported meat comes from, the Canadian government has civil penalty authority and the power to order mandatory recalls.”

Current Criminal Penalties & Detention Authority

The Federal Meat Inspection Act, the Poultry Products Inspection Act and the Egg Products Inspection Act (EPIA) provide severe criminal sanctions for violation of food safety provisions or other requirements of these laws. In fact, long-standing precedent makes it possible for the chief executive officers of individual companies to be prosecuted under these laws, even if they were not involved in the violation.

In addition, USDA has many other enforcement tools, including the authority to detain products wherever they are found. USDA can detain products at both the plant and retail facility levels and prevent products from being shipped. USDA further has the ability to obtain injunctions prohibiting companies from operating.

Section 401 of the FMIA currently authorizes the Secretary of Agriculture to refuse to provide or to withdraw inspection based upon a determination that the applicant or recipient of the inspection is unfit to engage in any business requiring meat inspection. To be deemed unfit, the applicant, recipient, or a responsibly connected individual must have been convicted of more than one violation of the law involving food, or convicted of any felony in federal or state court. Because continuous federal inspection is required under the FMIA, PPIA and the EPIA, a withdrawal of federal inspection services immediately stops a company from being able to process or market meat, poultry or egg products.

USDA's Current Recall Mechanism

Currently, USDA has no “mandatory” recall authority for meat, poultry and egg products, but relies instead on voluntary recalls. When meat, poultry and egg products are believed to be a health risk to consumers, USDA's Food Safety and Inspection Service (FSIS) asks the company to coordinate a recall of the product and provides appropriate public notification. FSIS then verifies the effectiveness of the recall and ensures that corrective actions are taken.

If a company does not agree to initiate a recall, FSIS has the authority to detain and seize the product. FSIS officials can detain product for up to 20 days and can institute an action in the appropriate U.S. District Court to seize or condemn the product.

Concerns About the Administration’s Bill

USDA’s pursuit of new authority to sanction food companies has raised questions, because there is concern that sufficient enforcement authority already exists, and the new bill fails to address the root cause of foodborne illness. Some representatives of the food industry have expressed concern that enactment of the proposed Food Safety Enforcement Enhancement Act could drive well-intentioned and well-managed food companies out of business if they become the unfortunate victims of an overzealous government agency looking to set an example.

It is argued that imposition of large fines and the institution of mandatory recalls will do little in the way of improving food safety and eliminating troublesome pathogens in our food supply, but it could go a long way in putting food companies in serious financial jeopardy and/or out of business.

If Hudson Foods was in compliance with all of USDA's food safety rules and regulations, would that have been enough to avoid the recall of 25 million pounds of hamburger and the ultimate sale of the plant and the entire company? To have a business that was built over 20 years disappear so quickly has sent shudders through the food industry.

The scope of the meat recall -- the largest in history -- and the ultimate demise of the company is an indication of the extensive reach of USDA’s current authority to regulate meat and poultry processing. Indeed, the agency has the ultimate regulatory authority--the ability to put a company out of business. The issuance of negative press releases from the federal government can cause irreparable damage to the image of a company and millions of dollars of lost sales.

What if a recall of only 2.5 million pounds of hamburger was justified, rather than the recall of 25 million pounds? Should USDA owe Hudson or any other similarly situated company restitution for actions found to be excessive and unwarranted?

Another area of concern is the lack of due process or procedural rights for food companies involved in recalls. Even though the recall is deemed "voluntary," the reality is that companies do not have a choice in the face of negative national publicity.

The question has arisen on Capitol Hill and elsewhere as to whether the Department of Agriculture is responding with a “quick fix” legislative solution rather than dealing with the hard work of re-examining its own procedures and actually addressing the reality of food-borne pathogens.

