Agriculture, Energy and Trade Subcommittee Chairman Scott Tipton (R-CO) today held a hearing to examine how the United States Department of Agriculture’s (USDA) proposed GIPSA rule could hurt thousands of small businesses in the beef, pork and poultry industries, further damage our already unstable economy, and cost thousands of American jobs.

“Saddling small farms and small businesses with more government regulations will only prolong our economic downturn and crush more jobs. In fact, if the GIPSA proposed rule is adopted, it has the potential to reduce gross domestic product by over $1.5 billion and cost the U.S. economy nearly 23,000 jobs.

In June, Tipton and House Small Business Committee Chairman Sam Graves (R-MO) sent a letter to USDA Secretary Tom Vilsack calling on the agency to fully comply with the Regulatory Flexibility Act (RFA) and ensure that USDA understands the private-sector costs of the regulations it is imposing on all sectors within the livestock industry.

“More troubling are the inadequacies in the USDA’s Initial Regulatory Flexibility Analysis (IRFA) and their failure to take into account the economic impact on small businesses. Especially when the USDA acknowledges that a majority of people involved in the livestock industry are small businesses, as USDA Undersecretary Edward Avalos admitted in today’s hearing. The USDA must fully comply with the RFA— this is not an option.

“However, I was pleased to hear from Undersecretary Avalos that the USDA is 'fairly close’ to completing the final economic analysis. This is the most information we have received from USDA since the analysis began. Nevertheless, I find it troubling that they are fairly close to completing the economic analysis, yet dodged questions in the hearing and claimed that it’s 'too early in the process’ to answer specific questions on the impact it will have on our job creators.

“A full, long-term economic recovery begins with America’s small businesses. We should be unleashing their entrepreneurial spirit and allowing them to thrive instead of instituting more burdensome regulations that will strangle economic growth and delay a recovery.”

The GIPSA proposed rule would amend the P&S Act to "clarify conditions for industry compliance with the P&S Act and provide for a fairer marketplace." However, the proposal will severely undermine the capability of small businesses to differentiate their products from larger competitors. Additionally, the proposal may also force changes to a company’s asset structure as well as a broader change in industry structure that could lead to more vertical integration. This will result in less competition for livestock producers, packers and consumers—a result contradictory to the proposed rule.  

Notable Witness Quotes:
Although the USDA recognizes that a majority of people involved in the livestock industry are small businesses, they still failed to fully evaluate the effects on small businesses with the rule:

Honorable Edward Avalos, USDA Under Secretary of Marketing and Regulatory Programs, said, “It is very appropriate that the Small Business Committee has decided to focus this hearing on small businesses in the livestock and poultry industries. The vast majority of farmers in general, and specifically livestock and poultry producers, are small businesses. There are currently over 70,000 hog producers, almost a million cattle farmers and ranchers, and nearly 20,000 poultry growers. The majority of these individuals are family-owned small businesses.”

Robbie LeValley of LeValley Ranch in Hotchkiss, CO, said, “The proposed GIPSA rule will destroy our small business model, force us to lay off our employees, cripple our ability to market our cattle way we want to and limit consumer choice.”

Joel Brandenberge, President of the National Turkey Federation, said, “Industry analysis of the regulation concluded that it likely will have a chilling effect on innovation and flexibility, leading to a race toward mediocrity. It will create legal uncertainty that will drive costs higher and cause an increase in vertical integration in the livestock and poultry sector, driving producers out of the business and possibly affecting supplies.”