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WTO Struggles Speed Farm Bill Debate

posted on December 22, 2006

Once every five years, Congress undertakes the monumental task of determining how the U.S. will dole out billions of dollars in farm subsidies. The current law, commonly known as the Farm Bill, is scheduled to expire next fall.

The Bush administration is calling for reforms to correct iniquities in the system. According to Secretary of Agriculture Mike Johanns, five commodities -- corn, soybeans, wheat, cotton, and rice -- receive 90 percent of government subsidies, yet the crops account for less than 25 percent of farm cash receipts.

Current farm policy also is likely to change in order to comply with a yet-to-be-determined deal negotiated by the 149 member nations of the World Trade Organization. But, as Andrew Batt explains, that may be a tall order.

WTO Struggles Speed Farm Bill Debate WTO history could be characterized by adamant resistance and disappointment. The 1999 riots in Seattle set the stage for a battle over world trade…a series of negotiations and trade talks that have fallen short at virtually every opportunity.

The 2003 collapse in Cancun…. the 2005 hang up in Hong Kong and the most recent letdown in Switzerland this summer are but a few examples of unsuccessful negotiations among WTO members.

When the World Trade Organization declared its DOHA development agenda in November, 2001, member nations were optimistic. The current so-called DOHA round of talks was supposed to clear the way for free trade and help feed millions of impoverished citizens around the world.

Nearly five years later, the murky waters of international trade have not cleared….and time and time again WTO talks have self-destructed.

Pascal Lamy, WTO Director-General: "Those that oppose the WTO and everything it stands for, see a once-in-a lifetime opportunity to finish what they think they have started years ago: stop the WTO from functioning. All it needs is a final push over from the cliff and dance on its ashes."

Even the typically optimistic WTO Director-General Pascal Lamy has questioned the prospects for success. At a recent address to the WTO General Council, Lamy urged member nations to exploit a "window of opportunity" that may shut after the first quarter of 2007.

Time is of the essence for the Bush Administration as the President's fast-track trade authority is set to expire next summer. The so called "fast-track" power allows the executive branch to sign a trade agreement then force an up or down vote in both houses of congress - without amendments being attached. But the new Democratic-controlled U.S. House and Senate intends to let the presidential authority run out in July 2007.

When policymakers reconvene for the 110th U.S. Congress in January, trade policy and a potential cut in subsidies likely will be points of heated discussion. And lawmakers don't expect to have a WTO framework in place for the 2007 farm bill.

Sen. Charles Grassley, R-Iowa: "The only thing that we've had is Susan Schwab is still not giving up trying to revitalize and give new life to the Geneva negotiations on WTO and the farm bill and everything else that you negotiate. I wish her well but I think she's wasting her time."

The Bush Administration is wasting no time in its push for a new farm bill --- whether a WTO trade deal is reached or not. Last week, USDA Secretary Mike Johanns called on other nations to drop barriers to U.S. goods.

Sec. Mike Johanns, USDA: "I believe our farmers and ranchers can compete with anyone in the world but they have to have market access."

With reforms in domestic farm policy all but a forgone conclusion, Congress must walk the tightrope between competing farm interests.

Rep. Bob Goodlatte, R-Virginia: "I assure you that the number of groups expressing interest in this farm bill is growing daily. The result is a larger number of players competing for a slice of the same pie."

Last fall, the House Agriculture Committee heard a flurry of opinions from major commodity representatives.

Paul Combs, USA Rice Producers: "The U.S. rice industry opposes any further reduction in the payment limit levels provided under the current farm bill."

Dale Schuler, President, National Association of Wheat Growers: "We do not believe our members can be satisfied with an extension of this farm bill. We need improvements and we need it now."

U.S. wheat and corn growers urged lawmakers to draft a new farm bill. But the call for new legislation was at odds with rice and cotton producers who claim an extension of the current farm policy is essential for U.S. agriculture. That sentiment was echoed by Farm Bureau President Bob Stallman – a staunch proponent of a farm bill extension lasting at least one year.

Bob Stallman, President, Farm Bureau: "If we reduce our domestic supports in an upcoming farm bill or budget reconciliation debate…we have less leverage to use to convince other countries to reduce their tariffs and export subsidies."

Stallman's opposition to a new farm bill is in conflict with not only the Bush Administration, but a key member of the Senate Agriculture Committee who feels a new farm bill could accommodate future WTO guidelines.

Sen. Charles Grassley, R-Iowa: "…if we get market access then I want the world to know that American farmers are willing to accept changes in the farm bill mid-term that would conform us to the WTO."

Last week, the newly reappointed chairman of the Senate Agriculture Committee, Tom Harkin, stated that any WTO success rests in the hands of the European Union, not the United States.

Sen. Tom Harkin, D-Iowa: "We're the ones trying to pull the rest of the world along on this. We've put something on the table…what have you done?"

While lawmakers and many commodity groups see WTO rules as a major issue affecting farm legislation, it certainly isn't the only one. When policymakers approved the 2002 farm bill, Congress acted under drastically different budget constraints than today.

According to the National Public Policy Education Committee, lawmakers were working with a projected budget surplus of $128 billion in 2001. Now, lawmakers must contend with an estimated deficit of $260 billion in 2006.

The budget shortfall is just part of a changing economic landscape in agriculture. While U.S. net farm income hovered below $50 billion in the years preceding the 2002 farm bill, 2004 and 2005 brought two of the highest earning years in history….including the record 2004 total of $82 billion. This year, USDA estimates U.S. farm income will drop to $59 billion – largely due to near record commodity prices and fewer dollars from Uncle Sam.

But what affect do all these numbers have on future farm policy? While the outcome is far from certain, farm interests may have a tough time coming to terms with a budget that's not likely to grow anytime soon.

For Market to Market, I'm Andrew Batt.

Tags: agriculture Congress government news policy trade