usda inc. : - how agribusiness has hijacked regulatory policy at the

USDA INC. :

HOW AGRIBUSINESS HAS HIJACKED

REGULATORY POLICY AT THE

U.S. DEPARTMENT OF AGRICULTURE

BY PHILIP MATTERA

CORPORATE RESEARCH PROJECT

OF GOOD JOBS FIRST

Released At the Food and Agriculture Conference of

The Organization for Competitive Markets

July 23, 2004, Omaha, Nebraska

ACKNOWLEDGMENTS

This paper was conceived by the

ORGANIZATION FOR COMPETITIVE MARKETS

www.competitivemarkets.com

It was commissioned by a working group of the

AGRIBUSINESS ACCOUNTABILITY INITIATIVE

www.agribusinessaccountability.org

The following working group members helped research and edit the paper:

SCOTTY JOHNSON, Defenders of Wildlife www.defenders.org

BEN LILLISTON, Institute for Agriculture and Trade Policy www.iatp.org

PATTY LOVERA, Public Citizen www.citizen.org

LARRY MITCHELL, American Corn Growers Association www.acga.org

PETER O'DRISCOLL, Center of Concern www.coc.org

MARK SMITH, Farm Aid www.farmaid.org

FRED STOKES, Organization for Competitive Markets www.competitivemarkets.com

The Agribusiness Accountability Initiative thanks

the working group members and

THE JESSIE SMITH NOYES FOUNDATION

for their financial support to this project.

Photos courtesy USDA or stock photography unless otherwise noted

Design and layout by TIM HILL www.psycosm.com

PHILIP MATTERA

Director

Corporate Research Project of Good Jobs First

1311 L Street NW 4th floor

Washington, DC 20005

202-626-3780 ext. 32

[email protected]

www.corp-research.org

www.goodjobsfirst.org

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

TABLE OF CONTENTS

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

CASE STUDY: BOVINE SPONGIFORM ENCEPHALOPATHY . . . . . . . . . . . . . . . . . 15

CASE STUDY: CAPTIVE SUPPLY IN MEATPACKING . . . . . . . . . . . . . . . . . . . . . . . . 19

CASE STUDY: MEATPACKING INSPECTION POLICIES . . . . . . . . . . . . . . . . . . . . . 22

CASE STUDY: BIOTECH FOODS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

CASE STUDY: CONCENTRATED ANIMAL FEEDING OPERATIONS AND EQIP . . 29

NEXT STEPS: TOWARD A SHAREHOLDER REVOLT AT USDA INC. . . . . . . . . . . . 32

ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

EXECUTIVE SUMMARY

IN ITS EARLY DAYS, the United States Department of Agriculture (USDA) was dubbed the

“People’s Department” by President Lincoln, in recognition of its role in helping the large

portion of the population that worked the land. Some 140 years later, USDA has been trans-

formed into something very different. Today it is, in effect, the “Agribusiness Industry’s

Department,” since its policies on issues such as food safety and fair market competition have

been shaped to serve the interests of the giant corporations that now dominate food produc-

tion, processing and distribution. We call it USDA Inc.

The reorientation of USDA has been occurring over many years, but it has now reached a dra-

matic stage. Thanks to its growing political influence within the Bush Administration, Big

Agribusiness has been able to pack USDA with appointees who have a background of working, lob-

bying, or performing research for large food processing companies and trade associations. Conversely,

there are virtually no high-level appointees at USDA with ties to family farm, labor, consumer or

environmental advocacy groups.

The extent to which agribusiness has packed USDA with its people is apparent when looking at

the biographies of the top officials of the Department, up to and including Secretary Ann Veneman.

In addition to her time as a public official, Veneman served on the board of biotech company Calgene

(later taken over by Monsanto). Many of Veneman’s key aides and the heads of various USDA agen-

cies are political appointees who spent much of their career working for agribusiness companies and

trade associations.

For example, Veneman’s chief of staff Dale Moore was executive director for legislative affairs of

the National Cattlemen’s Beef Association (NCBA), a trade association heavily supported by and

aligned with the interests of the big meatpacking companies, such as Tyson and Cargill. Deputy

Secretary James Moseley was a co-owner of a large factory farm in Indiana. Floyd Gaibler, a Deputy

Under Secretary, used to be executive director of the dairy industry’s National Cheese Institute.

Assistant Secretary for Congressional Relations Mary Waters was a senior director and legislative

counsel for ConAgra Foods, one of the country’s largest food processors.

These industry-linked appointees have helped to implement policies that undermine the regula-

tory mission of USDA in favor of the bottom-line interests of a few economically powerful compa-

nies. This paper documents USDA’s abandonment of its public mission from two perspectives.

Through five case studies, it both reviews the questionable policies the Department has adopted in

key areas and the background of the key officials who helped to determine those policies.

BOVINE SPONGIFORM ENCEPHALOPATHY (BSE). The assumption that the United

States was immune to this livestock affliction, popularly known as “mad cow disease,” came to an end

last year, when the first confirmed domestic case was found in a cow originating in Canada. Since

that time, USDA has resisted imposing the strict safety measures and testing procedures recom-

mended by most independent experts. At the same time, the Department has blocked an effort by a

Kansas-based meatpacker called Creekstone Farms to install its own BSE testing lab, claiming that

comprehensive testing by the company might lead consumers to think that meat from other providers

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

was not safe. The USDA Inspector General is now investi-

gating the actions of agency officials who secretly allowed

beef imports from Canada to resume shortly after a BSE out-

break in that country-while at the same time opposing coun-

try-of-origin labeling of meat. These reckless policies are best

explained by the fact that numerous key positions in the

Department are held by former staffers at NCBA, which,

along with the dominant meatpacking firms, has also

opposed stricter safety and testing measures as well as coun-

try-of-origin labeling.

CAPTIVE SUPPLY IN MEATPACKING. The handful

of giant corporations that dominate meatpacking in the

United States have used their economic muscle to deny live-

stock producers (ranchers) access to open markets and have

forced them to enter into private contracts heavily weighted

in favor of the packers. This one-sided arrangement is

known as captive supply. Under legislation enacted in the

1920s, USDA’s Grain Inspection, Packers and Stockyards

Administration (GIPSA) is supposed to oversee livestock

markets and guard against anti-competitive practices.

Instead, GIPSA has repeatedly downplayed the problem of

captive supply and has all but abandoned its enforcement of

fair competition rules. This “see no evil” approach has appar-

ently been embraced by the current Administrator of

GIPSA, Donna Reifschneider, who previously served as pres-

ident of the National Pork Producers Council, a trade group

closely aligned with dominant meatpacker interests.

MEAT INSPECTION POLICIES. Americans used to think that tainted meat was a problem

that disappeared with the reforms of the Progressive Era in the early 20th Century. Recent years have

seen a resurgence of E.coli bacteria, listeria and other hazards that are widely linked to a weakening

of traditional slaughterhouse inspection practices. Bowing to the wishes of the major meatpackers,

USDA has endorsed a system called Hazard Analysis and Critical Control Point (HACCP). But

instead of using HACCP to supplement traditional inspection, USDA implemented a watered-down

version of the system while at the same time allowing meatpackers to rely more heavily on question-

able procedures such as irradiation to deal with contamination. The federal official most directly

responsible for meat inspection policies is Dr. Elsa Murano, Under Secretary of Agriculture for Food

Safety. Before joining the Bush Administration, Murano was an academic who strongly supported

irradiation and who did research funded by Titan Corporation, a leading player in food irradiation

through its creation of SureBeam Corporation.

BIOTECH FOODS. Resistance to genetically modified (GM) wheat among farmers has

become so strong that Monsanto Co. announced recently that it was abandoning active efforts to

develop GM wheat. USDA, nonetheless, remains one of the strongest proponents of agricultural

biotechnology. Like her predecessor Dan Glickman, Secretary Veneman has promoted GM foods in

“The Department has been

deliberately transformed from

a servant of the public interest

into a vehicle for promoting

the narrow interests of large

producers and major food

processing and input

corporations, i.e. Big

Agribusiness.”

international forums, downplaying the safety issues and charging that biotech critics are impeding

efforts to reduce world hunger. As noted previously, Veneman once served on the board of a biotech

company. Neil Hoffman, the Biotechnology Regulatory Services Director of USDA’s Animal and

Plant Health Inspection Service, formerly worked for the biotech firm Paradigm Genetics. Nancy

Bryson, USDA’s general counsel, was formerly a partner in the law firm of Crowell & Moring, where

she co-chaired the firm’s corporate biotechnology practice.

CONCENTRATED ANIMAL FEEDING OPERATIONS (CAFOS). These overgrown

livestock facilities, which house and feed 1,000 or more animals in a confined area, are among the

biggest contributors to agricultural pollution. Also known as factory farms, CAFOs produce enor-

mous quantities of manure that contaminate water supplies and cause other environmental problems.

USDA has promoted the growth of CAFOs with little or no regard to their public health conse-

quences. Specifically, USDA has supported the misguided policy of using conservation dollars out of

its Environmental Quality Incentives Program to subsidize CAFOs’ attempts to solve their manure

problems. The official who oversees the day-to-day activities of USDA, Deputy Secretary James R.

Moseley, has been described by the Chicago Tribune as “a champion of industrial-style hog produc-

tion.” Before taking office, he was a partner in Infinity Pork LLC, an Indiana CAFO that raised

50,000 hogs annually.

Each of these case studies demonstrates an alarming correlation between controversial policies

adopted by USDA and the financial interests of the companies and trade associations that previous-

ly employed many key Department officials. Rapidly disappearing from USDA is a diversity of per-

spectives, particularly those that give priority to family farmers and consumers. There is no longer

any balance between USDA’s traditional dual roles of promoting the agriculture industry and pro-

tecting food safety and the livelihood of family farmers. USDA Inc. now appears to slavishly follow

the wishes of Big Agribusiness.

This paper concludes that until there is greater stakeholder representation inside USDA, a sub-

stantive movement toward more balanced farm and trade polices is impossible. Excessive industry

influence is the central obstacle to redirecting U.S. agriculture in a more sustainable and fair direc-

tion. The paper thus calls for broad collaboration on an alternative agenda for addressing the prob-

lems at USDA, including:

■ Reappraisal of ethics rules to prevent government officials from overseeing policies that

directly affect the interest of their former employers;

■ Enhancement of Congressional oversight over regulatory appointees;

■ Evaluation of whether USDA can continue to serve both as a promoter of U.S. agricultural

products and a regulator of food safety; and

■ Further research on revolving-door conflicts of interest at USDA.

Progress on these measures will begin to turn USDA Inc. back into an arm of government that

represents the public interest.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

INTRODUCTION

“WE PROVIDE LEADERSHIP on food, agriculture, natural resources, and related issues

based on sound public policy, the best available science, and efficient management.”

This is

the official mission statement of the United States Department of Agriculture (USDA), one

of the largest entities of the federal government, with an annual budget of more than $70 bil-

lion and a workforce of more than 100,000.

Despite this noble statement of public purpose, there is ample reason to question whether

USDA’s vast resources and expertise are serving the best interests of consumers, farmers and the envi-

ronment-or the narrow interests of large agri-food corporations that wield enormous economic

power and political influence.

This paper explores the extent to which the food industry has shaped USDA decision-making

over the past decade. It suggests that increasing market concentration in the food system may well be

exacerbating industry influence at USDA. The result of ongoing mergers and acquisitions is that

there are fewer and larger companies that face less competition in advancing their policy prescrip-

tions. To shed more light on these issues, the paper briefly reviews the mission and history of USDA,

as well as the rise of the food industry oligopoly. It then explores in more detail a series of issues in

which positions adopted by USDA are much more closely aligned with the interests of industry than

those of consumers, small farmers and the environment.

In each of the cases studied, high-level political appointees at USDA have had strong ties to com-

panies and industry sectors with much at stake in the Department’s policies. The paper therefore con-

cludes that a great deal more attention must be paid to conflicts of interest in the formulation of food

and agriculture policy, and that there is a need for greater balance in access to key decisionmakers to

ensure that the public interest is not always trumped by food industry insiders.

USDA is a vast bureaucracy with a wide range of responsibilities in its portfolio. For example, it:

■ conducts and sponsors agricultural research;

■ expands markets for U.S. agricultural products;

■ administers a financial safety net system for farmers;

■ manages 192 million acres of national forests and rangelands;

■ carries out anti-hunger efforts such as the food stamp and school lunch programs;

■ promotes rural economic development; and much more.

USDA is also a regulatory agency. It is responsible for protecting the nation’s food supply from

contamination and animal or plant diseases and infestations. Meat inspectors employed by the

USDA’s Food Safety & Inspection Service are stationed directly alongside production lines in pack-

inghouses. The Department is also responsible for enforcing certain antitrust-like laws in order to

ensure fair market competition and the viability of smaller agricultural producers.

This paper is concerned only with the food-related regulatory functions of USDA, and our con-

clusion is that the Department has been an increasing disappointment. The U.S. food supply, once

considered the envy of the world, is plagued by outbreaks of E.coli, salmonella and listeria that many

observers attribute to the spread of factory farming and production speed-ups by the big food proces-

sors. USDA has been widely criticized for its handling of the recent appearance of so-called mad cow

disease in domestic livestock. The Department (along with the Food and Drug Administration) has

also been called to task for promoting agricultural biotechnology without adequately assessing the

economic and environmental impacts on farmers or the public health consequences for consumers.

In addition to performing poorly in the food safety arena, USDA has fallen short in its responsibili-

ty to protect family farmers from the effects of economic concentration. Particularly in the meat sec-

tor, the Department has stood by while small producers have been squeezed by the handful of giant

corporations that have taken control of beef, pork and poultry processing.

The regulatory failures of USDA cannot be attributed simply to bureaucratic inertia. There is

growing evidence, documented in part in this paper, that the Department has been deliberately trans-

formed from a servant of the public interest into a vehicle for promoting the narrow interests of large

producers and major food processing and input (seed, fertilizer, etc.) corporations, i.e. Big

Agribusiness. This transformation has been carried out not only by a shift in policy orientation but

also by a change in the composition of the Department itself. Many of the top positions in USDA

are now held by individuals who previously worked for Big Agribusiness.

This special interest takeover, which parallels developments in other branches of the federal gov-

ernment,

poses a serious threat to the safety of the U.S. food supply and the viability of family farms.

We have produced this report to highlight this alarming development and to offer recommendations

for reorienting the agricultural regulatory system to the needs of the country as a whole, not just the

most powerful corporate players.

THE RISE AND FALL OF THE “PEOPLE’S DEPARTMENT”

The bill creating USDA was signed into law on May 15, 1862 by President Abraham Lincoln,

who later referred to the agency as “the people’s department,” given that the group it was designed to

serve—farmers and their families—made up roughly 50 percent of the population at the time.

USDA’s original mission focused on providing information to farmers to improve agricultural pro-

duction.

The phrase took on added significance in the 1880s, when USDA began to protect the well-being

of the population as a whole by researching the problem of food adulteration. During the same peri-

od, Congress gave USDA responsibility for overseeing the transportation and importation of live-

stock-a significant expansion of the Department’s role into the then-embryonic field of government

regulation. USDA’s Bureau of Animal Industry was also given responsibility for implementing the

first federal meat inspection act, passed by Congress in 1890.

That role was expanded when the law was strengthened in 1906 after the uproar caused by the

publication of Upton Sinclair’s muckraking book The Jungle. That same year, Congress passed the

Food and Drugs Act, largely as a result of research on food safety that had been conducted by USDA’s

Bureau of Chemistry (a precursor of the Food and Drug Administration). The Bureau was so zealous

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

in its research that it had assembled a group

of volunteers within USDA who consumed

meals containing potentially harmful sub-

stances to determine the health effects. The

press dubbed these human guinea pigs the

Poison Squad.

In the 1920s the

Department was given additional regulato-

ry functions as part of an effort by Congress

to control the effects of concentration of

ownership in meatpacking with the passage

of the 1921 Packers and Stockyards Act.

Later regulatory duties included enforce-

ment of the 1957 Poultry Products

Inspection Act and the 1968 Perishable

Agricultural Commodities Act.

Today, USDA is a very different entity

from the one lauded by Lincoln. It is

instead an agency that seems determined to

weaken or dismantle much of the regulato-

ry framework that has been developed over

the past century. In areas such as nutrition

advice (the food guide pyramid), analysts

such as Prof. Marion Nestle of New York

University have shown that the Department

has ignored scientific evidence in favor of

placating industry interests.

As described in

the case studies below, USDA takes decisive

action in favor of public health only when forced to by a public scandal, and even then it seeks ways

to protect the interests of large producers and major processing companies.

The idea that a regulatory agency would abandon its public mission in favor of a narrow one is

not a new concept. In fact, it is a common view of analysts on the left and on the right. The left cri-

tique of regulation originates with the work of historian Gabriel Kolko, whose 1963 book The

Triumph of Conservatism argues that the regulatory reforms of the Progressive Era were really a

response to demands by big business that the federal government rationalize ruinous competition.

George Stigler, a leading figure in the conservative Chicago School of Economics, wrote a widely

cited 1971 article in which he argues that industries seek regulation in order to control entry into the

field and otherwise restrict competition.

Critiques such as these have made the principle of “regula-

tory capture” a standard element of contemporary economics.

“Thanks to its political influence, Big

Agribusiness has been able to pack USDA

with appointees who have a background of

working in the industry, lobbying for it, or

performing research or other functions on

its behalf. These appointees have helped to

implement policies that undermine the

regulatory mission of USDA in favor of

the bottom-line interests of agribusiness.”

PACKING USDA

What has happened in USDA goes beyond a process of capture intended to restrict competition.

Thanks to its political influence, Big Agribusiness has been able to pack USDA with appointees who

have a background of working in the industry, lobbying for it, or performing research or other func-

tions on its behalf. These appointees have helped to implement policies that undermine the regula-

tory mission of USDA in favor of the bottom-line interests of agribusiness. In other words, public

health and livelihoods are at stake.

To see that agribusiness has packed USDA with its apparent representatives, one has only to look

at the biographies on the Department’s website of its roughly 45 top officials, including the Secretary,

Deputy Secretary, Under Secretaries, Assistant Secretaries, Deputy Under Secretaries, Deputy

Assistant Secretaries and heads of key offices. Many of the biographies cite previous work with

agribusiness companies and their trade associations, lobbying firms and research arms, including uni-

versity research centers bankrolled by the food industry. Additional research makes clear that there

are approximately as many industry people among the appointees as there are career civil servants.

Here are some examples of appointees with past industry ties (unless otherwise noted, the source for

each affiliation is the individual’s biography on the USDA website):

■ Secretary ANN M. VENEMAN served on the board of biotech company Calgene.

■ Secretary Veneman’s chief of staff DALE MOORE was executive director for legislative

affairs of the National Cattlemen’s Beef Association (NCBA), a trade association heavily sup-

ported by and aligned with the interests of the big meatpacking companies.

■ Veneman’s recently named Deputy Chief of Staff, MICHAEL TORREY, was a vice presi-

dent at the International Dairy Foods Association.

■ Director of Communications ALISA HARRISON was formerly executive director of pub-

lic relations at NCBA.

■ Deputy Secretary JAMES MOSELEY was a partner in Infinity Pork LLC, a factory farm in

Indiana.

■ Under Secretary J.B. PENN was an executive of Sparks Companies, an agribusiness consult-

ing firm.

■ Under Secretary ELSA A. MURANO conducted industry-sponsored research while a uni-

versity professor (see below).

■ Under Secretary JOSEPH JEN was director of research at Campbell Soup Company’s

Campbell Institute of Research and Technology.

■ Deputy Under Secretary FLOYD D. GAIBLER was executive director of the National

Cheese Institute and the American Butter Institute, which are funded by the dairy industry.

■ Deputy Under Secretary KATE COLER was director of government relations for the Food

Marketing Institute.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

■ Deputy Under Secretary CHARLES LAMBERT spent 15 years working for NCBA.

■ Assistant Secretary for Congressional Relations MARY WATERS was a senior director and

legislative counsel for ConAgra Foods.

Industry infiltration also extends to USDA’s non-food areas. For example, Mark E. Rey, the

Under Secretary for Natural Resources and the Environment, who oversees the Forest Service, was

previously a vice president of the American Forest and Paper Association.

By contrast, there are vir-

tually no associations with family farm, consumer or environmental groups to be found among the

appointees. The allies of Big Agribusiness have a tight lock on the main food policy arm of the fed-

eral government.

CAPTURED PRODUCER GROUPS

In addition to previous affiliations with food pro-

cessing giants such as ConAgra, many of USDA’s top

appointees used to be affiliated with producer groups

such as the National Cattlemen’s Beef Association and

the National Pork Producers Council (NPPC). These

organizations have close ties with the big agri-food

corporations. Such corporations can join NPPC

through the Council’s Pork Alliance, which is repre-

sented on NPPC’s board of directors.

NPPC

acknowledges that the dues paid by corporate mem-

bers (among which are Cargill and Monsanto) “are

used to fund critical industry priorities in the legisla-

tive and regulatory areas.” NCBA has an Allied

Industry Partners program with several categories of

membership, depending on the level of financial sup-

port provided by a company. Bigger contributors

(which here, too, include Cargill and Monsanto) and

are eligible to join the Allied Industry Council, which

has representation on NCBA’s board of directors.

NCBA, in fact, was created in 1996 through the merg-

er of the National Cattlemen’s Association and the

National Livestock and Meat Board (including its Beef

Industry Council), which put producers and proces-

sors under the same roof.

Given these relationships, it is not surprising that

groups such as NPPC and NCBA consistently side

with the interests of the big processors and ignore the

interests of small producers. This rift between small

and large producers has been most apparent in the

controversy over mandatory federal promotion and

“The increasing dominance of

USDA policymaking by

agribusiness interests and

personnel can be traced to two

sources: the growing concentration

of ownership in food production

and processing, and the growing

political influence exercised by the

large players in the industry.”

research programs, better known as the “check-offs.” Under these programs, producers have been

forced to pay fees on each head of livestock to help finance marketing programs such as the “Beef:

It’s what’s for Dinner” advertising campaign. Check-off fees also fund the political worker and regu-

latory advocacy of groups like NCBA and NPPC, including support for positions that dispropor-

tionately favor large producers and the meatpacking industry.

Small producers argue that they can’t afford the fees and that the marketing efforts provide little

direct benefit for them. In a 2000 referendum, a majority of pork producers voted to terminate the

check-off program, but USDA refused to comply with the vote. Instead, NPPC and NCBA have

gone to court (with the support of USDA) to preserve the check-offs, and the cases have dragged on

for years. In the fall of 2004, the U.S. Supreme Court will hear a case on the beef check-off dispute.

Another example of the rift concerns the debate over country-of-origin labeling. Despite strong

support among small producers and the public for mandatory labeling, NPPC and NCBA joined

with food processing and retailer groups in supporting a weaker voluntary system.

In many ways,

the leading producer groups have been taken over by industry influence in the same way that USDA

has been captured.

THE IMPACT OF

CONCENTRATION

The increasing dominance of USDA

policymaking by agribusiness interests and

personnel can be traced to two sources: the

growing concentration of ownership in food

production and processing, and the growing

political influence exercised by the large

players in the industry.

