Global Changes Exerting Pressure on Farm Policy
Martin Ross
Farmweek
Jun 9, 2005
Illinois Farm Bureau's Farm Policy Task Force (FPTF) last week fine-tuned some potentially provocative proposals for the 2007 farm bill, including movement from loan deficiency payments (LDPs) to a new farm revenue "safety net" and increased conservation incentives (see page 3).
The recommendations, submitted for July policy consideration by IFB's Resolution Committee in July, are directed at meeting federal budget and world trade reform goals and, according to FPTF Chairman Henry Kallal, offering agriculture as "the solution, not the problem" in addressing energy, environmental, and other domestic and global concerns.
Ongoing World Trade Organization (WTO) ag talks are focused on reducing export subsidies, import tariffs, and domestic supports.
As a result of major European Union (EU) Common Agricultural Policy ag support reforms, "a lot of what the EU will have to give in the trade negotiations, they've already done," warned Robert Thompson, chairman of the International Food and Agricultural Trade Policy Council.
"I'm more worried about the U.S.' ability to be as forthcoming as the EU already has been: They're so far ahead in reform right now," he told FarmWeek.
"We were way ahead until the 2002 farm bill, when we did an about-face. Now we're the ones struggling to condense (supports for) our most protected commodities like sugar, cotton, rice, and dairy."
Under congressional budget provisions, U.S. farmers have temporarily "dodged the bullet," with major program spending cuts planned for "2007 and out," Thompson said. The 2002 farm bill thus should be left "pretty much in place," but he believes significant changes will be made in the 2007 bill.
Beyond pressure posed by EU concessions, Thompson suggested U.S. policymakers could be influenced toward program shifts or cuts by the prospect of reciprocal trade concessions by developing countries and other WTO partners.
U.S. program debate has keyed in on the so-called "white" commodities, such as sugar and cotton: A recent WTO ruling concluded the world market price for cotton has been "depressed significantly" by U.S. supports.
But the ruling challenged what Thompson termed a major "commonality" between cotton and Midwest corn and soybean programs — marketing loans, LDPs, and countercyclical safety net payments.
He warns of potential for corn and bean supports "all to have a similar effect on world market prices." Corn and bean programs today may have an impact in the low single digits — in Thompson's view, "not a big enough impact for anybody to spend the $500,000 it takes just to launch a WTO case."
Brazil, which brought the WTO cotton complaint, eyed a case against soybean supports but "didn't have a solid case," Thompson reported. He nonetheless expects Brazil to watch future soybean price impacts "like a hawk."
The current WTO ag round focuses largely in improving developing world trade, and the needs of developing countries also may influence ag policy debate.
To achieve desired economic development, Thompson argued developing nations must be able to export "what they do most efficiently" — sugar, rice, and cotton — into high-income markets such as the U.S.
Domestic subsidy concessions by major traders would enable those countries to "bring wage rates up," he maintained. That would benefit the U.S., Thompson suggested, noting postwar development helped Japan, Korea, and Taiwan become "some of very best markets" for American goods.
At the same time, he stressed the developing countries have underinvested in rural infrastructure and ag research while impeding imports from other developing nations.
"High-income countries have to give low-income countries access to markets for the things they do best," he said. "Low-income countries need to reform their own policies. A lot could be gained if they'd liberalize trade among themselves as they're asking high-income countries to do."