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Elliott was with the Peterson Institute for many years before joining the Center full-time. Her books published there include Can International Labor Standards Improve under Globalization? (with Richard B. Freeman, 2003), Corruption and the Global Economy (1997), Reciprocity and Retaliation in US Trade Policy (with Thomas O. Bayard, 1994), Measuring the Costs of Protection in the United States (with Gary Hufbauer, 1994), and Economic Sanctions Reconsidered (with Gary Hufbauer and Jeffrey Schott, 3rd. ed., 2007). She served on a National Research Council committee on Monitoring International Labor Standards and on the USDA Consultative Group on the Elimination of Child Labor in US Agricultural Imports, and is currently a member of the National Advisory Committee for Labor Provisions in US Free Trade Agreements. Elliott received a Master of Arts degree, with distinction, in security studies and international economics from the Johns Hopkins University, School of Advanced International Studies (1984) and a Bachelor of Arts degree, with honors in political science, from Austin College (1982). In 2004, Austin College named her a Distinguished Alumna.
In honor of Japanese Prime Minister Abe’s recent visit to Washington, I thought I would try to distill my thoughts about the recent flurry of trade activity into a haiku:
TTIP, stuck on red?
TPP, waiting for what?
Okay, so I’m no poet. And the acronyms might make my verse a little hard to follow for the non-trade wonks in CGD’s audience. Here’s a brief translation.
Transatlantic Trade and Investment Partnership negotiations between the United States and European Union aim to eliminate remaining traditional trade barriers (i.e. tariffs, quotas) and reduce nontariff trade barriers, in part by employing initiatives to promote regulatory coherence (e.g. an agreement on auto safety standards). Negotiators formally launched the talks in mid-2013, but so far the main outcome seems to be mounting opposition from civil society groups in Europe. I’ll be surprised if this red light ever turns green.
Trans-Pacific Partnership* negotiations have been slogging along for six years under President Obama. The number of countries engaged has grown from 8 to 12, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Since the United States already has bilateral trade agreements with the countries in italics, the impact of a TPP deal may be relatively modest. Japan is the most commercially significant of the remaining countries, but Prime Minister Abe’s visit didn’t produce an agreement on market access for agricultural commodities and automobiles as hoped. The other TPP parties are waiting for the US and Japanese negotiators to reach a deal. Meanwhile, Japan appears to be waiting on Congress to approve trade promotion authority (TPA) legislation.** A more fundamental issue, from my perspective, is what impact the TPP might have on developing countries and the multilateral trade system. I have significant concerns about some aspects of the likely outcome of the negotiations, which I have discussed here as well as with Vox’s Dylan Matthews.
Amidst all of the hullaboo over the TPP and TPA, you might have missed the news that Congress is finally moving to extend the Africa Growth and Opportunity Act and other trade preferences for developing countries. As part of recent markups (where TPA took center stage), the House Committee on Ways and Means and the Senate Finance Committee approved legislation to renew AGOA (currently set to expire in September), extend two special trade programs for Haiti, and revive the Generalized System of Preferences (GSP) (which lapsed two years ago). While not the broad reform for which many had hoped, the bill would extend the AGOA program until 2025. If passed, and quickly, this would prevent AGOA suffering the kind of disruption and uncertainty from short extensions and long lapses that contributed to GSP imports dropping 40 percent in recent years. The Senate Finance Committee summary of the bill here briefly describes what each of these programs do, as well as the relatively modest proposed changes.
If you have additional thoughts, we’d love to see them in haiku form: #devhaiku
* If you are wondering why trans-Pacific has a hyphen and transatlantic does not, I have no idea.
** TPA legislation allows Congress to specify the objectives it wants trade agreements to achieve. In return, Congress agrees to vote on implementing legislation expeditiously and without the possibility of amending it. This so-called “fast track” procedure assures trading partners that Congress cannot pick apart agreements after negotiations are complete. It has become controversial, however, with trade negotiations increasingly addressing regulatory and other behind-the-border issues.
It seems the era of feeding large volumes of antibiotics to chickens to promote growth and prevent disease is on its way out. Tyson Foods announced it will join fellow producers, Perdue and Pilgrim’s Pride, and large buyers, such as McDonald’s, Chick-fil-A, and Chipotle, in sharply reducing use in chickens of antibiotics that are also used in human medicine. Details of each company’s phase-out plans differs, and their definition of which antibiotics should be avoided because they are important for human health is key. Still, given the alarming rise in “super bugs” – bacteria that are resistant to antibiotics – this is great news.
I can’t help but wonder, though: what about pork and beef? In my recent policy paper on antibiotics on the farm, I pointed to a growing number of studies that indicate the economic benefits of using antibiotics in livestock are small, or even negative, in well-managed operations. This is particularly true for poultry operations, so it is no surprise that this is the part of the food market where we’re seeing the most action. But as I’ve discussed previously, the experience in Europe, where regulators have been more aggressive in restricting antibiotic use on farms, and evidence from controlled experiments on pig farms in the American Midwest suggest that farmers could do more to reduce antibiotic use in other animals without suffering large losses.
Even more worrisome is that these private sector commitments will have little, if any, impact on the practices of livestock producers in rapidly growing emerging markets. China, for example, already produces more pork than the United States produces beef, pork, and chicken combined. Antibiotic resistance is a global problem and industrial livestock production, with extensive use of antibiotics, is growing fastest in China, India, and a number of other developing countries. This is what makes the new World Health Organization report on global responses to antimicrobial resistance so troubling. The WHO reports that only one country in Africa and nine in Asia have comprehensive, multi-sectoral national plans to combat resistance.
Next month, the WHO Secretariat will present a draft global action plan on antimicrobial resistance to the World Health Assembly for approval. While approval is expected, concrete actions need to follow – and quickly – to meet this rapidly expanding challenge.
But the action plan remains oddly cautious in tackling antibiotic use in livestock, despite the fact that American cows, pigs, and chickens consume most of the antibiotics used every year in the United States. And American farmers frequently use the drugs to promote growth and prevent disease in healthy animals—ideal conditions for drug resistant bacteria to thrive. US livestock producers have long fought restrictions on antibiotic use for fear that would reduce their profits. But there is a growing body of evidence that their concerns are overblown. Indeed, many meat suppliers are voluntarily moving away from the routine use of antibiotics because of consumer demands.
European Meat Exports Survive Antibiotic Restrictions
The European Union banned the use of antibiotics for growth promotion in farm animals almost a decade ago and many European countries have gone further in restricting antibiotic use in livestock. Denmark and the Netherlands have been among the most aggressive in slashing antibiotic use, yet they remain major meat exporters. Data from across European countries shows wide variation in antibiotic use and no correlation between antibiotic use and export success.
Modern Management Practices Reduce the Need for Routine Antibiotic Use
Sweden was the first country to restrict antibiotic use in farm animals in 1986. It did so at the behest of livestock producers who were concerned about negative reactions from consumers to reports about the heavy use of antibiotics in animals. The Perdue poultry company is phasing out antibiotics, except for the treatment of disease, and several major chains, including McDonald’s and Chick-fil-A, are requiring their suppliers to reduce antibiotic use. At the end of 2014, the six largest US school districts—Chicago, Dallas, Los Angeles, Miami-Dade, New York City, and Orlando County—announced they would demand antibiotic-free chicken when they renew contracts with meat suppliers.
President Obama Should Be Bolder
Despite these movements in the market, however, the President’s new action plan does little more than affirm the voluntary policy guidance that the Food and Drug Administration issued two years ago to phase out antibiotic use for growth promotion in livestock. This is disappointing. The European experience, reviewed in my paper, shows that simply banning antibiotic growth promoters is not enough. The Danish and Dutch governments both found additional steps were necessary to ensure that antibiotic use in livestock actually declined. The administration’s action plan calls for programs to educate farmers and veterinarians about antibiotic stewardship, but it does nothing to ensure the incentives they face are aligned with the goal of reducing use.
As I’ve written here and here, there are still important loopholes in the administration’s approach to reducing antibiotic use in livestock. Unfortunately, the new action plan falls short of sufficiently changing that.
A key component of any strategy for combating the global health threat posed by antibiotic resistance, including President Obama's, is to reduce the overuse and misuse of these vital drugs. Thus a big part of tackling the problem involves changing the behavior of doctors who too often prescribe antibiotics to placate worried parents or miserable patients. But American farmers also routinely use huge amounts of antibiotics in food and water to promote growth and prevent disease in farm animals. And, just like human doctors, veterinarians too often have incentives to overprescribe antibiotics.
A Reuters investigation at the end of last year showed that financial ties between veterinarians and drug companies can be extensive. And, unlike with medical doctors, there are few regulations governing veterinarians' relationships with drug companies.
In short, the Food and Drug Administration (FDA)’s plan to reduce antibiotic use in livestock by increasing veterinary oversight, without addressing financial incentives to overprescribe, is flawed. I've discussed this challenge previously here. But a picture really can be worth a thousand words.
The Danish government has been one of the most aggressive in trying to reduce the excessive use of antibiotics in livestock. And the first thing Danish regulators did, several years before banning the use of antibiotic growth promoters, was prohibit veterinarians from profiting from drug sales to farmers. As shown in the chart, the effect was immediate and dramatic.
The FDA has taken a useful first step by getting the drug companies to remove growth promotion as an approved use on their drug labels. But the FDA plan still allows farmers to use antibiotics for disease prevention (in addition to treatment) and it is relying on increased veterinary oversight to ensure appropriate use. The Danish experience suggests that the results will be disappointing without additional steps to align veterinarians’ incentives with public health goals.
Senators Dianne Feinstein (D-CA) and Susan Collins (R-ME) recently reintroduced legislation to reinforce efforts to rein in the use of medically important antibiotics in livestock. Representative Louise Slaughter (D-NY) is planning to reintroduce similar legislation in the House soon. But these bills also look to veterinarians to help oversee the use of antibiotics in livestock. To ensure that the new livestock policies are effective, Congress should also address the perverse incentives that veterinarians face.
The US Dietary Guidelines Advisory Committee is catching flack for recommending that Americans consider the environmental consequences of eating so many burgers. Pointing to climate change and other environmental effects of meat production, the panel suggested Americans contemplate the broader implications when choosing what to eat. Suffice it to say, the meat industry and its supporters in Congress are not happy.
But seriously folks, Americans eat a lot of meat:
Source: UN Food and Agricultural Organization.
And, as the panel pointed out, the negative consequences aren’t limited to those who choose to be carnivores and they aren’t contained within US borders.
In addition to the local water and air pollution generated by large feeding operations with thousands of animals crammed into small spaces, meat production contributes to global public bads. Climate change is a big one, but there are also growing concerns about the role of livestock production in accelerating the emergence of antibiotic resistance. Most farm animals in the United States receive antibiotics at some point in their life, often mixed in their food or water to promote growth or prevent, not treat, disease (look for my new paper on this next month).
And it is developing countries that will pay much of the cost. Research suggests that low-income countries will be hit hardest by climate change. Spreading resistance to older, cheaper antibiotics also imposes disproportionate costs on low-income countries and particularly poor children in them, who suffer and die more often from infectious diseases.
Let me confess that I like the occasional burger as much as anyone. The panel isn’t suggesting that everyone go vegetarian. But most of us (at least in the United States) could afford to eat a little less meat. If considering the impact on others—today and in the future—helps motivate us, what’s the problem?
When President Obama goes to India to help celebrate Republic Day, he will have two priorities: to further open India’s market to US exporters; and to energize India’s efforts to tackle climate change. Sorry for the pun, but renewable energy could be a key link between these two objectives, if a nasty trade dispute doesn’t get in the way. No one expects India to follow in China’s footsteps and commit to a specific target for greenhouse gas (GHG) emissions, as Xi Jinping did when President Obama went to Beijing last fall. But Prime Minister Modi wants to expand India’s solar energy capacity 30-fold over the next decade—a $100 billion investment that would help contain GHG emissions. And US investors would like a piece of the action.
Unfortunately, the United States and India are engaged in a trade dispute over India’s requirement that a certain percentage of solar energy projects use Indian components. World Trade Organization rules generally prohibit such “local content requirements,” though the dispute settlement panel has yet to rule in this particular case. The WTO also has rules governing other types of subsidies and US policymakers used those to impose duties on solar panel imports from China last year (because of allegedly unfair pricing and subsidies).
So do these disputes mean that President Obama is prioritizing trade over climate change? A bit of background may be helpful. WTO rules allow subsidies as long as they are not discriminatory and, in theory, that is the right approach. Both climate change policy and economic welfare would be in better shape if countries sourced renewable energy technologies from whomever produces them most efficiently. But what if governments also want to create jobs at home and are leery of subsidizing technologies that might benefit foreign producers?
Wearing his academic hat, my former colleague Arvind Subramanian argued that the United States, and the WTO, should give China’s subsidies a pass. By lowering the price of solar panels, Arvind and Aaditya Mattoo note here, direct production subsidies encourage adoption of the technology—in other countries as well as China. That has positive global spillovers by reducing GHG emissions, from which the United States benefits as well.
As Arvind and Aaditya argue, however, local content requirements “merely induce the substitution of more costly domestic inputs for cheaper foreign alternatives, and therefore do not further—they may even hinder attaining—environmental objectives.” To the extent that these content requirements deter foreign investment, they also increase the financial subsidy that the Indian government will have to bear to achieve its goals, leaving fewer public resources for health, education, and other important priorities.
So a deal to open India’s solar energy market would help India meet its ambitious renewable energy targets; help President Obama achieve the goals for his trip; and help the planet. Arvind is now the Chief Economic Adviser to the Indian government. I hope his new colleagues have read his CGD paper!