It is worth noting some of the key find-

ings of research on concentration in the agri-

food industry conducted by William

Heffernan and his colleagues at the

University of Missouri for the National

Farmers Union. Heffernan points out that

economists generally consider that there is

potential for market distortion when the top

four firms have combined market share of

40 percent or more. His research found that

the top four firms typically control 60-80

percent or more of the market in sectors

such as beef packing, pork packing, broiler

production, flour milling and soybean

crushing.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

"The result of concentration is that direct

food production is increasingly done by

large factory farms, and giant

corporations dominate the subsequent

phases of the food chain."

Moreover, Heffernan points to evidence that the food system is increasingly vertically integrated

as companies on the input (pesticides, fertilizers and seeds) side of food production form partnerships

and strategic alliances with firms in the processing, food manufacturing and retail phases of the food

chain to expand their capacity to influence prices and product specifications. Concentration in the

agri-food system, as evidenced by anti-competitive market distortions and vertical integration, raises

a series of important questions about antitrust enforcement, the future of American farming, and the

rise of transnational food cartels.

The result of concentration is that direct food production is increasingly done by large factory

farms, and giant corporations dominate the subsequent phases of the food chain—including inputs

such as seeds and fertilizer (DuPont, Monsanto, etc.); initial processing (Cargill, Archer Daniels

Midland, etc.); meatpacking (Tyson, Smithfield, etc.); dairy (Dean Foods, etc.); and packaged food

manufacturing (Kraft, ConAgra, etc.). Growing concentration is also seen in food wholesaling

(Sysco), retailing (Wal-Mart) and foodservice (Compass Group, Sodexho and ARAMARK).

Another consequence of growing concentration is that the remaining few corporate players and

their executives are in a good position to exercise political influence through campaign contributions.

According to compilations by the Center for Responsive Politics, the agribusiness sector increased its

aggregate federal contributions from $20.6 million in the 1990 election cycle to $54.4 million in the

2000 cycle, when the current administration was seeking office. By devoting 74 percent of the con-

tributions to Republicans in the latter year, agribusiness interests were in a good position to reap the

rewards when George W. Bush was elected.

These generous contributions have, of course, also given Big Agribusiness substantial influence

in Congress. One example concerns the country-of-origin labeling issue mentioned above. Strong

farmer and public support for the idea forced Congress to include a provision for labeling in the 2002

farm bill. Processing companies, which want to be able to keep the public in the dark about their use

of imported foodstuffs, have been waging a campaign against implementation of the provision ever

since. In 2003 agribusiness allies in Congress, with support from the Bush Administration, moved to

delay implementation of the program until 2006, and President Bush readily signed legislation to

that effect earlier this year.

The fact that agribusiness allies in Congress and the Administration succeeded in derailing a pro-

gram that enjoyed overwhelming public support (a January 2004 National Farmers Union poll

found 82 percent of consumers favored labeling) and was already the law of the land shows just how

powerful industry has become.

Not only did USDA fail to stand up to Congress; it tried to bolster

the industry’s case against mandatory labeling by estimating the costs of the system at a high level

that the General Accounting Office called “questionable and not well supported.”

The case studies that follow describe other examples of the way in which food-sector regulatory

policy has been hijacked by agribusiness interests. We have chosen to focus our presentation on

USDA, but the problem extends to other federal agencies that have some jurisdiction over food safe-

ty matters, such as the Food and Drug Administration. In 1993 FDA ignored substantial evidence

about the risks of using recombinant bovine growth hormone in milk production and approved

Monsanto’s heavily promoted product Posilac. The FDA official responsible for the agency’s labeling

policy was Michael R. Taylor, a former partner of the law firm King & Spaulding, which represent-

ed Monsanto.

A decade later, in July 2003, FDA proposed to loosen rules about the health claims

food processors can make for their products; the New York Times described the Grocery

Manufactures of America as “pleased with the agency’s decision.”

The case study below on confined

animal feeding operations notes agribusiness influence over the Environmental Protection Agency as

well as USDA.

Clearly, the problem of excessive industry influence over federal policymaking is widespread. This

paper seeks to highlight one aspect of that problem

—

revolving door appointments at USDA

—

and

to outline some reforms that can help restore some balance to the Department’s regulatory opera-

tions. Only then would USDA cease to function as an arm of Big Agribusiness and return to its orig-

inal role as a guardian of the interests of family farmers and consumers.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

CASE STUDY: BOVINE SPONGIFORM ENCEPHALOPATHY

THE PROBLEM

Since the late 1980s, the world beef industry has

contended with a threat called bovine spongiform

encephalopathy (BSE), more popularly known as

mad cow disease. The problem was originally con-

centrated in Britain, where at least 141 people have

died since a variation of the disease spread to

humans.

For more than a decade, Americans

thought that BSE was mainly a European problem.

U.S. consumers continued to consume prodigious

quantities of beef and accepted assurances from fed-

eral officials that everything was being done to pre-

vent the disease from infecting domestic herds.

That confidence began erode in May 2003,

when a BSE-infected cow was found in the

Canadian province of Alberta, prompting the U.S.

government to suspend beef imports from our

neighbor to the north. Japan and South Korea

demanded that all beef they bought from the U.S. be

labeled as born, raised and processed in the United

States. USDA refused such labeling, insisting to

those countries, as it had to U.S. consumers, that

existing rules were sufficient for safety and confi-

dence in the food supply.

The bigger shock came in December 2003,

when the first cow in the United States tested positive for BSE. For several days, during which the beef

market crashed, USDA withheld the fact that the cow was from Canada. Countries such as Japan and

South Korea wasted no time in banning U.S. imports, yet Agriculture Secretary Ann Veneman and

other department officials insisted that the diseased Holstein in Washington State was an isolated case

and that they were acting quickly to address the issue for the “North American” herd. Veneman made

a show of saying that she intended to serve beef to her family at Christmas.

About a week after the BSE discovery, USDA announced that it would impose some of the stricter

rules that independent analysts had long been advocating. These included a prohibition on the use of

downer cows (those unable to walk because of injury or illness) and a ban on the use of certain body

parts (such as brains and spinal cords, which are most likely to harbor BSE). The latter applied only

to cows older than 30 months. The downer cow policy came as a surprise to most Americans, who

had no idea that their hamburgers may have come from crippled animals. Yet, for more than a decade,

the beef processing industry had successfully thwarted efforts in Congress to ban the practice.

"At a time when [USDA] should be

bending over backward to reassure

customers, it keeps taking actions

that suggest more concern with

protecting the financial interests of

the beef industry than with

protecting public health...No one

can be confident if the department

remains so blatantly protective of

the American meat industry."

Despite the level of public concern in the wake of the Washington State BSE discovery, the indus-

try was not prepared to accede to new rules, such as the testing of all cattle for BSE, country-of-ori-

gin labeling and a ban on using cattle remains in the production of animal feed. In early January the

chief lobbyist of the National Cattlemen’s Beef Association (NCBA) declared: “We’re not about to let

the federal government come in here and overregulate at a time when they think they ought to do

something.”

As it turned out, the NCBA had little to worry about. USDA wrapped up its investigation of the

Washington State BSE case in only seven weeks, after having failed to find almost two-thirds of the

80 cattle that entered the United States from Canada with the infected Holstein. W. Ron DeHaven,

chief veterinary officer of USDA, declared: “It’s time to move on.”

The rigor of USDA’s investigation came under Congressional scrutiny shortly thereafter, when a

report by the House Committee on Government Reform, citing three eyewitnesses, disputed USDA’s

claim that the infected cow was a downer. Committee Chairman Thomas M. Davis III (R-VA) and

ranking Democrat Rep. Henry Waxman of California wrote to Secretary Veneman, stating that the

new evidence “could have serious implications for both the adequacy of the national [mad cow] sur-

veillance system and the credibility of the USDA.”

Under pressure such as this, USDA reluctantly

agreed to expand its testing program a bit more, but it still resisted the more aggressive measures that

were widely advocated outside the Department and the beef industry.

USDA also continued to deny that country-of-origin labeling would help re-establish export mar-

kets and consumer confidence—despite the certification requested by Japan and South Korea.

Consumer surveys showed a strong preference for country-of-origin labeling. World Animal Health

Organization rules state that a country can maintain “BSE free” status if an infected animal is proven

to be imported. But Tyson, Cargill, and Swift—which have large meatpacking and production oper-

ations in Canada, Australia, Argentina and other countries—did not want to identify the source of the

meat they sold to consumers. USDA, as a result, adamantly refused to change it position on labeling.

USDA’s inclination to put the interests of the big meatpackers ahead of public safety was so

strong that the Department went on the attack against a small maverick beef company. Kansas-based

Creekstone Farms operates what is reputedly an ultramodern plant and has sold premium meat to

customers in places as far away as Russia. Realizing that its business would be crippled unless foreign

customers were assured that its product was free of BSE, Creekstone spent more than $500,000 to

install its own BSE testing laboratory—the first in a U.S. slaughterhouse—to test every head of cat-

tle it slaughtered. The company hired seven chemists and biologists to operate the facility.

Rather than praising Creekstone for its initiative, USDA prevented the company from operating

the lab by refusing to sell it necessary testing materials, domestic distribution of which is controlled by

the federal government. In a position that was supported by NCBA,

USDA insisted that its own pol-

icy of limited testing was the only acceptable one and that allowing Creekstone to do comprehensive

testing might lead consumers to think that meat from other companies was not safe. USDA also

claimed that false positive results for BSE could have a negative impact on cattle and beef markets.

The inadequacy of USDA’s regulatory approach has become even clearer with some recent events.

In May there were reports that a cow with evidence of neurological problems (which is considered to

be a marker of higher risk of BSE) was discovered at a Lone Star Beef slaughterhouse in Texas, yet it

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

was not tested for BSE. The animal was removed from the meat production line but was sent to a

rendering plant to be made into animal feed, which could allow a BSE infection to return to the

human food supply. USDA could not explain how this animal slipped through its supposedly

strengthened testing program.

Revelations such as these prompted the New York Times to editorialize: “At a time when [USDA]

should be bending over backward to reassure customers, it keeps taking actions that suggest more

concern with protecting the financial interests of the beef industry than with protecting public

health…No one can be confident if the department remains so blatantly protective of the American

meat industry.”

It then came to light that, in September 2003, USDA had allowed meatpackers to resume

imports of some meat products from Canada that were prohibited by an August 2003 regulation that

responded to the discovery of BSE in that country. Over a six month period, more than 30 million

pounds of ground beef and other high-risk beef products were brought into the country. The will-

ingness of USDA to take this reckless secret action can only be interpreted as another example of an

agency totally subservient to the interests of industry. Senator Kent Conrad (D-ND) was so outraged

that he urged President Bush to ask for the resignation of Secretary Veneman (whose spokeswoman

claimed the Secretary knew nothing about the imports), adding that the public “deserved to know

who may have benefited from favored treatment, and why.”

At the written request of U.S. Senators

Tom Daschle (D-SD), Tom Harkin (D-IA) and Mark Dayton (D-MN), the USDA Inspector

General agreed to review the agency’s authorization of the Canadian beef imports.

USDA’s wrong-headed BSE policies have put U.S. consumers at risk while jeopardizing the liveli-

hood of ranchers. Despite the position of NCBA, it is not in the best interests of cattle producers to

resist comprehensive testing or country-of-origin labeling. The domestic meat market may have sta-

bilized after last year’s scares, but beef exports have plunged in the face of foreign skepticism about

the safety of U.S. cattle. If USDA continues on its current course, there is a serious risk that a crisis

of confidence will emerge in this country as well.

THE USDA-FOOD INDUSTRY CONNECTION

USDA’s inclination to defend the interests of major meatpacking companies comes as no surprise

when one considers the background of some of the Department’s key officials. USDA is overflowing

with meat industry veterans.

■ DALE MOORE, Secretary Veneman’s Chief of Staff, was previously the executive director

for legislative affairs of the National Cattlemen’s Beef Association (NCBA).

After taking

office Moore said he would recuse himself from matters involving his former employer, but

it is unclear how far that position extends into meat safety issues and how diligent Moore has

been in observing it.

■ DR. CHARLES “CHUCK” LAMBERT, Deputy Under Secretary for Marketing and

Regulatory Programs, spent more than 15 years in various positions at NCBA.

In a June

2003 Congressional hearing the former beef lobbyist was asked whether it was possible that

a case of BSE could occur in the United States. He replied: “No, sir.” When asked whether

he would bet his job on that statement, he replied: “Yes, sir.” He later admitted to a reporter:

“I overstated my case.”

■ ALISA HARRISON, USDA Director of Communications, was formerly executive director

of public relations at NCBA.

Harrison has defended the BSE policy of USDA and Secretary

Veneman to the press, and she was the spokesperson who tried to justify the Department’s

position on the Creekstone Farms controversy. On the latter issue, Harrison made the fol-

lowing dubious statement: “We are looking at what the consensus of international experts is

when it comes to testing, and that consensus is that 100 percent testing is not justified.”

■ J.B. PENN, Undersecretary for Farm and Foreign Agricultural Services, used to be a senior

vice president of Sparks Companies, a consulting firm that works closely with the meat indus-

try and other parts of agribusiness.

In April, Penn led a USDA delegation that went to

Tokyo to try to reassure Japanese officials about the safety of U.S. beef. Penn strongly hinted

that his aim was to persuade the Japanese that the 100 percent testing approach that

Creekstone Farms wanted to pursue was not necessary. Speaking of planned follow-on nego-

tiations, Penn told reporters: “I think part of what we’ll be discussing in these technical talks

is, are there different ways to get to the same level of consumer safety, to the same assurance

of a level of some consumer safety of beef?”

■ MARY WATERS, Assistant Secretary for Congressional Relations, used to serve as a Senior

Director and Legislative Counsel for ConAgra Foods, which until 2002 was a major packing

company for beef and pork.

In 2002 the company was forced to recall 19 million pounds

of beef shipped from a plant in Colorado because of E.coli contamination.

■ SCOTT CHARBO, Chief Information Officer, was formerly president of mPower3 Inc., a

wholly-owned subsidiary of ConAgra Foods.

Secretary Veneman assigned Charbo responsi-

bility for creating a national animal identification program to help deal with problems such

as BSE. Charbo seemed to be downplaying the importance of the project. He stated: “It is

important to note that no animal identification program by itself will prevent an introduc-

tion of animal disease, ensure safe food or prevent a recall.”

It is difficult to avoid the conclusion that officials such as these are going out of their way to min-

imize the regulatory burden on their former employers in the beef industry, even in the face of mar-

ketplace and food safety threats as potentially disastrous as BSE. The industry mindset seems to be

so ingrained that these officials have become oblivious to common sense or simple prudence.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

CASE STUDY: CAPTIVE SUPPLY IN MEATPACKING

If Hasbro Inc., the current owner of the board game “Monopoly,” wanted to be up to date, it

would bring out a new game called Monopsony. A monopoly, of course, is a situation in which a sin-

gle seller dominates a market and thus can command an artificially high price. A monopsony is a sit-

uation in which a single buyer dominates the market for raw materials or wholesale goods and thus

can compel suppliers to accept an artificially low price.

In the U.S. economy today, the increas-

ing domination of certain industries by a

small number of companies is moving those

sectors in the direction of monopsony. One

of the key examples of this phenomenon is

meatpacking, where a handful of giant com-

panies now wield enormous market power.

Two of the most powerful are Tyson Foods

(annual revenues: about $25 billion) and

Smithfield Foods ($8 billion). After conquer-

ing the poultry business, Tyson bought IBP

Inc. in 2001 and became the dominant play-

er in beef, processing more than 12 million

cattle a year. Thanks to a string of some 30

acquisitions over the past two decades,

Smithfield is now the undisputed king of

pork, processing about 20 million hogs a

year. Excel Corp.—a subsidiary of Cargill

Inc., a $60 billion agribusiness conglomer-

ate—is also a major force in beef and pork.

Tyson, Smithfield, Excel and the other

major packers use their economic power to

make sure they are buying livestock from

ranchers and farmers on the most advanta-

geous terms. Over the past few decades, they have increasingly done this by limiting their purchases

in open markets (such as auctions) and instead have forced producers to enter into contracts well

before animals are delivered. These contracts are weighted in favor of the packers. The result of these

arrangements is that ranchers and farmers become captive suppliers and tend to receive less for their

output than they would in a competitive market.

The danger of unchecked market power on the part of big meatpackers was recognized back in

the early 20th Century. During the Woodrow Wilson Administration, the federal government took

antitrust action against the leading companies, which in 1920 signed a consent decree to settle the

case. Its provisions required the large packers to end their involvement in retailing and to divest their

interests in public stockyards, railroad terminals and market outlets. Additional reforms were codi-

fied in 1921, when Congress passed the Packers and Stockyards Act. The main results of the Act were

"GIPSA officials find it hard to think that

packers could act in an anti-competitive

manner, preferring to believe that

economic forces or random factors are

always the explanation for suspicious

market trends."

that packers could not apportion territories, that stockyards had to post

their rates and that market agencies and brokers were subjected to rules

barring unfair, discriminatory or deceptive practices.

The Act created the Packers and Stockyards Administration (PSA)

within the Department of Agriculture. PSA was given authority to oversee

matters such as prompt payment to livestock sellers, bonding of livestock

buyers and accuracy of weighing equipment. It was also empowered to col-

lect data on the industry and to investigate complaints of anti-competitive

practices. PSA—which joined with the Federal Grain Inspection Service in

1994 to form the Grain Inspection, Packers and Stockyards

Administration, or GIPSA—was authorized to bring administrative pro-

ceedings against parties that broke the rules, but it had to refer more seri-

ous matters to the Justice Department.

As meatpacking has grown ever more concentrated over the past few

decades, groups representing family farmers and ranchers have been warn-

ing that the increased use of captive supply arrangements is undermining

fair competition. Although this is an area in which GIPSA is mandated to

act, the agency has been reluctant to do so. Instead, the agency focuses

mostly on that part of its mission related to marketing. In its annual report

for fiscal year 2003, GIPSA reports that, of the 1,522 investigations com-

pleted by the Packers and Stockyards Programs, only eight related to com-

petition issues. In six of the eight cases, the agency found no violation had

occurred.

GIPSA has bent over backward to avoid the conclusion that packers

are colluding to restrict competition. Noting allegations that packer behav-

ior led to low hog prices at certain times or that packers deliberately

refused to bid on cattle at certain times and places, a GIPSA report stated:

“These circumstances do not necessarily suggest that firms are acting in

concert to restrict competition and instead may be attributable to normal

supply and demand forces, competitive bidding processes, or personal rela-

tionships that have developed over time between packers and livestock sell-

ers.”

In other words, GIPSA officials find it hard to think that packers

could act in an anti-competitive manner, preferring to believe that eco-

nomic forces or random factors are always the explanation for suspicious

market trends.

GIPSA also adopts a sanguine approach toward the spread of captive

supply arrangements. While acknowledging the concerns of family farm

groups, the agency says that there are other observers who contend that

captive supplies do not affect market prices and that they play a beneficial

role. GIPSA avoids taking a strong position of its own by saying that “con-

cerns about the possible effects of captive supplies are complicated by ques-

tions about the accuracy of publicly available captive supply statistics.”

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

"The government

has sat by as the

packing industry has

steadily become

more concentrated

in fewer and fewer

hands with greater

and greater political

clout."

The truth was put more bluntly in a New York Times editorial last February: “The government has

sat by as the packing industry has steadily become more concentrated in fewer and fewer hands with

greater and greater political clout.”

With the failure of GIPSA to act against monopsony, family farm groups have sought relief in

Congress and the courts. Both Republicans and Democrats from major cattle-producing states have

introduced legislation that would bar some of the most unfair practices associated with captive sup-

ply arrangements. Prospects for the legislation in Congress are unclear.

As for court action, in February 2004 a federal jury in Alabama found that Tyson’s beef opera-

tion (the former IBP) was guilty of manipulating cattle prices by using illegal supply contracts. The

jury awarded damages of about $1.3 billion. The judge in the case (Pickett et al. v. Tyson Fresh

Meats), who seemed to be leaning in favor of Tyson throughout the case, later threw out the verdict

for technical reasons. His action is being appealed.

Despite being vacated, the jury’s verdict in the Pickett case helped to dramatize the problem of

captive supply and gave an indication of how much economic damage is being done to small pro-

ducers. It makes GIPSA’s failure to act all the more egregious.

THE USDA-FOOD INDUSTRY CONNECTION

The Administrator of GIPSA is Donna Reifschneider. There is currently no biography of

Reifschneider posted on the USDA website, but a press release issued when she was appointed in

2002 indicated that she was previously a member of the executive committee of the Meat Export

Federation and, prior to that, president of the National Pork Producers Council.

The Federation

and the Council are agribusiness trade associations that have not been critical of growing concentra-

tion in the meat industry. Reifschneider participated in a Council task force that came out against a

ban on packer ownership.

Reifschneider’s family owns and operates a hog and grain farm in south-

ern Illinois. In 2000 Successful Farming magazine reported that the Reifschneider farm was where

multinational agribusiness giant Bunge Ltd. “had its main genetic nucleus herd.”

GIPSA’s Deputy Administrator for Packers and Stockyards Programs, JoAnn Waterfield, does not

come from an industry background, but she has apparently adopted much of the meat processing

industry’s point of view. According to a September 2003 article in a publication of the Illinois Farm

Bureau, Waterfield “recognizes packers enjoy the right to ‘grow their business.’ She emphasizes [that]

neither livestock market concentration nor consolidation are prohibited under the agency’s guiding

Packers and Stockyards Act.”

Speaking to a 2002 meeting of the National Cattlemen’s Beef

Association, Waterfield made it sound like enforcement of the unfair competition provisions of the

Packers and Stockyards Act was all but impossible, claiming that the Act provides “an extremely dif-

ficult threshold” to prove there is a violation.

Apparently, GIPSA has given up trying.

CASE STUDY: MEATPACKING INSPECTION POLICIES

THE PROBLEM

When social studies textbooks in the United States mention Upton Sinclair and his 1906 novel

The Jungle, they give the impression that unsanitary conditions in meatpacking plants are a thing of

the past. Yet there is evidence suggesting that, over the past two decades, the meat consumed by

Americans has been getting increasingly dirty.

The consequences of tainted meat became quite apparent in 1992, when four children died and

500 people became ill as a result of eating hamburgers at Jack-in-the Box restaurants that contained

a virulent strain of E. coli bacteria. Then, in 1997, a Nebraska packing plant owned by Hudson Foods

had to recall 25 million pounds of ground beef because of bacterial contamination.

In the wake of the Jack-in-the Box scan-

dal, there was strong public pressure to

tighten the meat inspection system, yet the

industry had a different agenda.

Meatpacking had become increasingly con-

centrated, dominated by a handful of cor-

porations obsessed with maximum

productivity in order to achieve maximum

profits. These companies sought to replace

the long-standing inspection regime, based

on direct observation by federal employees,

with a system that impinged less on output.

The industry united behind a system

known as Hazard Analysis and Critical

Control Point (HACCP), which was pre-

sented as a modern science-driven, risk-

based approach. HACCP was not a new

concept. It had been used in manufacturing

since the 1970s and was supported by con-

sumer groups with the understanding that it

would supplement existing inspection pro-

cedures. There was thus no uproar in 1996

when the Clinton Administration adopted

HACCP as federal policy for meat and

poultry, with the new system to be phased

in over several years.

