The food industry is urgently driving issues it considers high-priority — from food safety and the controversial Employee Free Choice Act, to credit card interchange fees, organized retail crime, tax matters, pension solvency, immigration reform, second-generation biofuels and pharmacy Medicaid reimbursement.
Yet, as critical as the issues are to safeguarding the nation's food pipeline and the financial viability of food and beverage retailers, these are exceptional times on Capitol Hill. The new Obama administration and the 111th Congress are trying to get the upper hand on two wars, the worst economic meltdown in decades, and a deep national crisis in consumer confidence.
Still, because this industry feeds the nation, top trade-group officials are optimistic they'll influence legislators sooner rather than later.
“We know the administration and Congress will focus on industry issues. The economic recovery package could bring significant fiscal relief through reduced taxes and increased deductions and depreciation, and also provide pension funding relief,” Leslie G. Sarasin, president and chief executive officer, Food Marketing Institute, told SN.
“Labor issues are already moving. We expect Congress to take up EFCA [the Employee Free Choice Act] soon. The recent recalls could compel Congress to re-engage in food safety issues, and the administration must fill the top food safety positions at the [Food and Drug Administration],” she added. “On issues such as [credit card] interchange [fees] and organized retail crime, we will start to see action at the committee level, where these issues were beginning to move last year.”
Thomas K. Zaucha, president and CEO, National Grocers Association, got an early start. He sent a Dec. 18 welcome letter to the Obama transition team laying out key issues, emphasizing the entrepreneurial nature of NGA's members, and urging, for example, that the Federal Reserve Board be able “to regulate credit card interchange fees and rules,” and that the Federal Trade Commission chairman and the assistant attorney general for antitrust “enforce [antritrust] laws in a consistent and balanced manner.”
It's already clear that food safety has the President's attention. “That's [peanut butter] what [my 7-year-old daughter] Sasha eats for lunch probably three times a week,” Obama said on NBC's “Today” show about the current peanut salmonella scare.
Doubtlessly aware of the recent sullied history of the U.S. food supply — including spinach tainted by E. coli and pet food contaminated by melamine — Obama called for a review of how the FDA operates.
The food industry could hardly agree more, said FMI's Sarasin: “The peanut butter and paste outbreak strongly underscores the need for government to better coordinate its response to foodborne illness cases. We need quick action, credible and articulate communications, and officials who understand and appreciate how the industry responds to such events. The most immediate need is for the Obama administration to appoint a deputy FDA commissioner for food.”
Indeed, this would break from recent trends, in which the FDA lost more than 600 food inspectors and 200 food specialists since 2004. “This stagnation led to a Government Accountability Office report last July that found at least six other nations and the European Union have superior food inspection to the United States,” wrote Caroline Smith DeWaal, director of food safety at the Center for Science in the Public Interest, in Newsday on Feb. 1.
FMI and nine other industry associations urged the House Energy and Commerce Committee and the Senate Health, Education, Labor and Pensions Committee, in a Jan. 22 letter, to “quickly enact food safety reforms. … Rising food imports and changing consumer preferences pose new challenges that require Congress and the administration to modernize our food safety net.”
Scott Faber, vice president for federal affairs, Grocery Manufacturers Association, graphically described the safety gap when he told SN “the FDA is in charge of 80% of the U.S. food supply, yet its limited resources only allow the agency to inspect less than 1% of the imported food that it is responsible for monitoring. The volume of FDA-regulated imports has doubled in the last five years, and 60% of these imported shipments are food.”
GMA therefore urged Congress to increase FDA food-related spending to $661 million in fiscal year 2009, to $740 million in FY 2010 and to $900 million by FY 2012 — up from the FY 2008 budget of $510 million.
In a Jan. 15 press conference, GMA also called for:
Every manufacturer selling food in the U.S. to have a food safety plan, updated once every three years. This would also require every food importer to police its foreign suppliers and would build the capacity of foreign governments to regulate food safety.
