There is a strong and growing possibility that replacement legislation for the expiring 2002 Farm Bill, already deeply entangled in fierce partisan politics, could significantly change US agricultural and trade policies in a number of ways.  At least some of those could be detrimental to the long-term economic health of our industry.

Background

As replacement legislation for the expiring 2002 farm bill is considered this year and next, the United States must simultaneously deal with record-high budget deficits, severe terrorist threats in the Middle-East and at home and very difficult trade negotiations that could either open growing world markets—or, end in stalemate. At least four major forces will affect the final shape of the bill that likely will be adopted in 2007, including:

• growing budget concerns, including intense competition for resources for the war on terror, homeland security, social programs including Social Security, Medicare and Medicaid—and, for additional tax cuts. In this context, farm program spending is small but important.

• tough negotiations by trading partners who are skillfully using litigation, complex alliances and sophisticated bargaining tactics. Concessions will be demanded concerning export subsidies, domestic supports, additional market access and, possibly, sanitary-phytosanitary measures in return for increased access to their growing markets.

• powerful rural and urban coalitions who demand more extensive and more effective protections for soil, water and air quality, as well as more protections for animal welfare, but who may be willing to use working farms as a central feature of their ideal system.

• growing demands for equity across agriculture from increasingly insistent groups who make up the 68% of US farmers not now eligible for program benefits.

Already, lines are being drawn with the chief beneficiaries of current programs mobilizing in their support while others such as farmers in the non-supported sectors and conservationists organize to support change. A potentially important difference this time is that the urban press that helped reinforce the price anxiety leading up to the 2002 bill now believes that those policies have been damaging to developing countries and will be critical of efforts to extend them.

The most important unknown in the debate is the administration’s priorities. So far, the new Secretary of Agriculture—former Governor Mike Johanns of Nebraska—is hanging tough on the administration’s extensive but modest proposals for cuts for FY2006. If the administration does not prevail in this year’s budget skirmishes, it is likely that the current program structure will be continued largely in its present form once Congress focuses on the reauthorization debate, likely next year.

Even that scenario would imply some tweaking, of course, to make the existing programs WTO-compliant. Most analysts thought the direct payment programs were Green-Box, but the recent WTO Appellate Body decision on cotton says that they are not. To make them so would mean changes that vegetable growers and others can be expected to oppose. The administration must either come to grips with that reality or attempt to change WTO’s Green Box definition, a really tall order.

It also must decide how far to go toward restructuring the remaining supply-control programs for dairy and sugar and how to modify the cotton, rice and soybean programs to fully meet WTO rules.

And, overall, the United States like the EU and others must decide how important more liberal trade really is in the current economic and political environment and how willing it is to concede the sharp reductions in domestic supports developing countries are demanding as the price of opening their markets.

Please join us in a comprehensive multi-client study of the context of the coming debate and its likely impact on US and world agriculture.

The entire prospectus in pdf form

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