U.S. ag subsidy extension

French farmers aren't the only ones trying to place constraints on the scope of a Doha agricultural agreement.

Elizabeth Becker reports that:

U.S. lawmakers are scheduled to vote Thursday on whether to extend the huge commodity subsidies for American farmers to 2011 from 2007, adding a new complication to the already complex negotiations for a global trade agreement.

A damper on WTO talks? (International Herald Tribune, Nov 3)

The proposal to extend the subsidies is part of a Senate package of budget cuts that has already been approved by the Agriculture Committee. It was intended to avoid giving other lawmakers a voice in shaping farm policy, according to Senator Saxby Chambliss, a Republican of Georgia and the chairman of the committee...

Keith Williams, spokesman for the Senate Agriculture Committee, played down the subsidy extension as "simply a budgetary administrative matter" that was meant to ensure that the current farm bill would be "respected" amid changing economic circumstances. He said the proposal was not intended to hurt trade negotiations. He said Chambliss had promised the administration that he would write a new farm bill in 2007 that would reconsider all subsidies.

For Ken Cook, president of the nonprofit Environmental Working Group, which tracks U.S. farm subsidies, an extension would be cause for concern. He said it would leave open the possibility of leaving subsidies "intact through 2011."

Both the House and Senate versions of the farm budget favor cuts in environmental and conservation programs, which are considered less harmful for global trade, and largely keep intact the commodity subsidies, which are considered especially harmful to farmers in poor countries because they allow U.S. farmers to place their products in the international market at a reduced price.

Gary Truitt interviewed two agricultural economists on the implications of the Doha Round for the next farm bill: Producers urged to prepare for change (Brownfield, Oct 31)

Luther Tweeten noted the administration's desire to use Doha agricultural agreements to generate subsidy reform:

"The administration would very much like to cut farm programs, and one of the principal points of leverage in changing farm commodity programs will be this Doha round (of WTO negotiations)," said economist Luther Tweeten. "The Bush administration wants to use these negotiations as leverage to go to Congress and say here's what the rest of the world would do, here's what we have to do, and then Congress would be asked to go along with these changes in farm commodity programs with the idea that any cuts in payments and protections to farmers would be more than offset by greater access to markets abroad."

Carl Zulauf points out that tighter constraints on trade-distorting subsidies, in WTO-parlance, subsidies in the amber or blue boxes, will place constraints on the 2007 farm bill that had never been there before:

The current proposal calls for the United States to reduce its domestic farm programs -- those that distort farm production and international trade -- by 60 percent. If such a proposal were to be approved, the potential exists for a radical change in the 2007 Farm Bill. "If the administration gets an agreement that substantively constrains U.S. farm policy, then we will be writing this next farm bill with a constraint that has never before existed," said economist Carl Zulauf.

Basing the new farm bill on WTO negotiations is a growing concern, because the move could substantially rewrite farm policy by shifting programs, reducing programs or eliminating programs to stay within the boundaries of WTO limits. "I refer to it as box management," Zulauf said. "You've got the amber box, you've got the blue box, you've got the green box. And it's managing those boxes of the WTO that is going to become very critical. In the past we either did not have these boxes, or the limits on these boxes were so large relative to what we were spending that we didn't have to worry about them. That's not going to be true in 2007."

Comments

[Mike Gould]

In your October 11 post, you mentioned that the end of December 2006 was the last chance for Doha to conclude in order to meet the TPA's statutory requirements. You mentioned that in some cases, March 27, 2007 could be the last chance...I looked at all your links but couldn't find how March 27 is calculated. Any ideas? (I am currently writing a research report about this so I am very curious.)