By Elizabeth Becker New York Times WASHINGTON - Every five or six years Congress argues over how to subsidize farmers. But this time around the forces against big subsidies have a new weapon: the international trade agreements the United States signed promising to reduce those payments.
For the first time in the tumultuous debate over farm policy, lawmakers trying to increase already ballooning farm subsidies could be forced to retreat because of limits required under the World Trade Organization for certain subsidies.
The trade dispute has become a major political battle within Republican ranks. Free-trading Republicans, particularly Agriculture Secretary Ann M. Veneman, are up against several influential farm- state Republicans in the House who want to keep the large payments. This summer Representative Larry Combest, chairman of the House Agriculture Committee, criticized Ms. Veneman as giving in to treaty requirements, in what he called "unilateral disarmament."
And looming in the background is the budget problem created by the rapidly dwindling surplus that could force lawmakers to rethink the bill expected to be voted on in September in the House. In a recent report on the budget, the Bush administration warned that lawmakers would have to find other items to cut to offset some payments in the farm bill.
For her part, Ms. Veneman refused to talk specifics about the House bill, saying only that any farm bill has to respect trade agreements.
"We don't want to be left behind on trade," she said in an interview. "We have to be a lead player."
Senate leaders have just begun to write a farm bill, which they say will place greater emphasis on conservation, like paying farmers to return cropland to prairie, which would not violate trade agreements. They, too, say they are worried that the House bill would upset the United States' trading position.
When they passed the last farm measure - the "Freedom to Farm" bill of 1996 - lawmakers agreed to phase out a system in place since the Depression, promising to reduce subsidy payments based on fluctuating prices or the amount of crops produced. Under the World Trade Organization agreement, the payments are considered trade-distorting and have strict caps.
When farmers balked at the rigors of the free market, however, Congress approved emergency payments and loan payments. The result was that subsidies quadrupled, to $32.2 billion last year from $7.3 billion in 1995.
Anticipating the dispute over subsidies, the House Agriculture Committee took up its farm bill one year ahead of schedule, writing a 10-year, $171 billion measure that not only keeps current payments but also includes a new subsidy called countercyclical payments, which would give farmers additional money when prices drop. Even sponsors concede that those payments could exceed international treaty limits.
Indeed, an internal analysis by the Agriculture Department warns that the House farm bill would exceed the subsidy limits imposed by the world trade agreement, a senior department official said on condition of anonymity.
"The House is on its way to producing a bill that goes against the W.T.O.," the official said. "The bill's countercyclical payments are clearly related to price, and there is no question they fail to meet W.T.O. criteria."
Also of concern to trade officials is an effort in the House measure to lift some restrictions on how much money each farmer can receive. Already, 10 percent of American farmers receive 61 percent of the subsidies.
"U.S. policy is going in the wrong direction," said Gerry Kiely, agriculture counselor for the European Union delegation here. "The new subsidies plus lifting the caps effectively remove the farmer from market signals and give greater subsidies to crops for export."
Mr. Combest, recovering from surgery, was unavailable for comment. But a senior aide to the Agriculture Committee said such disagreements over what constitutes fair and unfair subsidies were normal between Europe and the United States.
In a letter last week, Senator Tom Harkin, the Iowa Democrat who is chairman of the Senate Agriculture Committee, and Senator Richard G. Lugar, the Indiana Republican who is ranking minority member of the committee, asked Ms. Veneman to give them a report on whether the House bill complied with world trade requirements.
Sponsors of a rival House amendment that would also increase conservation payments have used the trade argument to win 125 co-sponsors to shift more money to environment-friendly programs that also adhere to trade restrictions.
"Unlike the payments made to farmers for certain commodity production, conservation payments are considered nontrade distorting," said Representative Ron Kind, Democrat of Wisconsin.
Ms. Veneman, a lawyer and the former deputy agriculture secretary in the previous Bush administration, has made trade her signature issue and said that any new farm bill must conform to trade agreements. She and the lawmakers all agreed that President Bush would not sign a farm bill that would exceed the limits of the trade agreement.
Agricultural exports have doubled in the past decade, Ms. Veneman said, and the United States has a positive trade balance for food and agricultural products.
Mr. Combest, the agricultural committee chairman with ties to his fellow Texan in the White House, made a rare public attack against Ms. Veneman in June. He accused her of wrongly declaring some crop subsidies as trade-distorting. Mr. Combest then withdrew his name as a sponsor of legislation to give the president new trade promotion authority, which allows the administration to negotiate trade agreements that Congress must accept or reject, but not amend. Ms. Veneman has promoted the measure tirelessly.
The Food and Agricultural Policy Research Institute, a federally financed institute that does independent agricultural research for Congress, has told Mr. Combest that his House bill has a 37 percent chance of breaking trade limits next year.
"It's much higher than the current policy because the new House bill carries forward current policies and puts new ones on top of it," said Chad E. Hart, an agricultural economist who wrote the report along with Bruce A. Babcock, a professor of economics at Iowa State University.:
