Saturday, February 10, 2007

Farm Bill may not do the trick

The US Farm Bill published last week may not offer enough to revitalise the Doha Round trade talks where the scale of US domestic support for agriculture is one of the outstanding issues. Indeed, given that the bill is likely to be watered down by the Congress and the Senate, prospects are even less good than they might at first appear.

Ag Secretary Mike Johanns stopped short of an EU-style decoupling of domestic support from production. The bill is likely to cost around $10bn less than over the next five years than was spent under the 2002 farm bill. However, USDA admitted that the proposals would cost approximately $5bn more than the projected spending if the 2002 farm bill had been extended over the 2007-12 period. The administration heralded the proposed bill as one that directed subsidies away from the traditional commodity group recipients including rice, corn, cottn and wheat and towards conservation and rural development programmes. Johanns admitted that the proposals represented an evolution of the 2002 bill rather than a radical break from it.

The headline totals do not go beyond the cut in annual allowable trade-distorting farm subsidies that the Bush administration has already informally offered in the Doha round. The controversial counter cyclical payments scheme which compensates farmers when prices are low is to be adjusted but the changes are incremental.

There will be strict limits on subsidy payments to the biggest and richest farmers. The existing subsidy payment limit per individual of $360,000 is retained, but new rules will seek to clamp down on the practice of artificially dividing up large holdings in order to get around the rule. There is also a $7.6bn increase in conservation funding with the focus on improving enviromental quality.

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