Yet, as was documented in a report titled

The Jungle 2000 by Public Citizen and the

Government Accountability Project, the

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

"Yet, as was documented in a report titled

The Jungle 2000 by Public Citizen and the

Government Accountability Project, the

adoption of HACCP served to weaken

rather than strengthen the inspection

process. The report, based on a survey of

federal meat inspectors, concluded that,

under HACCP, companies were gaining

control of the inspection process and were

letting dirtier meat get distributed to

consumers."

adoption of HACCP served to weaken rather than strengthen the inspection process.

The report,

based on a survey of federal meat inspectors, concluded that, under HACCP, companies were gain-

ing control of the inspection process and were letting dirtier meat get distributed to consumers.

Inspectors, who joked that HACCP really stood for “Have A Cup of Coffee and Pray,” reported that

they felt pressured to “let the system work” and not to shut down the line, even in cases of serious

contamination.

Disturbing conclusions were also reached in a General Accounting Office report released in

August 2002.

The GAO found that the USDA’s Food Safety and Inspection Service (FSIS) was not

ensuring that all plants’ HACCP plans met regulatory requirements; that FSIS was not consistently

identifying repeated violations; and that FSIS was not ensuring that plants took prompt and effec-

tive action to return to compliance after a HACCP violation had been identified.

The HACCP program was supposed to provide for comprehensive pathogen testing, yet what

was put into effect was a requirement for routine microbial testing only for salmonella, with limited

random testing for other pathogens. It was also left ambiguous as to whether government inspectors

would have access to the results of testing done by the company. At the same time, HACCP has

allowed meatpackers to rely on questionable procedures such as irradiation to deal with contamina-

tion, rather than preventing the problem in the first place. Irradiation serves only to mask sanitary

problems in slaughterhouses, and the process forms new chemicals in food that are known or sus-

pected carcinogens.

HACCP has now been fully implemented in processing (from carcass to package) but not in

slaughter (from live animal to carcass.) FSIS is trying to implement HACCP in slaughter through

something called the HACCP-based Inspection Models Project, or HIMP. As proposed by FSIS, the

change would end the policy of having a government inspector examine every carcass, as mandated

by the Federal Meat Inspection Act. The inspectors’ union sued the agency to stop this, and in

response the agency reinstated an inspector at the end of the line to comply with the requirement of

continuous government inspection. HIMP is currently in place as a pilot project, mostly in poultry

plants with high line speeds.

Since HACCP was implemented, there have been several high-profile food safety problems. In

2002 ConAgra (where, as noted above, Mary Waters, USDA Assistant Secretary for Congressional

Relations, used to work) was forced to recall 19 million pounds of beef shipped from a plant in

Colorado because of E. coli contamination. Also in 2002, in the wake of several deaths and dozens

of hospitalizations, Wampler Foods recalled more than 27 million pounds of cold cuts shipped from

a plant in Pennsylvania because of listeria contamination. In the Wampler case, there were reports

that inspectors had found dozens of violations in the months before the listeria outbreak, but “cor-

rective actions were either not implemented or ineffective.”

In the midst of these problems, the meat industry was praising USDA for putting a new empha-

sis on cooperation with industry. In December 2002, Dan Murphy, editor of the trade journal Meat

Marketing & Technology (and later vice president of public affairs for the American Meat Institute),

published an editorial in the magazine titled “A Regime Change at USDA?” In it he wrote that the

people now running the main regulatory agencies at the Department were putting “emphasis on

structuring regulations with the input of industry so that compliance is maximized and the benefits

of policy are realized.” He also approvingly noted that, in an address to the American Meat Institute,

FSIS Administrator Garry McKee said one of his goals was to have a “healthy relationship” with

industry.

Increasingly, it appears that FSIS has surrendered its responsibilities over to industry and is will-

ing to keep regulation as toothless as possible. According to Time magazine, the agency caved in to

pressure from meat processors (and the White House) and substantially weakened a proposed listeria

policy.

As with BSE, USDA is pursuing policies that endanger the integrity of the U.S. food system

and the well-being of consumers.

THE USDA-FOOD INDUSTRY CONNECTION

The federal official most directly responsible for meat

inspection policies is Dr. Elsa A. Murano, Under Secretary of

Agriculture for Food Safety and the head of FSIS. On the sur-

face, Murano’s background is that of an academic.

She was on

the faculty of Texas A&M University for six years, rising to the

position of full professor. She also served as director of the

Center for Food Safety within Texas A&M’s Institute of Food

Science and Engineering. Prior to her time at Texas A&M,

Murano served as professor-in-charge of research programs at

the Linear Accelerator Facility at Iowa State University.

What her official biography fails to mention is that, before

taking office, Murano was a proponent of HAACP as well as an

ardent supporter of the controversial practice of food irradia-

tion, the meat industry’s preferred method for dealing with

pathogens. When Murano was nominated in July 2001, the

Associated Press referred to her as an “irradiation advocate.”

Nation’s Restaurant News headlined its story “Bush Taps

Irradiation Ally for Top Safety Post.”

Public Citizen wrote a

letter to Sen. Tom Harkin, then chairman of the Senate

Agriculture Committee, pointing out that the program where

she taught at Texas A&M had signed a 10-year research and

development deal with Titan Corporation, a leading player in

food irradiation through its creation of SureBeam

Corporation.

The letter also cited statements from Murano

downplaying the risks of irradiation and comparing it to

microwaving, an entirely different process.

Since taking office, Murano has acted as a proponent both

of HACCP and irradiation. For example, in May 2003 she

addressed the First World Congress on Food Irradiation, prais-

ing irradiation as “an important tool in our fight against food-

borne illness.”

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

"Murano was a proponent of

HAACP as well as an ardent

supporter of the

controversial practice of

food irradiation, the meat

industry's preferred method

for dealing with pathogens."

Murano has been joined in her efforts on behalf of irradiation by her husband Peter Murano, who

also performed industry-sponsored research on irradiation while an academic at Texas A&M and who

was also brought into the Bush Administration.

He is Deputy Administrator for Special Nutrition

Programs at USDA’s Food and Nutrition Service, which gives him a position of influence over the

National School Lunch Program. In May 2003, USDA lifted its ban on the use of irradiated ground

beef in school lunches. Elsa Murano defended the move, telling reporters “when compared with con-

ventional beef, the product’s that irradiated is going to be safer, no question.”

Murano and USDA

proceeded with the irradiation plan despite what one trade publication called “a flood of angry com-

ments…from parents denouncing” the proposal.

To top things off, USDA announced last year that it was awarding a grant of $185,000 to Texas

A&M to help fund a National Center for Electron Beam Food Research, which was also getting $10

million from SureBeam.

USDA also gave $151,000 to the state of Minnesota for what was

described as an irradiation education program in three school districts, but which critics called a pro-

irradiation propaganda campaign.

USDA is not only encouraging the dubious practice of irradia-

tion; it is subsidizing its development.

CASE STUDY: BIOTECH FOODS

THE PROBLEM

May 10, 2004 may long be remembered as a major turning point in the fifteen-year battle over

the introduction of genetically modified foods in the United States. On that day, Monsanto

Company, the leading corporate proponent of agricultural biotechnology, announced that it was, in

effect, abandoning the effort to sell genetically modified (GM) wheat. Although the company’s press

release didn’t say so, the move was necessitated by strong opposition to GM wheat on the part of food

processors, consumers and a significant number of farmers.

Now that Monsanto has faced up to the reality of the resistance to its line of business, the ques-

tion is whether another leading cheerleader for biotechnology—the U.S. Department of

Agriculture—will change its tune. USDA has been favorably disposed toward biotech at least since

the first Bush Administration, when Ann Veneman (the current Secretary of Agriculture) announced

in her capacity as Deputy Secretary that the Department would no longer regulate Calgene’s FLAVR

SAVR tomatoes, one of the first GM foods to enter the marketplace.

For a period of about a year

between her first stint at USDA and her appointment as head of California’s agriculture department,

Veneman served on the board of Calgene, which was later taken over by Monsanto.

Although at times he acknowledged the risks of forcing biotech on wary consumers, Clinton

Administration Agriculture Secretary Dan Glickman did his best to promote genetic engineering.

The St. Louis Post-Dispatch once referred to him as “one of biotechnology’s leading boosters, admon-

ishing reluctant Europeans not to stand in the way of progress.”

In an April 2000 speech to the

Council for Biotechnology Information, Glickman stated: “I believe that biotechnology has enor-

mous potential for consumers, for farmers, and for the millions of hungry and malnourished people

in the developing world.”

That same belief has been propounded by USDA since Ann Veneman was chosen to lead the

Department by the current Bush Administration. Veneman took office only months after the dis-

covery of unapproved Starlink GM corn in the food supply illustrated the shortcomings of the fed-

eral regulatory system for biotech. One of her Department’s early acts was to commit to spending up

to $20 million to compensate seed companies for Starlink contamination. Echoing Dan Glickman,

Veneman told a United Nations Food and Agriculture Organization conference in November 2001

that biotech “will reinvigorate productivity growth in food and agriculture production and make agri-

culture more environmentally sustainable.”

In August 2002 Veneman lashed out against biotech opponents for supposedly influencing the

decision of several countries in southern Africa to reject food aid that included GM corn. “It is dis-

graceful,” she said, “that instead of helping hungry people, these individuals and organizations are

embarking on an irresponsible campaign to spread misinformation and create an atmosphere of fear,

which had led countries in dire need of food to turn away safe, wholesome food.”

Veneman joined with U.S. Trade Representative Robert Zoellick in pressuring the European

Union to drop its ban on GM food, in effect instigating a major trade dispute over the issue at the

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

World Trade Organization. She also appointed an Advisory

Committee on Biotechnology that excluded key anti-biotech farmers

organizations.

In March 2003 the Washington Post revealed that

USDA, which had made a show of fining ProdiGene Inc. for mis-

handling GM corn that tainted soybean supplies, was giving the com-

pany a $3.5 million no-interest loan to help it pay for cleaning up the

problem.

USDA’s promotion of biotech can also be seen in its use of feder-

al funds to finance research on the highly controversial “terminator”

technology, which helps biotech seed companies protect their intel-

lectual property by rendering seeds sterile. This means farmers can no

longer engage in the age-old practice of saving seed. Instead, they have

to buy new seed every year—an especially harsh burden for farmers in

poor countries.

The Department has also taken a biotech-friendly approach in its

oversight of genetic engineering test plots. According to a study by the

U.S. Public Interest Research Group, from 1987 through 2002,

USDA authorized 15,461 field releases of genetically engineered

organisms on 39,660 field test sites spanning 482,226 acres. USDA

rejected only 3.5 percent of applications, and those were denied for

reasons such as incomplete applications or other minor paperwork

errors. USDA largely operates under a notification process, where

developers just let the agency know they are conducting a field trial.

There is very little oversight or monitoring.

A similarly lackadaisical

approach to regulation on the part of USDA can be seen with regard

to the growing field of biopharmaceuticals. This controversial practice

of using crops to grow drugs creates risks that nearby plants could be

contaminated and thereby expose consumers to unwanted drugs.

For U.S. farmers, a major consequence of the spread of biotech is

a loss of export markets. For example, the U.S. share of corn exports

in Europe went from 82 percent in 1994-95, before GM corn was

first adopted in the U.S., to 0 percent in 2003-2004. Instead of help-

ing farmers, the introduction of GM corn has cost the U.S. taxpayers

hundreds of millions of dollars in additional farm program expenses,

contributed to a collapse in the price American farmers receive for

corn and has cost U.S. corn farmer billions of dollars (an estimated

$15 billion in 2004 alone) because of lost exports to Europe and other

countries over the last 10 years.

While farmers are paying an economic price, USDA is allowing

U.S. consumers to be turned into a vast pool of unwitting test sub-

jects for the biotech industry’s questionable agenda for transforming

agriculture.

"USDA's promotion of

biotech can also be seen

in its use of federal

funds to finance

research on the highly

controversial

"terminator"

technology, which helps

biotech seed companies

protect their intellectual

property by rendering

seeds sterile. This means

farmers can no longer

engage in the age-old

practice of saving seed.

