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GIPSA Is A Debate Of Several Tiers

The bulk of the industry’s debate over GIPSA has centered, and rightfully so, around the proposed rule’s intent to turn the cattle market into a government-controlled trial lawyers’ dream and put the brakes on the industry’s move toward a value-based pricing system. But, there are other levels of this debate as well.

Certainly, everyone sees the risk of having an activist plaintiffs’ attorney create his own marketing structure designed to foster litigation. From a big-picture standpoint, however, the most significant issue may be that this is yet another attempt by a government agency to bypass the legislative process – to create what in effect are laws.

In fact, Congress’s opposition to the proposed rule has been amazingly bipartisan. In part, that’s because many of the components included in the GIPSA rule were debated and rejected by Congress when the last farm bill was enacted. Congress understands that if it lets USDA go forward with its proposed rule, it abdicates its right to legislate commerce. This isn’t an isolated incident; rather, we are seeing departmental overreach like this occur in other areas as well. The Environmental Protection Agency is one of the easiest examples to cite.

Another issue is the advent of angry populism, where any entity that’s been successful or prospered is regarded as a problem. Profits, or attempts to make a profit, are seen as being fundamentally wrong. When success, either because of size or profits, is deemed as inherently a bad thing, we’re talking about government becoming involved at an unprecedented level.

This is especially significant in agriculture, where economies of scale are very real economic drivers. And, I truly understand how this anti-market demagoguery can be so well received. After all, in a business where profits are hard to come by, it’s very easy to take aim at those who have enjoyed some success.

A major component of this debate is the competition between industry groups. With enactment of mandatory country-of-origin labeling (COOL) generally regarded as a major failure, and recent World Trade Organization findings making the demise of COOL in its current form inevitable, there is a struggle for viability among these groups.

The difference between the groups largely has been restricted to three areas – trade, mandatory COOL and GIPSA.

The trade debate has little traction, as the real impact of exports and imports has been proven yet again in the marketplace. While being anti-trade is still well-received in some circles, most don't consider the agenda realistic.

GIPSA is the only substantive issue that the populist groups can throw their weight behind right now. And, as such, it’s their key to legitimacy.

There are other little side issues, as well. The lack of true economic analysis for such a major shift in an industry structure is one example. Others are largely irrelevant, but are being used to shape the debate.

For instance, GIPSA head J. Dudley Butler’s comments about the new rule being a trial lawyer’s dream were deemed to be so damaging to the rule’s prospects that proponents tried to claim the meaning was taken out of context. Perhaps the most absurd thing of this whole debate is that there are some who actually believe Butler was trying to close litigation opportunities against packers. It defies common sense and logic.

In the end, it appears the positions are well established. USDA seems committed to moving forward, and Congress appears poised to step in and try to stop its loss of power by moving to cut funding or rework the measure in a major way in the next farm bill. Meanwhile, the industry is preparing for legal challenges as soon as the actual rules are known.

In the end, the stakes of GIPSA are probably much higher than they were for mandatory COOL. However, the end result will be very similar – a tremendous waste of industry dollars and political capital while other more-important issues languish unattended on the sidelines.