Info Service on Trade and WTO Issues (July08/13)
The 2008 Farm Bill and the
The negotiators' reaction echoed that of President Bush, who promptly vetoed the legislation, saying the Farm Bill would impede a conclusion to negotiations on the Doha Agenda at the WTO. Yet, neither the House nor the Senate had any trouble securing well over the necessary two-thirds majority necessary to overthrow the veto the same day.
Farm Bill, also known as the Food, Conservation and Energy Act of 2008,
sets US farm policy for the next five years. The legislation does nothing
to help advance the already long-delayed and still blocked negotiations
on agriculture in
THE FOOD, CONSERVATION AND ENERGY ACT 2008
The Food, Conservation and Energy Act (Farm Bill of 2008) authorizes spending of up to $307 billion over five fiscal years starting October 1, 2008. The 673-page bill encompasses 15 "titles." Each deals with a different area, including commodity programs, nutrition, research, livestock, conservation, trade and more. Approximately $209 billion is scheduled to be spent on "nutrition programs" - mostly domestic food aid or food stamps.
The share of spending on the commodities title has dropped from 23 percent in the 2002 legislation to about 10 percent in 2008. In addition, crop insurance programs have been allocated approximately 8 percent of the spending, or $23 billion over five years. Projected spending on commodities, conservation and trade in the 2008 bill is between $72 and $74 billion, which is considerably less than actual spending on those items under the 2002 Farm Bill ($95 billion over five years).
The real cost of the 2008 Farm Bill is unpredictable, because the amount actually paid out varies with average annual market prices and crop yields, together with legislative target prices and the historic yield per acre in different regions. The funding mechanism is such that if spending is less than forecast, Congress is not at liberty to allocate the savings to fund other legislation.
On the other hand, if market conditions push government expenditures above the forecast level, Congress can approve a "supplemental" appropriation without having to rewrite the Farm Bill.
For example, Congress approved "emergency payments" when the economic projections that accompanied the 1996 Farm Bill failed to allow for the 30-40 percent price fall in program crops in 1997 that continued through 2001.
2008 Farm Bill introduces a new optional program for farmers called
the Average Crop Revenue Election, or
insurance, including that covered in the Farm Bill, protects only against
crop loss or low yields. ACRE would also protect against a price drop
resulting from a policy not affecting yields (e. g. removal of the
ACRE is AMS classified, the
payment formula is based on the average annual market price for the
crop concerned over the previous two years. The last two years, 2006
and 2007, saw record-high crop prices. The likely fall in commodity
prices ahead could trigger very large payments to US farmers under ACRE's
provisions if a large number of farmers choose to sign up for the program.
ACRE price, yield and program enrolment factors make it difficult to
predict the amount of program payments the
is no simple correlation between Commodity Title payments and the WTO's
AMS definitions, but for comparison, the current authorized limit for
AMS for the
However, the US will not have to adjust its spending to conform with this much tighter spending limit on AMS because the 2004 July Agreement, now incorporated in the Doha Agreement on Agriculture proposals, allows counter-cyclical payments (that are part of the AMS under Uruguay AoA rules) to be moved to the Blue Box.
in the Blue Box is less constrained than the AMS. In other words, the
terms of US food aid programs, the 2008 legislation brings very little
reform. President Bush has made several important attempts to reform
For example, the President proposed a pilot program of $350 million over four years for local purchases, rather than US-sourced food shipments; the Farm Bill authorizes only $60 million.
As for export credit guarantees, the 2008 Farm Bill eliminated the GSM-102 program of long-term export credit. It also removed the one percent cap on loan origination fees in the GSM-102 program.
measures are intended to bring the
central question for WTO delegates trying to finalize
According to a Congressional Research Service interpretation of this law, "WTO agreements and adopted WTO rulings in conflict with [US] federal law do not have domestic legal effect unless or until Congress or the Executive Branch, as the case may be, takes action to modify or remove the statute, regulation or regulatory practice at issue."
unofficial US Trade Representative (USTR) position in
USTR: OUT ON A LIMB?
The USTR is a Presidential appointment (although confirmed by Congress). Presidents do not have a strong record of imposing their will over the Farm Bill. Instead, the process is firmly controlled by Congress. [The 2008 Farm Bill was sent by both Houses to President Bush who vetoed it, but the Congress over-rode the veto.]
There are, broadly speaking, two camps that negotiate trade-offs within the Farm Bill: the largely rural legislators who champion the commodities title, and the largely urban legislators who champion the domestic and overseas food aid programs (which bridge more than one title in the legislation). Each camp has its share of lobbyists and advocates, and little love is lost across the divide, but the understanding is that each side needs the other to secure the outcome they want for their specific programs.
means, for example, that spending for government-supported school lunch
programs is secured by providing increased direct payment support for
the end, more than 500
2008 Farm Bill indicates that the fundamental structure of
in the 2008 legislation changes the basic structure of
(* The authors are with the Institute for Agriculture and Trade Policy based in the United States and this article was published as a Commentary on the website of IATP - www. iatp. org) +