Instead, they have to

buy new seed every

year—an especially

harsh burden for

farmers in poor

countries."

THE USDA-FOOD INDUSTRY CONNECTION

USDA’s promotion of biotechnology has been displayed at the highest level of the Department,

including Agriculture Secretary Ann Veneman, who, as noted above, once served as the director of a

biotech company. Other key USDA officials also have ties to the biotech industry. For example,

■ NEIL HOFFMAN, the Biotechnology Regulatory Services

Director of USDA’s Animal and Plant Health Inspection Service

(APHIS), formerly served as a researcher at the biotech firm

Paradigm Genetics Inc.

■ DAVID HEGWOOD, Counsel to the Secretary of Agriculture,

formerly worked at the Washington, DC law firm, O’Mara &

Associates, where he advised clients in international trade issues

related to biotechnology.

■ NANCY BRYSON, USDA's general counsel, was a partner in

the Washington, D.C. office of the law firm of Crowell &

Moring, where she advised clients on biotechnology product

approval and regulations and served as the co-chair of Crowell &

Moring's biotechnologies practice.

There are also cases of federal officials’ leaving USDA to work for

the biotech industry and its representatives. Chief among these is

former USDA Secretary Dan Glickman, who went to work for Akin

Gump Strauss Hauer & Feld, one of the major lobbying and law

firms in Washington, where he was to advise corporate clients on a

variety of issues including biotechnology

.76

Attorney Andrew C. Fish, a former Assistant Secretary at USDA

during the Clinton Administration, joined the Government Affairs

Practice Group at the law firm of Downs Rachlin Martin PLLC,

where his areas of focus included biotechnology.

When it comes to biotechnology, the movement between govern-

ment and industry is truly a revolving door.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

"While farmers are

paying an economic

price, USDA is allowing

U.S. consumers to be

turned into a vast pool

of unwitting test

subjects for the biotech

industry's questionable

agenda for transforming

agriculture."

CASE STUDY: CONCENTRATED ANIMAL FEEDING

OPERATIONS AND EQIP

THE PROBLEM

Among the biggest sources of agricultural pollution in the

United States are concentrated animal feeding operations.

CAFOs are livestock facilities that house and feed 1,000 or more

animal units in a confined area. These large factory farms are not

capable of efficiently disposing of the enormous amounts of

manure they create. Current practices such as storing waste in

giant open air lagoons and spraying liquefied manure in adjacent

fields create serious public health and environmental hazards.

These problems were well documented in a June 2001 peer-

reviewed study issued by Iowa State University and the University

of Iowa.

Among these were high rates of respiratory disease and

dysfunction among workers exposed to the gases, particulates and

vapors produced in CAFOs; possibly fatal asphyxia and respirato-

ry arrest from very high levels of exposure to the hydrogen sulfide

generated by CAFOs; reemergence of antibiotic-resistant

microorganisms; and negative impacts on ecosystems from leak-

age or rupture of manure lagoons.

CAFOs have been promoted by USDA with little or no

regard to their environmental or public health consequences—or

the fact that the growth of factory farms helps to accelerate

agribusiness concentration. As the number of CAFOs proliferated

and research provided conclusive evidence about their negative

impacts, USDA, instead of safeguarding the public interest and

promoting appropriate production technologies, has pursued the

misguided policy of using conservation dollars out of its

Environmental Quality Incentives Program (EQIP) to subsidize

CAFOs’ attempts to solve their manure problems.

EQIP was first enacted as part of the 1996 Farm Bill with $1.4

billion in funding. It is a voluntary USDA conservation program

administered by the Natural Resources Conservation Service

(NRCS) that provides subsidies to farmers, ranchers and livestock

producers to treat soil, water and related natural resource prob-

lems. Under the 1996 law, animal waste storage structures for

CAFOs were ineligible for EQIP funding. The program, accord-

ing to experts, worked reasonably well in support of farm conser-

vation efforts.

"CAFOs have been

promoted by USDA with

little or no regard to their

environmental or public

health consequences—or

the fact that the growth

of factory farms helps to

accelerate agribusiness

concentration."

Under the 2002 Farm Bill, with authorized funding of $6.1 billion over six years, EQIP is the sec-

ond largest conservation program in the history of U.S agriculture. This unprecedented increase in

funding could have been a great opportunity to expand sustainable livestock conservation practices.

Instead, CAFOs were made eligible for EQIP funding, the yearly payment limit of $10,000 per farm

was eliminated, and the overall payment limitation increased nine-fold from $50,000 to $450,000, all

of which skewed funding in favor of large-scale operations. Congress declined to pass safeguards that

would have kept taxpayer money from subsidizing new or expanding CAFOs. Both the National Pork

Producers Council and the National Cattlemen's Beef Association testified at Congressional hearings

in support of EQIP funding for CAFOs.

Agriculture Secretary Veneman has repeatedly stated that the changes in EQIP under the 2002

Farm Bill would help farmers and ranchers live up to higher environmental standards, encourage con-

servation and enhance their ability to protect wetlands and water quality. But despite the increase in

funding under the 2002 bill, it appears that the total number of farms and ranches benefiting from

EQIP has not increased.

Instead, more of the money is apparently going to CAFOs and other large-

scale operations, which use capital-intensive structures and equipment. For example, USDA is encour-

aging the adoption of anaerobic methane digesters, which decompose manure to produce energy.

Methane digesters are considered feasible only if they are subsidized. Such incentives would come from

EQIP.

According to Dr. William J. Weida, a prominent

rural economist, “Subsidizing anaerobic digesters diverts

EQIP funds to support a technology that will only

encourage factory farms to continue producing unsus-

tainable amounts of manure and pollution. What they

should do is eliminate environmental damage from

excessive animal waste, and the only viable way to do that

is to reduce the size of factory farms and utilize EQIP

funds for true environmental restoration.”

Methane

digesters also emit ammonia at rates that exceed indus-

trial pollution standards and result in increases in increas-

es in greenhouse gases in the atmosphere, according to a

recent study by the National Academy of Sciences.

Federal policy on CAFOs is also under the purview

of the Environmental Protection Agency. EPA first began

to regulate CAFOs in the 1970s. At the time, compliance

with waste-storage and waste-disposal was voluntary. In

February 2003, the EPA published the final Clean Water

Act regulation for CAFOs and large-scale livestock oper-

ations. The EPA rule was in response to a lawsuit aimed

at getting the agency to implement and enforce a 30-

year-old provision to regulate CAFOs as a point source of

pollution. A majority of CAFOs in the country operate

without permits because of lack of enforcement.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

"EPA and USDA have both shown

an unwillingness to confront

factory farm interests and have

instead allowed the EQIP

conservation program to be

twisted into a CAFO promotion

program. This helps to hasten the

decline of family farms and

increasingly subjects Americans

to the environmental disaster of

factory farms."

The proposed rule for EQIP was published around the same time in February 2003. At issue was

what relationship, if any, EPA should establish between the $6.1 billion program and its CAFO reg-

ulations. Critics charged that the changes to EQIP that assisted CAFO owners increased the risks of

environmental damage by encouraging the use of large-scale waste-treatment structures. They also

argued that opening EQIP to CAFOs to assist in complying with EPA regulations was unnecessary

because CAFOs should have to pay to manage their waste without federal assistance.

The ties between EPA and factory farm interests were made clear in a recent article in the

Chicago Tribune. The newspaper, citing documents obtained by the Sierra Club through a Freedom

of Information Act request, reported that a slide show being used by EPA to explain farm pollution

issues was based on material prepared by the National Pork Producers Council.

EPA and USDA have both shown an unwillingness to confront factory farm interests and have

instead allowed the EQIP conservation program to be twisted into a CAFO promotion program.

This helps to hasten the decline of family farms and increasingly subjects Americans to the environ-

mental disaster of factory farms.

THE USDA-FOOD INDUSTRY CONNECTION

The Natural Resources Conservation Service, the USDA agency that administers EQIP, is head-

ed by Bruce Knight, who previously worked for agricultural producer groups such as the National

Corn Growers Association (NCGA) and the National Association of Wheat Growers (NAWG).

These groups have strong ties to corporate agribusiness. NCGA gets about 13 percent of its revenue

from industry.

Among the corporations identified on the association’s website as “helping the

NCGA” are Archer Daniels Midland, Bunge North America and DuPont.

The website of NAWG

lists Industry Partners such as DuPont, Dow Agrosciences and Monsanto.

The official who oversees the day-to-day activities of USDA, Deputy Secretary James R. Moseley,

has been described by the Chicago Tribune as “a champion of industrial-style hog production.”

Before taking office, he was a partner in Infinity Pork LLC, an Indiana CAFO that raised 50,000

hogs annually.

This is in addition to the USDA officials – including GIPSA Administrator Donna Reifschneider

and Eric Hentges, head of the Center for Nutrition Policy and Promotion – who used to work for

the National Pork Producers Council, which is essentially a trade association for factory hog farms.

Here, too, there is no presence of officials who might be more inclined to promote sustainable

agriculture, family farms and the real interests of American consumers. This and the preceding case

studies are some of the more significant—but hardly the only—areas in which USDA policymaking

has been hijacked by the food industry. Principles of public health, environmental protection, fair

competition and simple common sense have been thrown out in favor of policies that play to the

short-term, narrow interests of the big producers and major processors. More and more, USDA now

seems to stand for U.S. Department of Agribusiness.

NEXT STEPS:

TOWARD A SHAREHOLDER REVOLT AT USDA INC.

BY PETER O’DRISCOLL, CENTER OF CONCERN

This paper details a pattern of preference and exclusion in decision-making at USDA. Time and

again, the agency has championed the interests of a narrow group of powerful food industry groups,

at the expense of many other constituencies with legitimate interests in U.S. food and agriculture pol-

icy. Revolving door appointments of industry executives and their allies to key regulatory and pro-

motional roles at USDA go a long way toward explaining how the “people’s department” has been

hijacked by Big Agribusiness.

Stakeholders in the food system include farmers of all sizes; rural communities that depend on

the farm economy; agricultural and food processing workers; environmentalists concerned about the

sustainability of the food system; and tax-paying consumers who depend on it for safe, nutritious and

affordable food. The companies that provide inputs for the food system, process farm products and

sell them to consumers are also legitimate stakeholders.

But even as industry consolidation leaves

the fate of the agri-food system in the hands of

a few transnational conglomerates with

tremendous economic and political power,

there is no justification for allowing the voice

of Big Agribusiness to drown out all others in

the formulation of food policy. The foregoing

case studies show that the food industry’s

interests have routinely prevailed over those of

other stakeholders in key decisions regarding

how USDA fulfills its role of promoting the

farm economy, developing export markets,

ensuring rural development and regulating the

safety and competitiveness of the food system.

In a well-functioning democracy, agency

appointees should be creating opportunities

for meaningful participation for all stakehold-

ers in the policy formulation process. Their

job is to balance consumers’ need for safe,

affordable, accessible food with farmers’ desire

for fair, competitive markets and with the cor-

porate quest for profit. USDA should gather

input from all these constituencies and pro-

pose programs and regulations-on food safety

standards, disclosure and labeling require-

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

"Therefore, a much-needed reappraisal

of ethics rules across federal agencies,

including "cooling-off" periods between

government and industry roles as well as

incoming and outgoing ethics pledges

from political appointees, must include

attention to the particular conflicts of

interest generated when industry

leaders become policymakers."

ments, environmental impact, animal welfare, marketing, subsidy and trade policies-that best serve

the rights and needs of consumers, farmers, food workers, companies, and the environment.

