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EDITORIAL
 
Subsidy issue threatens to land Bush in mire
Jeremy Grant
1/23/2006
 

          MIKE Johanns, the US agriculture secretary, likes to refer to his humble farm upbringing in the grain and livestock -rearing state of Iowa. He and his two brothers would often find themselves wielding pitchforks in the family's cowshed, "knee deep in you-know-what, pitching away".
While such homespun tales have helped him to connect with US farmers, they have done little to win grassroots farming support for the Bush administration's desire for a far-reaching overhaul of government support for agriculture.
Farming's most powerful bloc, the American Farm Bureau Federation, voted recently to push for an extension of the current US farm bill. Passed in 2002, it is the most generous farm bill in history, projected to provide $180bn (euro149bn, £102bn) over 10 years.
The Bush administration has been eager to make substantial changes to the next bill, which must be rewritten in 2007 and on which Congress will start deliberations in coming months.
Mr Johanns spent much of last year in town hall meetings with farmers floating the idea that US farm subsidies must be overhauled to help cut a ballooning federal deficit and remove the threat of legal challenges to the US subsidy regime within the World Trade Organisation (WTO).
The 2002 bill was controversial because its provisions to strengthen cash support for farmers were linked to the volume of production of specific crops, and this was seen as more trade-distorting than direct cash payments for conservation and other uses.
Mr Johanns recently sounded the alarm on the issue, citing the US rice support programme and a Canadian investigation into US corn subsidies as evidence that the current farm bill was "perhaps the most high-risk approach we could take for our nation's farmers and ranchers in the future".
Recently, he told the AFBF's annual convention in Tennessee that a successful WTO challenge from Brazil against US cotton subsidies last year "shook the confidence in the ability of current policy to provide a true safety net [for farmers]". The Bush administration had hoped that farmers would agree to lower subsidies if it could win them greater market access for their exports in the Doha Round of World Trade Organisation talks.
Yet with the Doha talks stalled, the AFBF voted in the middle of this month to extend "the economic safety net" provided by the current farm bill.
Bob Stallman, AFBF president, said his members were "not willing to unilaterally disarm". For Mr Joharms, the outlook is not entirely bleak. On his farm "listening tours", he says he picked up signs of some dissatisfaction with current farm subsidies.
The largest 3.0 per cent of farms receive about a third of all government payments. In addition, 92 per cent of all so-called commodity programme spending goes to only five crops: soyabeans, maize, wheat, cotton and rice.
A study produced by the AFBF acknowledges that "government support for agriculture will look very different in 2019".
The Illinois Farm Bureau has proposed replacing support for specific crops with an "income assurance programme" that compensates farmers if their annual net income falls below a multiyear average. Henry Kallal, a board member, said: "We might as well be leading the change rather than be litigated to change."
However, the forces ranged against Mr Joharms are formidable. The cotton and rice producing states of the south still wield immense influence in Congress.
As mid-term congressional elections loom this year, politicians are unlikely to be vocal in opposing the interests of farmers.
Don Villwock, president of the Indiana Farm Bureau, says: "All politics are local and the heartland 'red' states control Congress. Very few people on the Hill would like to be perceived as cutting agricultural programme payments, even in a budget deficit year."
Mr Stallman adds that farmers are also sceptical about the WTO and the value of export markets even though the US enjoyed an agricultural trade surplus of $4.6bn last year.
Bob Thompson, a professor of agricultural policy at the University of Illinois, says he has been "shocked by the erosion of support for agricultural trade liberalisation or even exports among Midwestern farmers" as farmers see the prospect of easier returns from the rapidly growing domestic market for ethanol and biofuels.
Trade negotiators are meeting in Geneva to try and break the Doha impasse. But most observers are pessimistic that the US will come away with any concessions for its farmers.
Bob Young, AFBF chief economist, says: "If Doha collapses six to nine months from now, I strongly suspect the 2007 farm bill looks an awful lot like the 2002 bill and we all go out and litigate each other."
..........................................
FT Syndication Service

 

 
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