Originally published in October 2013 and updated January 2015
Food security has arisen again on the development agenda. High and volatile food prices took a toll in 2007–08, and in many low-income countries agricultural yields have risen little, if at all, in the last decade. Moreover, food production in these poor countries is especially vulnerable to climate change. Meeting this demand is a global challenge. The Food and Agriculture Organization of the United Nations (FAO) is expected to lead the way in meeting this challenge and, with the arrival in 2012 of the first new director-general in 18 years, it has an opening to restructure itself to do so.
Despite six decades of trade liberalization, trade policies in rich countries still discriminate against the exports of the world’s poorest countries. Much remains to be done to achieve the goal of meaningful market access for the poorest countries, including reformed rules of origin that facilitate rather than inhibit trade.
Several colleagues and I are still debating what we’ve learned about Fairtrade from the recent flurry of attention to the topic. The Fair Trade, Employment, and Poverty Reduction (FTEPR) project garnered a lot of attention when it reported that Fairtrade certification does not help extremely poor agricultural workers. My colleagues Matt Collin and Theo Talbott pointed out in an earlier blog post that there was not enough evidence in the study to support that conclusion. They noted that the authors could not rule out unobserved factors that might explain the worker’s low wages and poor working conditions in areas with Fairtrade certification.
But is the impact of Fairtrade on wage laborers even the right question to ask? By design, the primary targets of Fairtrade certification are marginalized smallholder producers who are poor and who, by definition, rely primarily on their own and their family’s labor. For commodities such as coffee and cocoa, where smallholders are the majority of producers, Fairtrade International only certifies smallholder producer organizations. Fairtrade International also certifies some commodities that are typically produced by large-scale operations where hired labor is the norm. These include flowers and other commodities that are typically large-scale, as well as commodities like bananas and tea that both smallholder organizations and plantations produce. But smallholder organizations account for three quarters of certified operations and generate 90 percent of total Fairtrade sales revenues (see the most recent Fairtrade International monitoring report here).
Under those circumstances, why would anyone expect Fairtrade certification to have much impact on rural labor markets? We might still hope that certification would have positive spillovers on others in the area. But the fact that certified producers often sell only a fraction of their output on Fairtrade terms makes that even less likely. It would have been legitimate for the FTEPR researchers to argue that Fairtrade International has the wrong target. It doesn’t seem fair, however, to criticize Fairtrade for not helping workers that it is not primarily designed to help.
If the authors nevertheless wanted to better understand Fairtrade’s impact on wage laborers, why not examine the subset of commodities where Fairtrade does target them? Yet, only one of the four certified producer organizations in the study is a large-scale, hired labor organization (producing flowers). There are several large-scale tea operations in East Africa, but the authors selected a certified tea organization comprised of smallholder producers. The other two cases examine smallholder organizations producing coffee.
So we don’t know from the FTEPR study whether Fairtrade works for the smallholders, which are the primary target, because that is not the question the authors asked. (The fact that small producers are willing to bear the costs of certification suggests they do see benefits, however.) And we don’t know whether Fairtrade works for wage laborers because neither the study design nor the case selection was well-suited to answering that question.
There is an interesting experiment underway that could help us better understand the opportunities and limitations of Fairtrade. Around the same time that the FTEPR team was launching its research, Fairtrade International’s US chapter withdrew. Fair Trade USA founder and President Paul Rice did not reject the traditional Fairtrade model as a failure. Rather, he believed it was not reaching as many of the rural poor as it might. To reach more of those wage laborers, the revised model allows certification of large-scale, hired labor organizations for coffee and other commodities dominated by smallholders. It will also certify smallholders that are not members of cooperative organizations. This revised model may not succeed, but it should shed more light on the questions about whether or how fair trade certification improves livelihoods, and for whom.
Sugar is a prototypical case of a policy that favors the few at the expense of the many. Thanks to a government policy that supports prices by sharply restricting imports, a small number of American sugar cane and beet growers are enriched at the expense of US consumers and of more efficient foreign growers, most of whom are in poorer developing countries.
Value chains is one of the hot buzzwords in agricultural development discussions these days, but middlemen are something to be eliminated. I’m rather puzzled by this seeming contradiction. I’m currently working on a paper on “fair trade” (think certified coffee or chocolate) and one of the benefits cited is that it increases returns to farmers by eliminating the middleman. Similarly, the issues paper for the UN Food and Agricultural Organization’s marking of World Food Day earlier this week cited a similar benefit of coops.