Instead, thanks to the revolving door, food industry advocates at USDA block consumer and

environmental regulations they don’t like, stave off antitrust enforcement as oligopoly power grows,

and push international trade and domestic farm policies that guarantee Big Agribusiness cheap inputs

at taxpayer expense. Far from balancing competing stakeholder interests, USDA consistently

advances the policy prescriptions of the biggest players in the food industry. This paper seeks to gen-

erate progress along four broad axes in order to end the industry stranglehold on USDA and to pro-

mote more balanced formulation of food policy:

1. OVERHAUL AND ENFORCE FEDERAL ETHICS RULES

REGARDING APPARENT CONFLICTS OF INTEREST

Like other federal agencies, USDA employees are subject to both administrative and criminal

penalties if they are deemed to have violated ethics rules in the performance of their official duties.

Appropriately, substantial proof is required for criminal prosecution under Title 18 of the United

States Code, which relates to bribery, graft and conflicts of interest.

However, federal appointees are

also subject to “Standards of Ethical Conduct,” published by the Office of Government Ethics, which

address the issue of “Impartiality in Performing Official Duties.” These standards establish a lower

threshold for identifying conflict of interest, stipulating that agency employees “shouldn't participate

in particular matters involving specific parties that are likely to affect the financial interests of…

prospective/former employers [and] outside associations in which [they] are active or principal…

where a reasonable person might question [their] impartiality.”

By this standard, many of the key appointees mentioned in the foregoing case studies should

recuse themselves from USDA policy making on issues from food safety to biotechnology, because

their associations with former employers in the industry would lead any reasonable person to ques-

tion their impartiality. As detailed above, Dale Moore promised to recuse himself from matters relat-

ing to the National Cattleman’s Beef Association. But such recusals by themselves do not solve the

problem of excessive industry influence. There is little evidence that top USDA officials have been

subject to administrative sanction for the apparent conflicts in these case studies.

In its excellent report on revolving door issues at the Department of Defense,

the Project on

Government Oversight (POGO) sheds important light on why ethics rules are so poorly enforced:

they are rife with loopholes, exemptions and complexities that require significant legal expertise to

disentangle. POGO illustrates how enforcement of revolving door ethics violations across the feder-

al government has declined over the past eight years, and offers thirteen very specific recommenda-

tions for tightening the rules framework.

This paper applauds and supports those

recommendations.

Spurred by scandals at the Pentagon, Senator Robert Byrd (D-WV) recently sought to introduce

legislative curbs on federal appointees who work with government contractors,

while Senator John

McCain (R-AZ) plans hearings on revolving door issues in July.

However, it is important to point

out one major difference between revolving door appointments at the Pentagon and at USDA.

Concern at the Department of Defense has centered on procurement officers, often with military

backgrounds, who accept lucrative jobs with the very firms whose defense contracts they managed.

In such cases, the door revolves from government service to industry.

This has allowed some observers to suggest that the revolving door may be a positive phenome-

non, because career civil servants imbued with patriotism, discipline and ethical rectitude would not

seek to defraud the government for their own personal gain, and would instead use their knowledge

and experience of the system to enhance efficiency. But that argument weakens when the revolving

door swings the other way, from industry to government, as in the case studies at USDA. Executives

with long experience in the private sector often bring with them to public service an ideological aver-

sion to regulation, which in turn colors their attitudes about their policy options.

Therefore, a much-needed reappraisal of ethics rules across federal agencies, including “cooling-

off” periods between government and industry roles as well as incoming and outgoing ethics pledges

from political appointees, must include attention to the particular conflicts of interest generated

when industry leaders become policymakers.

2. INCREASE CONGRESSIONAL OVERSIGHT FOR REGULATORY APPOINTEES

The executive branch of government is empowered by the constitution to nominate “high gov-

ernment officials,” but their final appointment is contingent on the “advice and consent of the

Senate.”

Most of the former food industry executives and lobbyists named in the case studies in this

report were confirmed in their roles without much apparent attention to the potential for conflict of

interest as they set out to regulate the companies they had so recently left (and to which most will

likely return). Senators may have been swayed by the argument that those who understand the food

industry from the inside will be best placed to oversee it from regulatory posts in USDA.

But corporate executives and lobbyists are by no means the only—or even the best—qualified

candidates for management jobs in food policy. Family farm organizations and producer groups that

are not directly tied to food companies also understand the system intimately. Public interest and

consumer groups are well versed in law and policy surrounding American agriculture. With regard to

conservation policy and assessment of ecological impacts, non-profit environmental organizations

have demonstrated that they are at least as technically adept on issues of substance as food company

lobbyists. Finally, there are many academic experts on regulatory policy who could guide USDA

without leading reasonable people to question their impartiality.

In reviewing presidential nominees to key roles at USDA, the Senate should use its “advice and

consent” mandate to demand that top officials at the agency reflect the diversity of talents and expe-

rience necessary for balanced decision-making. Congressional committees with oversight responsibil-

ities for the food and agriculture system should also pay closer attention to potential conflicts of

interest among appointees with ties to the food industry. This need for scrutiny extends to the com-

position of various USDA “advisory committees” on agriculture policy, which are typically stacked

with corporate leaders and representatives from industry-linked producer groups, but rarely include

other stakeholder groups.

Along with reform of relevant ethics rules, the best way to limit the damaging influence of revolv-

ing door appointments at USDA is to make sure that all legitimate stakeholder interests are repre-

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

sented in the policy process. Congress can ensure progress in this direction through support for pro-

cedures to broaden participation in the debate on food policy, such as recent advances in “e-rule-mak-

ing,” the electronic gathering and processing of input on regulatory proposals.

But such measures

are no substitute for ensuring balanced stakeholder representation among USDA appointees.

3. RECONSIDER THE COMPATIBILITY OF USDA’S PROMOTIONAL ROLE WITH

ITS REGULATORY FUNCTION

Many observers believe that there is an inherent contradiction between USDA’s mandate to pro-

mote American agricultural products and its duty to regulate food safety and guarantee fair compe-

tition. Given that USDA performs both promotional and regulatory functions, the agency must

continually work for a balanced approach. But when revolving door appointments of industry insid-

ers predispose the agency to promote the interests of Big Agribusiness at the expense of public health,

major problems arise.

Senator Peter Fitzgerald (R-IL) was so concerned about USDA funding for a Pizza Hut promo-

tion to increase cheese consumption that he opined in a September 2003 hearing on nutritional

guidelines that “putting the USDA in charge of dietary advice is in some respects like putting the fox

in charge of the henhouse.”

Fitzgerald suggested that it might be necessary to move some of USDA’s

regulatory responsibilities into other federal agencies that are “less likely to be cozy with farm groups

and the food companies.”

Bureaucratic reorganization of a federal agency as large as USDA would certainly be a complex

and expensive process, potentially plagued by unintended consequences. Yet pressure is building from

several quarters to restructure USDA’s role, driven by concerns about its ability to guarantee food

safety amidst indications that maintaining the food industry’s profit margin is a higher agency prior-

ity. For example, General Accounting Office testimony before the House Committee on

Government Reform this past March recommended a fundamental overhaul of food safety legisla-

tion and the creation of an independent food safety agency.

100

Public interest groups take varying positions on the wisdom of creating a separate food safety

agency. In the context of concerns raised in this paper, one critique of the idea is particularly com-

pelling: what safeguards would be put in place to prevent the hijacking of the new agency by food

industry appointees? Further discussion and debate on institutional reform at USDA should certain-

ly be encouraged, to ensure that the agency’s key responsibilities are carried out as effectively as pos-

sible.

But that debate must place a strong emphasis on the need to guarantee balanced participation

from all legitimate stakeholders in the formulation of food and agriculture policy. Such participation

can only be guaranteed by measures that close the revolving door and limit the disproportionate

appointment of food industry advocates to key USDA positions.

4. INVESTIGATE SPECIFIC REVOLVING

DOOR CONFLICTS OF INTEREST

This report seeks to “connect the dots” and

expose an overall pattern of industry influence

and its consequences for other stakeholders in the

food and agriculture system, by compiling and

reviewing a series of major food policy decisions

at USDA over the past decade, under administra-

tions of both major parties. But the report is by

no means a definitive or final statement on the

matter. There is much more digging to be done

to detail the specific mechanisms through which

food companies and trade associations use cam-

paign contributions and other forms of influence

to guarantee themselves a seat on the board of

directors of “USDA Inc.” Such research will

involve use of the Freedom of Information Act to

request documentation of meetings between

industry advocates and USDA officials, and more

in-depth analysis of specific decisions than is pos-

sible within the limits of an introductory report.

The public interest organizations that collab-

orated in the production and release of this paper

call on like-minded colleagues, as well as inves-

tigative journalists and other members of the media, to further document revolving door industry

influence at USDA. Groups should also work together to develop proposals to remedy the situation.

Concerned members of Congress can also encourage the General Accounting Office and other gov-

ernment investigators to look more closely at the apparent conflicts of interest raised by the industry

links of key appointees.

Dominant agri-food companies have legitimate interests in USDA policy, but their objectives

must not be allowed to violate the rights or drown out the voices of other key constituencies. Big

Agribusiness has used the appointment of food industry executives and advocates to turn the “peo-

ple’s department” into “USDA Inc.” And as long as the food industry monopolizes the debate, there

is little prospect of meaningful reform in farm and agricultural trade policy, or movement toward a

more sustainable food system.

But there is still time for the majority shareholders in this enterprise–taxpayers, consumers, farm-

ers and proponents of a fair, safe and sustainable food system–to replace the de facto board of indus-

try-friendly directors with representatives from all appropriate constituencies. It’s time for a

shareholder revolt at USDA Inc.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

"But there is still time for the majority

shareholders in this enterprise—

taxpayers, consumers, farmers and

proponents of a fair, safe and

sustainable food system—to replace

the de facto board of industry-friendly

directors with representatives from all

appropriate constituencies. It's time

for a shareholder revolt at USDA Inc."

ENDNOTES

INTRODUCTION

1 . <www.usda.gov/mission/miss-toc.htm>.

2 . See, for example, Special Interest Takeover: The Bush Administration and the Dismantling of Public Safeguards,

produced by the Center for American Progress & OMB Watch for The Citizens for Sensible Safeguards

Coalition, May 2004; available online at <www.sensiblesafeguards.org/sit.phtml>; Anne C. Mulkern, “When

Advocates Become Regulators,” Denver Post, May 23, 2004; and Democratic Policy Committee, A Sweetheart

Deal: How the Republicans have Turned the Government Over to Special Interests, February 14, 2003; available

online at <www.house.gov/georgemiller/bushinsiders.pdf>.

3. Wayne D. Rasmussen, “The People’s Department: Myth or Reality?” Agricultural History, vol. 64, no.2, Spring

1990, p.291. The historical section of this introduction is based on this article and on two books: Wayne D.

Rusmussen & Gladys L. Baker, The Department of Agriculture, New York: Praeger Publishers, 1972 and Gladys

L. Baker et al., Century of Service: The First 100 Years of the United States Department of Agriculture,

Washington, DC: Centennial Committee, U.S. Department of Agriculture, 1963.

4. Carol Lewis, “The ‘Poison Squad’ and the Advent of Food and Drug Regulation,” FDA Consumer, November-

December 2002, p.12.

5. Marion Nestle, Food Politics: How the Food Industry Influences Nutrition and Health, Berkeley: University of

California Press, 2002.

6. George J. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science,

vol. 2, no.1, Spring 1971, p.3.

7. “Calgene Names Former USDA Deputy Secretary and Specialty Foods Vice President to Board,” PR Newswire,

March 22, 1994.

8. <www.usda.gov/Newsroom/0250.04.html>.

9. Jerry Hagstrom and Jason Ellenburg, “Agricultural Department Profiles,” National Journal, June 23, 2001.

10. <www.usda.gov/AboutUSDA/AB/rey.html>

11. <www.nppc.org/about/bod.html>.

12. <www.beefusa.org/documents/ACFFF9.pdf>.

