TWN Info Service on WTO and Trade Issues (June08/10)
16 June 2008
Third World Network

Agriculture: G20, Cairns Group criticize US Farm Bill

Published in SUNS #6489 dated 5 June 2008 

Geneva, 4 Jun (Kanaga Raja) -- Both the Group of 20 (G20) developing countries and the Cairns Group of agricultural exporters on Tuesday criticized the new US Farm Bill, saying that it contradicts the mandate of the Doha Round, and urged the US to show leadership by committing to substantial and effective cuts in subsidies.

The criticism that was levelled against the US Farm Bill by both the groups came at an informal open-ended meeting of the Special Session of the Agriculture Committee.

In its statement, the G20 expressed its concern with the 2008 Farm Bill, saying that "overruling the Administration's veto, the USA Congress' new bill heads agriculture policies in the wrong direction at a decisive juncture of the WTO Doha Round."

"In keeping with the Doha Mandate, the Round should result in effective reductions in the levels of trade-distorting subsidies in developed countries. This would level the playing field in agriculture trade and promote development. Rising world prices in agriculture create the conditions for reform," said the G20.

In its provisions, said the G20 statement, the Farm Bill will lead to larger outlays through increased thresholds for subsidy payments for 15 commodities, contrary to the Doha Round Mandate and the recent WTO Dispute Settlement Body decisions on Cotton.

"Even if agriculture prices and farm income fall slightly from their record current levels, farmers will replace market earnings for subsidies, thus perpetuating the insulation of American producers from market signals."

Moreover, said the G20, the new bill creates a coupled income insurance program whose impact is yet to be fully assessed, but that is likely to generate generous payments over the next years going well beyond the subsidies' ceiling under consideration in the Doha Round.

"The 2008 Farm Bill not only runs counter [to] the long-term process of reform in agriculture, but also accentuates the competition between developed countries' Treasuries and unassisted developing countries' farmers, and perpetuates distortions in agricultural markets. The unfair competition brought by subsidies hinders the process of market liberalization by developed and developing countries alike."

The G20 believed that only substantial reductions in subsidy levels, effective disciplines and strengthened monitoring will effectively contain the distorting effects of the 2008 Farm Bill.

In order to achieve this objective, the G20 urged the US to show leadership in the multilateral process of agriculture reform by committing to substantial and effective cuts in subsidies and to renew its purpose to conclude the Doha Round.

In its statement, the Cairns Group expressed "its strong disappointment" at the decision by the United States Congress to approve a Farm Bill that clearly contradicts the objectives and mandate of the WTO Doha Round of trade negotiations.

The Group said that it particularly regrets Congress' decision to take "a significant step backwards" by increasing farm subsidies. This will prolong the negative impact of distorting policies on the productivity of important agriculture and food industries worldwide - including in developing countries whose development objectives depend highly on the competitiveness of agricultural exports.

"At a time when US farmers are benefiting from record food prices, Congress has failed to take advantage of an ideal opportunity to contribute to the Doha Round reform effort."

Instead, said the Cairns Group, Congress has increased loan rates and target prices, introduced new programs that have the potential to provide a significant amount of new trade distorting domestic support to commodities already generously supported, and extended trade distorting domestic support to commodities not previously supported.

The Farm Bill passed by Congress also missed the opportunity to reform US food aid policies, said the Cairns Group, adding that a decision to untie a meaningful portion of US food aid would have been a welcome response to address the current food crisis and to provide for humanitarian needs on an on-going basis.

"US farmers stand to gain from the Doha Round which would take a significant step towards a fairer and more market oriented agricultural trading system."

The Cairns Group called on the US to play its part, as a major trader and as one of the main providers of trade distorting domestic support, in securing a successful conclusion to the negotiations by accepting significant commitments to reduce and discipline trade-distorting support.

While support levels in the markets of other Members may be higher, it is only in the US that reform is moving in the wrong direction, noted the Cairns Group.

"This failure by Congress to use the opportunity of record levels of farm income and commodity prices to take steps towards a more market-oriented agricultural policy underlines the need for WTO Members to conclude the Round and secure an outcome that delivers real reform and binding commitments across the domestic support, market access and export competition pillars."

These are commitments all Members, particularly those responsible for the major distortions in world agricultural markets, must take to conclude the Round, said the Cairns Group. +