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Collapse of WTO Negotiations May Lead to Farm Bill Extension

posted on September 29, 2006

While acknowledging that Congress is the author of farm legislation, the Bush administration said this week that it wants to "have an impact" on how the next Farm Bill is written. The Agriculture Department will publish its proposal for the next Farm Bill -- a multi-year blueprint for U.S. agricultural policy that includes billions of dollars in subsidies -- next January. But Secretary of Agriculture Mike Johanns is calling for reforms to correct iniquities in the system. Johanns claims that 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.

Collapse of WTO Negotiations May Lead to Farm Bill Extension

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 public forum, Lamy urged member nations to "pre-cook" diplomacy between each other before officially resuming negotiations.

One sign of "pre-cooked" negotiations was this month's Cairns Group meeting in Australia. U.S. trade representative Susan Schwab and European Union officials joined the 18-member agricultural trade group in an attempt to jump-start WTO talks. The Australian meeting did not accomplish its goal of reviving negotiations but Schwab offered to expand the U.S. plan for slashing domestic subsidies.

Back in Washington, a potential cut in subsidies is a point of heated discussion in the face of future legislation. 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. Just last week, USDA Secretary Mike Johanns said U.S. farm policy must change and Congress should expect a new farm bill proposal in January.

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 week, 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."

Ranking Senate Agriculture Committee member Tom Harkin stated this past summer that any WTO deal should not be rushed for the sake of timeliness.

Sen. Tom Harkin, D-Iowa: "DOHA right but not DOHA light. We should not settle for a modest result just for the sake of having a final agreement. American farmers, the American public and our taxpayers expect and deserve better than that."

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.

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 government news politics trade