The Custom-House

Good anti-dumping news

Daniel Ikenson reports that the Department of Commerce has stepped back from its use of "zeroing" methodologies in one class of anti-dumping analyses. 

Ikenson explains what zeroing is and why this is a good thing, and points to some potential bumps in the road, over at the Cato@Liberty blog: Antidumping Reformers Rejoice .

It turns out that "major commodity programs are highly regressive in the US"

Hertel, Keeney, Ivanic and Winters look at Distributional effects of WTO agricultural reforms in rich and poor countries (World Bank Policy Research Working Paper 4060, Nov 2006), and find:

Rich countries' agricultural trade policies are the battleground on which the future of the WTO's troubled Doha Round will be determined. Subject to widespread criticism, they nonetheless appear to be almost immune to serious reform, and one of their most common defenses is that they protect poor farmers. The authors' findings reject this claim.

The analysis uses detailed data on farm incomes to show that major commodity programs are highly regressive in the United States, and that the only serious losses under trade reform are among large, wealthy farmers in a few heavily protected subsectors. In contrast, analysis using household data from 15 developing countries indicates that reforming rich countries' agricultural trade policies would lift large numbers of developing country farm households out of poverty. In the majority of cases these gains are not outweighed by the poverty-increasing effects of higher food prices among other households.

Agricultural reforms that appear feasible, even under an ambitious Doha Round, achieve only a fraction of the benefits for developing countries that full liberalization promises, but protect U.S. large farms from most of the rigors of adjustment. Finally, the analysis indicates that maximal trade-led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization.

How the President Got His Trade Promotion Authority

And why it was possible to launch the Doha round...

One of the most remarkable examples of the farm lobby's power came in 2001 and 2002, when the existing farm bill was written, expanding payments again over the opposition of the White House and key lawmakers. Reformers see it as a cautionary tale.

The architect of the legislation was Rep. Larry Combest, an aggie through and through, a West Texas Republican who came from three generations of cotton farmers and who took control of the House Agriculture Committee in 1999.

Others on Combest's committee included a cattle rancher and tobacco farmer from Tennessee, a Missouri corn and hog farmer, and a government-subsidized rice farmer from Arkansas. The ranking Democrat, Charles W. Stenholm of Texas, had an ownership interest in cotton farms that got more than $300,000 in subsidies between 2001 and 2005, USDA records show.

With help from a generous mandate from the House Budget Committee -- chaired by Jim Nussle (R-Iowa) -- Combest produced a new farm bill in 2001 authorizing an eye-popping $50 billion, 10-year increase in price supports and income supports for farmers. He boasted that the measure was "a major step away from Freedom to Farm."

For one thing, the bill restored a key pillar of the pre-1996 program: cash payments that compensate for low crop prices. Thousands of farms were eligible even if they never grew crops. Budget officials estimated that change alone would cost $37 billion over a decade.

The Bush White House disliked Combest's bill. Chief political adviser Karl Rove saw it as the antithesis of fiscal responsibility. "We're Republicans," aides remember Rove grumbling. The White House budget office issued a stinging critique, saying the bill was too costly and failed to help farmers most in need.

Combest also faced strong opposition from a disgruntled group of Eastern and Midwestern lawmakers, and from senators who wanted tighter limits on what a farm could collect each year.

But Combest had a strong hand. "He hijacked the process," said a former USDA official who spoke on the condition of anonymity because he still deals with Congress.

At a meeting in Rove's office soon after the Sept. 11, 2001, attacks, Combest delivered a warning, according to several people with knowledge of the session. Unless the administration backed off, Combest warned, he and his farm-bloc allies would sink a top priority of President Bush's: legislation giving the president a free hand to negotiate a global trade treaty strongly favored by big corporations. "You have to ease up," one participant remembers Combest saying.

Over the next several months, the administration laid off its public criticism of Combest's farm bill. Combest withdrew his opposition to trade-promotion authority, and it squeaked through the House by a single vote. He declined to comment for this article.

(Powerful Interests Ally to Restructure Agriculture Subsidies, Dan Morgan, Sarah Cohen and Gilbert M. Gaul, Washington Post, Dec 22).

Thanks to Jonathan Dingel and Daniel Drezner for the pointer.

A new farm subsidy claimant

Alexei Barrionuevo reports that fruit and vegetable Farmers Seek Subsidies as U.S. Eats More Imports (NYT, Dec 3).  In the past, fruit and vegetable farmers haven't been as heavily subsidized as commodity producers, such as corn, cotton and rice farmers.   

Not good news with the new farm bill looming:

For decades, the fiercely independent fruit and vegetable growers of California, Florida and other states have been the only farmers in America who shunned federal subsidies, delivering produce to the tables of millions of Americans on their own.

But now, in the face of tough new competition primarily from China, even these proud groups are buckling. Produce farmers, their hands newly outstretched, have joined forces for the first time, forming a lobby group intended to pressure politicians over the farm bill to be debated in Congress in January.

Nobody disputes that competitive pressures from abroad are squeezing fruit and vegetable growers, whose garlic, broccoli, lettuce, strawberries and other products are a mainstay of world kitchens. But the issue of whether the United States ought to broaden farm subsidies beyond the commodity crops like corn and cotton, which have historically been protected, is a big flashpoint.

“This is like the tectonic plates of farm policy shifting, because you have a completely new player coming in and demanding money,” said Kenneth A. Cook, president of Environmental Working Group, a research group in Washington that has been critical of farm subsidies, which are mandated by federal laws that date to the Great Depression.

On the other hand:

The farmers are not asking for the kind of direct subsidies that have been accused of distorting trade and hurting developing countries’ agricultural industries. Hoping to avoid a nasty battle with powerful farm-state politicians in the Midwest and Southeast, they are asking instead for money to help market their products at home and overseas, as well as for research and conservation.