More specific concerns with the proposed legislation include the following:

1. Overly Broad Notification Requirement. Section 411(a) would require anyone, other than a household consumer, who has a "reasonable basis for believing" a product is adulterated or misbranded to immediately notify the Secretary of the offending product's identity and location. Such broad language would subject any misbranded product to the notification requirement. This means that a company discovering it had improperly labeled a product, with no potential adverse health consequences and no potential consumer fraud, would still have to notify the Secretary.
2. Informal Hearing Process. The opportunity for an informal hearing held within two days after the issuance of an order also could be problematic. Any time a hearing is "informal," the extent to which procedural due process is available in the proceeding can be an arbitrary decision that varies from case to case. This hearing is critical because a finding by the Secretary that there is a reasonable probability of a threat to public health means that the Secretary could require a recall under section 411(d).
3. Procedures for Denial of Inspection Services. Although section 412 provides for an expedited hearing before the Secretary, it also would permit the denial of inspection services while the hearing is pending if the Secretary deems that denial is necessary to protect the public health. Inspection could be withdrawn or refused, regardless of whether there is a prior criminal conviction.

There also is little to indicate what type of hearing would be provided. Currently, in administrative actions to withdraw inspection services, USDA must comply with the formal adjudicatory provisions of the Administrative Procedures Act (APA).

Provisions of Section 412 that deny inspection services for "willful" violations of the act fail to provide any guidance as to the definition of willful, nor is there any guidance as to the nature of the violations that would warrant withdrawal or refusal of inspection. It is unclear as to what extent insignificant and technical violations of the regulations would constitute grounds for withdrawal.

Pursuit of Additional Measures to Ensure Food Safety

Sen. Tom Harkin, the chief sponsor of S. 1264, recognized the shortcomings of this proposal in his statement in the Congressional Record (Oct. 7, p. S10480), upon introduction of the bill:

"I view this bill...as only the beginning of a process to identify needs in the meat and poultry food chain that can lead to enhanced public safety. All sectors of the food system, from the producer to the consumer, need to take responsibility for improved safety. Real food safety cannot be achieved by any one method. We need multiple defenses, using each to their maximum potential.”

Harkin also identified the need to take a number of steps to lower the incidence of foodborne illness:

1. Additional research into the way foodborne pathogens infect animals, remain in meat products and cause illness in humans;
2. Increased research into treatments for foodborne illness;
3. Improved identification and regulation of hazard points in the production and processing continuum;
4. Electronic pasteurization as a means of reducing pathogens in meat and poultry products; and
5. Consumer education on proper handling and preparation to reduce the risk of illness.

Conclusions

In all cases where a recall is justified in order to withdraw adulterated or misbranded products from the marketplace, the affected company does so to protect the public health and its own business. Otherwise, the government can and will use its current authority to force a reluctant company to comply. As further evidence of the adequacy of current law, USDA officials acknowledged to the Senate Agriculture Committee that the agency had a 100% compliance rate for recalls under the voluntary system.

New civil penalties and other enforcement weapons layered on top of an extensive arsenal of existing regulatory tools and enforcement sanctions may do nothing to improve food safety, but do a lot of harm to the food industry and confuse the consuming public. Without adequate due process and other procedural safeguards to protect food companies from unfettered government action, there is a real danger that official decisions in handling food-borne illness outbreaks become based more on political expediency than sound data and science. We must be careful that we do not over-promise a “solution” to the Hudson Foods outbreak and trample due process rights provided by the Constitution in the valid pursuit of protecting the public health.

Recent disclosures of overzealous actions by Internal Revenue Service officials should serve as ample warning about the potential problems associated with unchecked agency authority without adequate accountability.

Richard Pasco is an attorney in the firm specializing in legislative, environmental, agricultural, food safety, food labeling, and trade issues.

The United States Dairy Industry Challenges
Canada's New Dairy Policies Under the
World Trade Organization (WTO)
Agreement on Agriculture

by Dale McNiel

U.S. Trade Representative Charlene Barshefsky’s office officially has requested consultations with Canada on that country’s dairy export pricing scheme. Three U.S. dairy industry organizations filed a section 301 petition with the USTR on September 5. The organizations alleged that Canada’s new all-milk price pooling system constituted exports subsidies that circumvented Canada’s obligations under the Uruguay Round Agreement on Agriculture.

