Associated Press | September 3, 2001 | By PHILIP BRASHER, AP Farm Writer
WASHINGTON - As lawmakers spend the fall overhauling federal farm programs, they will have to keep one eye on an international trade agreement that could limit how much money they give to growers.
The United States committed under the World Trade Organization to spend no more than $19.1 billion a year on "trade-distorting" farm subsidies. Those primarily are crop price supports that underwrite the cost of growing certain commodities.
A 10-year farm bill that the House is scheduled to take up this month could break that limit next year, economists say. "We'd look for that to be kind of a problem for the first two or three years of a bill," said Bob Young, co-director of the Food and Agricultural Policy Research Institute, which advises Congress on farm policy.
In an analysis of the House bill, his group estimated there was a 36.5 percent chance that the $19.1 billion limit would be broken in 2002. After that, the probability is less because commodity prices are expected to rise. Subsidies that are tied to market prices decrease as the prices rise.
A bigger problem in the long term, given the government's shrinking surplus, is whether there will even be enough money to fund the $168 billion House bill, Young said. The House bill is based on money Congress set aside for farm spending during the spring when the budget outlook was much rosier.
"If you don't have the money to spend, the rest of this gets pretty moot in a hurry," Young said.
Still, the trade issue gives ammunition to environmentalists, some farm groups and others who want to reduce the price-based payments that go to grain and cotton producers - traditionally the biggest recipients of federal farm spending.
The issue also pits free-trade advocates such as Agriculture Secretary Ann Veneman against lawmakers allied with grain and cotton interests, such as Texas Republican Larry Combest, chairman of the House Agriculture Committee.
Veneman, in an interview last week, declined to discuss the specifics of the House bill. But she said, "We want to make sure any farm bill is consistent with our obligations under the WTO."
The House bill would retain existing price supports for corn, wheat, rice, soybeans and cotton and create a new "countercyclical" program to provide additional payments when prices drop below certain levels.
The new program is designed to replace the emergency payments Congress has voted each of the last four years to supplement the subsidies farmers receive under the 1996 farm law, which expires in 2002.
The National Corn Growers Association thinks its members have been hurt by the existing subsidy system and says the House bill is tilted in favor of cotton growers. The group also has raised the WTO issue.
The European Union, long criticized by U.S. farmers for its heavy agricultural subsidies, does not like the House bill. EU countries have been shifting their farm subsidies from price supports into direct payments to growers.
American farmers "are being taken farther away from market signals by the new subsidies," said Wilfried Schneider, a spokesman for the EU's Washington office. "We do agree on supporting agriculture. The question is how we do it."
Lower federal revenues from cutting income tax rates and a slowing economy also could bolster the case of environmentalists and farmers who raise livestock and fruits and vegetables. They want to shift more federal farm spending into programs that underwrite the cost of manure control and water conservation.
The chairman of the Senate Agriculture Committee, Democratic Sen. Tom Harkin of Iowa, and the panel's ranking Republican, Richard Lugar of Indiana, have asked the Agriculture Department to evaluate the trade implications of the House bill.
Harkin wants to increase conservation spending, while Lugar is an advocate of freer trade.
"Our first priority is to craft farm policy that meets the needs of U.S. agriculture, but it is also important that we carefully consider all of the ramifications of various policy approaches," Harkin said.Associated Press:
