Agricultural subsidies in the US are once again attracting the ire of rest of the world. Just last month, the WTO ruled that the US was not doing enough to roll back cotton subsidies previously ruled illegal, paving the way for others to ask the US for compensation. (This pertains to DS 267, in which Brazil was the complainant.) Yet, as cotton farmers in Burkina Faso and elsewhere were celebrating the ruling, perhaps the US Congress did not got the message as the farm bill before it is still laden with WTO-illegal provisions. Unsurprisingly, the main proponents of the farm bill as it stands are politicians from states which have historically received healthy cotton subsidies like Iowa, Georgia, and North Dakota. The American maps out the upcoming political economy battle. You have a strange coalition of the White House, environmentalists, and NGOs like Oxfam opposing the bill, among others:This week, the 2007 farm bill hit the Senate floor—and already, everyone from fiscal conservatives and free traders to environmentalists and celebrities has found something to hate about it.
What’s wrong with the legislation? For one thing, it increases government price supports and continues to make federal subsidies available to wealthy farmers. While the Bush administration sought to deny subsidies to farmers earning more than $200,000 per year, farm-state lawmakers had other ideas. Indeed, according to the fiscal watchdog Citizens Against Government Waste (CAGW), the 2007 farm bill would take just 7,000 farmers off the dole, compared to some 38,000 who would be removed under the Bush proposal.
There are other problems. The bill contains provisions that violate international trade agreements; and its high subsidies pose a threat to the ongoing Doha Round of global trade talks. Administration officials are advising President Bush, who signed the bloated 2002 farm bill, to veto the legislation—and it’s attracting sharp criticism in other quarters, as well.
Senators Charles Grassley, an Iowa Republican, and Byron Dorgan, a North Dakota Democrat, want to cap annual subsidies at $250,000 for a two-person farming household, which for some farmers would represent a significant cut. Green outfits, such as Grist magazine and the nonprofit group Environmental Defense, are unhappy with the lack of attention given to land conservation and sustainability efforts. Earlier this week, a former Environmental Defense lobbyist dismissed the farm bill in a comment to the LA Times as “horse manure [rolled] in powdered sugar...”
Senators such Iowa Democrat Tom Harkin, chairman of the Agriculture Committee, and Georgia Republican Saxby Chambliss have a lot riding on passing the farm bill in its current form. Both are up for reelection next year, and both represent states where farmers (and the farm lobby) are an important constituency. Harkin has never won a Senate race with more than 56 percent of the vote; and a recent poll showed Chambliss winning just 36 percent support (with 40 percent undecided).In a broader sense, the Democratic Party has a lot riding on the bill’s passage, too. Last year, the Democrats won previously Republican House seats in agriculture-heavy districts such as Kansas’s 2nd district, now represented by Nancy Boyda, and Ohio’s 18th district, now represented by Zack Space. Failing to deliver a sufficiently “healthy” farm bill could put those seats in jeopardy. That may have been one reason why the avowedly “reform-minded” Democratic House majority balked at introducing farm savings accounts, a bold free-market concept pushed by Representatives Ron Kind, a Wisconsin Democrat, and Jeff Flake, an Arizona Republican.
Between political calculations and the undoubted strength of the farm lobby, the chances of achieving real reforms in the Senate bill look slim. True, crop prices and household incomes have hit record levels; it therefore seems like a good time to revamp U.S. farm policy. But a similar argument could have been made in 2002, when Bush signed the largest farm bill in history. This year’s legislation is no less bloated with wasteful spending. As always, agriculture reform is proving an uphill battle.
In a related story, Brazil and Canada are joining up to take on the US at the WTO over (zzzzzz...) agricultural subsidies--this time with respect to corn, wheat, soybeans, sugar, lentils, and peas. From Bloomberg:
Canada and Brazil, countries that have fought trade disputes with each other, said they're asking the World Trade Organization to rule on whether the U.S. is exceeding international limits on farm subsidies.Canada re-filed a June request in order to work with Brazil and dropped an earlier complaint about export credits, Trade Minister David Emerson said today in a statement. A statement on the Web site of Brazil's foreign affairs ministry confirmed the country is filing a request similar to Canada's.
Both countries said U.S. subsidies surpassed a cap every year from 1999-2005 except 2003, with the ceiling worth around $19 billion annually during that period. The U.S. Trade Representative said last month that its most trade-distorting farm subsides never topped $13 billion, from 2002 to 2005.
``The United States has provided domestic support for agriculture within our WTO commitments,'' Gretchen Hamel, a spokeswoman for the U.S. Trade Representative, said today. ``Given the opportunity before us in the Doha negotiations to make real progress in reducing trade distortion in agriculture, we think that a formal WTO panel procedure would be an unfortunate diversion of resources at a critical moment.''
The so-called Doha round of trade negotiations began in late 2001 and has moved in fits and starts during the past six years. The negotiations have foundered over U.S. and European Union aid to farmers that limits exports from developing countries such as Brazil and India. The U.S. and EU have called on Brazil and other developing nations to slash customs duties on industrial goods.
The WTO will probably use one panel to decide on the Canadian and Brazilian complaints at the same time, Emerson said in the statement.
The dispute covers farm products such as corn, wheat, soybeans, sugar, and lentils and peas known as pulses, the Canadian government said.
