US Farm Subsidies Still a Problem for Trade Partners

Farm bill plans pose WTO strife risk
WASHINGTON

U.S. farm subsidies under the 2002 farm bill have been repeatedly challenged by trading partners, and new bill proposals from Congress would likely worsen the situation, the U.S. Department of Agriculture's top economist said.

"We are going to face continuing challenges for our domestic support programs" unless lawmakers make significant changes to their legislation to overhaul the farm bill, USDA Chief Economist Keith Collins told Dow Jones Newswires in an interview Thursday.

The 2002 farm bill had been set to expire in September, but Congress is late in completing its work on cobbling together a new five-year farm policy bill. The House passed its version in July, but the Senate did not approve its bill until December. Both houses must come together and resolve their differences before presenting a unified piece of legislation to the White House.

Bush administration officials have made veto threats to both the House and Senate, saying the bills lack necessary subsidy reform.

Instead of reining in subsidies in a time when some prices farmers receive for their crops are at record-high levels, Collins said, Congress is trying to raise price support levels and target prices.

The subsidy challenges by U.S. trading partners have been lodged through the World Trade Organization. A WTO ruling in December slammed the U.S. for not sufficiently complying with an earlier ruling that cotton subsidies need to be curtailed.

Substantial counter-cyclical farm payments and marketing-assistance loan programs are still under fire, Collins said, and Congress' proposals don't address the problems.

"Under the House and Senate farm bill proposals," he said, "they do not reform domestic programs in a way that would eliminate such challenges and, in fact, they may aggravate such challenges."

The United States also faces yet another possible challenge through the WTO. Upon request by Canada and Brazil, the WTO opened an investigation in December into whether the United States has exceeded its ceiling on trade-distorting subsidies for corn, cotton, soybeans and other farm commodities.

Brazil and Canada, according to news reports, asked for the WTO investigation after failing to get the U.S. to limit subsidies in the ongoing WTO Doha Round of trade talks.

U.S. lawmakers, Collins said in the interview, are still working under the U.S. interpretation of constraints agreed on in the 1994 Uruguay Round trade pact, not in the spirit of the Doha Round. The Uruguay Round was agreed on under the General Agreement on Tariffs and Trade, or GATT, which became the WTO.

The USDA published a detailed proposal for a new farm bill in 2007, including some substantial subsidy reforms. One such reform would have called for halting all subsidies to farmers with an average adjusted gross income of more than $200,000. Both the House and Senate rejected similar constraints proposed by lawmakers.

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