13. <www.beefusa.org/dsp/dsp_locationContent.cfm?locationId=1630>.

14. “Producers, Beef, Pork, Seafood Producers, Food Retailers and Wholesalers to Create Program to Inform

Consumers About Products’ Country of Origin,” PR Newswire, January 16, 2004.

15. Concentration in Agricultural Markets, February 2002; available online at

<http://nfu.org/documents/01_02_Concentration_report.pdf>. Links to other reports on concentration by

William Heffernan and his colleagues can be found at: <www.nfu.org/index.cfm?category=newsroom&catego-

ry2=research&category3=x&category4=x&category5=x>.

16. <www.opensecrets.org/industries/indus.asp?Ind=A>.

17. “NFU Unveils National COOL Poll,” National Farmers Union press release, January 19, 2004; available online

at <www.nfu.org/newsroom_news_release.cfm?id=1150>.

18. U.S. General Accounting Office, Country-of-Origin Labeling: Opportunities for USDA and Industry to

Implement Challenging Aspects of the New Law, GAO-03-780, August 2003, p.28.

19. See, for example, Rachel’s Environment and Health News No. 381; available online at: <www.rachel.org>.

20. Marian Burros, “Looser Rules Proposed for Health Claims on Food Labels,” New York Times, July 11, 2003.

CASE STUDY: BSE

21. <www.fact.cc/BSE_Update.htm>.

22. Quoted in Sarah Lueck, “Cattlemen Saddle Up for Duels Over Rules,” Wall Street Journal, January 8, 2004,

p.A4.

23. Quoted in Shankar Vendantam, “U.S. Ends Investigation of Mad Cow Case,” Washington Post, February 10,

2004, p.A1.

24. Quoted in Marc Kaufman, “USDA Accused of Misleading Public on Mad Cow,” Washington Post, February 18,

2004, p.A2.

25. <www.beef.org/dsp/dsp_content.cfm?locationId=45&contentTypeId=2&contentId=2603>.

26. “More Mad Cow Mischief” (editorial), New York Times, May 8, 2004, p.28.

27. Quoted in Mikkel Pates, “Conrad Calls for Veneman Resignation,” Grand Forks Herald, May 21, 2004.

28. <www.usda.gov/AboutUSDA/AB/moore.html>.

29. <www.usda.gov/AboutUSDA/AB/lambert.html>.

30. Ann C. Mulkern, “When Advocates Become Regulators,” Denver Post, May 23, 2004.

31. <www.usda.gov/news/pubs/newslett/old/vol61no1/harrison.htm>. Harrison was promoted from press secretary to

director of communications in June 2004; see <www.usda.gov/Newsroom/0250.04.html>.

32. Quoted in Libby Quaid, “USDA Rejects Meatpacker’s Plan to Test All Animals for Mad Cow,” Associated Press,

April 8, 2004.

33. <www.usda.gov/AboutUSDA/AB/penn.html>.

34. Quoted in Stephen Clapp, “Japan and United States Agree on Further BSE Talks,” Food Chemical News, May 3,

2004, p.11.

35. <www.usda.gov/AboutUSDA/AB/waters.html>.

36. <www.usda.gov/AboutUSDA/AB/charbo.html>.

37. Quoted in Nelson Antosh, “Tracking of Cattle Becomes Key Goal,” Houston Chronicle, March 6, 2004, p.1.

CASE STUDY: CAPTIVE SUPPLY

38. <www.usda.gov/gipsa/pubs/03ar.pdf >; see pages 9 and 23.

39. U.S. Grain Inspection, Packers and Stockyards Administration, Assessment of the Cattle and Hog Industries:

Calendar Year 2001, June 2002, p.49.

40. ibid., p.53.

41. “A Cattle Showdown in Alabama” (editorial), New York Times, February 17, 2004.

42. <www.usda.gov/news/releases/2002/04/0130.htm>.

43. <www.agjournal.com/agprofile.cfm?person_id=29>.

44. “Bunge of Australia ‘New Kid’ in U.S. Pig Genetics,” Successful Farming, February 15, 2000, p.29.

45. Martin Ross, “GIPSA Applies Reasonableness Rule to Practices,” FarmWeek, September 24, 2003; available

online at <www.ilfb.org/viewdocument.asp?did=6894>.

46. Rod Smith, “Packers Act Provides Exacting Proof Threshold,” Feedstuffs, February 18, 2002, p.8

CASE STUDY: MEATPACKING INSPECTION

47. Felicia Nestor and Wenonah Hauter, The Jungle 2000: Is America’s Meat Fit to Eat? September 2000; available

online at <www.citizen.org/documents/TheJungle2000.PDF>.

48. U.S. General Accounting Office, Better USDA Oversight and Enforcement of Safety Rules Needed to Reduce

Risk of Foodborne Illnesses, GAO-02-902, August 2002; online at <www.gao.gov/new.items/d02902.pdf>.

49. For more on irradiation, see the website of Public Citizen’s Critical Mass Energy and Environment Program at

<www.citizen.org/cmep/foodsafety/food_irrad/>.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE

50. Quoted from an internal inspection document cited in: Oliver Prichard and Aparna Surendran, “Food Plant

Cited Before Outbreak,” Philadelphia Inquirer, November 3, 2002, p.A1.

51. Dan Murphy, “Editorial: A Regime Change at USDA?” Meat Marketing & Technology, December 2002, p.8;

available online at <www.meatingplace.com/Archives/init.asp>.

52. Michael Weisskopf, “Can Cold Cuts Kill?” Time Magazine, March 3, 2003, p.24.

53. An official biography of Murano can be found at <www.fsis.usda.gov/About_FSIS/Under_Secretary/index.asp>.

54. Philip Brasher, “Irradiation Advocate Named to Head USDA Food-Safety Program,” Associated Press, July 10,

2001.

55. “Bush Taps Irradiation Ally for Top Safety Post,” Nation’s Restaurant News, July 23, 2001, p.3.

56. The letter, dated July 16, 2001, can be found online at

<www.citizen.org/cmep/foodsafety/food_irrad/articles.cfm?ID=4905>.

57. Remarks prepared for delivery by Dr. Elsa Murano, Under Secretary for Food Safety, U.S. Department of

Agriculture, before the First World Congress on Food Irradiation, May 5, 2003, Chicago; available online at

<www.fsis.usda.gov/oa/speeches/2003/em_irrad.htm>.

58. See, for example, <www.ceresnet.org/ViewEntry.cfm?ID=289&Section=research>.

59. Quoted in Emily Gersema, “Irradiated Meat May Soon Be in Schools,” Associated Press, May 30, 2003.

60. Paul King, “Parents Air Beefs About Irradiation,” Supermarket News, January 13, 2003, p.1.

61. Carole Sugarman, “USDA Funds New Irradiation Center Amid Financial Flap,” Food Chemical News,

September 8, 2003.

62. Carole Sugarman, “Irradiation Opponents Blast School Lunch Pilot Program, Survey Methods,” Food Chemical

News, April 7, 2003, p.1 and Allie Shah, “Meat Plan Blasted as a Marketing Tool,” Star Tribune, July 28, 2003,

p.1B. It was later reported that none of the school districts involved in the pilot program chose to make use of

irradiated meat. See Allie Shah, “Pilot Schools Say No to Irradiated Beef,” Star Tribune, December 29, 2003,

p.1B.

CASE STUDY: BIOTECH FOODS

63. “USDA Deregulates Calgene’s FLAVR SAVR Tomato,” PR Newswire, October 16, 1992.

64. “Calgene Names Former USDA Deputy Secretary and Specialty Foods Vice President to Board,” PR Newswire,

March 22, 1994.

65. Bill Lambrecht, “U.S. Turns Spotlight on Genetic Engineering,” St. Louis-Post Dispatch, May 30, 1999, p.A1.

66. Federal News Service, “Remarks of Secretary of Agriculture Dan Glickman Before the Council for Biotechnology

Information,” April 18, 2000.

67. <www.usda.gov/news/releases/2001/11/0222.htm>.

68. Emily Gersema, “Veneman Says Advocacy Groups’ Anti-Biotech Approach to Food Hinders Aid,” Associated

Press, August 30, 2002.

69. Stephen Clapp and Lucy Ament, “Biotech Advisory Committee Seen Lacking in Diversity,” Food Chemical

News, April 14, 2003, p.1.

70. Justin Gillis, “U.S. Will Subsidize Cleanup of Altered Corn,” Washington Post, March 26, 2003, p.E1.

71. U.S. PIRG Education Fund, Raising Risk: Field Testing of Genetically Engineered Crops in the United States,

June 2003; available online at <http://pirg.org/ge/GE.asp?id2=10195&id3=ge&>.

72. See, for example, material from Friends of the Earth at <www.foe.org/new/releases/1102biopharm.html>.

73. Neil Hoffman, “Phenotypic Profiles Determine Gene Function,” Genetic Engineering News, May 15, 2001, p.34.

74. <www.usda.gov/agencies/gallery/hegwood.htm>

75. <www.usda.gov/agencies/gallery/bryson.htm>.

76. Judy Sarasohn, “Ex-USDA Chief Glickman Joins Akin Gump,” Washington Post, February 8, 2001, p.A21.

77. <www.vermontguides.com/2002/9-sep/cfsep02.htm>.

CASE STUDY: CAFOS AND EQIP

78. The Environmental Health Sciences Research Center, University of Iowa <www.public-

health.uiowa.edu/ehsrc/CAFOstudy.htm>.

79. See the white paper on EQIP by Mafruza Khan of the Corporate Research Project available at <www.agribusines-

saccountability.org/page/238/1>.

80. <www.newfarm.org/depts/gleanings/1003/eqipabuse.shtml>.

81. <http://books.nap.edu/books/0309087058/html/>.

82. <www.msawg.org/press/pr_20030212_equip.shtml>.

83. Andrew Martin, “Livestock Industry Finds Friends in EPA,” Chicago Tribune, May 16, 2004, p.9.

84. <www.usda.gov/AboutUSDA/AB/knight.html>.

85. See p.11 of NCGA’s annual report, available at the organization’s website at <www.ncga.com/aboutus/2002annu-

al_report/index.htm>

86. <www.ncga.com/aboutus/ind_news/index.htm>

87. <www.wheatworld.org/html/sponsors.cfm#members>.

88. Andrew Martin, “Factory Farm Foes Fed Up,” Chicago Tribune, March 24, 2004, p.1

89. Jerry Hagstrom and Jason Ellenburg, “Agricultural Department Profiles,” National Journal, June 23, 2001.

90. Reifschneider: <www.usda.gov/news/releases/2002/04/0130.htm>; Hentges:

<www.porkboard.org/News/NewsEdit.asp?NewsID=274>.

NEXT STEPS

91. See <http://www.usda-ethics.net/advisor/index.htm>.

92. See Subpart E - 5 CFR 2635.501-503 at <http://www.usda-ethics.net/advisor/index.htm>.

93. <http://www.pogo.org/p/contracts/c/ca-040601-contractor.html>.

94. <http://www.pogo.org/p/contracts/c/co-040101-contractorb.html#4regulating>.

95. <http://federaltimes.com/index.php?S=3000941>.

96. <http://www.nytimes.com/2004/06/29/business/29door.html?ex=1089531751&ei=1&en>.

97. <http://lugar.senate.gov/CRS%20reports/Senate_Confirmation_Process_An_Overview.pdf>.

98. See a recent report on this subject at <http://www.ksg.harvard.edu/press/E-Rulemaking_Report.pdf>.

99. <http://www.mycattle.com/news/dsp_regulatory_article.cfm?storyid=11233>.

100. <http://www.gao.gov/new.items/d04588t.pdf >.

USDA INC. : HOW AGRIBUSINESS HAS HIJACKED REGULATORY

POLICY AT THE U.S. DEPARTMENT OF AGRICULTURE