By Gene Lucht Iowa Farmer Today
DES MOINES - Forget for a moment the discussion about what type of farm bill will benefit farmers the most. Remember, policy makers also need to consider what type of farm bill will be allowed under international trade agreements.
That's right, some proposals would undoubtedly lead to trade sanctions from other nations thanks to agreements signed by U.S. presidents and approved by Congress during the past decade.
Welcome to the world of farm policy in the shadow of the World Trade Organization (WTO).
"If we're going to have a safety net, we don't want a safety net that bumps us over the top (with the World Trade Organization limits)," said Kevin Brosch, an analyst with dtb associates in Washington, D.C.
Still, Brosch says farmers should be hoping Congress debates the farm bill in 2001 instead of waiting for 2002.
The reason is the economy is still relatively good now, and Congress is still feeling flush with money. That may change if the economy takes a downturn and the ag budget is stuck in a downward budget curve.
The present government budget projects allow less each year for ag spending. The additional monies farmers have gotten in recent years have been "off-budget," meaning they don't count against the budget agreements.
If the economy turns down, it will be far more difficult to get "off-budget" ag money.
"You want to get a permanent solution now," Brosch says.
Farmers should look for an ag bill that will not lead to a trade war or WTO sanctions, he explained.
There are ways to meet those goals.
Brosch offered his analysis of WTO rules and his views about which farm policies would be allowable under those rules during a presentation at the Iowa Farm Bureau Federation's annual meeting last week.
While the WTO explanation is long and complex, the ideas about what new legislation would pass WTO muster are a bit more basic.
In short, programs tied to conservation almost would certainly be allowable under WTO rules, the present farm bill payment would be allowed (although additional AMTA payments are more questionable and any program expanding those payments is in question).
Simply raising the loan rate or any new program that ties payments to present production almost certainly would not be allowed.
Brosch suggests it might be possible to get around those guidelines by either tying payments to income rather than production or by tying them to almost any type of historical production rather than present production.
The good news, he says, is domestic political rhetoric regarding the farm bill appears to have cooled off in the past year.
"They're going to do something, and they're going to do something that's counter-cyclical," Brosch says. The counter-cyclical idea means higher payments when times are bad on the farm and lower payments when times are good, he explains.
But he says farmers and lawmakers need to remember some types of counter-cyclical payments almost certainly will lead to trade violations while others may be allowable.
The 1993 General Agreement on Tariffs and Trade led to the formation of the WTO and set guidelines on government programs which affected production.
Under that complex agreement there were several classifications of payments and programs.
The green box payments were based on environmental goals (CRP, Swampbuster, etc.). A blue-box payment was agreed upon by the United States and the European Union nations that essentially allowed some existing programs in those nations to continue.
Unfortunately, the U.S. blue box included deficiency payments, which were eliminated in the 1996 farm bill.
While the European Union still has substantially higher allowed payments under present rules, the total gets at least a bit closer when green-box payments are included.
There is legitimate concern that additional AMTA payments or any new counter-cyclical program to be included in a new farm bill could put the United States over its allowed payment limits.
AMTA payments, Brosch explained, are allowed because they are not based on current production and thus are not considered to alter production.
In new trade negotiations starting this year, the United States is proposing to eliminate the box system, lowering payment allowances to some type of percentage of ag production value.
"This is a very interesting proposal, but it's not going to go far," Brosch says, adding such an idea would benefit the United States but would force Europe to cut ag programs by about two-thirds.
He said other free-trade nations, such as Australia and New Zealand which sided with the United States in the last round of trade negotiations, are not happy with present U.S. policy or present U.S. trade proposals.
While those two countries know the Europeans spend far more on farm programs, they see the U.S. use of additional AMTA payments and other programs as possible trade violations.
Finally, Brosch said several farm bill proposals are interesting, but they still need work. He noted ideas, such as raising loan rates, won't fly internationally.
He suggested designing a counter-cyclical program based either on environmental guidelines or on historical production, rather than present production.
Lawmakers eventually need to find a way to meet domestic needs and international rules
"We need to find a way to mesh those two.":
