We recently spoke with Josh Hofheimer, senior counsel at Sidley and leader of the firm’s Agribusiness and Food group, and Scott Andersen, co-leader of the International Trade practice. They discussed what led them to Sidley and lent perspective on the current and future state of the global agribusiness and food industries.
Q. What initially led you to Sidley and a career in agribusiness and food law?
JH: I joined Sidley as a lateral associate in 2001 and became a partner in 2003. After building a niche practice focused on agricultural technology, I stepped out of law and moved my family overseas in 2008 to become CEO of Australia’s first publicly listed ag-biotech company, Hexima. In 2011, I returned to the firm, thoroughly committed to the agribusiness and food industry. At the time, Sidley had the essential pieces in place in areas of law important to agribusiness, but they hadn’t yet been harnessed to form an integrated, industry-focused practice group. So, I did some research, interviewed some people and wrote a business case, which I presented to the firm’s Executive and Management Committees. They signed off on it, and in 2011, we launched the global Agribusiness and Food practice.
I approach the industry from the perspective of being a tech lawyer—I believe in the power of technology and innovation. Certainly, technology is not without its faults, but I believe it plays an important part in addressing some of today’s global agriculture and food challenges. These include population growth and the competition for scarce resources in an increasingly interconnected and interdependent world.
SA: I’ve been focusing on World Trade Organization (WTO) litigation work in Geneva for more than 20 years. When I left the Office of the United States Trade Representative (USTR) in 2000 to open Sidley’s Geneva office, one of the first cases that I worked on was the landmark Brazilian Cotton case challenging U.S. cotton subsidies. For the first time, I had to pick up the Agreement on Agriculture and WTO Agreements, which I had studiously avoided in my work for the USTR because it was so complicated and scary [laughs]. So that’s when I got involved with the industry, and I’ve continued to work on similar agricultural-related cases since then.
The WTO has a number of rules relating to sanitary and phytosanitary situations in which countries can protect the health of their animals and plants from diseased imports or products that are unsafe for human consumption. These rules are essential to protect a country’s market; however, history shows that they can also be abused by using sanitary or phytosanitary reasons when the real purpose is to protect your domestic producers from competition. The WTO rules exist to help distinguish between what’s a real sanitary or phytosanitary concern based on science, and what’s guided more by protectionism. Sometimes it’s a combination of both, so the cases can be quite complicated.
Q. How has the industry changed over the years?
JH: It is amazing how quickly everything has evolved since I started working in the industry more than 15 years ago. Now more than ever, people are interested in agricultural production and resources, the nutritional value of food and understanding the supply chain (or simply put, “where our food comes from”). In the last five years, there has been a real explosion of different technologies and advanced science applied to agribusiness, including new classes of crop inputs, the development of new plant varieties, the advent of natural plant chemistries, biologicals, microbiomes, biotechnology, synthetic biology applied to both human and agricultural products, and data and traceability forays into agriculture. We are also seeing advanced input management systems, as well as the use of satellite imagery, drones, fixed-wing and sensor-based visualization, and robotics. With increased focus on productivity and sustainability has come new investment dollars, research and the emergence of terrific entrepreneurship.
SA: Europeans have learned to apply the WTO sanitary and phytosanitary rules better than most other WTO members, and this allows them to build a strong paper case to try and fend off charges of protionism. While they have been on the losing side of some sanitary WTO disputes, they have also been on the winning side as complainants, resulting in the opening of markets for EU agricultural products. Additionally, we are seeing an increasing number of proposed free trade agreements outside of the WTO, including the Transatlantic Trade and Investment Partnership between the EU and U.S. and the Trans-Pacific Partnership between the U.S. and 11 other nations. These new agreements are aiming to clarify and tighten up rules against protectionist practices affecting trade in agricultural commodities.
Q. What developments in agribusiness and food have you most excited?
JH: Big data and data analytics are huge right now. In agriculture, we are currently experiencing what I like to call the “shrinking farm.” I give it this name not because farms are getting smaller—actually, many of them are getting bigger in certain markets—but because farmers now have the ability to analyze and understand what’s happening on smaller and smaller quadrants within their farm. They can tailor their methods to create more precise farming tools that allow them to do more with the same or less. So it’s a really exciting area, and it ties together a lot of modern developments, such as increasingly specific crop inputs, along with precision agriculture, which uses sensors to collect data, and precision machinery that can allow for variable applications.
SA: There are many more WTO disputes based on sanitary and phytosanitary measures and technical barriers to trade requirements in cases involving agricultural or process products. Further, there are very onerous private standards that can be difficult for many agricultural producers, particularly in developing countries, to comply with. Issues in these disputes involve required packaging, size, shape and color of fruit, existence of trace elements and compliance with testing, product, environmental and even labor standards. These requirements can constitute major trade barriers, especially for developing countries that are trying to penetrate the EU and U.S. markets. I think that countries and major trading and agricultural producing and consuming companies are learning how to use the WTO rules to their advantage and break down barriers that they have run into as traders. We are increasingly representing and doing more trade work for these types of clients, including through Sidley’s Emerging Enterprises Pro Bono Program for agricultural-oriented clients in Africa, Asia and Latin America.
Q. Any emerging markets in this sector?
JH: For a number of years, Brazil was emerging as a real industry powerhouse, but the country’s recent political and economic instability has shaken things up a bit. Fortunately, even with all the turmoil, Sidley was able to assist one of our clients in 2016 with closing a pretty substantial private equity fund focused on the Brazilian agricultural market. This deal says a lot for people’s belief in the long-term power of the country, as well as other South American markets like Argentina, Colombia and Uruguay. Eventually, when everything settles down, Brazil will return as a major force to be reckoned with in the agribusiness space.
The specialization of agribusiness is also creating a lot of opportunities. People are now focused on emerging markets, not so much in the geographical sense but rather in new emerging crops and areas of focus. We are seeing a lot of interest in permanent crops and specialty crops, which is due in large part to the acceleration of precision agriculture and big data and a shift toward organic and natural crop inputs.
Q. Sidley was the only law firm to receive a Band 1 ranking for agribusiness in the 2016 edition of Chambers Global. Can you speak on this accomplishment?
JH: We are very fortunate, especially since this was the first year that Chambers came out with the category. It really speaks to our long-term experience within the industry, our range of agribusiness and food clients, and the excellence of our individual practice teams. As a group, we work together to ensure that our lawyers understand how the industry is evolving and how changes in one part of the industry can impact others. That commitment makes us better advocates and advisers to our clients.
SA: It certainly helps that the firm’s highly ranked Environmental and International Trade practices are two important components of the Agribusiness and Food industry group. Our clients know that they can come to us for advice on everything from regulatory and litigation issues to trade barrier and investment requirements. We also eliminate a lot of the doubt and uncertainty in large cross-border transactions and financing, and our clients don’t have to go to three or four different law firms to get that done.
Q. What do you envision for the future of the industry?
JH: The industry is going to be even more interconnected, with an increasingly complex supply chain. While we are seeing local food movements and a focus on organics in the developed world, we will also see a more globalized system in the developing world, where production and export from one country helps lift and raise its economic status. That, combined with a greater focus on scarce resources and the impacts of environmental change, is going to force people to innovate and create opportunities for themselves.
SA: We will see more investment in the developing parts of the world, especially Africa, since over 40 percent of the continent’s arable land is not cultivated. Also, as the world gets more integrated, there will be an increase in transboundary disputes on commodity trade and in the usage of trade barriers as tariffs come down to really low levels. Countries are looking for other ways to protect their industries, so they are going to use technical barriers to trade, like labeling and sanitary and phytosanitary restrictions. You have to remember that most of the clients that we represent in the agribusiness space sooner or later are either importing inputs or exporting products. And all of this is subject to the trade rules.
Q. What has been particularly gratifying in the work you have done with Sidley?
SA: In 2012, with the Management Committee’s support and encouragement, I co-founded Sidley’s Emerging Enterprises Pro Bono Program, which offers free legal support to small and midsize agricultural enterprises and NGOs working in developing countries across Africa, Asia, Central and South America and the Caribbean. This is the firm’s only program that provides pro bono projects for our lawyers outside, as well as inside, the U.S. Since the program isn’t primarily focused on litigation, it allows our lawyers with experience in specific practice areas, such as corporate, intellectual property and tax, to apply their legal skills to these projects. As we do more and more pro bono work, we get a bigger and bigger pool of lawyers who are sensitive to the regulatory environment in these developing parts of the world, which helps our clients tremendously.
I started and currently manage the program with Pro Bono Director Vanessa Fox, but it is certainly the lawyers who are doing all of the client-related work. Since the program’s inception, close to 500 lawyers have dedicated more than 26,000 hours to 100 clients in 29 countries worldwide. These lawyers are the true heroes of the program, and I get such a kick out of watching them use their formidable talents for our pro bono clients. It is kind of like being a parent and seeing your kids go off to do something cool that you could never imagine doing yourself [laughs].
JH: I’m really proud of the work we did on behalf of the Syngenta Foundation, which was cultivating a crop insurance program at the micro-farm level in Kenya and Tanzania. When they were ready to spin off the program into a stand-alone business, we helped them attract private capital by arranging some of the initial private equity investments and positioning them for success in securing International Monetary Fund grants. It is extremely important for smallholder farmers to have access to insurance in the event their crops are destroyed by flood, drought or pestilence. Not only does insurance protect their farms and holdings for the current season, but it enables them to get back into the market for next season. Ultimately, it helps them get off subsistence farming, and builds a system that creates a virtuous cycle for growth and exit from poverty.