`USITC Stalking the Olive Groves

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USITC Stalking the Olive Groves

Oct. 14, 2012
Virginia Brown Keyder

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The recent announce­ment that the United States Inter­na­tional Trade Com­mis­sion (USITC) will con­duct an inves­ti­ga­tion into com­pet­i­tive con­di­tions fac­ing US olive oil pro­duc­ers should pro­voke some seri­ous think­ing. As noted on this site last week, such inves­ti­ga­tions do not come out of nowhere and are often under­taken with the intent to use their con­clu­sions to launch anti-dump­ing charges and coun­ter­vail­ing duties against for­eign pro­duc­ers allegedly receiv­ing ille­gal sub­si­dies.

That the lob­by­ing pow­ers of the domes­tic olive oil indus­try have been strength­ened in recent years is clear from the USITC’s will­ing­ness to under­take such a study. The impe­tus behind the industry’s request is best illus­trated by an arti­cle in the San Fran­cisco Chron­i­cle last year:

The biggest threat to Cal­i­for­ni­a’s his­toric olive indus­try isn’t the bad weather, dis­ease, pro­hib­i­tive har­vest­ing costs and fierce com­pe­ti­tion already tak­ing their toll, grow­ers say: It’s the fed­eral gov­ern­ment. The United States has promised Morocco — one of Cal­i­for­ni­a’s main com­peti­tors — hun­dreds of mil­lions of dol­lars in aid to stim­u­late agri­cul­ture in that coun­try…

It first needs to be said that California’s his­toric’ olive indus­try was pri­mar­ily ded­i­cated to pro­duc­ing processed black, pit­ted olives, rather than olive oil, which began to be pro­duced for the top of the mar­ket in the 1990s. It would be hard to find a pro­ducer any­where in the world who would will­ingly com­pete with Cal­i­for­nia black olives.

It should also be noted that in 2004 Aus­tralian olive oil pro­duc­ers (who occupy roughly the same niche in their national mar­ket as Cal­i­for­nia pro­duc­ers do in theirs) failed in their claim before Aus­tralian Cus­toms to estab­lish that EU sub­si­dies to olive grow­ers were coun­ter­vail­able, as it could not be estab­lished that such sub­si­dies ben­e­fited olive oil pro­duc­ers. Aus­tralian Cus­toms relied partly on WTO Sub­si­dies Agree­ment (and caselaw) to which it is a party (as is the US). Arti­cle 1 pro­vides that not only must there be a sub­sidy, but there must be a ben­e­fit. Mate­r­ial injury must also be found.

More impor­tantly, how­ever, if there were an attempt to answer accu­sa­tions of being the biggest threat’ to the olive indus­try by can­cel­ing such aid, the Fed­eral Gov­ern­ment would run the risk of under­min­ing what is these days an increas­ingly rare but impor­tant act of good will — the offer of agri­cul­tural exper­tise to, and the pro­mo­tion of exports by, devel­op­ing coun­tries. Morocco (whose oil can­not real­is­ti­cally be seen as one of California’s main com­peti­tors) is not the only recip­i­ent of U.S. assis­tance. Iraq, Pales­tine and Alba­nia are also among its ben­e­fi­cia­ries and may well suf­fer from grow­ing calls for such short-term pro­tec­tion­ist mea­sures.

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The EU, with its Com­mon Agri­cul­tural Pol­icy (CAP) sub­si­dies to grow­ers in what are now its most des­per­ate mem­ber states, will most cer­tainly be in its crosshairs as well. While CAP has indeed been sub­ject to seri­ous finan­cial fraud, often in rela­tion to these sub­si­dies, this is cur­rently being addressed by Brus­sels, and in fact was sub­stan­tially reduced by changes to such sub­si­dies imple­mented a decade ago. Com­bined with advanced sci­en­tific meth­ods of detect­ing prod­uct fraud (in terms of ori­gin and quality/purity stan­dards, which have also been the sub­ject of new EU law), these prob­lems will likely be solved in the near future, espe­cially given the EU’s real­iza­tion that it must now com­pete with US pro­duc­ers for the US mar­ket.

Lim­it­ing aid to strug­gling farm­ers and low-end pro­duc­ers to appease high-end US pro­duc­ers could well back­fire. The mar­ket fun­da­men­tal­ism of attempt­ing to gun down any and all state aid to poor farm­ers and overt pro­tec­tion­ist poli­cies will not only draw accu­sa­tions of acute hypocrisy but may well encour­age rec­i­p­ro­cal actions against those agri­cul­tural sub­si­dies that the US has declined to aban­don for polit­i­cal rea­sons, such as cot­ton and corn.

The USITC report sched­uled to come out in August 2013 will be a much needed and no doubt high qual­ity analy­sis of the world mar­ket in olive oil. Hope­fully it will be used wisely to sup­port long-term inter­na­tional goals, not only the short-term inter­ests of Amer­i­can olive oil pro­duc­ers.

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