It is certainly true that when there are a small number of buyers and many dispersed, small producers, especially without current information about market conditions, the buyer has the advantage. But aren’t middlemen part of the value chain and aren’t they providing essential services in collecting and transporting goods further up the supply chain? Coops clearly can increase the market power of farmers in both buying inputs and selling outputs collectively. But if the coop also has to provide the transportation and other services previously provided by middlemen, costs to the farmer also go up and the net benefit is less obvious. There is also the issue of the extra time involved if individual farmers are responsible for delivering their product to a central collection point.
So rather than demonizing middlemen, shouldn’t we be focusing on how to deal with imperfect competition and increasing smallholder access to market information? Coops are certainly one response to balancing buyer market power, and the spread of cellphones provides more current information about prices. So that brings us back to supply chain strengthening, and middlemen as potentially part of the solution.
After years of growing concern that the extensive use of antibiotics in animals was leading to the spread of drug-resistant infections, the US Food and Drug Administration (FDA) has issued a final guidance document that seeks to eliminate the use of critical antibiotics to promote growth in animals. This is an important but modest step forward for the FDA. In 2011 the FDA reported that 29.9 million pounds of antibiotics were sold for use in livestock – this represents 80 percent of the total volume of antibiotics sold in the US. The FDA is hoping that by limiting the use of antibiotics for growth promotion it can slow the emergence of drug resistant bacteria. But experience suggests the new FDA rules may contain a fat loophole.
A number of key reports highlight drug resistance as a major challenge of our time. The Center for Disease Control and Prevention’s Antibiotic Resistance Threats report estimated that in the past year, approximately 2 million people were infected with bacteria that were resistant to antibiotics and that at least 23,000 deaths could be attributed to antibiotic-resistant infections each year. A CGD report warned in 2006 that the useful life of antibiotics has been getting shorter and shorter, as resistance appears more and more rapidly.
Members of Congress have proposed legislation that would require the FDA to take steps toward withdrawing approval for all nontherapeutic use of drugs in animals (the use of drugs for a purpose other than treatment of disease, e.g. growth promotion and disease prevention). Until FDA’s new plan, the United States had resisted undertaking even modest policy changes in this area. By comparison, the European Union banned the use of antibiotics for growth promotion in 2006.
While the FDA’s new plan offers a ray of hope to those concerned about the widespread use of antibiotics, it is a basic first step. First, the plan is voluntary. Drug companies are encouraged, not required, to revise antibiotic labels to clarify that drug use is allowed only when medically necessary and not for growth promotion, but drugs can still be used to prevent (rather than just treat) infections. While several pharmaceutical companies have agreed to change their drug labels, the disease prevention loophole is a large one.
In the Netherlands, a ban on antibiotic use for growth promotion alone had little impact on farmer behavior and the volume of antibiotic use remained fairly constant during the initial years. Later, stricter regulations that instituted limits on total use and imposed fines to penalize noncompliance brought about small decreases in antibiotic use. By contrast, Denmark, a pork production powerhouse, banned antibiotic use in animals for all nontherapeutic purposes in 1999; including growth promotion and disease prevention. Result: use of antibiotics per pound of Danish meat dropped by half. The Danish government also collects extensive data on antibiotic sales, so the use of antibiotics can be traced back to individual livestock producers.
We are encouraged that the FDA is finally moving to combat the looming threat of drug resistance, but these examples suggest that this initial response is unlikely to be enough to bring about large reductions in unwarranted antibiotic use. To take it a step further, the United States should, like the Danish government, prohibit all non-therapeutic use, for growth promotion and disease prevention, and systematically track antibiotic sales and use.
Antibiotic use in livestock is not unique to Europe and the United States. For example, China is believed to use four times more antibiotics on animals than the United States. Unfortunately, data in China is even harder to find. This is a global challenge. All countries need to come together to reach an international agreement on principles for responsible livestock production, including rigorous monitoring of antibiotic use, so that the effectiveness of the world’s antibiotics are preserved and a post-antibiotic world is postponed. The US FDA move is welcome, but falls short of what is needed to protect Americans and to provide global leadership.
That’s the question the Chicago Council on Global Affairs is asking and they are inviting you to weigh in by answering a brief survey here. As I went through the survey, I found myself filling in the “neutral” circle a lot and wishing there was an option for “too soon to tell.” On the good news front, Julie Howard, widely respected around town for making the Partnership to Cut Hunger and Poverty in Africa the go-to place on these issues, was just appointed Deputy Coordinator for Development for the Feed the Future initiative. Although the process of filling top jobs at USAID, especially those requiring confirmation, has been far slower than most of us would wish, at least the quality is stellar, including, of course, our own former colleagues Steve Radelet and Ruth Levine at USAID and Sheila Herrling at MCC.