• FDA authority to order mandatory recalls when a food has caused severe and adverse health consequences, and when a company has refused to conduct a voluntary recall. Also, GMA said the FDA should have the power to establish federal safety standards for certain fruits and vegetables.
• Establishment of an Asia Pacific Economic Cooperation (APEC) Partnership Training Institute Network for food safety as “an institutional way to get our high FDA standards, as well as best practices of the private sector, into the system of our trading partners. Sen. Richard Durbin, D-Ill., and others are very motivated to do this,” said Mary Sophos, senior vice president and chief government affairs officer, GMA.
Moreover, following the food inflation of 2008 — which was partly accelerated by the shift to produce ethanol when oil prices soared as high as $147 per barrel — GMA has called on Congress to “foster research, development and rapid deployment of second-generation biofuels that do not pit our energy needs against our food and feed needs,” noted Faber. “This could include wood chips, crop waste, municipal waste, switchgrass, algae and/or any other new technologies that prove effective. We'd like to see the same commitment to these new fuel technologies that ethanol has been given all these years.”
In addition, FMI wants the FDA to establish criteria to recognize third-party certification programs accredited by an independent, internationally recognized body. This would include FMI's Safe Quality Food certification program.
The final country-of-origin labeling (COOL) rule will go into effect March 16, requiring specified commodities (muscle cuts and ground beef, lamb, chicken, goat and pork; wild and farm-raised fish and shellfish; fresh and frozen fruits and vegetables; macadamia nuts; pecans; ginseng; and peanuts) to be labeled at retail. “So many labels come in already labeled that a retailer doesn't have to worry [about onerous requirements] — labeling is very often a marketing decision rather than compliance with rules,” said Kathy Means, vice president of government relations and public affairs, Produce Marketing Association.
The initiative to trace back produce at the case level, using a standard external bar-code system (advocated by PMA, United Fresh Produce Association and Canadian Produce Marketing Association) remains ongoing, with the goal to enable the U.S. Department of Agriculture, FDA and the industry to contain foodborne illness outbreaks and help identify root causes of contamination more quickly.
Employee Free Choice Act
The most contentious issue this year is what Neil Golub, CEO, Price Chopper Supermarkets, Schenectady, N.Y., nicknames “the Employee Forced Choice Act.”
“There's nothing free choice about it,” he said of the proposal, called the Employee Free Choice Act. “It takes away workers' rights to secret-ballot elections. And sign-up cards prevent management from having freedom of speech, because if 51% of cards say ‘go union,’ you have a union.”
Actually, countered Jim Papian, director of communications, United Food and Commercial Workers International Union, “at 51% workers could go to the employer and say, ‘Will you certify us. We want to take this process now,’ or say, ‘We want to hold an election.’ A 30% sign-up is the National Labor Relations Board cutoff to petition an employer for a workplace election.”
If an employer and a union that has been “certified” are unable to agree in 120 days to a contract, a federal arbitrator would be appointed to set terms that would apply to those employees for a period of two years, explained Tom Wenning, executive vice president, government affairs, NGA.
Golub called such government-binding arbitration “deadly interference.”
“Many operators are so upset that they'd consider closing their business,” he said. “This could mean the death of collective bargaining, which … imposes no penalty if either side walks away from the table. This law would impose a new penalty in the form of a government decision.”
“We recognize that entrepreneurial organizations have been growing the economy, and their employees have benefited by having jobs and benefits,” added Wenning. “In a recession it doesn't make sense to penalize that entrepreneurial spirit, or to penalize employees who've benefited from the organization's success.”
The industry's most vocal opponent of EFCA, Golub had no figures available describing either the percentage of union and non-union supermarkets today, or the incremental costs when a retailer turns union. “Costs can go either way once organized,” he said. “Sometimes the union gives the operator an easy shot for the first year or two, and then they nail you. Others hit you right away.”
EFCA, also known as “Card Check,” is “about leveling the playing ground, creating more balance in the economy,” described Papian. “What kind of economy do we want? Do we want workers to fully participate in what they create? Or don't we care about the lives they lead in order to concentrate on one stakeholder only, the shareholder? There has to be more equity here — union jobs drive expansion of the middle class. Consumerism drives the economic engine.
“Kroger is highly unionized, and has been a shining example of productivity in this downturn,” he noted.
In Papian's view, the card-signing process is “unencumbered by coercion or intimidation that workers now face when they want to get a union.”
How might this turn out? President Obama said while signing the order to create the White House Task Force on Middle Class Working Families: “I do not view the labor movement as part of the problem. To me it's part of the solution. You cannot have a strong middle class without a strong labor movement.”
In other labor-related issues, PMA sees “perhaps a more favorable climate” to resolving immigration reform, said PMA's Means.
“Many in Congress understand the dire need for agriculture production. The labor situation is dire. We believe it can be resolved without having to split the issue up into either border security or immigration reform. It's not ‘either/or,’ it's both.”
PMA estimates that 70% of the U.S. farm labor force lacks proper legal status.
With the world's food production needing to double to keep pace with population growth of 3 billion people between now and 2050, according to the multidisciplinary group Field to Market at the Keystone Alliance for Sustainable Agriculture, and with the potential of $5 billion or more in lost annual U.S. fruit and vegetable production if an enforcement bill passes, the need to keep ample harvest workers on hand seems clear to Means.
“Labor is a key input, especially for specialty crops that largely cannot be mechanically harvested without scarring and damage. This is a significant issue for our global competitiveness,” Kam Quarles, vice president of government relations and legislative affairs, UFPA, told SN. “Clearly, the chances for reform have improved. People who are in the Obama administration have previously been supportive … but this is not a first-100-days issue.”
He also noted that last year's Farm Bill gave “significant new funding for the first time to fruits and vegetables. We'll fight hard to see that money stays in the bill.”
Credit Card Fees
Retail groups keep the issue of credit card interchange fees hot. Credit card companies and banks imposed $48 billion in interchange fees in 2008 — triple the pace of the decade's start.
“Retailers don't know what the fees are on any individual transaction until they get the bill at the end of the month, so they're reflected in costs to all consumers,” explained Wenning. “The credit card industry is almost the next shoe to drop. Let's not make the same mistake here as in the other bailouts. Merchants and consumers are the ones that will end up paying for it.”
The Credit Card Fair Fee Act, which NGA, FMI and others in the Merchants Payments Coalition are seeking, would set fair and transparent interchange fees and would give retailers a seat at the negotiating table, said FMI's Sarasin.
Organized retail crime is a $30 billion-a-year problem that's growing worse in these economic times, FMI Chairman Steve Smith said at the organization's recent Midwinter Conference.
FMI expects Bobby Scott, D-Va.; Durbin; Brad Ellsworth, D-Ind.; and Jim Jordan, R-Ohio, to reintroduce legislation in the House and Senate this year to combat this kind of crime, identify fencers and possibly make ORC a federal felony.
Action is likely on estate taxes, said Sarasin, because “unless Congress takes action, in 2011 this tax will revert to its original oppressive rates, as high as 55% and 60% for some.” Added Wenning: “We're advocating that the rate be lowered, and that the dollar exemption before estate taxes have to be paid be increased to at least $5 million, up from the current $3.5 million.”
The industry is urging Congress to suspend funding requirements for pensions, as it did last year, until the stock market rebounds.
Unless Congress legislates a Medicaid drug reimbursement formula that covers the full cost to dispense prescriptions, two bad outcomes will ensue, warned Sarasin: Pharmacies that fill many of these orders will fail under the current average manufacturer price (AMP) formula proposed by Centers for Medicare and Medicaid Services; and a pharmacy shortage, especially in rural and inner-city areas, will bring hardship to low-income Americans.
Implementation of the AMP formula has so far been blocked until Sept. 30, but more intervention is needed, Sarasin said.