U.S. Must Reform Farm Policy, U.S. Agriculture Secretary Says

By Andrzej Zwaniecki
Washington File Staff Writer

Washington - The United States needs to reform its farm policy even if currently suspended global trade negotiations fail to produce an agreement in the near future, U.S. Secretary of Agriculture Mike Johanns says.

Johanns said that if a global trade accord eventually is concluded, it likely would require the United States to reduce substantially agricultural subsidies and other farm supports.

He spoke August 31 at a panel discussion at the Cato Institute, a policy research group based in Washington.

The global trade talks, formally called the Doha Development Agenda and held under the auspices of the World Trade Organization (WTO), were suspended indefinitely on July 24 after negotiators from member countries failed to bridge major differences, particularly in the area of agriculture. (See related article.)

In October 2005, U.S. negotiators offered, in exchange for cuts in agricultural tariffs, a reduction in overall U.S. trade-distorting support to agriculture by 53 percent and a cap on less-trade-distorting subsidies.

Since the negotiations were launched in 2001, the Bush administration has pressed for much more foreign market access for U.S. farm exports in exchange for reducing domestic supports and eliminating export subsidies.

But even if a WTO agreement that included such changes is not reached in the near future the United States must reform its farm policy because global and U.S. economic conditions have changed since the farm bill that set this policy was enacted in 2002.

That law is scheduled to expire in 2007 and both the Congress and administration have held hearings around the country to help them craft new legislation.

Johanns said the administration may submit its own farm bill proposal but not before January 2007.  He said that reform is necessary because current farm supports distribute much money to relatively few large producers and for selected crops that produce relatively little revenue, thereby unintentionally raising the prices of land and capital, and discouraging young people from entering agriculture.

He added that some U.S. farm support programs such as those concerning rice and maize, as well countercyclical and marketing payments, are vulnerable to legal challenges at the WTO. The organization already has ruled against U.S. cotton subsidies.

Any challenges in the WTO to these programs would be defended aggressively by the administration, Johanns said.

But U.S. farm policies should not be driven by the WTO litigation that may "dismantle farm programs piece by piece," he said.

Instead, Johanns said, the administration and legislators must take the initiative and deal with relevant issues "in such a way that it leads us to the future with vision and foresight."

He said a true safety net for farmers is more than subsidies and comprises tax and includes energy and trade policies, as well as investment in export markets, which provide the greatest opportunities for U.S. farmers.

"A good farm policy needs to be equitable, predictable and unchallenged," he said. "It should be done in a way that is pro-trade, pro-growth and fiscally responsible."

Also speaking at the same forum, Robert Thompson of the University of Illinois said the lobby that supported large subsidies in the 2002 farm bill has fragmented and international pressure against subsidies has intensified since, providing an opportunity for reform.

For more information on U.S. policies, see WTO Agriculture and USA and the WTO.