Tuesday, 25 June 2013

Washington D.C Blog

I'm back! We have just spent 3 days in Washington DC where the focus was to get a feel for the political climate in the US. After arriving late Saturday night we all jumped on a DC lights tour, a tour of the monuments and White House at night. The monuments were pretty amazing and the Lincoln memorial was certainly a highlight (the spot where Jenny runs through the pond when Forrest is making the speech at the anti war rally in Forrest Gump) I was so impressed I walked back there the next day during the daylight to see it again!

Ok, I am going to attempt to give you a run down of the US political system....I will do my best! The US is a bipartisan government meaning it has two main parties. The Democrats (Obama) who could be compared to the Labour govt in Australia and the Republicans who are similar to Liberals and the coalition. Urban voters tend to go with Democrats and rural with Republicans. The US parliament or congress is split into a senate (the democrats hold power here currently) and a House of Representatives (Republicans hold the balance of power at the moment) and in order for the country to pass a new law or legislation (they call it a Bill) these two committees need to both propose a plan, agree on it in their own committee then come together and negotiate a deal together, take the revised plan back to their respective committees vote on it, then if it gets passed that process it goes to the President to sign off on. The president can veto a Bill, however if the senate can get a 2/3 vote in favour of the Bill, the Presidents decision is void. Phew, get that?

The reason I am explaining this is that the US congress is going through a difficult time at the moment passing a very important bill called the Farm Bill. A Farm Bill is revised and rewritten every 5 years and it is responsible for spending 900 Million dollars!!!! Despite the Bills name, all this money does not go to the farmers....80% of this money actually goes to a welfare programme called SNAP (supplementary nutrition assistance programme) aka food stamps for the poor. So the remaining 20% of the funding is available to farmers for crop insurance subsidies and direct payments.

So why can't they pass the farm bill? Essentially the US government is taking strict budget cutting measures to help get their massive debt under control, which means that there is not the money in the budget to give everyone what they want this time around and cuts have to be made- the senate has come up with a Bill however the House of Reps can not agree on theirs! There was a historical moment last Friday where the proposed bill was taken to the floor and voted down in the House, something that has never happened on a Bill before - so there was a bit of mind changing done at the last minute as one would assume it would not be taken for a vote if they didn't think there was support for it. Capitol Hill is reeling from it still, so it was a very interesting time to be there talking with the people involved.

The issue is who should take the brunt of the cuts, the poor urban American or the Farmer? Interestingly the US system does not really align according to Party, it is more aligned by regions....so the southern states stick together as do the northern states (each state gets 2 senators per state in the Senate and House Representatives are determined by population density) so in the case of the farm bill it has become farmers vs urban with no one wanting to concede any ground. It is a clear indication that the US government is not functioning properly and no one really knows how to move forward. Best guess from those in the know is that the current farm bill will be extended, but this is not a great option because there are some very important reforms that need to be implemented to move the country forward. So it is a pretty monumental stalemate.

The general consensus is that in the new farm bill if it is ever passed direct payments to farmers will be removed, leaving a subsidy for farm crop insurance in its place. One thing I have learned this week is that not all commodities in the US attract a subsidy. Most livestock enterprises don't (dairy is the exception) however rice and cotton are heavily subsidised (up to $150/acre) and soybean, maize and wheat ranging from $9-$15/acre. As you can imagine it is the rice and cotton guys that are the most worried about direct payment removal. The main reason direct payments are being removed is that they are difficult to justify in a time when US farmers are killing the pig! Record beef and grain prices (largely driven by Chinas expansion and ethanol production) are making it hard to justify money for nothing especially when the country is in so much debt. It is also more WTO and free trade friendly not to have them.

A quick comment on China and the US. China is driving the agricultural boom in the US, over 20% of US ag exports go to China (like Australia) and with the credit crunch which has happened in China in the last week or two there is concern about the exposure the US has to this (much like how it will effect Australia's export demand). Another interesting piece of trivia is that one of the largest meat processing companies in the US, Smithfield, has been bought out by a Chinese company in the last couple of weeks. It was put very well by the diplomats at the New Zealand embassy that we met with that, it is the first time that we Western countries (Australia, NZ and USA) major export trading partner is not a traditional political or military ally which makes some nervous.

We also met with Gary Baise, an Agricultural attorney who was actually instrumental in Developing the EPA in the states, but now helps agricultural companies and farmers fight the EPA as he feels it has really begun over reaching in the last 10 years and he is worried about the criminalisation of Agriculture in theUS. We discussed the Indonesia live cattle export debacle and he highlighted the importance of us being on the front foot promoting agriculture and getting our NFF type organisations to start helping us.

That is a brief-ish (!)run down of what I have learned in the last couple of days of discussions with the NZ embassy, NZ Beef & Lamb and many political staffers on Capitol Hill. It has been a highlight of my trip so far. Many thanks to Hope for organising such a fantastic programme for us!

Ok, about to board a flight to the Netherlands, I will report soon :)

PS. In a brief chat with the NZ Beef and Lamb guy at the Embassy he mentioned what a great job the Australian MLA is doing promoting our lamb to the US masses (NZ beef and Lamb does not have anyone in that kind of role in the US) which I was happy to hear.

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