The National Milk Producers Federation, U.S. Dairy Export Council and international Dairy Foods Association asked that the USTR file the complaint with the World Trade Organization (WTO). The industry’s petition also challenged Canada’s failure to implement a tariff-rate quota (TRQ) for fluid milk in violation of the General Agreement on Tariffs and Trade 1994 (GATT).

The All-Milk Price Pooling System

In the Uruguay Round, all participants agreed to reduce certain export subsidies for budgetary outlays (including revenue foregone) and volumes (i.e., the quantities eligible for the subsidies) and bound these commitments in their WTO Schedules of Concessions annexed to the GATT. The term "export subsidies" was defined to mean “subsidies contingent upon export performance.” Those kinds of export subsidies described in Article 9.1 of the Agreement on Agriculture were subject to reduction.

This included many of the most prominent kinds of export subsidies being used at the time of the agreement. Article 3 of the Agreement on Agriculture provided for the reduction commitments to be reflected in the WTO Schedules of Concessions and to become an integral part of the GATT 1994. Also, subject to flexibility provisions, the agreement prohibits a WTO member from providing the export subsidies described in Article 9:1 at levels in excess of the budgetary outlay and quantity commitment levels specified in its schedule or providing such export subsidies in respect of any agricultural product not specified in its schedule.

With respect to the various possible kinds of export subsidies not listed in Article 9.1, Article 10.1 of the Agreement on Agriculture prohibited using such export subsidies or non-commercial transactions “in a manner which results in, or which threatens to lead to, circumvention of export subsidy commitments.” This provision was intended to prevent WTO members from devising ingenious new schemes to avoid the precise legal descriptions in Article 9.1 but still achieving the same results.

Prior to the Uruguay Round, Canada used producer-financed export subsidies for dairy products. Domestic milk prices were held at levels far above world prices by domestic supply controls and absolute import quotas which kept imports at minimal levels. Typically, the Canadian dairy program was operated to ensure that there would be national self-sufficiency in dairy production with the planned tolerance skewed toward a surplus of domestic production to supply the allocations to Canada under U.S. and EC import quotas. Surplus domestic production was dumped on the world market by means of direct payments to exporters from funds contributed by domestic milk producers.

This type of export subsidy scheme specifically was targeted in paragraph (c) of Article 9.1 of the Agreement on Agriculture, which provided:

(c) payments on the export of an agricultural product that are financed by virtue of governmental action, whether or not a charge on the public account is involved, including payments that are financed from the proceeds of a levy imposed on the agricultural product concerned or on an agricultural product from which the exported product is derived. Canada acknowledged using export subsidies for butter, cheese, nonfat dry milk and other dairy products and reported the levels of budgetary outlays and volumes involved during the 1986-1990 base period. The Canadian WTO Schedule of Concessions commits Canada to reduce these export subsidies by 36% on the basis of budgetary outlays and 21% on the basis of volumes over the six-year implementation period.

However, immediately after implementing the WTO Agreement on Agriculture, Canada abandoned its regime of export payments financed by levies on producers and implemented a twotier price pooling scheme to achieve the same results. Under the new regime, Canada maintains high domestic prices for fluid milk and dairy products, as before, and exports dairy products to world markets at lower prices. Dairy farmers receive a pooled price fixed by provincial agencies. Milk sold to processors for domestic consumption returns the high domestic prices to the pool. Milk sold for use in the production of dairy products to be exported, with a permit from the Canadian Dairy Commission, returns so-called “Class 5" prices at the estimated world industrial milk price. The payments made to dairy farmers reflect the blend of the various prices received in those provinces participating in the pooling scheme.

In effect, the dairy farmer still “pays” for exports by accepting a lower return on the milk used to produce exported products rather than receiving a higher return and paying part of it back in the form of a levy. The exporter receives a “payment” in the form of a discounted price for the raw material rather than paying the full domestic industrial milk prices and receiving a government check for the difference between the domestic and world prices. But since the scheme cleverly does not involve a literal export “payment” or a “levy” on producers, Canada boasts that it is not subject to the Uruguay Round reduction commitments. Thus, Canadian dairy product exports systematically can exceed the budgetary outlay and volume ceilings to which Canada agreed in the Uruguay Round.

The TRQ for Fluid Milk Imports

All participants in the Uruguay Round agreed to convert non-tariff barriers to imports of agricultural products to tariff equivalents, usually in the form of tariff-rate quotas (TRQ), in a process familiarly called "tariffication." Canada had maintained a prohibition on imports of fluid milk but agreed to provide a TRQ of 64,500 metric tons (product weight basis) for imports of fluid milk, worth about $20 million per year in trade. The Canadian WTO schedule bears the note that “this quantity represents the estimated annual cross-border purchases imported by Canadian consumers.”

However, Canada does not open a fluid milk TRQ as of the first day of a quota year, as is done normally to provide the agreed upon market access. Commercial shipments of fluid milk are not allowed to be imported on the opening day or at any other time during the quota year. Canada claims that citizens and foreign tourists entering Canada claims that citizens and foreign tourists entering Canada carry with them such quantities of retail containers of fluid milk as to fill the TRQ despite the complete lack of any evidence of this practice.

The legal issue is whether the note in Canada’s WTO schedule constitutes a “term, condition or qualification” of the tariff concession, such that only cross-border purchases by Canadian consumers would be allowed under the TRQ. The note does not purport to say this directly but rather only states the basis for estimating the quantity of the TRQ. As such an estimate, it should not be considered a term, condition or qualification of the tariff concession represented by the TRQ.

The USTR and WTO Processes

On Oct. 11, USTR accepted the dairy industry’s petition and initiated an investigation. USTR also requested consultations with Canada under Article XXII of the GATT 1994, as well as provisions of the Dispute Settlement Understanding (DSU), the Agreement on Agriculture and the Subsidies Agreement.

Pursuant to the DSU, Canada must enter into consultations within 30 days from the date of the request, in good faith and with a view to reaching a mutually satisfactory solution. If Canada does not enter into consultations within 30 days, then the United States may proceed directly to request the establishment of a WTO dispute settlement panel.

Consultations are confidential and without prejudice to the rights of either member in any further proceedings. If the consultations fail to settle a dispute within 60 days after the request for consultations, the United States may request the establishment of a panel.

Once a panel has been requested, the WTO Dispute Settlement Body will establish a panel within 3-10 weeks. From this point, until the circulation of the final report, can take an additional 23-34 weeks. The panel’s decision can be appealed to the WTO Appellate Body. Under section 304 of the Trade Act of 1974, the USTR must determine within 18 months after the initiation of an investigation, or within 30 days after the conclusion of WTO dispute settlement procedures, whichever is earlier, whether any violation of trade agreement rights described in section 301 exists. If so, the USTR must determine what action, if any, to take under section 301. As of this time, there is no precedent for a violation of export subsidy reduction or anti-circumvention commitments. In this novel setting, it will be interesting to see how the USTR fashions an appropriate response.

Dale McNiel is a partner in the firm specializing in international trade law in agriculture. McNiel was recently a senior counsel in the office of the General Counsel at the U.S. Dept. of Agriculture.

The Agricultural Law Letter is published to highlight recent changes and developments in the law and public policy. As with any publication of this type, it is essential that before any action is taken based upon this information, competent, individualized, and professional advice should be obtained. Copyright 1997 by McLeod, Watkinson & Miller. Reproduction in part or in whole is permitted with permission from McLeod, Watkinson & Miller. Contact Suzanne Bucciarelli at (202) 842-2345, or write to One Massachusetts Avenue, NW, Suite 800, Washington, D.C. 20001. Subscriptions to the newsletter are $25 per year.